TTM Technologies, Inc. (TTMI) Earnings Call Transcript

All right. Well, thanks, everyone. Welcome to TTM Technologies Analyst and Investor Day here in Farmingdale. I appreciate everybody coming out. It's a good crowd today. It's their first Analyst Day since 2018. So we have a lot to update all of you on. I'm pretty excited. I have all of you here and as well as our executives. We'll be presenting a couple of quick points on the agenda today: first, we're going to start with kind of the strategic update, the vision, the overview of the day. Then we'll move into the businesses, first with the commercial sector. We'll feature some of the commercial end markets, networking data center computing as well as automotive, medical, industrial instrumentation. And then we'll move on to aerospace and defense, the sector as well as the engineering strategy. And then we move on to operations, finance, and then we'll finish up at around 12:30 where the presentation. So we'll do Q&A for the whole group for about 30 minutes. Just another point, this is being webcast as well. So those of you who are on the webcast can ask a question by clicking on the box in the upper right corner where it says Ask a Question. And we'll read those questions aloud in the room. After the Q&A, we'll do a lunch right here next door in the Cetera from 01:00 p.m. to 02:00 p.m. and then we'll do a tour for those of you who are -- have time here from 02:00 p.m. to 03:00 p.m. and we'll be done by 03:00 p.m. today. A couple of other points. The WiFi access is on your tables with cards, you've got power outlets. And then there are restrooms, if you need to use the restrooms, if you go out this door and you make a left, there'll be -- you'll see the signs for the restrooms. And we also have these pretty circuit boards up here for anyone to take a look at when we kind of break later for lunch, if you want to take a look at those. I think I covered everything. Todd, I missed anything or we got the safe harbor statements a little bit here. And then I'm going to hand it over to Tom next to talk about the strategic update and vision.

Thank you, Sameer. Good morning, everybody. Welcome. Yes. It's great to have you in our facility here in Farmingdale. We're excited to present our strategy to you today, introduce the executive team members and then that tour, which should be a real highlight for the day. Those of you joining us virtually, I'd also like to welcome you as well. So let me get started. Most of you have seen this slide really provides some background on TTM. We are a leading technology solutions, provider of mission systems, PCBs and specialty components. We have -- we are serving a set of diverse end markets that we will go through today including data center and semiconductor, networking, aerospace and defense, the medical industrial instrumentation area and automotive. As a company, we have 27 facilities today. Now that will be down to 23 facilities by the end of the year. We are consolidating facilities, 2 facilities in California, 1 in Hong Kong, and we have sold our Shanghai backplane facility. So we'll be down to 23 at the end of the year, 17,500 employees at the -- or 17,800 employees at the end of last year. That's down now to about 16,500 employees as we deal with a softer commercial market. And then from a scale standpoint, about $2.5 billion in revenue. So a little bit on the history of TTM. We started out with approximately $70 million, a little bit more than $70 million in revenue. We've grown that to $2.5 billion today. And I wanted to cover some of the key events that have occurred historically for TTM as we built our strategy. The first was the acquisition of Tyco Printed Circuit Board Group. That really established us inside of aerospace and defense with a strong PCB position. We then supplemented that capability with an AESA production base with the acquisition of Meadville, that was in 2010. In 2015, we acquired ViaSystems, that really brought us our industrial position, automotive position as well and strengthened our aerospace and defense position and printed circuit boards, really established us as the leading provider of printed circuit boards in North America. And so from there, we had really consolidated at that point, the printed circuit board position in North America. We were pleased with our global position in printed circuit boards. And so we started to look at adjacent areas to grow with a focus on aerospace and defense. And so in 2018, we acquired Anaren. Anaren really brought us the RF position to the company, the build-to-specification capabilities with a strong engineering base. And then the last year, we acquired Telephonics, including, of course, the facility that you're in today. That really then brought us our Tier 1 position in Mission Systems and particularly strengthened our radar area tying directly to our RF expertise as well as bringing us into new markets in communications and surveillance. So that's the TTM that you have in front of you today and we'll continue that journey going forward. So what is this about? First of all, as TTM, we have focused on removing or changing our portfolio and adapting that portfolio in line with our strategy. That meant divesting of our mobility business in 2020, which was directly exposed to the consumer business and was more seasonal as well as exiting some of the more commoditized commercial assembly businesses that we had been involved with closing down facilities in 2020 and then selling our Shanghai assembly facility this year. So at the same time, we have been investing in engineering capability. Anaren, Telephonics critical to that direction as well as strengthening our footprint with the establishment of the Penang, Malaysia facility. And so the result, really, the goal here is to deliver a highly valued package to our customers and bring stability in terms of our operating margin performance our cash flow as we go forward. So we're on that journey and we'll continue that journey going forward. So since 2018 Analyst Day, I just wanted to highlight some of the progress that we have made since then. First of all, organic revenue growth. If you look at our organic revenue growth, we have grown at 6.8%. That's above the mid-single-digit area that we were discussing at that Analyst Day. Acquisitions. I've already talked about the 2 acquisitions, Anaren and Telephonics that have been critical as well as we've been focusing on the acquisition piece of our portfolio. The differentiation can keep adding to that technology breadth as well as the footprint diversification that we've been involved with. And then with the focus on engineering and operating excellence, also delivering strong cash flow, 11% for the company in terms of cash flow and then building on operating margin. So we have improved our operating margin over time. Since then, we still have work to do there and we'll talk today about our targets in terms of operating margin going forward. So backing up a bit, I just wanted to lay out for you the strategic foundation and what I'm about to present is what we present to our employees at every communication meeting, we present to our customers as well and you'll see it generally in our facilities at different locations. Starting with the vision, the vision to inspire innovation as a global preeminent technology solutions company. That's for our customers and we cover that in our mission. So providing customers with market-leading differentiated solutions and an extraordinary customer experience built on our KPI performance as a company. Strategically, we focus on 3 different areas: investment where are we going to be investing in any given year, where are we going to -- and that's both organic and inorganic. Where are we focused on performance generally aligned with our KPIs and the focus on KPIs operationally as well as building our engineering performance and then appeal. And this is all about attracting the right employees to the organization and retaining those employees. What we emphasize is our set of core values that underlie our performance as a company. Those values are related to integrity, teamwork, clear communication, which is what we're about today and then a focus on performance excellence as a company. We also talk to our employees about where we are in terms of our strategy and what we are doing in the short term about it. And this is a year that we view as a year of critical transition. One key feature of that is, yes, we have a commercial sector that is facing some end market challenges in terms of demand. So we are taking cost actions and have taken cost actions, but at the same time, Doug and his team are focused on opportunities in terms of market share, where can we gain critical market share positions on key programs. You could see that with the automotive program bookings that we announced last quarter at $267 million in lifetime program value that positions us for the future. And that follows a fourth quarter of also a very strong performance in terms of program wins. That's a key area that positions us again for the future direction of the commercial sector. We also are focused on responding to a record backlog in aerospace and defense, $1.38 billion, that's backlog that we need to now execute against. And so as we look at A&D, Cathie will be talking to you about how we have aligned our aerospace and defense organization with the mission priorities of our customers. Thinking as our customers do about critical program areas and aligning with those critical programs in terms of our portfolio of capability. Secondly, enhancing supply chain management. This is a critical and urgent priority for us and that is a focus for us in terms of integrated electronics or our non-PCB portion of aerospace and defense. So we'll be speaking more about that. Phil will be covering that today, but a critical area of focus, delivering on the Telephonics synergies. We're well on the way there in terms of delivering against the cost synergy goals of $12 million but we also have revenue synergy goals related to product development and the combination of the 2 companies. And again, Rich and Cathie will be speaking more about our plans there. It's a successful facility consolidation. So of course, we made the announcements about facility closures. We have closed at this point, our Hong Kong facility, but our California facilities are still in operation through the course of this year and we need to transition that business into our other facilities. And that's an intensive process of working with our customers as we transition. So we are presently involved in that process and that process will continue through the course of the year. And then all of this resulting in a focus on incremental improvement in our operational performance in our Aerospace and Defense business. And then finally, our Penang start-up. We need to start up the facility in Penang on time. We have a handful of customers who have signed long-term agreements with deposits. They are relying on this facility. We need to execute against that promise and begin production in the fourth quarter for qualification with critical customers. So far, so good on this, but a lot of attention being paid to Penang. So those are the 3 priority areas, again, that we've highlighted for our employees and I wanted to highlight for you all today. We couple that, of course, with the longer-term M&A priorities as a company. Those have not changed. Our corporate strategy really driven by improving differentiation overall for the company, continuing on that path, adding new product and technology capabilities and of course, an emphasis on aerospace and defense, moving that business mix from 43% to 45% today towards 50% or half of the business in the future. When we look specifically at the commercial sector, we're looking to long term add RF -- to our RF component business and add that expertise as well as looking at footprint differentiation, continuing to build on the supply chain resiliency needs and responding to those needs from our customers. Aerospace and defense, engineered subsystems, right? And that focus on RF microwave and microelectronics. Terrific opportunities there, we need that, again, our M&A strategy will be focused on. We are committed to sustainable business practices as an organization. We did publish our first corporate social responsibility report in 2022. Emphasis in that report on corporate governance, which we've always been proud of, a strong, diverse independent Board of Directors and emphasis on cybersecurity. That's always been an emphasis for us for our defense business and for the company overall, combined with a commitment on environmental and Phil will go through this further later today, but I did want to highlight we have an environmental policy that forms the foundation for us on environmental. We are committed to waste reduction. We're committed to energy reductions as well and then finally, water consumption and water recycling as a critical component of our manufacturing. And then if you look to alternative energy, we are also starting to incorporate solar into our facility operations, starting with Penang. And Penang will have the largest rooftop solar installation in all of Malaysia. So that's the kind of commitment that we are making here to alternative energy. On the social side. So our commitment to diversification, a diverse workforce and an inclusive workforce is critical. We have a DEI organization that spans our North America footprint. We also -- I'm just really excited to say have seen a spanning of ERGs or employee resource groups throughout our organization that are also part of this inclusive effort by our employees to mentor others in the organization, terrific to see. We have also -- will continue to publish and internally look at our data as it relates to diversity. And again, strong third-party recognition of our efforts, ISS scoring of a 2 on a scale of 10. Of course, the lower numbers are positive. So really thrilled to see that ISS as well as recognizing our efforts in this area. So with that, I wanted to introduce you to the speakers today. Starting with the commercial sector. Doug Soder is our Executive Vice President of the Commercial sector; Anthony Sandeen is our Vice President of Automotive, Medical, Industrial and Instrumentation. They will be presenting to you on the commercial sector. On the A&D side, Cathie Gridley is our Executive Vice President for Aerospace and Defense. Rich Hines is our Vice President for Engineering, for Aerospace and Defense, and Rich will also be leading the tour later today. Phil Titterton, Chief Operating Officer; and Todd Schull, you all know, is our Chief Financial Officer. I also wanted to recognize Dan Weber, in the back of the room. Dan Weber is our Chief Legal Officer and our General Counsel, okay. And then I'm going to just leave the stage here with a set of key messages that I hope will be takeaways for you from today's Analyst Day. Number one, that we are focused on the right areas, the right submarkets inside of each of our end markets that will help to drive growth for TTM above the forecasted rates of growth for those markets. That we have, again, the right acquisition strategy as demonstrated by Telephonics and what you will learn about Telephonics in our Aerospace and Defense business today. That from a differentiation standpoint, that we have the right set of technologies that we will form a foundation that we will continue to build on and that our manufacturing footprint is a fantastic fit for our customer base and again, an area for further improvement. And then finally, from an operating performance and an engineering performance that we are able to, as we go forward, demonstrate consistent and improved cash flow, as you have been seeing, and that we also have the right product mix to demonstrate improved operating margin for the company here going forward. And with that, I'll turn my the presentation over to Doug Soder, Executive Vice President of the Commercial sector. Doug?

Okay. Thank you, Tom. Good morning, everyone. My name is Doug Soder and I'm the President of the Commercial sector. Before I start, I just wanted to give you a little bit of background on myself. I've been in the industry about 40 years. I started with AMP incorporated in the connector business and then moved into PCBs with Tyco, became a part of Tyco Printed Circuit Group with the acquisition in 2006. And since I've been with TTM, I've had responsibilities for global sales. I ran our former North America business unit and now most recently, the commercial sector. And that's what I'm going to talk to you about today. Really excited to have this opportunity to update you on our commercial sector. And I'm going to be highlighting some of our recent track record growth as well as successes. And we've been outperforming the market. I'm also then going to switch gears and walk you through our data center computing business as well as our networking markets. And then I'll hand off to Anthony and he'll walk you through automotive, medical, industrial instrumentation. So let's start just with the commercial sector at a glance. Our mission across the commercial sector is to provide our customers with advanced technology printed circuit boards with RF and specialty components and with differentiated technology solutions across all of our targeted markets. In 2022, our revenue was $1.6 billion and you can see how that broke out in the pie chart led by medical, industrial instrumentation followed by automotive and then data center and networking. To the right, I've shown you the reference serviceable available market from Prismark and the difference between the TAM and the SAM from Prismark as we've excluded commodity PCBs as well as substrates, neither of which are focus areas of business for the commercial sector. Across the bottom, we have pictures in the middle of the RF and specialty components. On the right, some examples of the analysis and testing services we do for our customers, in this case, signal integrity and power analysis. And on the right, a picture of an advanced technology PCB, but it really doesn't do justice. I had an opportunity to show some of you earlier, some of our Boards. Anthony, if you could stand up here. We just -- when we talk about advanced technology printed circuit boards, you really need to see some of this product to appreciate the complexity and how complicated these products are, Anthony has got a networking line card in his hand that he will walk through and show you. We've also got a variety of other products out there and we can walk through during the break, but we've got super computing for AI. We've got examples of downhill technology. We've got a number of automotive radar boards as well and a very complex substrate testing board as well. So I'd encourage you to take some look at that product as you have breaks today. Very impressive and it helps put in context what we're talking about. Now the commercial sector is really a fully functioning business. I've got reporting to me 3 business units. Anthony runs the automotive, medical, industrial instrumentation. We also have the communications and computing business, the RF and specialty components business as well as corporate sales, commercial technology and marketing. And then what we call customer relationship and business support, and this is really our customer service, our program management and sales operations group. In addition, we have close alignment with Phil and his operations team and we have functional partners from finance, HR, legal and IT. Now in the commercial sector, we are highly focused and attuned to a number of very important megatrends that are affecting our business. They're creating growth opportunities and some really exciting opportunities for us going forward across each of our end markets. This first one that comes out is the 2 items, the Internet of Everything and the increasing electronic content across our AMII markets. And you can see some of the areas where this creates opportunity and Anthony will go into more detail, but in automotive, it's in areas like electric vehicles and ADAS and vehicle-to-everything communications. In medical, it's the continued advancement of medical testing and diagnostics equipment as well as robotics, and for patients wearables and implantables. And then in industrial, we have continued advancements in factory automation, something we're taking full advantage of in Penang. Second set of major opportunities for us is the ongoing explosive growth of data. And what that's driving in terms of needs for more signal speed and more bandwidth and in turn, what that's doing in terms of the requirements for managing data and high-performance computer as we see in our data centers. And in terms of opportunities for us, we're focused on our hyperscale data center and our cloud computing customers, all of which are seeing rapid growth and opportunities for us and driven by AI, machine learning, large language models, and of course, has been in the news so much here in the last month or so, the generative AI. I'll talk more about that later. So let me take just a minute to review our outperformance since 2019 in the commercial sector. And you can see during this period of time, we grew 35% and when you compare that to the reference Prismark, SAM, you can see that our compound annual growth rate was 10.6% compared to the Prismark reference at 9.4%. And I think it's notable to remember that this type of growth and outperformance was achieved in the face of some heretofore and previously never witness challenges and upheaval that came out of COVID-19. We had wild demand swings. We had massive supply chain disruptions and we saw the emergence of inflation. Now critical to our ability to put up that track record is a disciplined commitment to selling TTM differentiation to our customers and it starts with our reputation. TTM is well known across these markets and has decades of track record. During which time, we have really distinguished ourselves for customer performance and service and are known for our financial strength and financial discipline. The second differentiator is Technology Solutions. And by this, I mean our focus on early engagement selling. We get with our engineers that our customers early. We understand their concepts. We collaborate with them on their road map. Ultimately, we help them to develop new products to address their needs and to create higher ASP products and revenue streams for TTM. The third differentiator is what we believe is a largely unique coordinated global sales model. Our sales force includes global account management teams. It includes regional sales personnel and it includes global field application engineers. Typically, for a major customer, our global account management team will serve as a quarter back, so to speak and they will coordinate how we use those various teammates in support of customers, many of which who have multiple locations around the world as well as a complex network of EMS and ODM partners that we need to coordinate to be able to successfully manage their business. Last but not least, is our global footprint. This is a real unique advantage for us and it means different things to different customers. For example, we have customers that take advantage of multiple plants to support new product introduction through production. We have other customers that take advantage of multiple plants because they want to have capacity, surge protection and flexibility options. Others view our regional footprint as an asset because they can use it to protect IP concerns or more recently, a lot of focus on supply chain resiliency. And lastly, buttressing these differentiation factors is a disciplined operating model. First and foremost, we are customer focused. Our business units operate very closely with operations. And we pursue everything with agility and speed to execute for the customers. In addition, on the strategic investment side, supply chain resiliency. A perfect example of this is the investments we're making in Penang right now. TTM is the first mover in Southeast Asia. Our customers are extremely excited and so are we. And this is going to create a brand-new area of competitive advantage for TTM going forward. Tom talked about some of the M&A initiatives for commercial sector, which are really about continuing to build regional presence and strategic capability there as well as building out our RF and specialty components business. So let me shift gears here and talk now from this point on about our data center computing and networking businesses. First, a bit about the names. The data center computing is largely data center customers, but it also includes a portion of semiconductor customers. And you can see some of the names and logos at the bottom there with examples of those customers. On the networking side, this business is primarily just that networking, but it also includes telecom infrastructure customers. And that has largely become more of a niche business for us and I'll spend a little bit of time talking about that in a subsequent slide. Across these markets, we did $665 million of revenue last year, servicing 395 customers. And again, we've put a representative listing of some of the customers we work with in each of those end markets, many leaders in both sides. And one of the keys to our success has been very long-term relationships and deep relationships with a number of these leading customers. So now let me take you through how we view the data center and networking portions of these markets. And I'm going to start with a walk-through of the TAM and SAM numbers from Prismark and compounded annual growth rates for these markets. And then I'll talk about some of the submarkets we're focused on and the growth drivers that make those markets exciting for us. First of all, data center. Prismark refers to this as server storage. And you can see 2019, the total available market was about $5 billion with a forecast to grow to $12.3 billion by 2025. Above the bars, you can see the 3-year CAGRs going backwards and forward for the total available market. When we look at the SAM, taking out the substrate and the commodity board, you can see that market goes from $3.6 billion to $6.8 billion. And again, the reference compound annual growth rates. Shifting to networking, what Prismark refers to is wired infrastructure, the TAM $4.7 billion in 2019 with a forecast to be $7.6 billion by 2025. And again, the reference CAGRs. Looking at the SAM portion of that $3.6 billion to $5.2 billion. Now with those figures in mind, I would like to shift your attention to the right, and you can look at 2 of the submarkets that we are highly focused on hyperscale and cloud data centers and a couple of interesting facts. When you look at the cloud service provider business, it's now forecast that cloud service providers will account for more than 50% of all server revenue by the end of this year. And the data center overall will account for all switch -- 50% of all switch revenue by the end of next year. Now looking at the bottom, some exciting growth drivers, cloud computing spend, 5-year CAGR, 2022 to '27, 10.5%. When you look at the cloud server revenue portion of that business, 11.8% CAGR over that 5-year period. To the right, artificial intelligence-related hardware, CAGR of 20.5% during this period and then artificial intelligence machine learning networking gear switches, routers, almost 40% CAGR over the next 5 years. So as a result of this focus, we have substantially outperformed the greater data center computing as well as the focused data center market during this time period. And you can see here on the left, looking at our total data center computing that first market that I discussed with you. Revenues grew from $237 million to $378 million over this period of time. And we outperformed the reference Prismark CAGR, 16.8% to 9.2%, during which time our share grew from 3.6% to 4.4%. If we look at just the data center business alone, our business has grown from $170 million in 2019 to $295 million in 2022. And there you see that the 3-year CAGR jumps to 20.1% versus the Prismark reference at 3.4% and our share has grown to 5.3% in this market. Now when we talk about the networking side of things, it's a different story, but it's still an attractive story for us. And I mentioned earlier, we have really made telecom infrastructure more of a niche market for us. We've also become much more focused in our networking business and shed a lot of the commodity business that we saw in that market as well. The reason for the niche focus in telecom is the PCB requirements and the nature of that business has largely become commoditized over the last 4, 5 years. And as you can see, when we look at that overall market, we actually had a negative 1% 3-year CAGR compared to the market at 9.8% and our share fell 3.8%. When we look at networking, even with that selective approach and focusing more on the high end where we really see some fertile soil, customers that value our technology offering, our differentiation and really have a need for our technology solutions. We've been able to have a 5.4% compound annual growth rate through this selective approach. The other thing that's attractive to us out of this is that technology that we see in these highest end switches and routers is really technology we can apply across our data center business as well as our other commercial sector end markets. So let me move on to our growth strategies for this business. I've talked a lot about focus today, focusing on the fastest-growing submarkets and customers and the customers that have the needs for our advanced technology requirements, but I'd like to share with you the rest of our list and it's -- there's 5 on this. The second is to grow our customer base. We are focused every year on growing our customer list across all of our markets. For the reasons I've shared already today, we have a lot of focus on that, obviously, in data center and that can be with new OEMs or also their ODM partners. Gaining market share, in that networking business, I just discussed that really entails growth through our maintained leadership position. In data center is capitalizing on that rapid growth to grow faster than market with our existing and new customers. And then cross-selling, how can we take our PCB leadership position in our RF&S specialty components and look at selling product solutions across customers and end markets or combinations of those to create unique product solutions for our customers. And then all of that together are pursuing those strategic program wins that Tom talked about, pulling it together to win the programs to give us long-term revenue streams that are attractive ASP programs for TTM. And lastly, executing that differentiation to deliver value-add solutions, whether it's the technology solutions through the production or executing the global sales force or the global footprint. Now I've also talked about Technology Solutions a number of times today. And I'd like to take this opportunity just to give you an example of what that might look like. We talked about it generally, it can be reviewing where are the product concepts going, what's your road map look like? But eventually, you get down to what are your product needs. And in this case, I'm talking about a hypothetical situation where we'd be working with engineers with a data center customer. And on the left, you see a rendering of a typical data center architecture, starting with your rack of servers on the bottom, your top-of-rack switches, your leaf switches, your spine and any core switches, which allow data centers to communicate with each other. On the right, you can see what we're depicting here is making that step from 400-gig switches to 800 gigabit switches. And when you get into that discussion, you really have to start to look at a number of factors. And this is what our FAEs would be doing with our customers. What are the materials required to support these new PCBs in these new switches. What type of board size are we looking at? What kind of layer counts? What are the drilling and plating requirements and specifications. Do we need to entail sequential lamination? Is there a high-density interconnect? Are there requirements for smoother copper technology to be able to support the signal speeds and the signal integrity. And then what are your testing requirements, not only for quality, but for reliability, when you think of the end-use application and customers of these data centers, they cannot afford to go down and our boards are a key part of that and so these customers have very stringent requirements for reliability testing. So this is a type of example we would get into in these engineering early engagement discussions. I'd like to close here with several success stories before handing off to Anthony. The first is with a data center and networking customer with whom we've experienced very rapid growth. And the customer relationship originally began because of the customer's attraction to our ability to support different business units with different plants. So we use different plants from our footprint in a very focused support model for that customer. They also were attracted by our commercial technology center and the ability to support them on R&D work for new technologies in the future. What really cemented the relationship was our ability to creatively use the footprint last year to bring more plants to bear to execute for them on a very unforecasted surge in AI-related data center growth. The results, we've grown that customer relationship 459% since 2019 and had about $150 million of revenue last year. Our products that we support them with are advanced and high-technology line cards, network interface cards and -- why we win? It started with that reputation but over the years, we've built very strong multilevel relationships. As I mentioned, they value our technology and our R&D but we're really was the clincher is executing that global footprint to be able to respond and execute to an amazing surge of business that was not forecast at the beginning of the year or throughout the year and then being able to manage it and coordinate it with our global account management team. My second success story is a hyperscale data center customer. This is more of a steady growth story. The relationship has been long term. It was originally started with the customer's attraction to us because of that reputation in the industry and the footprint. They've used the footprint to support different types of technologies. More recently, they are really interested in the footprint and the regional aspects of our footprint to be able to support their IP concerns and their supply chain resiliency concerns. Since 2019, the revenue has grown 11% to about $70 million last year. And our products, again, are advanced and high-technology line cards going into servers, accelerator cards and network interface cards. Why do we win? Once again, we operate weekly with this customer at multiple levels of relationships across both organizations. Obviously, they take advantage of our advanced technology capabilities and the footprint. Historically, they've been a user of both our U.S. and our China footprint. This is one of our partners for Penang. They are extremely excited and anxious to get started with us in support of their supply chain resiliency strategy for PCBs and then the ability to support a business model that operates on short lead times and often has very quick peaks and then valleys and to be able to offer them that flexibility and to manage their business through our global account management team. So in conclusion, I hope that this has given you a better sense of the commercial sector and in particular, our data center computing and networking business. We are very well-positioned, and we're executing for long-term growth. Key to that has been and will continue to be focused, focusing on the fastest-growing submarkets and the customers within those submarkets that have an interest in our technology and where we see opportunities being fueled by those mega trends I spoke about in the very beginning and we are winning. As I've shown you today, we're growing faster than market. And we're doing that by executing on our growth strategies and leveraging TTM differentiation to create value for our customers and competitive advantage for TTM. So with that, I thank you very much, and I'm going to turn it over to Anthony.

Great. Thanks, Doug. Good morning. It's my pleasure to be here today. By way of introduction, my name is Anthony Sandeen, I'm the President of the AMI&I Business Group that is hopefully for the last time, Automotive, Medical, Industrial and Instrumentation. My background, I joined TTM about 3 years ago. Prior to that, I had about 8 years with General Electric, 8 years with Amphenol. And then many, many years in private equity portfolio operations and M&A. My commonality, though, across that experience is really deep exposure to many verticals, primarily being automotive, medical and industrial, and then relationships across those customers many of the same customers that we have today. Today, I'm going to tell you about AMI&I, and our business has done really well. We've done better than market. We've gained share and we go to market with a differentiated offering, and we deploy a disciplined approach across a diverse set of customers and end markets. As a result, we're a thriving business and I'm very excited to tell you why. I'll take you through our markets overview. I'll cover a couple of success stories at the end and then discuss briefly some of the growth drivers that we're seeing. Okay. So if you look at AMI&I, it's helpful to think of us in terms of automotive and MI&I. They're quite different. Revenue point of view, we were $920 million last year, split fairly even across the 2 segments. If we look at automotive, automotive is relatively a low mix, high volume business. We've got a relatively smaller customer base. Our customer base is largely Tier 1. So that is companies like Bosch, companies like Vitesco, companies like Continental, we sell to them and they sell to the OEMs. So we're selling to Bosch. Bosch is selling to Daimler or selling to General Motors. However, more recently, with the advent of new energy vehicles, new kind of technology, we are now engaged directly with the OEMs. So we now go to market directly with companies like Tesla with Rivian, with Aurora. MI&I, on the other hand is very fragmented. It's a large global customer base. It's very, very much a high-mix, low-volume business. That's a model that most companies struggle to address. It's something that we do very, very well. And I'll take you through reasons for that in a moment. Okay. So let's look at overall automotive. The following slides, likewise to Doug's, it's going to show you overall total available market. Then we'll exclude that business that we do not address and show you the served available market. So here we have automotive from $7 billion in 2019 to $11 billion in 2025. Factoring out what we do not address, you see our served available market from $4.7 billion to $7.7 billion. Looking at the lower left, now this chart is really, really interesting. What this is showing is that content per vehicle is growing, okay? And this is illustrated if we look at the data points, in 2019, we had about 92 million vehicles produced. Forecasted for 2025 is 90.8 million vehicles, a delta of negative 1.5. So overall vehicles have been reduced, but the overall content per vehicle has increased from $76 to $122. So even in a flat market, we're able to grow. Why is this? It's simply that additional electronic content is driving additional opportunity? What's driving that electric content is really a couple of the mega trends. And that's really the electrification of the vehicle and ADAS. This is the advanced driver assistant systems. When you see ADAS, think of autonomous driving, broadly speaking, okay? And the electrification and the autonomous driving is driving faster areas within automotive. So these are the submarkets that we're focused and where we are positioned well to capture. Okay. Going into medical. Similar, you see total available market factoring out. We go from about $1 billion in 2019 to $1.2 billion in 2025. Medical, again, a highly fragmented market, but we've identified the areas that we want and where we do not want to participate, okay? They do not want to participate is equally important. One area that we are focused is on medical robotics and continuous glucose monitoring. Medical robotics, this is really driving access to healthcare in new geographies, sometimes through remote surgeries and this is all enabled by faster bandwidth. On the continuous glucose monitoring side, this is something that diabetes used to be a kind of a western disease. Unfortunately, now it's worldwide, advent of type 2 diabetes, I mean it's affecting greater portions of the demographic population meaning children. This is increasing, unfortunately, the market. Other areas for us that are very important medical implantables, patient monitoring, medical imaging. All of these submarkets require some or all of our product offering, some of the attributes that we bring to the market. These are things like high technical requirements, a global footprint. And really, I'll touch on a number of times here is our ability to seamlessly transfer business from North America to Asia Pacific. And what that means is we first interface on new product introduction, NPI, some of the front-end engineering, development of prototypes, the ramp of initial production. And once it reaches serial volume, then we're able to transition to Asia Pacific and that's something that is unique in the industry. Okay lastly, industrial instrumentation, again, total available market, 2.7% to 3.6%, factoring out where we want to play at $2.2 billion to $3 billion. Some markets that we're really focused on here, industrial automation and robotics. This is really the online shopping. This is the warehouse fulfillment and manufacturing in general and also key as some of business is on showing back to the United States, how do we remain productive, that's in robotics and automation. Other areas of interest for us semiconductor process equipment. This is where we're very bullish on mid and long term and then test and measurement. And again, important for us is these are very critical industries, mission-critical, very high barriers of entry, the need for repeatability extremely high and where we bring value. And then again, once we do that front-end work in the United States, transferring to Asia Pacific, really, really important. Okay. So overall, we've got great outperformance through this very challenging environment, something that we're very proud of. If we look at automotive, we've got a 3-year CAGR of 12.3% versus 10.6% in the time period and a modest increase in market share. How did we do this? Number one, we ask for more business. We've got relationships with customers and sometimes it's as simple as asking for more than your fair share as long as you have confidence to execute on that request. We had the right focus in the submarkets. This is ADAS. This is electrification. We also knew where we didn't want to play. So there is a point here of improved customer mix and within each of those customers, some improvement on the portfolio mix, really important. It's important to know where we can deliver value and where we cannot. Lastly, new program wins. I'll cover in detail in the following slide, but it's paying attention to our overall portfolio and how our new program wins are staggered over the out years, really, really important as you manage automotive. In MI&I, look really proud here, we're #1. TTM is #1 market share in all 3 of these areas, industrial, medical, instrumentation. It's an achievement that we're very proud about. We've taken a difficult market to address this high mix, low volume, global fragmented, very difficult. We've taken that and we've really exploited the opportunity there. We've got lots of opportunity here due to the overall size of the market. And we've got an opportunity to somewhat copy and paste what we've done in North America to new geographies. So taking business development to EMEA to Asia Pacific, certain geographies, Southeast Asia, doing that business development in those geographies with serial production in Asia Pacific, really, really exciting for us. Okay. So let's talk about automotive and just very quickly for everybody's understanding the way automotive works is we win business today and that goes into production in about 2 years' time. And then it stays in production for about 7 years, okay? And over that 7 years, you have a couple of years of ramp-up, mass production, you have 3 years of kind of peak volume and then there's a ramp down and end of life. So generally speaking, opportunities lasting for about 7 years. We have generally averaged about $530 million of new program lifetime value awards per year, $530 million in 2021 and $532 million in 2022. However, the last couple of quarters, Q4 of 2022, we had $279 million of lifetime awards, follow that up by $267 million in the first quarter of this year. The key for us, again, is the intelligent management of this portfolio and making sure that we're appropriately staggering awards over the out years so that we never have these peaks and values of output and revenue. All right. I'm going to talk about 2 success stories. The first is really rapid growth, 2x rapid growth by design with a major medical customer. For us, this involved early involvements that drove the specification and the design, which was very important as this came into production in terms of competition. So being in the driver seat there, really important. We had this footprint that enabled North America new product introduction and engineering with eventual transfer to Asia Pacific that was always going to have to be the plan, okay? We were never going to be able to produce all of this in North America for economic reasons and then being able to address a very fast-growth market. So what this was 4 TTM sites around the world. We first had a step from 0 to 40 million units in year 1. The plan with this customer, once they gained FDA and European regulatory approval, there was going to be another jump in the addressable market for them. So from 40 million units in year 1 to then 160 million units in year 3. This is a 4-layer HDI board, very difficult tolerances, very ultra-thin profile. The idea on the board is very difficult. And again, really, for us, it was why did they talk to us first. They knew we had the reputation. They knew we had the strength, medical product, very difficult, high reliability. We needed to be here yesterday, today and tomorrow. So that got us in the door that MPI development, global team are really, really good. And then they knew that they could count on us to handle these successive ramps and we handle the first one great and we're in the midst of the second at present. Second success story is with automotive and this is really interesting. So this is 17 different part numbers, okay, across vehicle, fleet and infrastructure. So this is a car or a fleet that you also have charging systems maybe at your home, maybe at the place of business or out in the field, okay? A number of products across this. This was ADAS. This is connected car. This is power chassis and energy storage. So really exciting for us, kind of content value per system, how you define that system may be a bit difficult, but generally speaking per system, about $350 per system. Years of production, again, back to that 5- to 7-year time frame and a total value opportunity for TTM of about $150 million. The high voltage, the heavy copper for us, really important. That high-voltage speciality that we have that speaks to the electrification of the car and heavy copper, also an area that we stand out. Why did we win? Again, early involvement here was critical because it allowed us to talk to the customers first, where we could devise and define specifications and requirements and that seamless global transition from North America to Asia Pacific. Okay. So I'm going to wrap up here with our growth strategies: number one, we're focusing on the right submarkets. Within each of those submarkets, there are customers that we're focused on and at the customers, there are certain applications that we hone in on. That's really, really important to know where we can add value, where we can charge for it and where we don't want to waste our resources. So important for us. That high mix, low volume, it's a speciality of TTM, great for us. Automotive tremendously exciting with electrification and ADAS coming. Expanding our customer base. Again, this is a deliberate customer acquisition model, growing more with our existing customers and selective acquisition of new customers, really, really important, that penetration of EMEA and other geographies in Asia Pacific for the MI&I business, a huge opportunity for us. Okay. If we look at expanding our customer base, how do we do that? Number one, that global sales force, the FAE team, those field application engineers, a big differentiation for us via the competition, talking about automotive radio frequency RF, that's the autonomous driving, the heavy copper, the electrification of the vehicle something that is really exciting for us and you saw that earlier with the CAGRs. And lastly, investing for growth. So my business, Penang is hugely important. My customers are concerned, they demand security of supply, supply chain resiliency for all of the reasons that we know. Penang is incredibly important and incredibly exciting for us. We'll continue to invest incrementally across the rest of the installed factory base in technology, in capability, in capacity. And then lastly, some of the tools that you don't really see in the industrial space, things like CRM, okay? You certainly know CRM. You don't see CRM in industrial and Asia Pacific. So that's a way that we stand out, how we manage our funnel, how we manage our sales pipeline, our future revenue sets us apart. So for me, that's the end of my presentation. I'm now going to hand over -- we're just going to do a restroom break. So we're going to do a quick restroom break right now. Thanks, Anthony, but thanks a lot. I didn't want to introduce Cathie and then -- Yes, exactly. We're going to do a quick restroom break right now for about 5 minutes. And I would ask if those TTM employees use an alternative restroom other than the one here so that our attendees can use the one here because we don't need escorts. That was where I was looking more exactly and then one point on the slides. So on the webcast right now, all the slides are being broadcast real time and then we'll post them all as PDFs at 12:30 when we're done with the presentations, 5 minutes, yes. [Break]

All right. So what isn't better than an A&D video to start, right? So very happy to be with you here today to talk to you about Aerospace and Defense. But first, let me introduce myself. I am Cathie Gridley, President of our Aerospace and Defense business, joined TTM in 2019 and bring to the TTM leadership team about 25 years of A&D experience having led businesses with companies like Goodrich, GE Aviation and most recently with Northrop Grumman. I'm going to talk to you today a bit about our sector overview and then talk about our strategic focus for growth. And then I'm going to turn it over to Rich Hines, and he's going to talk about how we're differentiating through our engineering capability. So first, just a quick A&D glance, who we are. So we are $1 billion complements of the acquisition of Telephonics last year. We made that great milestone, puts us in the top 40 U.S. defense manufacturers. Our footprint almost exclusively North America with a small amount of commercial aviation in Asia and our U.S. defense production capability, all exclusively in the United States. We have a dual-source strategy, which is a real strategic differentiator for TTM here in the United States where we have dual source on many of our more nationally critical program capabilities, and we produce in multiple locations on behalf of our customers. It provides us with the ability to bring them supply chain resiliency through TTM's manufacturing. And it also allows us to flex and surge and to adapt to their growing demands. So it ends up being a big differentiator for us and something that our customers seek from us on a regular basis. So with our portfolio, we have more than 50% in the design to spec as well as highly engineered products. And we span now with the acquisition of Telephonics from the foundation of our portfolio, which is Tier 4 PCBs, all the way up through 2 Mission Systems in Tier 1. When we consider our portfolio, it spans 3 primary domains. So the defense domain, the commercial aerospace domain and the rapidly going space domain, and I'm going to talk about those in a bit more detail for you. We align to our customers' missions. So Tom spoke about this a little bit in the beginning. We have looked at our organization and our portfolio and the lens through which we both face our customers and have structured our sector is through that mission orientation, and I'll talk about that in a bit more detail as well. And I'll ask you to cast your eye to the bottom right hand of the slide to our vision. We live and breathe this vision every day, to be that reliable indispensable and trusted partner, in particular, for our major OEM primes and to ultimately be a partner to the war fighter and to the end-user customer base. A little bit about our journey. So TTM's A&D business is built on an incredibly strong foundation of TTM as North America's leading PCB manufacturer. And this is a true foundation. You hear me use that word regularly. This not only is it the foundation for the A&D business, but it is the true foundation for integration of electronics. In 2018, with the acquisition of Anaren, that really began the launch upward in the vertical and this is the formation of our vertical integration strategy. And with that acquisition really brought us RF, so radiofrequency, microwave capability as well as our footprint in microelectronics. We've taken the opportunity over the last several years to hire key leaders into aerospace and defense from a number of very recognizable OEM primes like Raytheon, Northrop and Lockheed. We did this really to expand our knowledge of those key customers to understand how they set priorities and to really make sure that we -- when we talk about mission, when we talk about engineering and technology differentiation that we are able to articulate that and translate that on behalf of our OEM customers. Moving on. So the acquisition of Telephonics has really propelled us into that Tier 1 product group but not only that, it brings us strong systems engineering capability and greater integration capability at all 4 tiers of our value chain, gives us direct access to end user customers, think these folks on the wall over here for you on the phone, all the services, especially in the United States as well as internationally with our allied ministries of defense. And then in terms of where we've gone and what this has all done for us. So if you cast your eye to the right-hand side to the chart on the right, you'll see that we have more than doubled since 2017. And yes, 2 key events, the Anaren acquisition and the Telephonics acquisition were big parts of that but not only did we double our revenue over that time period. We also expanded our addressable markets and expanded our product groups. So we added RF components, microelectronics as well as mission systems. When we look at our investments and we look at where we're headed, it is the investment in these significant acquisitions as well as the investments we're making in our manufacturing footprint, our capacity expansion and our capability expansion as well as the investments that we're making in R&D that are really allowing us to better address and capture more of the share of our addressable markets and to both leverage our vertical and horizontal strategy for growth, and I'll talk about that a bit more. So a few highlights first on 2021-- 2022, which was really a stage setter for us and so when we look at what happened for us in 2022, it has really set a great stage for where we're headed with the A&D business. Firstly, our revenues grew over 19%. That extraordinary growth really driven by the Telephonics acquisition, but we did see a bit of growth in our underlying organic business as well. We had record bookings back to back, 2021 was record bookings. We were very excited about that and then crushed it with 2022 record bookings as well, which has really delivered us that backlog of $1.38 billion that Tom referenced. One of the really great things about that backlog and when you think about a strong A&D business, it is that multiyear backlog situation that you have, right? And so when we think about that nearly $1.4 billion backlog, we think about that multiyear position and what that does for us. So A&D is a longer-cycle business, it gives us that opportunity to see more of what it is that we need to do with strategic sourcing, supply chain management as well as our labor needs. What are the types of skill sets that we're going to need going forward and then we can take our appeal efforts and our recruiting efforts and target that labor so that we are better prepared for that multiyear position that we hold in our backlog. Again, the heavy lift that was the Telephonics acquisition and the integration effort last year. So we still have some of that integration activity underway, but we really did a lot of the groundwork in the second half of last year, have really had good benefits coming through in terms of those cost synergies that Tom referenced. And now are really turning our focus to those revenue growth synergy opportunities that come with that integration. Moving right along, talking about where we are from a supply chain and labor perspective. The whole industry struggled last year in terms of supply chain, in terms of labor access and you'll hear that repeated throughout. And one of the things that we put a lot of emphasis on last year was taking deliberate action in how we are addressing both the challenges that we're seeing in the supply chain, better forecasting, again, taking advantage of that long-term view of our revenue stream and through our backlog and then also in terms of addressing labor. We have detailed operational and margin improvement plans. I know Todd is going to talk about that a bit as well, Phil. One of the key areas of emphasis for me has to do with the operational improvements that will shorten our lead times, and we'll increase our capacity because demand is very strong, especially on the defense side of our business as well as the space side. And then finally, in 2022, with the expansion of our portfolio with the broadening of the submarkets that we are able to address, we set up A&D as a sector and we created 2 business units underneath them. So I'd like you to cast your eye to the right-hand side of the chart, please. What we did was we have 2 business units now. The first one being radar systems and radar systems, along with our sensors is about half of our portfolio. TTM has a long history and a strong position and very good customer relationships when it comes to radar. The growth here on the radar side of the business really is about that technology advancement. And if you think AESA radars, so active electronically scanned arrays, this is a growing, highly technical area, and we are well positioned in this, both with our customers and through our own advancement on radars through our mission systems. On the right-hand side of the 2, we have C4ISR & Space, which also happens to include our commercial aerospace domain. This is a complex business unit. So it is a more diverse set of market segments and one of the reasons that we split in this way was to allow us to hone our focus on our growth strategies within those submarkets. So on the C4ISR & Space side, First of all, if you think of C4ISR, think of the nervous system of the military. And then we have Space, which is rapidly growing far and away, the largest growth area for national security as well as for commercial space, and we are well positioned in both of those domains. If I walk down just a bit further, looking over under C4ISR to give you an idea of the mission areas that they are aligned to. We have surveillance and communications. Tom mentioned both of those really strengthened by that acquisition of Telephonics. We have a long history and navigation and guidance. Moving along to electronic warfare. And I'm going to just take a moment here. When you hear the word electronic or you hear electronics, and you heard it on the commercial side, and you'll hear it again and again on the A&D side, you should think TTM. The foundation of all electronics is the printed circuit board. And PCB is required to integrate electronics. We have an expression that we use on a pretty regular basis because within the U.S. government and certainly all around the U.S. and globally, there's all of this focus on chips. And that's great but chips don't float. They have to be integrated with the PCB. The Printed Circuit Board, again, the foundation of our A&D business and the foundation of our integration strategy vertically up the supply chain is a key in all electronics, including in electronic warfare. Let me talk about Space. I could spend a lot of time here on Space. There are huge opportunities. We have been seen with our products through history back to the International Space Station, rolling forward to programs that are clearly recognizable like Mars Rover and James Webb Space Telescope, among others. Tom mentioned it. I'll say it again. When we think about how we are aligned from an A&D perspective and you look at the major OEM primes or you look at the U.S. Department of Defense and the other major services, they're all focused on the mission. And so when we have restructured A&D as a sector and we have reorganized, we are focused on mission first. We then look within those missions through the lens of programs and I'm going to talk more about franchise programs. But first, let me talk about our product portfolio. The way that this chart is depicted moving from bottom left to top right, really shows our move up the vertical. We are highly differentiated throughout every tier of this supply and this product group. If you look to the bottom left here, we're really talking about PCBs and Interconnect, again, the foundation for our integration strategy. A couple of examples here, bottom left, 2 substrates, both of these substrates manufactured in our advanced technology center in Chippewa Falls, Wisconsin where we're also investing in new processes, material utilization and manufacturing capabilities. If you move up to the right, you get to microelectronics where our RAD hard products are on virtually every significant space program. A good example, sort of in the middle, you'll see there's a stack there, and that is an active beam former and we have been providing that active beam former, which is the integration of products from other TTM sites provided into Syracuse and then that package provided on a number of space programs. We've been doing that for 20 years into the space domain. So we have space credibility and experience. And we are going to optimize that and leverage that in an incredibly rapidly growing domain. If you move further up the right, try to use my laser pointer here, Todd. Sort of in the center, you've got a couple of chassis. These are integrated chassis that are built in our Stafford Springs location. And this is not Lego building, right? So this is not just putting a bunch of individual pieces together. This is the proper integration of technology into these chassis, again assembled in our Stafford Springs facility. And then we really shift up to the right and we get into our Mission Systems area, again, really tied to the Telephonics acquisition. And we have some representations up here at the top. We have communication system and then further to the right, we have radar systems. And then down here, we have what is our PDRS, which is our Passive Detection and Reporting System. This was an industry-first all-mode IFF, so indication Friend or Foe solution, recently selected by the U.S. Army. We recently went under contract with them, and it provides aerospace situational awareness. So think, for example, is tied to 2 missile defense installations, identifies friendly versus enemy aircraft. And one of the things I will say, if you think about the breadth of our capability and what we bring to the market, we did not consider scale at all in the development of this chart. So we produce about the size of a grain of sand components in our Salem, New Hampshire facility, all the way up to this shelter IFF solution up here, manufactured right here -- built right here in Long Island. And we span the verticals but we do it very deliberately. And part of that vertical strategy that we have is to find the right point within the tiers, whether it be Tier 4, complex PCBs, Tier 3 components, subsystems or all the way to the mission system, we find the right point in that vertical to bring the best value to our customers. We use our engineering capability to be an extension of our customers' engineering bench strength so that we can help them to optimize their design. So now I'm going to talk just a little bit about what our growth opportunity looks like by segment. And so what you see up here are the 5 product segments that we look at when we're considering our growth strategies. And I'm going to draw your attention first to the serviceable addressable market line here, 2022 SAM. So you can see billions of dollars of opportunity reflected on this chart. The first 2 columns, PCB substrates and value-added assemblies. So this is about half of our portfolio. We are looking at CAGRs all heading in the right direction across all of these product segments. We have high market penetration in the PCB substrate and moderate penetration in value-added assemblies. We expect in both of those segments to grow with the market and you'll see that when it comes to PCB and substrate, how are we going to do that? So we are really going to take its full advantage of our manufacturing footprint and our manufacturing know-how. And the thing that differentiates there is that where other suppliers tell our customers that what our customers need is impossible, we do it. We know how to manufacture it or we figure out how to manufacture it for them. And it is a huge differentiator for us. We regularly hear from our customers who may first go and try and find that low-cost solution impossible, can't be done or they lose a lot of value and it becomes less affordable. But with TTM, through our know-how, through our engineering capability, we are able to bring them that solution. When it comes to value-added assemblies, again, similar to what I just talked about in terms of what we do in Stafford Springs, we will see with the market growth. It's a great CAGR, plenty of opportunity here. It is a smaller addressable market but we will be very deliberate here. We will select those opportunities where we can create value for our customers and not look at opportunities where they're really just looking for something that more resembles are bundled solution. And then we move to the right, where things get really interesting. And if you look at our market penetration, it is low in all 3 of those segments, which should not surprise you when you consider that, that is over $30 billion worth of addressable market. When we talk about microelectronics and I talked about that a bit already. It is a sizable, serviceable, addressable market and it is our largest growing segment with a 7% estimated CAGR. We are going to outgrow the market at least that is our expectation in all 3 of these segments. We're going to expand our capability areas in microelectronics and in RF microwave and we're going to do this in a few ways. So we're going to look at advanced packaging and invest in advanced packaging. We're going to invest in 2.5 and 3D techniques and custom designed semiconductors, such as the ASICs, which are I have to cheat on this one because A&D is a -- has a love affair with acronyms, Application Specific Integrated Circuits. We designed those here in Long Island and also acquired that capability when we acquired Telephonics. And we're also going to expand system-on-chip capabilities and look at investments in that area as well. When it comes to Mission Systems -- Sorry, I'm going to back up. On both Microelectronics and RF microwave, we're also investing to increase our capacity. One of the reasons that this is so critical for us is because the need for speed. The Department of Defense and for national security, we need speed. This is a mantra that we hear out of the DoD speed of technology introduction, speed of product. When we invest to increase our capacity and we invest in the right talent and the right engineering, we are able to bring our products to our customers faster. So I'm looking forward to seeing lower lead times and also to that expanded capacity because the opportunity and the demand for microelectronics is significant and a lot of growth opportunity for us there. And then finally, moving over to Mission Systems. So Mission Systems' $11 billion estimated SAM, moderate growth, but we have low penetration here. And again, we will be selective. We will be niche. We will focus in those areas where we have great subject matter expertise. We find ourselves in a good position, certainly in communication systems and in SDI, where we are advancing our SDI being secure digital Intercom. We find ourselves well-positioned on a couple of key platforms. So most recently on the future attack reconnaissance aircraft, so FARA, recently awarded, we are well positioned there. We were actually well positioned there regardless of how that award went. So those of you who are familiar with that may have heard, was awarded one way. There was a protest. For those of you who are familiar with Aerospace and Defense, that does happen on a fairly regular basis. We had the benefit through our strategy and through what we acquired with Telephonics to sort of sit back and let that unfold in the way it was going to unfold because we are well positioned on both solutions. We are also working through and pretty well positioned on the future long-range assault aircraft, which is the flare. So we will see what happens there on the basis of what happens with future vertical lift, but we have solutions that play in that market very well. And then finally, in terms of what else we will do with the Mission Systems, we're going to refresh product and technology portfolio. We are investing in additional R&D for the Telephonics, the systems integration and the Mission Systems area of our portfolio. And in addition to that, and Rich is going to talk about this a bit more. We're taking the opportunity to really look at the Telephonics supply chain, where they have had challenges historically in being able to create those really strong strategic relationships. Our heritage CTM business is very well positioned to collaborate now and to find the right places for us to bring value through that vertical integration model. We are well aligned with industry trends and I'm going to try and make up a little bit of time because I'm conscious that we took a break here, but I'm going to talk about a few things here. So we know they're expanding defense budgets in the United States as well as with our allies, especially in Europe. And if you think about the great power competition, so you think about what's happening in the world right now, the United States, Russia and China. On a global basis, defense spending is increasing and that includes with our allies. With the acquisition of Telephonics, we also have the opportunity to expand our foreign military sales access. So Telephonics brings with it good access within Allied Ministries of Defense and foreign military sales, which are typically derivatives of U.S. defense products that we are already on, we will be well positioned with the support of the U.S. government to capture additional revenue through foreign military sales. Just a few other things. I'm going to talk about industrial policy and reshoring. So we've heard a lot about that. And if you aren't familiar with Section 851 in the NDA, which is the National Defense Authorization Act, so there is language in there now that has gone into law. That really requires the U.S. Department of Defense to procure it's PCBs, not in China. I know that sounds a little bit strange that, that actually had to be put in writing. But when you think about direct commercial sales and commercial applications, right, this pivot in the NDAA is very good from a TTM perspective. Our footprint in the United States is well established. We are the market leader here. And so we are ready for this shift that is being made. It is bringing more and more attention, not just on chips, but again on the whole ecosystem of electronics and microelectronics and the value of securing resilient supply of the printed circuit board as a part of that whole ecosystem. We're very pleased with commercial aviation recovery, which we are seeing come through in our bookings. We know that, that is coming. We have strong relationships and a long history of strong relationships with customers on the commercial aviation side. And then finally, franchise program announced. This picture on the right-hand side is a really good depiction. And if you look at the programs in particular, and I am not going to readily turn them off because I don't have that acronym skill set. But what I can tell to you and it should stand out for you is how well we span the various domains, land, sea, air, space, ground-based radar, air-based radar. And I'm going to talk about a few specific programs. We support over 200, but I've got a few that I'd like to highlight for you. So first of all, is the F-35 Joint Strike Fighter, the largest DoD program of record. TTM has over 200 unique part numbers on that aircraft. We support direct to Lockheed Martin as well as to several of the major OEM partners. In the support of that aircraft, I do have to cheat here to make sure I get all my acronyms right. We have the RF antenna, so the radio frequency antenna, which we provide to Northrop Grumman and they integrate into their fire control radar. Overall, on that program, we have over half a dozen TTM facilities that are manufacturing products for the F-35. We have over 2,300 pieces that we contribute to every single one of those aircraft. If we move on to another program, one that maybe if you follow TTM in the press, you will have seen we recently received a rather sizable award from Raytheon and that is the SPY 6 program. So AMDR/SPY 6 family of radars is a premier Raytheon program, and we are extremely well positioned. I believe we are the largest supplier into Raytheon on that program. On that program, we actually have the mission-critical OLBFN, Overlapping Beam Forming Network, which we produced out of Syracuse, but is supported by Denver and Forest Grove and soon to be Stafford in Connecticut with product that we integrate in Syracuse. On that program, we have over 16,000 pieces that we provide. And then we move on to HDR Homeland Defense Radar with a SPY 7 variant, which is the Navy variant. On that particular program, which is a Lockheed Martin program, TTM, again, incredibly well positioned. So on that program, we provide out of at least half a dozen of our TTM facilities between RF components and PCBs, over 200,000 pieces into each one of those programs. There are derivatives of that program that have already been accepted by Japan, Spain and Canada, and we anticipate additional international derivatives as well. So finally, a quick wrap up here. We expect to grow organically greater than 5%. We're going to leverage our manufacturing and engineering know-how. We're going to identify new opportunities for growth, especially as it relates to our acquisitions. We're going to continue to invest to optimize the capture of greater market share. And on the margin improvement side, we're going to continue to realize our acquisition cost synergies. We're going to execute on our operational improvements. And Phil and the operations team have really been doing an exceptional job of deliberately targeting opportunities there. We're going to increase our design engineering content, and we're going to add more value when we do so for our customers. And then finally, key takeaways. So we expect sales to outgrow the market. We expect our margins to outgrow our sales. And when all is said and done, we expect to continue to be that reliable and dispensable and trusted partner to our customers. And with that, I'm going to turn it over to Rich Hines to talk about differentiation and engineering.

Thank you, Cathie. All right. As Cathie mentioned, my name is Rich Hines. I'm the engineering lead for the aerospace and defense sector. I've spent my entire career in engineering, various roles at a number of companies, including Eaton's AIL, or Airborne Instrument Laboratories division, now part of L3 Harris, general instruments, Litton Industries, now part of Northrop Grumman and Telephonics, now part of TTM. So it's a little bit of a track record there. So we'll see where it goes from here. So if I'm successful at the inclusion of my discussion, you'll have a firm understanding of the approach we use to deliver technology-driven differentiated solutions. And in my opinion, there's no better evidence of providing differentiated solutions and securing positions on next-generation platforms. And TTM has been very successful in doing just that. Due to contractual restrictions, I can't discuss all of them, but I would like to just highlight a few such as our communications equipment is on board the Air Force's latest airborne tanker, the KC-46. You heard Cathie mentioned about our position on the Navy's SPY 6 radar, with our beam forming networks. And then also our Identification Friend or Foe Mission Systems is onboard the Navy's latest maritime patrol aircraft or subhunter, the P-8A. Those are really just 3 examples of more than a dozen recent next-generation programs that TTM is part of including a number of highly visible strategic and tactical platforms as well as 2 very high-profile DoD VIP platforms. Certainly, the acquisition of Telephonics advances our vision of becoming a larger provider of highly engineered solutions. It also provides TTM with an immediate presence as a Tier 1 provider in the value chain vertical. It also rounds out the product offering to cover all 4 tiers of that value chain vertical from highly differentiated PCBs, substrates and interconnect solutions through complex RF and microwave products, such as beam formers, integrated microwave assemblies concluding with integrated mission systems providing surveillance, radar, and communication solutions to both the DoD and international markets. It's actually that ability to cover all 4 tiers of the value chain has really unlocked a lot of potential relative to vertical integration. And we believe that this potential will provide us with pricing flexibility to enhance our position, win in significant competitive situations as well as expanding margins within less competitive or follow-on production situations. More importantly, it will also help us eliminate in some areas of our business, supply chain disruption. And I have a case study slide that I'll use to discuss an ongoing vertical integration activity that's doing just that. And then not to rest on our laurels, we have recently introduced a strategic innovation center of excellence with the sole focus of ensuring that we're planting the seeds for future differentiation. And I'll discuss a little bit more about that center of excellence, or COE, on the next slide. The integration of Telephonics resulted in a new engineering organization. It is constructed primarily of 3 design centers of excellence or COEs aligned to the verticals, the verticals in the value chain. We execute development programs, whether they're internally funded or funded by a customer by selecting resources from each of those sense of excellence based on the scope of the project and we execute those as integrated project teams. You can see by the numbers, we have more than 400 engineers, degreed engineers supporting the aerospace and defense sector with more than 200 of those actively participating in new product development. And of those, nearly 1/3 have advanced degrees. We also created a fourth center of excellence, which I just briefly introduced on the opening slide called our Strategic Innovation Center of Excellence. And it really has 2 main tenants to its charter: the first is ensuring execution excellence on all the elements in our technology road maps, and we'll talk a little bit about the road maps in a little bit; the second is to ensure that we continue to expand our technology through innovation so that our future innovation remains intact. And our target zone, if you look at the upper right-hand side of the slide, the target zone for our strategic innovation is really the intersection of our strategic vision, our technical competencies and then most importantly, the customer solution gaps. And it's an engaged early and engage orphan philosophy that we have to try to unearth what are those out-year solution gaps that the customers have that they're looking for solutions to help them fill their road map gaps. And I have a case study slide on early engagement that will walk you through how with that approach, we're oftentimes able to create programs that might not have otherwise been available to us. And before we leave this slide, I just want to touch a little bit on our total research and development spend. It really consists of 2 buckets, our internal research and development as well as contracted research and development, or CRAD. We're very fortunate to have a significant CRAD funding stream to support -- to supplement our internal research and development dollars. And I think it's clear evidence of the customers' belief we're providing advanced technology solutions as evidenced by their willingness to participate in advancing or accelerating various elements on our road map to help them fill technology gaps that they have in their technology road maps. And so internal road maps that we have that are really tied -- it's a water flow. We start with the sector vision, which then flows down into subsegment strategies. Our market subsegments are radars, surveillance, communications, EW, commercial aviation, space, the ones that Cathie had mentioned on the org chart. Those subsegment strategies then inform our technology road maps and then those road maps ultimately result in IRAD projects. Early stage investment is absolutely key in ensuring that we continue to provide differentiated solutions. And the 4 projects you see on this slide all come from our technology road maps. They also happen to cover all 4 tiers of the value chain. And I'll just briefly talk about each one of them, integrated versus federated. So the days of a single sensor for a single mission requirement are slowly disappearing and being replaced by something called a converged aperture, fancy name for a gadget that does more than 1 mission system requirement. Some of the enabling technologies that are going to be required in order to unlock affordable converged apertures our systems on chip and multi-signal RF front-end processing. So we're investing in both of those early-stage investments to ensure that we're able to support our customers as well as our own mission systems products when we get to the point where converged apertures are expected in the market, RF to bits. So the pace of technology acceleration with AESAs, active electronically scanned arrays, is very rapid. The next generation of AESAs is -- envisions actually digitizing at the antenna element. So they're trying to move the digitization all the way to the antenna elements. So you're actually digitizing RF frequencies. In order to be able to support that, again, both for our mission systems that we develop as well as our customers that rely on us for some of their technology, we'll be investing in the substrates that are ultimately going to be required to package the very dense transmit receive modules that will be required to unlock that next-generation AESA vision as well as the RF digitization to ensure we can digitize at very high RF frequencies to support various road maps. Size, weight and power, or SWAP, it's always a differentiator, especially when you're on airborne platforms. We will be investing in various advanced packaging techniques to ensure that we continue to be viewed as a company that provides SWAP differentiated solutions. Specifically, we'll be investing in what's called 2.5 in 3D packaging, a way to, again, package the high density of integrated circuits and dye that are going to be required in future solutions as well as embedded components, where we've had a lot of success in actually taking packaged integrated circuits and embedding them inside a printed circuit board to free up real estate for other types of circuits that cannot be embedded. We're also embedding resistors. We're also embedding Rhod dye. So the actual silicon wafer, we're embedding inside of our print to circuit boards. Again, all to provide SWAP differentiated solutions. And then finally, digital transformation. We've all heard about ChatGPT. TTM has certainly been investing in artificial intelligence and machine learning, specifically in our Mission Systems area. One example is we are currently working on a project to create a machine learning-based aircraft prognostics engine. And what that will do is it will use all of the audio that's available through the microphones of our communication systems that's installed on many, many, many platforms and look at audio signatures on that platform, apply machine learning techniques to predict and upcoming maintenance actions. Currently, maintenance actions are either reactive, something breaks, you take the aircraft out of service, you fix it, or proactive. The maintenance manual says, you got to remove the part and replace it even if it still has another 1,000 hours of useful life. Those are either wasteful or inefficient maintenance actions. We believe our prognostic engine will make those maintenance actions more efficient, which brings up the availability of the fleet, which directly ties to the overall readiness of the U.S. armed forces. Also under the digital transformation umbrella is something called model-based systems engineering and digital twins. Those are becoming table stakes, the DoD community, acquisition community. We've been investing in those technologies for at least 3 years now. As a matter of fact, our Mosaic AESA radar won a Navy challenge in 2020 that required companies that were interested in participating to define using the model-based systems engineering tool set, a next-generation, AESA based airborne early warning radar. And at the time, Telephonics, won first place prize in that Navy challenge. So we are certainly ready to support the model-based systems engineering and digital twin requirements that are emerging in the DoD. Okay. I touched a little bit on our early engagement philosophy, engage early and engage often. And that engagement can take on many forms. It can take on the form of road map sessions, technology road map session for the customers. It can also take on the form of engaging with their requirements community to understand what type of requirements are they looking to fill in the future. It can also take the place -- of the form of connecting with DoD labs to understand what research are the DoD labs looking at and then making sure we always stay connected with academia to see if there's any basic research ongoing that we can leverage as we work on our road maps. Probably the most important of all those engagement mechanisms, in my opinion, is the recurring technology road map sessions, one-on-one with the customer. Oftentimes, they'll also share you their road map. But we certainly go in. We show them our latest technology advances, the products that we are now introducing as well as the future items on our road map. These conversations almost always result in follow-on discussions. Follow-on discussions where they would like to collaborate with us on technology or follow-on discussions where they would like to collaborate with us on a potential pursuit. This is an example of using the road mapping sessions to identify an opportunity. We were sharing our road map, talking about a lot of work we were doing in our Interconnect solution area, specifically with rigid flex circuits. And they came up with a solution, a problem statement that they were looking for a solution for. They had a legacy interconnect solution for a 5 cabinet set of equipment, power conversion equipment. It had reliability issues and the size was too large to where they want to take the product. We told them based on the advances we had made, we thought we could address both those quickly created some prototypes. They evaluated those prototypes, verified that we met all of their criteria and then turned us on to create 53 unique interconnect cable designs to integrate all the equipment in those 5 racks. So I think it's a very good example of how you're just engaging early and often with the customer, you'll unearth opportunities. It's also a great case study of what happens when you provide differentiation. This is another example of a new -- a next-generation platform, the Columbia-class submarine, the first boat only started construction in 2020. When fielded, they will replace the Ohio-class submarine. So it's a brand-new next-gen strategic platform that TTM secured a position on because we can do things other companies cannot. And then the second case study that I mentioned was vertical integration. So certainly, the acquisition of Telephonics, you've heard a number of times, creates a company that can provide technology and products to all 4 tiers to the vertical chain. And that capability, as I also mentioned, provides us with pricing flexibility and more importantly, the ability in many areas of our business to minimize supply chain disruption. And this case study will discuss just that On the upper right-hand side of the slide, you'll see a product called our small form factor 44. It's an identification Friend or Foe product. For those of you with us today, you'll actually see that as well as many other products when we do the facility tour. It came out of development just about the time the acquisition of Telephonics was completed. It wasn't easy getting through development. We had some problematic suppliers. You can see there are 3 major components that make up our small form factor 44. And one is a fully integrated chassis, including enclosure and the Interconnect solutions, a high-power RF amplifier, and then finally, some next-generation processing and receiver circuit card assembly. The 2 at the bottom, the high-power amplifier and integrated chassis were 2 areas that Telephonics have decided to subcontract out the design and manufacture of those two. And it was difficult. So shortly after the acquisition, when the engineers started getting together from all the sites, we realized quickly, we can indigenize this entire bill of material. So the Long Island systems engineers quickly started working with the Stafford Springs Connecticut folks. And fast forward to today, we have our own version of that integrated chassis with the Interconnect solutions designed and currently in fabrication in some of our TTM sites, and we'll be showing up very shortly. The Long Island Systems engineers then engaged with the legacy Anaren folks up in Syracuse, and we are now designing our own version of that RF high power amplifier. So it's one example of how we can totally indigenize a bill of material and exit a couple of suppliers that were certainly creating drama in development and would have probably created a lot of drama in production. So I think it -- it's the list of vertical integration projects that we have is long, but they're all very exciting because they each have the capability to provide the same benefits that I just mentioned on this case study. I think with that, I will turn it back to Cathie for a couple of closing remarks on the aerospace and defense sector.

Great. Very quick wrap up here because I think that we are short on time. So again, just hitting the highlights for you. We expect sales are going to outgrow the market, expect our margins are going to outgrow sales. And we're going to continue on what are the 3 pillars of our A&D strategy. We're going to create enduring value, execute with excellence, and we're going to grow this franchise. With that, I'm going to turn it over to Phil Titterton to talk to you about operations.

Thanks, Cathie. All right. Good morning, everyone. I'm the ops person, so I tend to want to get people awake. Just real briefly, who am I. So Phil Titterton, I've been with the company for 31 years. I came through the Tyco Asset back in 1992. So I've been building circuit boards or higher-level assemblies since then. My concentration is in operations. I'm one of the few remaining in North America that likes operations, and I enjoy it every day. I have had some minor concentrations during my career, both in engineering and aerospace and defense business, both side passions. Really, before we get going, Tom touched on an interesting slide in the beginning that I thought had a unique aspect to it. And that was our growth slide since we're TTM. He showed that we were $80 million back in the day, right? Basically, if you look at that $80 million across 3 factories, about $30 million of revenue per factory and negligible on aerospace and defense business when TTM started. Go forward 12 years, the Tyco acquisition, which I and Doug came along with, now we are about $800 million. We are about $65 million revenue per factory and $350 million in aerospace and defense business. Now with that, we are now the largest North America PCB supplier by far in the United States after the dot-com bust in 2001. We're also significantly the largest aerospace and defense PCB supplier. But in 2008, 2009, TTM is looking at ourself, where do we go from here? And as Tom's described, as Cathie has described, we decided to go East and we decided to go North, okay? We went East to the commercial PCB out in Asia, and we went North going through the verticals, the Tier 3, the Tier 2s and the Tier 1s for the mission systems for aerospace and defense. And what's the result? The result is now $2.5 billion. We run about $100 million of revenue per factory, and we have $1 billion of aerospace and defense content, okay? So that's just some added color to that chart. Now operationally, what's our vision? That is to provide unprecedented customer satisfaction. That's our job every day when we wake up. We do that through 2 key aspects that I want to bring your attention to. One is reliable products, the other is differentiated technologies. Reliable products. If you think of what our products go into, we make a medical robot that holds a scalpel -- you need that robot to work correctly each and every time. We build an autonomous driving car. So while you're on your phone, texting, that car is keeping you safe. Those are our circuit boards that need to keep you safe. As Cathie mentioned, we build, for the DoD, 200 mission system critical programs, okay? Those circuit boards, those higher-level assemblies, those Tier 1 mission system products need to work every single time, okay? That's the reliability of the name that TTM puts out there each and every day. The other thing we focus on is differentiated technologies. Our attitude is to say yes. When the customer comes to us and says, "I want this impossible technology", we don't even ask them what it is. We just say yes, okay? When everyone else know where the technology and the customer comes to us, we say, yes, we find it. It's our duty to say yes, and we're banking on our horses in the table. Rich's 400 engineers, our 1,000 engineers globally to find that technical solution. And we put our money where our mouth is. We take on that project, and we're going to yield it. We may not yield it the first time, but we're going to yield it. And our customers know that and our customers come to that when they have that enabling technology that would differentiate them in the market. And that's really what we stand by. Now 2 pictures here briefly. These are new technologies since 2018 when we spoke with you. The first 1 on the left, that is a substrate that is an 18-micron line in space substrate. And guess what? That was built in the U.S.A, okay? And that's for a defense customer. So we've been listening the chips don't flow, and we're starting to build the packages that can take these chips and take that supply chain resiliency and onshore into the United States, and we're going to continue to grow that. The picture on the right is a RadHard microelectronics, now RadHard, that's radiation hardened microelectronics. What does that mean to you? Radiation to electronics is akin to Krypton in Superman. Radiation does not treat electronics well. And when you're in space, there's a lot of radiation. So the circuits that we build that we put in space are radiation hardened and won't take that asset down. And that's a very key capability that TTM has. Now if you look at my organization, 2 changes from years ago. First and foremost, the -- in the center, you see the VP of Integrated Electronics operations. As we've been growing up the aerospace and defense vertical, we come from a PCB foundation. There's expertise in assembly, subsystem, Tier 1 manufacturing that we just necessarily don't have. So what do we do? We hire in experts from the outside to help us run that business. And as we acquire more businesses and as we grow up that vertical, we needed the right resources and the right competency to run that organization. So it's recognize your weakness, move through it, okay? And that's what TTM is doing, and that's what we stood up, and I'll talk more on it. I also want to highlight both our automation and our enterprise approach. From an automation perspective, very key to us to drive labor down quality up. I'll touch on that. They work directly for me to make sure that the automation is practically spent and effectively utilized. And our enterprise applications, many of you may not be aware, but we've been putting in an Oracle instance across the globe for the past several years, okay? TTM was a company that grew through acquisition. At 1 time, I think we had 17 disparate systems that all then talked to each other, driving Todd crazy. But we've been putting in Oracle over the past 3 years with about a 2-, 2.5-year road map to go. We haven't had a single significant customer disruption, putting in Oracle, that's key. If you go back in time and you know other people say, I put an SAP or I put it Oracle and I disrupted my customer service. We've been able to book orders by material, ship orders on time. And that's a significant accomplishment of the TTM team, that's the IT team, the finance team, the operations team, all working together, and I want to highlight that. Now looking back at the past 3 years, the COVID years, if you will, we did have some successful accomplishments. First and foremost, our China PCB operations performed admirably. They set records across the board on their performance. If you look at our capital spend, we continue to maintain our judicious 4% spend year-over-year. We were able to put in 13 plating systems. That's what we measure our capacity utilization on. That's where our growth is in the future. And these are not small plating systems, which I'll touch on. We also opened up and haven't utilized yet, 73,000 square feet of manufacturing space to support our electronics -- integrated electronics growth of the future aligned with our strat plan. If you look at some significant advancements, I talked about our RadHard microelectronics. I talked about our substrate capability. Cathie referenced it Chippewa Falls, Wisconsin, and then the advanced PCB differentiated technologies that Doug touched on. to help the higher speed in the server systems. Lastly, I want to touch on customer returns. Our customer returns in 2001 industry-leading at 0.9% on gross sales return, okay? We've now gone below 0.6% 2 years later. We're very proud of that. The products we build that we ship to the field needs to stay in the field for medical, automotive, defense related subjects. Finally, on the right of bringing your attention, that is 1 of the plating systems that we've installed, okay? In that red circle, you see that little human being. That little human being runs this entire plating operation, that 1 person. And that's a highlight of what TTM invests on it's capital and what we're doing for automation. Now to get a better view of our global operations and what we manage, these are the 27 factories. We're going to drill down into 3 different clusters, if you will, or segments of the business. First and foremost, our North America PCB operations. I want to bring your attention to the 2 gray boxes -- the 2 gray circles here. That's our Santa Clara Anaheim factory that we're consolidating this year. And from an operational perspective, why are we consolidating these sites? And these are very capable sites. Well, COVID had an interesting result and made us rethink about our approach on how we manage our factories. Resources became very scarce during COVID with absenteeism. Resources in the tighter labor market have been continued to be scarce post the COVID market. And then when you consider engineering, you have a bunch of engineers out there that can work from home or they can work in a manufacturing facility. So our small factory, nimble niche factory footprint and strategy put us a little exposed from a customer satisfaction perspective. So you see us pivoting back towards our medium-sized factories to our larger-sized factories. And that's really a result of the COVID and the post-COVID era of manufacturing. And we're seeing that across the supply chain that the Tier 1s have all referenced in terms of what is causing. It's a lot of the mom and pops that are no longer in business. And we even saw that in some of our smaller factories that it's an exposure. And that's TTM addressing that from a manufacturing footprint. Now drilling down into one of our factories in North America, this is our Forest Grove Oregon factory, an interesting story. It does advanced technology, including high-density interconnect PCBs. It's 206,000 square feet, 500 people, a modest amount of engineers. What's not said on this slide about the Forest Grove Oregon plant is this is the largest revenue-producing PCB factory in all in North America? What's also not said about the Forest Grove plant is this is the largest aerospace and defense revenue producing factory all in North America? And what's most interesting about that is when TTM picked up the VisSystems asset through acquisition, this factory didn't even have its military certification. And 7 years later, it is the biggest aerospace and defense factory in all of North America. Now panning back out, looking at our integrated electronics business that we talked about. It's a compilation of the legacy TTM, legacy Anaren, legacy Telephonics businesses. We really want to drill down and touch on one of these factories. Again, this is our Syracuse aerospace and defense factory up in New York. It does microwave products, microelectronics products engineered components. It's a design for specification, meaning we have the print and the IP rights that we sell into our customers. It has 160,000 square feet, same 500 people, this time, close to 100 engineers. So you see that higher content of engineering because we're doing the design, we're doing the testing. We're doing the validation. We're doing the design to spec, which is a real differentiator. But this is an ultra-high technology factory, and we're definitely excited as we integrate in with Telephonics and what we can bring to the party. Again, panning out in Asia. You'll see Southern China, we have a cluster of 4 plants. Those are the 4 plants that really carried the day, 2020 through 2022. You see the red dot down there. That's our Penang Malaysia factory that I'll touch on in more detail. First, I want to drill into one of our factories, this is our Guangzhou factory. This does large back panel formats. The size of that table holding all of those circuit boards, they build circuit boards the size of that table, just to give you an example, okay? They also build high layer account line cards that Doug referenced. They are also Anthony's premier RF and radar producer for 26 to 77 gigahertz processes. We have proprietary processes to form the circuitry a little better than the competition, which means the RF signature plays better when it goes down our customers' assembly line, very key. This factory is not small, 2.5 million square feet. That's 10x bigger than any factory we have in North America, 2,700 employees, 233 engineers. It's also big enough to also house our AP corporate center for shared services. We're able to relocate that out of Hong Kong into China from a cost perspective. It's also houses our commercial global technology center. So our scientists that are looking 5 years down the road, 10 years down the road on what technology the commercial world needs, they have a full factory of assets to go use from equipment. They are not in a lab. They're in the middle, literally the middle on the third floor of this 2.5 million square foot factory, and they have the rights to all the equipment in that factory, and that gives us an advantage. Now talking about some of the key milestones we need to improve on in the 3 clusters. North America, Tom talked about the KPIs, on-time delivery, quality, RMAs past due. We, for 2 years now, have tied those metrics to compensation. It doesn't matter if you're an operator in plant #17 or the COO up here addressing you today. We're on the same KPI performance-based compensation metrics across the globe for operations. The other thing we're doing, we're consolidating Anaheim Santa Clara by the end of the year. We're going to grow new technology like substrates. We're currently running at about $4 million a year. Our goal is to be at $20 million in 2026. And finally, to drill in deeper on 1 of our, if you will, our exposures from a performance perspective, our past dues, meaning our late to customers needs to improve. Now how do we get into this situation? Because we say yes. We say yes to technology, okay? We may not be on time. We need to work on that, but we always deliver to Cathie's point, but we score technology just as hard as some on building a resistor and they score the yield or the on time as well. We score it pound for pound, the same metric. There's no excuse, if you don't deliver technology on time. And that's what we're really focused on doing. We're working on our homegrown shop floor control systems that interface into Oracle. We're working on level loading between the sites. As Cathie mentioned, we have dual source qualification. So when 1 factory is overheated on technology, we can move some foundation work to another factory. So the engineers have enough time to focus on getting that technology out the door. We rate all of our plants platinum, gold, silver, bronze. There's actually a fifth metal, which isn't a metal, it's not rated. You don't want to be on that list in TTM. It's just a bad day. If you look at our integrated electronics key milestones. Again, performance base tied to compensation because this is a materials business, we also have PPV, purchase price variance, which is an integral part when you're buying a lot of material. We're going to -- we enhanced our integrated electronics supply chain. We basically had supply chain under a global umbrella because integrated electronics is so different because it's ITAR. We carved it out, and we're standing up our own integrated electronic supply chain to manage that supply base. It's so important in this business to get that supply base on track. The Tier 1s, the primes out there have mentioned that it will be January Q1 of 2024. We're on the same path for improvement. Rich talked about, we're in-sourcing everything we can. And the one thing that wasn't mentioned in integrated electronics is the spend within. We're probably spending almost equivalent to 10% within on our vertical. So when we call integrated electronics non-PCB or Tier 2 -- Tier 3, Tier 2, Tier 1 non-PCB, they actually all have PCBs. It's in addition to the PCB. So there's drag business that comes along as integrated electronics grows, so does the PCB business as well. And then finally, they have metrics, whether it's the volatility of the MRP, do we get the purchase orders out on time. That ties to the systems, do our suppliers deliver on time, et cetera. In telephonic synergy, we touched on, the cost side was not that large of a challenge. We're happy with that direction and looking forward to the revenue synergies. Looking at our Asia Pacific PCB sites. Again, Tom talked about, we've already completed the Hong Kong consolidation. That was 2 months early, by the way, we're working on cost controls during the soft demand. We lowered our labor accounts, as Tom alluded to. We're working on reduced work days right now until the business bounces back, while staying opportunistic as Doug comes in with these massive orders, okay? So we need to balance both. We are working -- when we get slow, we work harder on new technology. We don't batten down the hatches totally. We want to get ahead on technology. So when we come out of the business slowdown, we can grab more share. So we're working hard right now with Doug and his team on data centers for the 112 and 224 gigabit per second circuit cards. They drive a lot of new technology into our business. We leverage best practices, global sharing always for rapid issue resolution and then successful Penang startup, very key, you've heard it a couple of times. This is the architect for addition of what the factory is supposed to look like when it's done. That's the actual factory, which is already built. We broke ground 11 months ago, and that's where the factory exists today and how it views at least 3 weeks ago. In the red circle that give you a scale for the factory, that's a 52-foot tractor trailer truck. Just to give you a sense for the size of this factory. Again, we announced in February of '22, customer contracts in place in March, groundbreaking ceremony in April. We actually broke ground in June of '22, with a shovel. We actually installed our first piece of equipment yesterday, 11 months after we broke ground, we're actually installing equipment in this factory, and this is no small factory. We talk customer qualifications by January '24 full rate production in '25. A deeper dive into the specs of this factory, it's 800,000 square feet. It's 1 floor, 4 walls. It's built for automation and built for work minimization of transition, okay? It's going to have factory automation, Industry 4.0. There will actually be a command center that can run a significant amount of the processes. The productivity is designed to be 150% that of our China operations, it will be our most sustainable factory. Tom alluded to the fact that because it's 800,000 square feet, 1 floor, which is not normal in Southeast Asia, it's more vertical with multiple floors, we have a large rooftop we will have the largest rooftop solar installation in all of Malaysia when this gets completed. We did leave 25% floor space for expansion opportunities. And this picture on the right shows you one of our 2 plating rooms. In fact, the equipment was installed with those gentlemen are standing there yesterday. I would have taken a picture last week, but the equipment came in this weekend and that gives you a sense for the scale, there's 2 plating rooms back to back, just to give you a sense for the size of the factory. So pivoting a little bit to automation, very important to us. You see the 2 pictures on the left show a robot-feeding an automatic-guided vehicle, an AGV. And then you see that AGV actually transferring work to the next department. Two key takeaways on this slide that I like. This is in a clean room. So this robot doesn't leave to go to the bathroom. This robot doesn't leave for a break or lunch or a shift change. So this robot doesn't introduce new dirt, new debris into the clean room. That improves our yields. So a lot of people think robots are for productivity, labor savings, they can also improve quality, if you do it correctly. The picture on the right, my favorite, that's a small robot feeding a bigger robot. So now we have robots feeding robots, okay? And that's actually 1 of three 6-axis industrial robots feeding that plating line. You saw that person standing in the circle. And there's 3 of these access. Key takeaway here with all these robots, these are in North America. Our Asia operations and our Penang operations are going to be that much better because the factories are bigger, have more space. But this is accomplishments that we're actually doing in North America today for automation. Touching on our environmental health safety, ESG. We drive on metrics, safety metrics, greenhouse gas emissions, renewable energy, water, hazardous waste -- they're important metrics, and we're driving those down. What's more important to us actually, though, is process elimination. If we can eliminate a process, we don't have to reduce the process. So a lot of our engineering efforts go towards eliminating process steps in our operation, it gives you a better climate improvement. We also make our own wastewater treatment plants, which people may not be aware of. In North America, we're fitting out all of our sites with our own homemade designed and installed systems, which is unique. And we're focused now on aspirationally 2 of our factories in North America going to 0 liquid discharge by the end of 2026, which would be pretty neat. You see Tom referred to the CSR report published in 2022, and that's the cover. So concluding operationally, 4 key principles: quality, reliability, they're paramount to us. Nothing else matters. It's got to be that. We like to lean in on new processes and invest. We have customers enabling technology. Engineers are our foundation. And we have a tremendous best practice and needs help system globally. So once there's an issue in a factory somewhere in the world, we have rapid issue resolution. Three quick pictures I'll turn it over to Todd. The picture on the lower left-hand side shows a reliability tester. It measures our health of the line in our PCB shops. That's TTM proprietary. No one else in the world has this test system. The picture in the middle is that Guangzhou factory with that 77 gigahertz RF secretary, again, TTM proprietary processing. And the picture on the right is 17 of our 50 Penang engineers. They've been training in Southern China for the past 6 months. These are engineers hired directly out of school, 26 men, 24 females, they're running the equipment that they'll be using down in Penang. They're building relationships with the engineers in Southern China that will be their mentors and guide them through a successful startup. So with that, I'd like to turn it over to Todd. Thank you.

Thank you, Phil. I know most of you and a couple of new folks that we've met today, I appreciate the opportunity. I'm the Executive Vice President and CFO for TTM. I've been with TTM for just a little bit over 10 years. And prior to that, it's been over 30 years in Silicon Valley and various financial leadership roles in the tech industry. Most of that time was spent in the EMS industry, which some of you are very familiar with, a couple of names you might recognize between Solectron and Sanmina were 2 major companies that I spent a lot of time with. So I'm really excited to be with you today to talk a bit about kind of summarizing financially everything that you've been hearing today. We're going to talk a little bit about the financial results and the plans that we have for improving those results and sharing with you our targets that we're aspiring to over the next few years. And we'll go through a little bit on the balance sheet side and our cash flow also. So in 2022, we had a pretty good year. We grew revenue about 5.4% organically. If you add in the Telephonics acquisition, it was closer to 11%. You can see our non-GAAP operating margin of 9.4% and EBITDA margin of 13.8%. Our CapEx was just under our target range of 4% to 5%. It was 3.9% of revenue. Cash flow of 10.9% of revenue, which is great and then our return on investment of 10.5%. Where we're driving the company and our targets in the near term are listed on the right there. We expect to grow organically 4% to 6%. You've listened to the commercial presentation and the A&D presentation, you saw where those opportunities are coming from. We're driving our operating margins to the range of 11% to 13% with related EBITDA margins of 15% to 17%. Our CapEx target is to be 4% to 5% of revenue. Now this could be slightly higher in years when we are investing in new plant locations or new plant deployments such as our Penang operation. And it can generally be closer to the 4% or even slightly under when we're more in a sustaining mode and not necessarily launching any new plants. We target our cash flow to be greater than 10% of revenue. And you can see our return on investment objectives are 13% to 15%. Our goal is to achieve these targets in 2 to 3 years. So that's an important question. And then I'm going to spend a lot of time trying to summarize and show you and answer the question. So how are you going to get to those targets? Let's start a little bit with a review of our -- some of our history. And if you look at the financial performance over the last 9 years, there's a lot that can be gleaned from this at a fairly high level. We've grown significantly, both organically and through acquisition as we've added different assets ViaSystems, Anaren and Telephonics to help us with our differentiation. The first half of this chart reflects the ViaSystems acquisition in 2015, which got us into the automotive end market and enhanced our positions in the aerospace and defense and the medical industrial instrumentation end markets. It also reflects the acquisition in 2018 of Anaren. And during this time frame, this 5-year period, we generally had good macroeconomic situation and global trade relationship situations. In 2019, things started to change. We began to see changes in our maturing mobility business with missed product cycles and significant capital investments and declining financial returns. This led us to the decision to divest out of that business where we can no longer differentiate and generate the returns that we expect in our business. We also exited our assembly operations in Asia, where we can no longer further differentiate our service offerings. We also started to experience trade tensions between the U.S. and China, and that led to export controls by the U.S. government, where certain technology developed and produced in the U.S. could not be sold to Huawei. Well, Huawei was a big customer for our RF&S business unit, and that had a pretty interesting impact, and I'll show you some details on that in a bit. And the rest of the -- the result of these market challenges was a downturn in profitability in 2019. And then you can see the revenue downturn in 2020 when we, in fact, divested ourselves of the mobility business. The period 2020 through '22 saw dramatic changes in the global economy, and it all starts with COVID. COVID resulted in shutdowns in the economy, in schools and in significant absentee challenges here, particularly in North America. This led to labor and supply chain shortages, which impacted our ability to produce and meet the demand that we had. These COVID challenges were met around the world through government stimulus programs, which drove a rebound in the commercial business, but it sparked inflation. It started first with commodity prices, which particularly impacted our commercial business, and then transferred and kind of transitioned to significant wage rate pressures and particularly here in North America. And everything kind of came to a head in 2022. We saw a strong commercial market, which really became overheated. This resulted in buildups of inventory by us and our customers and the strong demand also drove excited premium revenue opportunities for our commercial business generated from quick turn orders. In North America, we were dealing with wage inflation and stimulus hangover. The result was a dramatic increase in labor costs and continuing shortages in labor availability for us and our suppliers, the latter of which has and continues to cause challenges for us in terms of supply chain and delivering material that we need for our business. We addressed the inflationary challenges by working with our customers to increase prices. This was relatively quick to implement in our commercial business, which have fairly -- have shorter contracts and purchase order cycles, but it has taken us longer to see the benefits in the aerospace and defense end market, where you have much longer product cycles and much longer cycles in terms of transactions, whether it's contracts or purchase orders, they can run 1 to 2 years pretty typically. And on the commercial side, they're much, much shorter than that. The overall results of 9.4% were really pretty good, but they're very uneven when you look at the different pieces underlying that. So I want to go into a little bit more detail on that. So I broke this down looking at the last 3 years, say, 2019 through the present by quarter. And you can see a few different things here. You'll note in early 2020, a decline in revenue due to the divestiture of our mobility business. And in 2021 and on into 2022, you'll see the revenue increase as the commercial markets rebounded complemented by the acquisition of Telephonics. And finally, you'll note the revenue decline in Q4 and Q1, the right most 2 bars, as the commercial market softened and as business tried to adjust and manage their inventory levels. If you look at the operating margin line graph, there's a couple of things I'd like to note. One, you'll note in Q1 of every year, you see a dip. We have some seasonality in our business, and it's a shortfall in profit generally in Q1. That's largely driven by the Chinese New Year holidays in our Asia operations. Secondly, you'll note in Q2 and Q3 of 2022 on the right side, there are peak in profitability. That was really driven by a very exciting commercial market. We had tremendous utilization and strong revenues and high premium revenue content, we had talked about that from time to time in our earnings calls, that really drove very, very strong margins. And then the other observation, if you look kind of in between the 2020 and then you look at the 2021 years and then you look at 2022, you see relative consistency in the overall profitability of the business. But when you look at the underlying pieces of our business, there's a lot more variability in performance. So let's take a look at that. So let's start with Asia. In 2019, it's easy to see the challenges we were experiencing in our mobility business and the profit impact that, that had. Once divested, you see our margins stabilize, but revenues suffered from COVID. We also struggled with material cost inflation during this time frame, and we worked aggressively to recover these costs from our customers. We were ultimately successful, but that recovery process generally lagged a couple of quarters from when we actually incurred the cost challenges. This was followed in late '21 and '22 by a strong rebound in the commercial markets. This led to very high plant utilization, unusually strong premium revenue, both of which drove terrific margins. Then in the last 2 quarters, you can kind of see the decline in revenue as our commercial customers began to deal primarily with inventory digestion issues, but in some cases, market softness. So what's our action plan? Fundamentally, our Asia operations are in really good shape, but we have 2 exceptions; our Hong Kong operation, which was a small plant and our Shanghai backplane operations, both of these are relatively underperforming businesses. We decided to close one. We talked about how we've completed that wind down of that business and we sold the Shanghai backplane facility. So we're left with 4 core factories, our major factories in Southern China, and they're fundamentally in great shape. What we need to do is short term, we're taking actions in terms of managing headcount, some furloughing, some cost reduction efforts just to manage our spending. Longer term, we need to see a rebound in our commercial markets, and that will enhance our utilization levels and improving our profitability. Our goal for this business is 17% operating margin. Now if you look at North America PCB, it's a little bit more complicated picture. In 2019, in the last 2 quarters, Q3 and Q4 of 2019, there you see some revenue softness, primarily related to service provider spending in our networking end market as well as data center softness in that in our data center computing end market. Revenue rebounded in the first half of 2020, but then COVID hit America. It hit America a little bit later than when it started in Asia and it hit America a lot harder than it hit our Asian operations. Absenteeism rose and the government stimulus encouraged workers to stay home and to not work. This was an attempt to contain the virus. This led to significant production inefficiencies for us and labor shortages, and we were beginning to see -- as a result of that, we're beginning to see the starting of wage inflation challenges. Further, we were incurring significant costs to keep our employees safe, extra cleaning, testing. We even went so far as we were producing our own masks for our employees and their families. And you can see the resulting impact on margins there as you look into -- through 2020 as it began to decline. In Q4 of 2021 and in Q1 of 2022, we needed to address the wage inflation issue. And so we made a significant investment in our employees and adjusted our base wage structure very significantly. And this drove a dramatic decline in margins. Now while we were making that cost investment, we were also employing and deploying our strategy with our customers to go and say, "Hey, we've had cost increases, we need to work with you on cost recoveries." And we began implementing those actions. With better access to labor, our revenue jumped back up and we were better able to meet demand as we go through 2022. Margins, however, have not fully recovered. As the cost of the recovery process with A&D customers, in particular, is a longer one. And I highlighted the fact that our order cycles tend to be longer cycle than aerospace and defense, 1 to 2 years' time frame rather than 3 to 6 months in our -- typically in our commercial business. So what's our action plan? In the short term -- well, let me back up. Back in February, we announced that we were closing the 2 plants in California. Phil talked about the Santa Clara plant and the Anaheim plant. We're closing those plants, but we're actually keeping virtually all of that revenue and transferring it to other sister facilities in North America. So that will be one big important step. Another step we're doing is managing our cost structure, where we've implemented mandatory vacation times. We are being very frugal in our spending and very careful on hiring. Longer term, we're focused on productivity improvements. Phil talked a little bit about our automation efforts, about yield improvement and other efficiency initiatives that we're driving internally will be very helpful and constructive, and we're continuing to pursue cost recovery actions with our customers as purchase orders or contracts expire or renew that gives us the opportunity then to have that conversation with them. Our goal is to drive our margins in North America PCB to that 18% target range. Next, we take a look at integrated electronics, which is a new business organization that Phil highlighted in his comments. This is a more material-intensive business than our PCB business. And throughout 2019, 2020 and 2021, you'll see relatively stable revenue and then obviously, you see the impact of the Telephonics acquisition in mid-2022. What you don't see here though is the missed revenue due to material shortages, particularly from late 2021 through the present day. These material shortages result from the impacts of COVID on our supply chain, our vendors who are -- many of them are small businesses that's generally prescribed by the government and the procurement plans and as they let out contracts. But it's created a real challenge. They've struggled the most in terms of managing through COVID. From a -- and then you can see, from a margin perspective, you can see a similar pattern to what we saw in our PCB business. So in 2020, you can see the impact of COVID on margins due to labor absenteeism inefficiencies as well as the extra cost to protect our employees. Late in '21, similar to our PCB business, we adjusted our wage rate structure to keep and attract labor. This reduced our margins. And we also staffed up to meet demand. Cathy highlighted the order flow and the orders that we're getting. So we staffed up for that, but we're getting disappointed a little bit in terms of the ability to get the material in to actually deliver on that. So that has resulted in additional margin pressure. So what's our action plan to deal with this? Phil highlighted organizationally what we're doing and creating a supply chain organization and bringing in focused management to address this business because it's a little different than our historical PCB business. We're also taking short-term actions to reduce our costs, such as mandatory time-off, and other spending controls. We're resolving bottlenecks in our production program with key programs, which will drive additional revenue with the incremental margins that will come along with that. Longer term, we're addressing and making sure that we're delivering on the synergies from the Telephonics acquisition. We're driving supply chain improvements with our vendor base, both internal vendors and external vendors. And we're continuing to pursue cost recoveries from our customers as contracts and purchase orders renew. Our goal for this business is to drive our operating margin to 15%. Finally, if you look at our RF&S business, it's a little bit different. Here, we have a high content of intellectual property or IP. So it's a much richer margin business where we can do better financially. In 2019, you can see the impact of the export controls that were implemented that basically knocked out Huawei as a customer for this business. And then you can see through '20 from that point forward to mid-2022, we're really kind of climbing our way back up, bringing in new customers. And as the 5G rollout and infrastructure was going on, we were able to kind of grow back and replace that business. Like our commercial customers, though, our RF customers built inventory also as they were dealing with supply chain challenges in their own organization. And as the 5G rollout slowed late in 2022 and the predictability of delivery of other components improved, our customers were taking actions to bring their inventory levels down. So between those 2 issues, you see a decline in revenue there over the last couple of quarters. Given our IP, our incremental margins in this business are very high. So you can see how our line graph of operating margin very much looks like our revenue pattern. There's rich flow-through both on the positive when we're ramping up and on the negative when we're slowing down. Our action plan for this business; we've done 2 things. One, in the short term, we have reduced our workforce in this business. So we're taking some headcount actions. And secondly, like the rest of our business, we're having mandatory vacation time as well as other cost spending controls. Longer term, we need to see a recovery in the 5G rollout. Right now, things in the world are pretty focused on India. That will change and expand again as the economy improves. We also need to expand our product offering and penetrate new markets. Doug touched on this in his comments when he was mentioning our need for cross-selling of our services, components to our PCB customers and PCB to our component customers and taking advantage of those relationships. Long term, and you can see we've been here in the past, the margins for this business should be up around 40% operating margin. So that's the big dive on the details. So what does it all mean when you kind of bring it all together. This is a bridge that we've put together to kind of show how we expect to improve from our results in 2022 on the left side, up to our target margin of 13%. The bridge starts, needless to say, 2023 isn't directly shown here, but 2023 is going to be a tough year coming off of 2022, largely driven by our commercial markets and what we're seeing in the industry. We've taken the short-term actions to address that and to mitigate those costs in that downturn, but this is predicated on recovering in those markets and then building on the longer-term action plans that we put together. I've showed at the beginning of my presentation that our operating margin target is 11% to 13%. This bridge shows you a path to 13%, highlighting the benefits of some major initiatives that we have going there. So we've built in a little bit of margin error for curve balls that we might see from the economy or just other issues. So that's the P&L. A quick view on cash flows and capital structure and capital allocation. You can see here on the left side, our cash flow from operations generally above 10%, which is our target, except for 2021, which was a reflection of inventory build that we did and our customers were doing. And so we had some additional investments in working capital. That has since normalized back out. On the right side, you see CapEx there. In the first 2 years, that was really big investments in the mobility business, which we then subsequently sold. The last couple of years have been more sustaining level, so slightly below 4%. I expect, in the next 2 years, you'll see an uptick at the high end of the range, 5% or maybe a bit above that as we launch our Penang operation. And then in the center, you can see the free cash flow, which is an indication of the consistent ability that we have to generate cash. If we look at our capital structure, you may have caught that we had a press release go out yesterday. I think we're in great shape. We just completed the refinancing of our Term Loan B, which was scheduled to mature in 2024. We refinanced that with a new term loan that goes out and matures in 2030. From a financial perspective, it's priced at SOFR, not LIBOR anymore. LIBOR has gone away. SOFR plus 275 basis points with 99 OID. So slightly more expensive than the term loan that we replaced. But given the market conditions, actually, I think, a very good outcome. I think a couple of the investors in this room for their support for that project. Thanks, [ Ben ]. And it's -- we then supplemented that with the fact that we entered into an interest rate swap about a month ago. So $250 million of the $350 million that we just re-upped in the term loan is actually hedged through an interest rate swap, where we get the 1-month SOFR, which today is over 5%, we swapped that for 3.49% in a derivative that we put in place. So our effective interest rate for that $250 million is basically 6.25%. The remaining $100 million then floats with SOFR, which is a little bit higher than that right now. But when you combine this new term loan with our hedge, along with the high-yield bond that's a 4% coupon that isn't -- doesn't mature until 2029. We're actually in very good condition for the next several years in terms of our capital structure. The other thing I'd highlight here is our leverage at 1.4x. Our target net debt leverage range is 1.5x to 2x. So we're slightly below that. That's just an indication of the strength and health of our balance sheet. On this slide, just really quick. You can see on the top right, our debt maturity schedule now, which is -- we don't really have anything that's due other than minor payments, the 1% amortization on the term loan for several years. And then in the bottom right corner, effectively, 85% of our debt is fixed, either because it's a bond or because we've got the hedge in place. So -- and I might add at pretty attractive rates. So I think we're well positioned here for the next few years. Finally, looking at our capital allocation strategy. First and foremost, our priority is to invest in differentiation, whether that's internally through R&D, don't salivate Rich, or capital equipment in terms of advanced technology capabilities or automation or through M&A activities. To the degree we need to borrow money to execute any of that, particularly in the M&A front. Then our second priority is to repay debt to get it down into that 1.5x to 2x window, which is our leverage target. But our ability to generate cash is good. You saw that in our graph. We're pretty consistent. We're a mature business. So we believe we can also have an element of our capital allocation dedicated to returning money to shareholders. We had a $100 million buyback program that completed last year. We just announced earlier this month a new $100 million program. And we'll execute that here over time. I will caution you, though, that to the extent we need to prioritize debt repayments or do M&A, our shareholder distributions could be a little lumpy. So it's not like you're going to have a steady amount every quarter, sorry, some of you. But you know what I mean in terms of our prioritization. We're pretty straightforward about that. So in conclusion, we have plans in place to improve our operations and to achieve our target financial model. We've got a strong balance sheet, and we generate consistent cash flows. And as we look at our capital allocation, we're working hard to balance the investment needs of the business as well as distributions to shareholders. So that concludes our formal remarks. Tom, I'd like to invite you and my peers to come on up and join us, and we'll be happy to entertain some questions.

Todd, I have a question for you just to get things started. Can you talk about the impact quarterly on the refinance and the interest expense change that we would be seeing as part of that?

Sure. Right. So as I indicated, our -- the structure or the cost of the new term loan is pretty close to our old one, which is really good. So we expect to probably have incremental expense associated with the new term loan of about $200,000 a quarter. There will be a noncash noise that you'll see in the next quarter as we write off the old amortized -- unamortized discount costs is that kind of thing of about $1.3 million, $1.4 million, that's noncash. But on the cash interest side, we expect probably a couple of hundred grand a quarter incremental cost.

Jim Ricchiuti with Needham. I wanted to go back to Tom, it might have been you early on in the presentation, you gave some targets as to how you thought the A&D business would represent a total revenue and maybe I misheard, but did I hear 50%?

Yes. So long term, as we build the business and again, incorporating acquisition strategy as well, that's our goal to be at about 50% aerospace and defense. That's incorporating acquisitions as part of that strategy. So today, we're about 43%, give or take, 43%, depending on the quarter.

Todd, just to -- as we think about your longer-term operating margin target, what does that assume in terms of the profile of the business?

So we're assuming in there only organic growth. So if there is an M&A event that happens that accelerates us towards that 50% that would be outside the model that we built at this point. So what I tried to share with you in terms of our targets are organic.

I'm Matt Sheerin from Stifel. I just have a question about your China footprint. I think it's still 50%-or-so, right, of your manufacturing footprint. You've talked about customers wanting you to diversify, particularly within Asia, you've got that big Penang project. How should we think about that China footprint, let's say, in 5 years from now, whether there will be more consolidation? Do you see more customers wanting you to move? And then in terms of the Penang revenue opportunities, how much actually shifts from China versus how much is incremental?

Okay. So let me -- I'll take the first part of that question, and then Doug, maybe you can talk a little bit about the Penang question. So in terms of the operational footprint, we're actually in our most recent quarter, about 42% was revenue generated from our Asia production sites. Now that shifted for really 2 reasons. One, the Telephonics acquisition, of course, brought us more North America-based revenue. The other is just the commercial softness that we're experiencing. So if you looked at sort of normalized, what would that look like, I would say, more like a 45% Asia, production 55% North America, particularly as we, again, look at supply chain management, we bring that revenue back into our North America footprint. So just to sort of scope that out in terms of where we are in Asia production, -- and now as we look at China, and as you saw through Phil's presentation, we have basically 4 large facilities in China, each one of those facilities has a clear charter. Phil showed you the Guangzhou site. Incredible capability there. It's our Guangzhou Technology Center site as well. We do some really complex difficult work in the RF center of excellence for what we do in automotive. If you go to our Zhongshan plant, another one of our major plants in Southern China, that is really focused on Anthony's -- supporting Anthony's business. It's an automotive site. You're looking at lower layer count, really large-scale production of conventional and heavy copper boards that are then utilized in EVs. So that's really the purpose of that site. If you travel up to HY, it's a smaller -- one of our, I'll just call it, mid-sized from a China standpoint, still much larger than anything we do in North America. But that HY plant, which stands for Huiyang, that plant is a marvelous plant that focuses on front-end engineering capability, quick turn capability and high-density interconnect capability that we have in Asia, a remarkably flexible site that we have positioned there. And then finally, our Dongguan site, DMC, as we call it, that site really focuses on supporting the data center and computing, high layer count end market. And so very high -- again, high-level technology requirements. So just wanted to set the scale -- set that for each one of these plants is a very specific charter and purpose. And when we start talking about Penang, that's going to overlap a little bit with what we do in that DMC facility, the Dongguan facility, except that Dongguan is far ahead in terms of the technology target and where it is in technology. So we'll be doing higher-level technologies there for customer needs while we do lower layer -- a little bit lower layer count, more standard technology in Malaysia. So as I said at that stage, having said that, there certainly is a little bit of crossover. And Doug, you can address that.

Okay. Thanks for the question, Matt. Yes. So let's look at Penang through several lenses. First, we've got a handful of customer partners, who have made capacity deposits with us and long-term commitments. And that's accounting for about 70% of the planned capacity in Phase I for that factory. Those customers are all looking at what they call a China plus strategy. And out of them, we're seeing a combination of both transfers and incremental business. Skewed to the incremental side. But the other way to look at it, even if they're planning to transfer business down to Penang, as Tom mentioned, what that does is it opens up capacity then to bring in additional business into the China plant. So those are some of the ways they're looking at it. That additional 30% of capacity we have to fill, we're -- primarily between Anthony's team and our CNC team, we're going to be looking to drive more incremental business into Penang. So that's generally how we're looking at it. We've got the core partners and then that additional unfilled, uncommitted business that we'll be pursuing for incremental business as well.

Yes. And what I'd say, we're really excited. Obviously, this fills out for our customers, their supply chain resiliency strategy. And once they have this in place, they'll feel much more comfortable about placing business with us in the China footprint. I just wanted -- before we go to Will, I just wanted to make sure, Phil, anything else you'd like to add?

No. Good.

Good. Okay. Will?

It's Will Stein from Truist. I want to follow on to Matt's question and then ask a second one. I think the reason for pursuing this very significant investment in Malaysia is because of the change in sort of military industrial strategy in the United States, right? And which locations, which geopolitical, well, which countries are more friendly versus not. And when we think about that and where it could head over time, while I understand there's a significant manufacturing footprint among the EMS companies in Penang, it's somewhat of a less friendly country relative to some of the other options in Asia, like the Philippines, Thailand. I wonder if you can talk a little bit about the decision to go with Malaysia as opposed to some of the other opportunities in Asia?

Sure. And I'll start, and then let's see why don't we go to Phil and to help on the answer. But let me just start. So Malaysia, as I think everyone knows is part of the ASEAN group of countries. That's if you look at the official status or the official policy of that grouping of countries, it's to remain neutral in what is going on in terms of geopolitical tensions. Having said that, these -- there has been certainly over the years, a concerted effort from the business community as well as from the U.S. government to make sure that these countries benefited from our chips, our semiconductor strategies as well as the associated electronics ecosystem. So as a result, you see EMS companies, as you mentioned Will, largely concentrated in Penang. You see production in Thailand as well, a little bit of production in the Philippines from, again, an electronics infrastructure standpoint. As we engage with our customer base and Doug was -- and Anthony were very involved in this as well. We started out with these core customers. We spend a lot of time with the core customers. And this goes back to probably 2017, when we first initiated the discussions at a high level. Though -- and we started talking with the customers about alternatives, where we might be able to go? These were commercial customers, Will, to answer your question, not concerned as much about U.S. defense policy, but much more concerned in their thinking about their reliance solely on China as a source. And the need to start thinking about spreading, looking at other geographies to support their business needs. And so that's where the conversation started. We did a survey ourselves of the different options. I won't go into detail on the results of that, but I can tell you that a big part of that was in-depth discussions with those customers and then also with our EMS partners. And general reaction, I would say those customers equally value Thailand with Malaysia, except that the proximity to the EMS side with Malaysia perhaps tipped them towards Malaysia a bit. That was 1 factor. So our customer input. I will tell you from a defense standpoint, of course, our Board of Directors, those of you I think are aware, but we have a government security committee on our Board of Directors. We have a lot of conversations about our plans, where we're going. That -- our Board of Directors, and I -- again, I won't go into great detail, but they were very comfortable with the choice of Malaysia. And so that was a critical part of the decision-making as well. And then the real important factor for us finally in going to Malaysia was what I'll call the soft component of the decision-making. And that was related to our leadership in China, core engineering in China and the personnel that we have there, a number of whom are Malaysian-Chinese. And so the ability and start-up to rely on that workforce as our core engineering capability and the leadership understanding of how to do business in Malaysia as well as the multilingual characteristics of Penang, Mandarin, fluency in Mandarin, fluency in English, allowed us to do what Phil just described, which was send our engineers to China to train and to train in Mandarin while also being able to interact with Phil at a level that has just been surprising to us. And culturally, again, I think many of you are aware, the Malaysian culture is different than the Chinese culture in a lot of ways. It's a much more outgoing culture. They interact with Phil, they interact with me when I visit in a way that is different and sort of Western, if you will, in terms of questions that are asked. It's been so far a tremendous experience. I'm really pleased. So we'll see now as we go into start up, how we do. But that -- but a long answer, but that's really what went into the selection of Malaysia from our perspective. I did want to give Phil a chance to give us a comment.

Sure. Thanks, Will. Anthony and I were able to get into the Southeast Asia countries during COVID, which was an experience in itself. And I'll say that when Wayne, Philippines, Thailand, Malaysia, just the Malaysian government from the onset, their development authority did us outstanding job getting us in during COVID and greeting us as well as invest Penang. And we can see the foundation, obviously, we've done electronics for 50 years now. But we can see the foundation of the substrate investment that's being attracted into Penang and into Malaysia. And that's part of that food chain that we're headed towards because, again, you need that circuit board to support that business. And we really see an additional resurgence we will, of electronics draw to Southeast Asia, to Penang in particular, Kulim right up the street as well. So that was a major differentiator. The other one is Malaysia has studied how to raise a factory in less than 12 months. And they guaranteed they would raise the factory in less than 12 months. And we're talking 700,000 square foot -- 800,000 and it kind of got a little bigger, sorry, Tom. But 800,000 square foot factory in less than 12 months, okay? I wish the others well in those other countries to see if they have the engineering and the general contracting resources that are going to raise a factory in even twice that time. It's really going to be a differentiator. First to market was important to TTM and that was another key decision was their focus on how to do these construction projects and really bring to market faster. Thank you.

I appreciate that. I have a follow-up, which is actually a different topic. But I'd like you to talk a little bit about the divergence between the backlog and the revenue growth in the aerospace defense end market. My sense is that if you could deliver everything that customers ask for, in other words, request date as opposed to promise date that you could have a quarter where you had quite a big revenue jump in that end market. Maybe you can -- can you talk about the -- I don't want to say a disconnect, but the separation between what customers want to get delivered versus what you can deliver. And what's the recovery, not necessarily strategy because you spent a lot of time talking about the tactics you're going to pursue. But over how long do you think it will take before there's a catch up to a point where you're delivering more in line with what customers want?