TTM Technologies, Inc. (TTMI) Cash Flow Statement

The wide quarterly swings in OCF/NI, from -0.33 in 2025Q1 to 2.67 in 2025Q3, suggest that net income is not a reliable proxy for cash generation in the short term. The 2026Q2 ratio of 1.16 is more normalized, but the persistent negative working capital changes in several quarters (e.g., -$139.0M in 2026Q1) imply that accruals are a significant driver of reported earnings. Investors should focus on multi-quarter averages to assess true conversion quality.

The FCF margin of 3.4% in 2026Q2 is an improvement from the negative margins in 2026Q1 and 2025Q4, but it remains well below the net income margin of 8.3%, indicating that capital expenditures and working capital are absorbing a significant portion of earnings. The elevated capex intensity (6.2% of revenue in 2026Q2, up from 8.6% in 2024Q1) suggests ongoing investment in capacity, which may be necessary for the defense and AI-driven growth but pressures near-term FCF.

The capex-to-revenue ratio has trended upward from 6.5% in 2024Q2 to 12.6% in 2026Q1, indicating a deliberate shift toward growth capex, likely to support the RF&S segment and advanced manufacturing capabilities. While this investment may be necessary to capture the A&D backlog, it also implies that depreciation will rise, potentially pressuring future margins if utilization does not keep pace. The company's ability to convert this capex into higher-margin revenue will be critical.

The persistent negative working capital changes in most quarters (e.g., -$90.4M in 2025Q1, -$39.5M in 2025Q4) suggest that TTMI is building inventory to support its growth, particularly in defense and data center end-markets. However, the positive working capital change of $41.5M in 2025Q3 shows that collections can be volatile. This pattern implies that cash conversion is highly sensitive to order timing and customer payment behavior, which may obscure underlying operational performance.

The absence of dividends and minimal buybacks (e.g., $34.5M in 2024Q4, but none in 2026) suggests that cash is being retained for capex and potential M&A, consistent with the Telephonics acquisition strategy. The $29.5M acquisition outflow in 2024Q2 and $39.0K in 2024Q3 indicate selective M&A activity. This conservative deployment approach may be prudent given the need to fund growth, but it also means shareholders are relying on earnings growth for returns rather than cash distributions.

The cumulative OCF of $646.9M is actually higher than net income, which is a positive sign, but the cumulative FCF of $49.5M is a fraction of net income, indicating that capital expenditures are consuming the bulk of operating cash flow. This divergence suggests that while earnings are growing, the company is reinvesting heavily, which may limit near-term cash returns. The gap between net income and FCF is a key metric to monitor, as it will determine whether the company can eventually generate shareholder value.