S&P Global Ratings has moved its outlook on TTM Technologies Inc. to stable from positive while reaffirming the company's 'BB' issuer credit rating following the printed circuit board manufacturer's announcement of a $1.1 billion acquisition of Epiq Solutions. The rating agency said it expects TTM to fund the transaction with debt, which will increase leverage over the coming year.
The Epiq deal is TTM's third acquisition in recent months and represents a more assertive financial stance than S&P had anticipated. The firm noted that TTM had not chased significant deals for several years, with its last major acquisition occurring in 2022.
S&P's analysis projects that TTM's pro forma leverage will rise to the high-2x area upon closing of the Epiq acquisition, which the agency expects in the fourth quarter of 2026. This compares with an estimated low-1x leverage position for 2025. The anticipated borrowing to fund the purchase is the principal driver of the near-term increase in leverage.
Despite the near-term increase in indebtedness, S&P expects leverage to decline in 2027 as business performance strengthens. The rating agency forecasts nearly 50% revenue growth in 2026, followed by mid-teens percentage growth in 2027, driven largely by demand from AI data center customers. Improved EBITDA margins are expected to accompany the top-line recovery, helping reduce leverage to the high-1x area by the end of 2027.
S&P highlighted the ongoing investment by AI data center customers in infrastructure as a key demand factor for TTM's advanced printed circuit boards. The agency said that continued heavy investment by these customers is a material driver of the projected revenue and margin improvement.
On cash flow, S&P expects TTM's free operating cash flow to be constrained in 2026 as the company increases investment to support growth. Capital expenditures are likely to exceed $370 million, and the company will face significant working-capital requirements, resulting in modestly negative free operating cash flow for 2026. By 2027, S&P projects improved EBITDA margins approaching 20%, supporting more than $250 million in free operating cash flow generation.
The rating agency set out conditions under which it could change TTM's rating. S&P said it could lower the issuer credit rating if additional debt-funded acquisitions or sustained declines in key end markets caused adjusted leverage to remain above 3x. Conversely, an upgrade would be considered if TTM sustained adjusted net leverage below the 2x area, generated free operating cash flow to debt around 15%, and increased organic revenue from its key end markets.
Bottom line: S&P's shift to a stable outlook reflects the immediate financial impact of debt-financing a large acquisition, while the affirmed 'BB' rating and the agency's recovery assumptions hinge on robust demand from AI data centers and subsequent margin and cash-flow improvements.