TTM Technologies, Inc. (TTMI) Earnings Call Transcript & Summary

Welcome to the TTM Technologies divestiture of the Mobility business unit conference call. I'd like to inform all participants, this call is being recorded. As a reminder, TTM has posted an accompanying slide presentation on the Investor Relations section of its website at www.ttmtech.com. I'd like to turn the call over to Sameer Desai, Senior Director of Corporate Development and Investor Relations.

Thanks, James, and thank you, operator. Good afternoon -- good morning, everyone -- or good afternoon. Before we get started, I would like to remind everyone that comments made on today's call may contain forward-looking statements. Any forward-looking information we provide is given in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The comments we make today are management's current beliefs, expectations, assumptions based on information currently available, and there can be no assurance that the results contemplated in these statements will be realized or in TTM's ability to successfully receive regulatory approvals to complete the transaction on a timely basis. Actual results could differ materially from the implied projections due to one or more factors disclaimed in the annual report on Form 10-K and other documents that TTM files with the Securities and Exchange Commission. TTM does not undertake any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or other circumstances, except as required by law. In addition, please refer to the legal disclaimers noted on Slide 2 of the investor presentation, which includes disclosures regarding the risks that may affect TTM and the risks associated with the proposed transaction. In addition to financial measures prepared in accordance with GAAP, we discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for GAAP, and we direct you to the reconciliation to the most comparable GAAP financial measure included in the appendix to the investor presentation, which is available on TTM's website at www.ttm.com. Today's call will be led by Chief Executive Officer of TTM Technologies, Tom Edman. Please go ahead, Tom.

Thank you, Sameer, and thank you, everyone, for joining the call on such short notice. Also on the call with me today is TTM's Chief Financial Officer, Todd Schull. So please refer to Slide 3 in the investor presentation. I would like to start this call by reminding you of TTM's strategy as it relates to diversification, differentiation and discipline. The transaction which we are announcing today will provide TTM with the balance sheet wherewithal to continue our path towards greater differentiation while sustaining leadership in a diverse set of end markets. These end markets share the traits of long cycles and excellent growth profiles, while providing sustained opportunities for early engagement, technology breadth and production footprint-based differentiation. We are excited to announce the signing of a definitive agreement today to divest TTM's Mobility business unit for approximately $660 million in cash. The consideration will be $550 million for our assets in China, plus the collection of an approximately $110 million in accounts receivable that are not part of the divested asset. This divestment will reduce our exposure to cyclical consumer markets and is expected to result in more consistent and predictable financial cash flows and overall performance. In addition, the transaction will greatly enhance our balance sheet, which will provide us with the flexibility to delever and increase our investment in critical areas of differentiation. Over the 20-year history of TTM, the company has performed numerous acquisitions that helped to execute the company's strategic focus on diversification, differentiation and discipline in order to deliver less volatile financial performance to investors. However, the cellular end market still remains highly seasonal and driven by short-term product cycles, making it difficult to efficiently manufacture products. In addition, cellular end market growth has slowed, but still demands substantial investment and capital commitments. The combination of these trends pose increasing challenges to our strategic direction and desired business model. As a result, today, we are announcing that we have agreed to sell the Mobility business unit to AKMMeadville Electronics (Xiamen) Co., Ltd., a Chinese consortium. In this divestment process, it was very important for TTM to find the right buyer who shares our commitment to our customers and employees. We are pleased to have identified such a buyer who is strategically committed to cellular market leadership and to growing the mobility business by supporting our customers and the approximately 7,500 employees that support this business. We view this transaction as a win-win for all stakeholders as the buyer has significant resources to invest in the business while the remaining TTM business is expected to have less seasonal, less cyclical and more stable financial performance. In addition, the transaction will free up cash which we can use to repay debt and invest in the business. Now we will share some highlights of the transaction before moving to your questions. Please turn to Slide 4. We announced the execution of a definitive agreement, under which we agreed to divest our 4 China manufacturing plants, comprising substantially all of the assets of our Mobility business unit as a separate enterprise through AKMMeadville Electronics (Xiamen) Co., Ltd., a Chinese consortium consisting of Meizhi Investment (Xiamen) Co., Xiamen Semiconductor Investment Group Co., Ltd., AKM Electronics Industrial Panyu Ltd. and Anmei Ventures (Xiamen) Equity Investment Partnership. The mobility business unit consists of 4 PCB manufacturing facilities in China, associated revenues of $528 million and approximately 7,500 employees. The enterprise value of this transaction is approximately $660 million, which represents 8x the mobility business unit's adjusted EBITDA of $82.5 million for the last 12 months ending September 30. The consideration for this transaction is 100% cash. $550 million represents the purchase price of facilities in China, and we will collect an estimated $110 million in certain account receivables that are not part of the divested assets. We anticipate net proceeds of about $600 million 3 to 4 months after closing. This amount is net of transaction costs and estimated taxes. The closing of the transaction will be subject to approval by the State Administration for Market Regulation of the People's Republic of China and change of ownership filings with other local government authorities. We currently expect to close the transaction in 4 to 6 months. Between now and closing, TTM will continue to operate the Mobility business unit and retain all earnings and cash flow. We remain committed to fulfilling the needs of our customers and our employees during this interim period. We will also be establishing a separation management office, which will be supported by Deloitte Consulting, to manage the separation process while allowing TTM to maintain our focus on the remaining businesses. The cash proceeds from the transaction will be used for delevering as a first priority. Post transaction, TTM is expected to have a pro forma net debt-to-adjusted EBITDA ratio of below 2x. Please turn to Slide 5. I believe this transaction is a win-win for all parties involved. It is expected that TTM will have a much stronger and more stable business going forward. This divestiture will reduce our exposure to the cellular market, which is driven by short-term product cycles. The remaining mix of business will be focused on longer cycle, less seasonal end markets with aerospace and defense remaining the largest end market. More capital will be available for growth investments in our remaining businesses, while the buyer will be committed to investing in the purchased business. In addition, since the facility is being sold are all in China, this transaction will reduce TTM's footprint and resulting exposure in China. And given that the cellular market is more consumer oriented, which resulted in both cyclical and seasonal volatility, the remaining TTM business should offer more stable financial performance. Finally, the cash proceeds from this transaction will provide balance sheet flexibility to pay down debt and pursue acquisitions. On Slide 6, we see a snapshot of what TTM will look like following the divestiture. Pro forma the divestiture, TTM would be a $2.1 billion revenue company with $300 million in EBITDA for the last 12 months ending September 30. TTM will continue to be a critical supplier enabling exciting and fast-growing hardware technologies such as advanced radar systems for aerospace and defense applications, 5G and optical networking technologies for networking and communication infrastructure applications and new advanced safety, infotainment and electric vehicle technologies for automobiles. Moving to Slide 7. We see that TTM continues to be a leader in the PCB market as the fourth largest supplier in 2018 based on pro forma revenues of $2.2 billion and the second largest rigid PCB maker in the world. This size will continue to allow us with the advantages of scale. In addition, TTM will be the only U.S.-based company in the top 10 as well as the most diversified from an end market and product perspective. We will remain the leader in PCBs in North America with a strong and growing presence in RF components, simulation and assembly solutions to meet the design for specification needs of our aerospace and defense and commercial customers. Overall, we will continue to be focused on high reliability and advanced technology PCBs, combined with engineered product solutions, allowing for early engagement with customers. On Slide 8, we see TTM's manufacturing footprint globally. The 4 facilities being divested are shown in the middle of the page under the Mobility business. They include GME, SBC, SME and SP. After the divestiture, TTM will have 26 facilities, with 17 in North America. Slide 9 shows how TTM would have looked for the last 12 months ending September 30, pro forma the divestiture. Starting in the upper left, we see that TTM's cellular market revenues were 12% compared to 0% on a pro forma basis. The aerospace and defense end market was 25% compared to 31% pro forma the divestiture, while the automotive end market was 16% compared to 20% pro forma. Our computing end market would have declined from 13% to 11% as we will be exiting the tablet and high-end laptop market, another market with consumer exposure. Looking at the table below, customer concentration is expected to reduce following the divestiture. Apple was our top customer in the recent 12 months at 14% of revenue, and pro forma the divestiture, no customer would have exceeded 10% of revenues. Similarly, our top 5 customers as a percent of revenue were 33% and would have been 26% pro forma the acquisition. Slide 10 shows the evolution of TTM over the past 20 years through a series of acquisitions. Historically, TTM has made large strategic acquisitions to increase our sales, add critical technologies and to diversify our end market and product exposure. More recently, we have been focusing on improving our differentiation and ability to engage with our customers through a broader technology portfolio and early engagement with the acquisition of Anaren as well as the assets of i3. This mobility divestiture fits with our strategy as we work to reduce our exposure to seasonal and cyclical consumer markets while enhancing our cash flow and earnings predictability. Now let me turn the call over to Todd Schull, our CFO, to speak about the financial impact of this transaction.

Thank you, Tom. On Slide 11, we summarized the financial impact of the transaction. Starting from the left, the first column shows TTM's previously reported financial results for the last 12 months ending the third quarter of 2019. The next column over shows the Mobility business unit's last 12 months revenues, non-GAAP operating profit and adjusted EBITDA, which were $527.8 million, $5.5 million and $82.5 million, respectively. Finally, the column on the right shows the last 12 months pro forma financial performance for TTM, excluding the Mobility business. Note that the non-GAAP operating margin is 160 basis points higher for TTM pro forma excluding the Mobility business unit. Net leverage is calculated by dividing the net debt, net of discount and net of cash by adjusted EBITDA. In calculating the pro forma balance sheet metrics, we assume net cash proceeds of $600 million. This would leave us with a net debt leverage ratio of 1.8 pro forma the Mobility business unit divestiture versus 3.0 previously reported. Turning to Slide 12. We discuss the potential use of proceeds from this transaction and how this will shape the company going forward. Our first priority is to repay debt and reduce our leverage ratio. Following that, we will review opportunities to reinvest in business through capital spending or acquisitions. Our focus will be to continue investing in companies with strong technology positions which are complementary to our PCB position and provide us with increased differentiation. The reduced leverage resulting from this transaction also provides us with the flexibility to potentially offset some of the dilutive effects of this transaction. Some potential options for reducing the dilution from this divestiture include acquiring other companies that fit our strategic focus or authorizing a share buyback program. So with that, let me turn it back over to Tom.

Thanks, Todd. Finally, I'd like to close on Slide 13 by reiterating the strategic focus of the company. As I mentioned earlier, TTM has 3 elements to our strategic focus: diversification, differentiation and discipline. TTM will continue to have diverse end markets with aerospace and defense, the largest end market, which offers solid growth in the near term. From a differentiation standpoint, we will still retain our scale, being the fourth largest PCB company in the world and the largest in the U.S. In addition, TTM will maintain our technology breadth and continue to focus on high reliability and advanced technology PCBs, combined with engineered product solutions, allowing for early engagement with our customers. Also, TTM will continue to maintain our global footprint with slightly lower exposure to China. Finally, from a discipline standpoint, we will continue to be focused on operational execution, leading to solid earnings power and cash flow generation. This transaction is expected to improve our financial performance and allow us to further reduce our debt and financial leverage, while providing flexibility to invest further in our core business. As a reminder, we expect to report our fourth quarter 2019 results and issue first quarter 2020 guidance on February 5, 2020. We request that you limit your questions today to the Mobility division divestiture. James, we will now take questions.

[Operator Instructions] And we'll take our first question today from Steven Fox.

I guess, first of all, Tom, can you talk about maybe if there was any specific impetus for doing this divestiture now as opposed to last year or the year before that because obviously, there's been cyclicality and some operating challenges with the business for a little while? And then I had a few follow-ups.

Sure. Yes. So we've obviously been looking strategically at our portfolio for a number of years. We needed to make sure that we had our footprint situated properly in terms of advanced technology capability. That was important. We needed to absorb Anaren into our structure. And as we did that, strategically, we looked at the footprint. This has been a very long process. So I can tell you multiple -- several years in the making. So it happens that we're able to announce today, Steve, but this has been a long process and one that really aligned with our strategic direction and one that we have had planned for several years now.

Okay. That's helpful. And then in terms of just thinking about the financial impact. Is it safe to assume that when you guys do report that, the Mobility business will be treated as a discontinued operation? Or is that yet to be decided?

Technically, because the deal is still subject to regulatory approval, I don't know that we will technically qualify for discontinued ops yet, but we'll certainly provide some information so that you can look at it independently, whether non-GAAP, nonofficial disclosure or whether it's an official discontinued ops.

Okay. And then in terms of just thinking about the math behind it post closing. I mean, it was only contributing $5.5 million of operating profits. The cash -- using cash to pay down debt should be more than offsetting that -- the profit loss. So am I missing something there? Or is there other -- are you not able to pay down debt right away? Are there any restrictions on paying down debt? Or is it accretive based on that type of time line?

It all depends on whether you're looking forward or looking backwards. $5.5 million in the last 12 months, and certainly, as we know from our disclosures and in the last few quarters, the cellular business, the mobility business has had some significant challenges. As you go forward, 2 things to keep in mind. Number one, we really don't expect the future to be as bad as this past year. And so there's that to consider. But also the fact that we don't receive the proceeds until probably 3 to 4 months after we close, which is still 4 to 6 months away. So it's going to be, pick a number, 7 to 9 months before we actually get the cash.

Okay. That's helpful in terms of understanding the modeling. And then the last question I had is, once everything is closed and you have received the cash, when you look at the ongoing businesses, what amount of cash do you think you need on hand to continue to run the business?

I've often said that the general rule of thumb is around $150 million. With the -- with this business divested, it will be something probably a little bit less than that.

Next, we'll hear from Paul Coster.

A few quick ones. First of all, yes, the trailing 12-month operating income was -- margin was pretty thin, but the adjusted EBITDA margin was actually above the corporate average. Can you talk -- perhaps you can talk us through that? And what should we expect in terms of D&A to go away as a result of this transaction on a forward-looking basis?

Paul, this is Todd. Good question. You're right. The -- one of the points that Tom highlighted in his comments, is that this is a very capital-intensive end market. And so there is -- and as you've probably seen over the last few years, we've made some substantial investments in new technology for this end market, and that does carry a fair amount of depreciation -- primarily depreciation, not so much amortization. So if you look at the difference between -- I forget the number, the $82.5 million and the $5.5 million, so call it, $77 million, that's primarily going to be the depreciation for the last 12 months for that business. And that's -- we're running about $165 million to $170 million per year right now. So as you can see, that's a disproportionately large chunk of our depreciation.

Good. Are there going to be any onetime costs that we should be thinking about from a cash flow perspective?

Well, in the proceeds number that Tom highlighted, the $600 million net, the price, we're saying it's $660 million, there is some cash tax outlay. There are some fees, that's, of course, associated with closing the transaction. And we've done our best to estimate that in terms of -- as part of that net $600 million number. Now that's an estimate. It could be off a little bit, but I don't think it will be significant.

Talk about receivables that you're -- the $110 million of accounts receivables. You stated quite clearly. It's not part of divested assets, what do you mean by that?

So the buyer really wanted to buy the Chinese asset, the PRC asset. So that was the 4 plants that Tom highlighted that was listed in our investor presentation. As we have a trading company that we run out of Hong Kong that handles most of our export sales. And the business or the -- and the buyer did not want to buy the Hong Kong asset. So that -- those assets are left to us to liquidate. And the $110 million is the biggest piece of that. That's the receivables that are on our trading companies books or expected to be on our trading companies books when we close that we would then liquidate in the normal course of business, and that won't necessarily need to be replaced. So that would be essentially a cash collection opportunity, and we accrued it or treated it as part of this entire business transaction.

Now we'll hear from William Stein.

Gentlemen, in the past, we've asked about the potential for the company to divest this exposure owing to the volatility that you've highlighted today. And one of the concerns that you expressed is that customers in this market drive significant innovation in the business that you can then propagate to other customers and other end markets. I mean, without that innovation, it would perhaps change your value proposition to customers. How should we think about that sort of condition going forward? And then I have a couple of follow-ups, if I can.

Sure. Yes, well, they -- so let me lay out a little bit more clearly the progression strategically for TTM. When we acquired Anaren, we acquired a substantial -- both IP portfolio but also a capability in RF, that is allowing us on the RF side of our business to engage extremely very early with our customers and really helped us to broaden our technology portfolio. We wanted to be able to prove that out. We wanted to be able to bring that acquisition strategically into the TTM, make sure that we -- that our strategy was panning out properly. We've done that. In the meantime, what we also were doing in China was taking our advanced technology position and leveraging that into our advanced technology center. So our development center that we added post Viasystems acquisition into our Guangzhou -- one of our Guangzhou facilities. That technology development center we developed also over the last several years. So we put the pieces properly in place around our advanced technology portfolio so that we were not -- do not need to be as specifically customer-driven going forward. We have technology road maps from our end markets. We understand where they're going, and we have positioning with our technology facilities now to move forward in concert with our customers, if not slightly ahead of our customers and as they move forward with their plans. And so those critical pieces we needed to get -- make sure that those were put in place, so that we could then position this business unit for sale. So that's where we've landed today. And in terms of overall markets, we're still very excited about our markets driving towards advanced technologies, and we're in a position to continue to service those requirements.

Okay. One follow-up, if I can. Another similar market to this. When I say similar, I mean, sort of not the most encouraging from margin perspective has been the manufacturing services business that you've also commented with similar reluctance to divest it. Should we view your appetite for that sort of transaction to be a little bit more -- want to be a little bit stronger now given today's move?

I don't know if it's stronger. I think we've always been clear that we look at our portfolio of businesses and look at strategic fit. And we do that on a regular basis. And that goes to whether our operating facilities and our footprint, making sure that, that footprint fits properly with our direction, ensuring that our businesses and the portfolio of business also fits well with our direction. So we'll continue to do -- to take a regular look at fit, make sure that it is there. I guess, it is true. Well, this is the first substantial divestment that we've made as a company. But as you know, we've never hesitated, if necessary, to shut down facilities if they no longer made sense, and the plant charter did not fit with our direction or the financial performance did not make sense. So that's always been part of our process. It's just this is a larger effort in terms of this particular divestment.

Next, we'll hear from Woo Jin Ho.

Great. A couple one -- couple for me. First, you called out SAMR as part of the regulatory review. Are there any U.S. or European regulatory review that needs to be conducted as part of this deal?

Nothing unusual. Really, the MOFCOM process and local government approvals in China, all in China.

And just to piggyback on the innovation question. Given that the factories are going over to the acquirer as well as all the machines, I was wondering, in order to keep with the -- your innovation advantage, do you need to make any other CapEx investments post deal?

Yes. So that's a great question, Woo Jin. Well, so when -- we will be looking at investments that would be required. I think we highlighted, and Todd highlighted also, that part of it the proceeds will be used in terms of our organic needs and our inorganic needs. But from an investment standpoint, I can tell you this. It's not -- we're not looking at substantial requirements there. What this really enables us to do is to add capability as the markets require without having to deal with an overhang kind of situation. The cellular market was requiring such large investments that during difficult or downtimes in terms of demand, there was substantial overhang there. And now we're able to take a much fresher look, if you will, in terms of what matching that advanced technology capacity with the needs of the market, which tends towards more lower volume kind of requirements. So really excited about that. I'd also add that we have continued to build that technology portfolio. And not only the Anaren acquisition, but the i3 asset acquisition as well, where we brought in some additional substrate-like PCB capabilities that are really targeted at high mix, low volume requirements and a really nice fit for some of the markets, particularly on the aerospace and defense side. So really, really excited about how this positions our technology portfolio going forward.

Too soon to ask what the CapEx requirements may be post deal?

Well, I mean, go ahead, Todd, you can...

I think we'll provide guidance on that. We tend to do that at the beginning of every year. We'll do that in our earnings call in a couple of weeks.

Matt Sheerin has our next question.

Just a couple of follow-ups on previous questions. Just regarding the use of the cash. So it sounds like there's going to be a chunk allocated toward the debt pay down, but as you said, it's several quarters away. So in terms of exactly what you're going to spend there versus M&A, et cetera, is that still an open-ended question that you're looking at?

You're right. We've got quite a bit of time and a lot of space to travel between now and when we actually get the cash. We'll certainly evaluate that. We are under obligation based on our debt agreements to either reinvest in the business or to pay down the debt. That's what we're obligated to do with the proceeds. But what that does, we still have cash flow that we generate from our company. We've been pretty consistent on that basis. And that, we're free to allocate and deploy as we think best. So over the next bit, we'll certainly provide more update when we get closer to the close date. We'll have more input there. But that's still a ways away. We're evaluating what's going to be the best uses of that cash. We just tried to explain to everybody what we're obligated to do and what options we're considering.

Okay. That's helpful. And then you talked about the operating profit associated with the business, which is small, but as you take that revenue away, is there any OpEx or SG&A that support the business that you'll have to look at from a corporate standpoint?

Yes, there will be some synergies. We're evaluating that. Obviously, we have an obligation to run the business like we've always done until we close, and there will be some transition period thereafter where we'll be supporting the separation of this business. So it's difficult to pinpoint the timing of those synergies. They're not going to be huge. As you are probably aware, we've operated under independent business units for the last few years. And so a lot of the costs associated with that business were already segregated in part of that business unit. There wasn't a lot of corporate-type shared cost. There's a little bit here and there, but it's not hugely material. And it's something that we won't see the benefit of now for some time because we've got to get through close and then the transition period.

Our next question will come from Mike Crawford.

From B. Riley FBR. Just going back to the capital spending option. If you do choose to -- that option out of the reinvestment in the business as opposed to paying down debt, how much room do you have in your existing footprint to slot in or tack on new capacity versus like more major -- in an efficient manner versus something more major?

Yes, just general comment. Yes, you're absolutely -- the crux of your question, Mike, is absolutely right. I think the -- as we've highlighted for investors, our first priority for a good period of time here has been to delever, and that will remain a very high priority for us. The -- any Capex, additional CapEx requirements that we'd be looking at, as I mentioned earlier, would be incremental to match the kind of market needs that we have. So you're not looking at a substantial need for the business. I think we funded the various business requirements pretty well here over the year. So again, you're looking at small needs there in terms of ensuring that we have that technology portfolio solid and in place.

Maybe I'll just try to ask it one more time. If you thought of, say, maybe in an effective capacity utilization where some plants you cannot operate at 100%, maybe it's even closer to 50% because of the need for quick terms or whatever. But there's still plenty of existing room of, I'd say, effective capacity where you can make these investments without running into major expenditures.

Oh, yes, yes. Absolutely correct. Your assumption is very in line.

Next we'll hear from Jim Ricchiuti.

This is Mike Cikos on for Jim Ricchiuti. Just a couple of quick questions for you. The first, I'm just trying to get a better sense of the timing of the proceeds, right? So the transaction is not expected to close for, call it, 4 to 6 months. And then 3 to 4 months after that, you're expecting the proceeds to come in, that $600 million. Is the -- I guess, is the reason for that lag, again, you guys liquidating that trading business in Hong Kong? And should we expect all $600 million of the net proceeds to come in, in a lump sum? Or is that going to be piecemeal and based on that accounts receivable?

I'll try to answer that. The $110 million part of it would be gradual over, let's just call it, a 90-day period after closing. The bulk of it, the purchase of the Chinese assets, the $550 million, will come in chunks. Obviously, it becomes effective when we close, okay, it's due and payable, but there is a process that you need to go through to actually have the cash remitted out of the PRC. And that's the 3 to 4-month timing window that we're looking at. And it will come in chunks. When it comes, it will come in chunks, and will probably be in 2 chunks, I would guess, depending on how the currency regulators in China decide to allow that money to leave the country. On the positive side, we have in place some performance guarantees with -- in- place with Hong Kong banks or branches in Hong Kong of banks that will guarantee our ability to collect that $550 million. So it's not at risk. It's just a timing issue, and we put in a stop or a safeguard to make sure that we derisk the actual ability to collect the cash. It's just a matter of timing. So in that -- after closing, you'll see the $110 million kind of come in over 2 to 3 months, let's call it, and then the $550 million will come in 2 chunks during that 3- to 4-month time window, probably in the more to 3 to 4, not the 1 to 2, in terms of when it actually is available for us to use.

Okay. And just to make sure I'm clear on that. You said it's not at risk. It's just a function of the timing that was talking to the $110 million in accounts receivable collections.

No, that was in regards to the $550 million. The $110 million is an estimate of accounts receivable. That's just normal accounts receivable collection, which historically, we've had very little problem with in terms of the quality of our customers and their ability to pay. What I was talking about, the risk was the ability to actually have the cash leave the PRC. And that deals with the $550 million part. And that's where we have our safety net, if you will, by virtue of the bank guarantees.

Okay. All right. And then another couple of questions, if I may. On the Mobility business unit, is that entire business isolated to these 4 plants? Or is there any spillover in any of your other facilities?

No, from the -- that encompasses the Mobility business for TTM.

And then what about other business that you guys might have mixed into those 4 mobility plants?

Yes. So those plants do provide product for -- that is used in some of -- by some of our other BUs or their customers and some of our other BUs. There will be a sales relationship, both through the -- certainly through the PSA period, so at least for a period of 12 months, where we will be -- our sales organization will continue to support those plants. And of course, for -- there will be payments made in return for that service. And then we'll see how it goes in terms of the ongoing after that period. But that business is pretty small. But at least that retains the capability for our customers that those plants were providing.

Okay. And then just with respect to your manufacturing footprint, I know you guys highlighted the fact that your exposure to China, whether it's to Chinese customers or your overall footprint in China will shrink. Just wanted to get a sense, how -- I guess, what will your exposure in China shrink to? How much of a reduction are we talking to your footprint?

From a revenue perspective, we've often quoted a number of about 2/3 of our revenue is produced in China. And that 2/3 then would be reduced by on a pro forma basis for the last 12 months, about $530 million. So that should allow you to get something close.

Okay. And then just one other -- one final question, if I may. I know that with the proceeds, I guess, debt reduction, I mean, is a top priority that you guys have. But if I was to think about potential M&A for you guys, I mean, obviously, your end market shift now you have a heavier focus on aerospace and defense. Should we be looking at any potential M&A? Would it be targeted towards a specific market to diversify your end markets? Or would it be more technologically focused?

Yes. Overall, more on the technology side. And the reason I say that, we're -- again, with the addition of Anaren and then with the i3 asset purchase, we've -- we are building a stronger technology portfolio, and we'll continue to build on that, that is adjacent to the PCB. And that has been, for us, a core part of the strategy. And so as we look forward, we'll continue to look at building on that. We also have a couple of areas on the PCB side in terms of footprint gap that -- for smaller prototyping-type facilities. We don't have a facility in Europe. We don't have some of the capabilities in Southeast Asia there for customers. That's a smaller -- that would be involved in a smaller effort. But the core piece of this will be continuing to build on that and that technology capability, adjacent to what we're doing with our printed circuit board position.

That will conclude today's question-and-answer session. I will now turn the conference over to Tom Edman for any additional closing remarks.

Thank you. Just wanted to thank everyone for joining this call on such short notice, and we look forward to speaking with you again in a few weeks. Thank you.

That does conclude today's conference. Thank you for your participation. You may now disconnect.