BHE - Earnings call transcript Q2 2019 | Benchmark Electronics, Inc.

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Operator

Good afternoon. And welcome to the Benchmark Electronics Incorporated Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

to of conference Strategy like Weeks, to now President Vice and would turn over the Lisa I IR. Please go ahead.

Lisa Weeks

Thank third joining will detailed second us Jeff will XXXX thanks provide and President; everyone a Benchmark’s Benck, introductory quarter Lakkaraju, have and results me quarter quarter CFO. Roop I With earnings you, second our call. comments, CEO review afternoon, Jeff provide outlook. of and today and operator, for this for and Roop

a with today session. call our conclude will Q&A We

the www.bench.com. replay online for live, presentation release of available an a financial This the will we After reference today are release, earnings issued is prepared will at market press we the under and close online being on be highlighting our webcast call. Relations following The this the presentation section available a Investor have and XXXX, performance that call we quarter of website call. our second and

forward-looking the a statements take Please slide presentation. X moment on advice review to the in

our information. we will During discuss forward-looking call,

results these of reminder, undertakes any press statements, forward-looking differ obligation statements not historical of and a that statements. filings. are forward-looking from Benchmark to today’s are As involve SEC Actual and described materially in fact risks releases statements, uncertainties our and which remarks update may no any

as provided The release the measures as well non-GAAP presentation. earnings company a the in has of reconciliation of to our in GAAP appendix the

our the to call CEO, turn I over Benck. now Jeff will

Jeff Benck

and their hear how turn our opportunity unique grow this and business job have call. four I've had room for have accelerate customers, of to help our. learned forward lot Thanks, and and we improve, and Lisa, going to us strength, capabilities been are our I've months and welcome our the the their from on we joining them to in about afternoon’s needs where many everyone can I now for importantly what a

the in we opportunity. to our front process the on organization of opportunities are I’m us ensure in energized we of by this and capitalize transforming

brief During I overview with new the call review our and we a will XXXX quarter second talk executives provide be update year. and close over team. of the coming added the Roop take our results of financial the have will through to I a key strategic today I will will in then and first driving introduce the initiatives

high-end increases In turn the XX, quarter $X.XX we June million we to guidance achieved and which $XXX XXXX, at non-GAAP of of driven X. of higher the high than than slide Revenue delivered was our from with of value higher revenues along ended expectations guidance Please was which by was revenues our beyond EPS, the higher end A&D our contracts. computing medical expected legacy range. year-over-year in and the the market,

X.X% despite sequentially basis was XX% higher mix, market softness Our to on cap value from improved in points quarter non-GAAP second continued margins XXXX. XX sector the down of the which semi gross a market

More in which importantly when legacy with potential over you leverage revenue, the were computing contract model an improving XX% gross reflects exclude our non-GAAP margin the portfolio.

been recent very strategy. execute our and about leadership we've excited I’m I've additions focused X. slide on us our the be to will turn Please helping and announced building instrumental that team

role portfolio achieve we with explicit Rob first optimization, strategy on Revenue market the realization global ensure Crawford to Chief our Officer. direct strategies, objectives. growth revenue this added we've and as marketing First, our to execution company's In will go attention Rob sector

our background in company, perfect his to over XX and unique that other the his enables spearheading am Rob market leadership in-flight Rob I will Furthermore great experience but be OEM confident our at Benchmark. him this transformation. articulate to a role do customer's him able not job EMS bring. prior to fit differentiation brings for making go capabilities, combined understand to technology new only we of engineering years from role

left design, the functions comp organizational of ConocoPhillips Rhonda Circle us replace model. of and Turner HR and position past team, deployment previous was the the to including Officer talent our benefits employee of our by HR Resources lead who Institute, I from all new added we've acquisition, Human to HR with comes where the she K. She Chief as leadership Second, HR the engagement, Rhonda the and oversee services shared University of before Technical leader at joined. vacancy will departed SVP

by and how diverse business workforce. a service energized agent in our has success. business to our organization company's scalability key be Rhonda are demonstrated and our ideas and people people Rhonda our ability centralization, to standardization strategy support critical on will initiative. a contributor to In align the and her Rhonda's I'm globally and to talented change

Now results please financial our the will turn X, I if the slide Roop for the call you over to to discuss turn quarter.

Roop Lakkaraju

a complete guidance QX of Thank transfer. contract higher and XXXX our in will our computing XXXX. activity second final be $XXX the expectations our be versus inventory above the million you, standing was quarter for performance against high driven discussion to The to afternoon $XXX primarily at revenue the of previous by Revenues wherein financial of on QX the We’ll remaining the end Jeff of X The good would million. summary. in guidance a was completed million substantial long slide everyone. completion of contract legacy $XXX contract start

GAAP EPS $X.XX. quarter the Our for was

customer $X.X from with site in million various costs million part Our and legal legal a our $XXX,XXX associated expenses and market for other also restructuring favorable received settlement. go of $X.X with funds included activities due and to changes. restructuring settlement GAAP a of results a

was EPS operating our basis the to due XX improved lower our XX year-over-year X.X%, range efficiency of non-GAAP end SG&A. quarter-over-quarter $X.XX margin points and $X.XX. basis improvement high to slightly QX of a at points was Our and $X.XX operational guidance of Non-GAAP

over For year the quarter, XX XXX ROIC basis down year. our was and basis X.X% sequentially, points points

by for for ended XX. revenue X slide to months market three the turn sector Please June

instrumentation comparative revenue. have cap, and more test we does in reflect semi the historical awareness affect this change renamed sector, revenue This the and the sector. not accurately to mix For your clarification,

expectations up and were down and and airborne booked the flat from year customers revenues the for softer up year A&D from strength our ground year-over-year demand slightly QX. X% from quarter Revenues new ramp from market programs. transportation X% delays vehicles. were revenues Industrial industrial X% a overall were previously in demand products, existing and the from over based from quarter

year were Medical semi programs renal X% declined Semi and softness. continued revenues patient We cap from and XX% over increased cap saw from and XX% ramps revenues year-over-year existing demand quarter-over-quarter monitoring. cardiovascular higher fluidic imaging were year. for XX% and down sequentially, and program

markets of higher quarter and down value the year. our over Overall sequentially up revenue. X% represented year XX% second And we're X%

value XX% of higher QX. markets Excluding the computing legacy revenue contract, represented in our

delay down Turning computing demand for was Computing was and down contract. XX% advanced legacy a traditional program Telecommunications from a sequentially our and our sequentially, from support up and from a broadband year X% the final year products delay. build program to design for in and software expected legacy higher satellite over primarily market. customer program blind telco ramp than the XX% to

XX% of Our traditional from represented XX% X% second markets sequentially. year revenues last down down were quarter and which

contract computing QX. our legacy represented in of the traditional XX% revenue Excluding markets

the sales quarter. XX% represented customers second for of XX top Our

X. turn to quarter were slide Please the $XXX for Bookings million.

A&D semi cap. and We win market bookings, share strong in and continue to have medical

overall was in by our quarter, sector. disappointed our However, expected lower performance bookings the driven achievement industrial than we in which the in are

were for Industrials again design sensor. the connected for total with were in IoT new only program, MPI win asset a a manufacturing system We project awarded strong management bookings manufacture were a and wins QX biometric of X% manufacturing with transportation an of medical of fluidic XX% new monitoring and infrastructure a and product. for bookings.

win semi-cap components precision used space for the in multiple technology continue new in throughout processing critical the programs fab. we Semi-cap to steps wafer

and with We continue wins TCPA vehicles. win existing new precision and including programs with including to customers, electronics technology and ramps customers, and A&D manufacturing technology existing with airborne for radar for ground manufacturing wins, expand systems precision PCBI

a a and electronics supercomputing new for combined in were XX% program. satellite were and new manufacturing In we legacy the Computing quarter. programs telco awarded to telco computing

XX the total XX XX manufacturing quarter, have We and wins for engineering.

turn a margin quarter and margin the non-GAAP year-over-year our points. value Please sequential global and basis improvement a for from for key business improvements attributable to Slide network X.X%, XX better improvement point second of is gross higher Year-over-year basis to discussion of XX was throughout XX improvement mixed trends. revenue. Gross operational market

margin Without reported the gross computing our the versus would legacy have contract, been XX.X% X.X%.

QX was site in million our $XX.X which our guidance was XX margin to X.X%, sequentially. restructuring and basis operating in QX, changes. had with go $X.X including and SG&A points expenses XXXX. QX non-GAAP for market Our costs associated other in Non-GAAP line is restructuring We with various activities, million up

employee related charges in transition million incur expect $X activity. -related additional to are of We and various $X that million restructuring to QX approximately to

sites $X as expected Additionally, our two the and mid-XXXX. we site press release we locations will closures which Jeff stated $X the in with for with activities to million to by in to between we strategic associated are annualized these million these million Once customer benchmark Restructuring close $X rationale elected $X closures network of approximately million the transitions savings into in million. expected expect are $X occur will cover charges completed be QX. shortly. have other to of

we of expenditures $XX operations operations update on $XX $XX We working now million I million million $XX million. generated a second million flow the of and our approximately Please in XX cash few from that free capital for estimate will between We slide $XX highlight. was cash flow for previous the cash $X quarter, estimate from $XX to turn between where in to compared will to after quarter provide cash generate and capital million. flow million

$XX range million to higher towards range year $XX for We prior plans. new end which the expect business trending additional of now the our investments is required between for due million, CapEx to

US. $XXX balance cash million was in with XX June available $XXX the Our million at

March was accounts a decrease for over balance Our of $XXX million $XX XX. quarter. million were Payables flat quarter receivable

of XX, Contract at quarter. X Inventory quarter assets decrease June from XX. XX which were June at million was is million, flat March $XXX million over a %XXX

performance. slide our XX, cash conversion cycle Please to to turn review

Our conversion days lower was days our balance. for cycle range XX of days XX below slightly cash AR XX by driven QX, the to

in capital dividends approximately XXXX. repurchased XXXX, repurchases price March during shares. slide announced In million million paid update, share Year-to-date quarterly X.X were QX, million $X.X Total shares XX or per or dividend. X.X average share cash million recurring were $XXX we for to our million $XX.XX. $X.XX QX allocation an we $XX at Turning have a of

We repurchases repurchased If to shares through open evaluate will we will market in repurchase XXXX. do our QX program. so further continue share

had $XXX program. current repurchase end approximately the June, As million of share of we the under available

for XX review slide of third our to guidance. turn XXXX Please a quarter

completion essential contract the to $XXX This from to demand semi-cap muted the expect We then range reflects the from revenue legacy sector. $XXX of computing million million. guidance and

is of earnings in non-GAAP lower Our if which the diluted per EPF achieved to range of the sequentially on revenue. even range share the would guidance be in in midpoint result this $X.XX results of flat expected $X.XX, the $X.XX to

high of slide the be for strong to market revenues persistent across digits infrastructure defense expect programs and to growth in from by existing be continued information strong new supported strength on lack turn third the QX and softness new transportation budget. programs. and XX. please multiple modeling based And Overall, expected demand and these sequential by us facility we single with For quarter, flat industrial the to

new the low to We continued sustained and up flat. be program. single from Semi-cap imaging driven expect digits, is a expected be customers medical with demand ramp of revenues existing

expect Turning now to our revenues down to computing market, from we traditional computing due legacy than be exiting XX% the contract. greater to our

intangible estimated life be purposes. programs. programs strengthen our does provided to guidance existing impact costs. to restructuring other non-GAAP telco and end guidance margin X.X% Implied flat X.X% of and exclude amortization is for of of offset modeling expect operating the is We in range a The by assets,

value XXXX expense Interest are XX%. million, to million. XX%. $X.X contract, to effective for will legacy expected revenue XXXX expected market rate approximately and tax Exiting we the and believe between XX% The higher shares is be be our mix XX.X QX, be that computing estimated is the average weighted

year-to-date, X.X% to be million and not will bookings will our of $XX of X.X%, between do $XXX the in the reach million. for we year. to to SG&A range margin our million to remain Based range $XX $XXX expect gross million Our our on

market Jeff As to believe we and go improve organization our level in are will bookings realization. we that indicated, future changes making revenue

the initiative. turn call for detailed now Jeff. strategic Jeff look I will back our to at

Jeff Benck

Thanks, Roop.

Let's go XX. slide to

During the strategic with coming past leadership refined have we for working quarter my year. team, our the priorities

to reinforce the a in already one thing I In are initiatives that our new made with centric on initiatives is these fact, prioritized quarter. we've progress want The mindset. customer strategic

is customer organization optimizing to go initiative and our strategy. coverage market first The

targeted a future marketplace. partnership our addressing customers help of If Our growth. us, strategy will strategy customers our is our around will the that accelerate win needs with the we built in revenue them with win

an Go of mature booking, drive to drive to investment years pace. been faster area to progress in the market at has over turn several revenue But growth. important been a Certainly needs which past the has organization would made.

and revenue marketing have sector organization our quarter, more organization role, this a is filled improve leadership, Crawford. realigned go-to-market one This operations in under sales purpose complexity CRO we to The our coverage, and reduce The under business new new Rob the customer process have merges we conversion. with new development teams, organization which and leader. effective sector of selling facilitate

our the time market our the portfolios in process customers benchmark. for customer revenue bookings expedite to to sector process methodology. will on optimizing and focus will the sales time a Rob to key enhancing Part of and play be and role for

communicated down land. Roop were As expected this quite we we from quarter to where earlier, bit a

anticipate to specific time quarter. to and communication challenge we customer pipeline, awards a date in it's in XQ the recovery bookings given a While our a of

that, competitors their communicate they all. I at competition, our if am they EMS booking, that look at to a approach as different slightly Beyond finding how have

our A&D revenue that, medical. future bookings growth Having an new said our illustrated indicator by growth, are of as and in

process our across am So CRO with a to teams accountability to develop business roadmap bookings development revenue. incentivize also continue sectors we revenue will charging converting pursue the to them. to our for I new

to forward. report these quarterly changes, intend we performance our don't Given bookings going

with come a up with will methodology once new We revised aligned processes reporting in our place.

a new veteran we hired bringing In leader quarter. our the new industrial an CRO industry also addition on in have to sector as

for across our network. capability our is our the considers second It and customers operational also our for the across comprehends footprints move This strategy process our for driving requirements address them and to challenge. and consistency ability The us rationalize to initiative efficiencies need site. geographic seamlessly strategic utilization

global for our customers' most services considering refreshing manufacturing placement, such long-range strategy utilization, are importantly volume as and geographic We manufacturing. our network many scale, cost factors need

Mexico close have to our this of California with operations target QX, we part closure As a Jose process decided of XXXX. Guaymas San date and

X% As actions reducing a of global our these global and result of we're approximately of X% footprint. workforce

in and programs past the network, I our these and sites efficiency. of asset to to in completed. our manufacturing turn utilization others transitions customers support locations in while their at for improve many loyal are consolidate thank service want and will We at their Benchmark location these which ongoing our will these employees the for dedication

productivity we to Across programs deployment and also process reduction network margins asset focusing cycle utilization. on and are our from improvement consistent time increase

benefit We expect have progress productivity drive coming but point, I further early accelerated proof in initiatives these can the quarter. and

deliver deliver as centralized us the benefit customer. to shared to cost-effective as G&A scale our accelerate teams efficiently enable This The updated third well and to ability structure internal our a support of initiative is creating organization our organization service. our will to services

to legal our We've the functionally resources, and realign teams by process year. of kicked end human finance, IT off

processes business We growth. deploying objective The expect of by increase next ultimate we our this efficiency execution accelerate this activity and and is scalability of across period tools realignment drive as to to scalable Benchmark.

most complex solutions focus on challenges. customers, help our solve And finally is initiative accelerating services engineering to the and fourth

filter our mixed nicely manufacturing Process RF and and microelectronic capability. in In Over device invested as make invested continued which as microelectronic. engineering with including a the design We've of circuit to past optical center. we've in capabilities for connected our high-speed technical several fluidic, advanced investments and well expertise, packaging our rich years, capability. in we've technology number fit S&P organization component and large

we with We're and business and customers align building investing these roadmap for to capabilities investments input with to our partner demonstrate customer where can winning We're these investments. with advantage an new us.

Benchmark is organization. leadership communicate are go the throughout right services of the and are in we improve We our our for these of all the and With as engaged where better team of aligned an integrated team believe optimization these driving priorities executive market on to our organization differentiated will initiatives value and sales we the capability. the

Now I an of provided XX to summary. will please our if outlook. near I sector provide a brief sectors update turn view but a term want broader to Roop on you slide the provide

will cap, April question. semi improvement but that the at customer We still is that our I've back be since Looking XXXX. met Semi with more cap XXXX improved view is will magnitude in end the believe loaded in XXXX, the be general from

Having design are we as in believe gaining to as new up we supplier we down from we invest a in as picked And that, have market share said consolidation. this well production segment. existing are continuing programs, won

Now, remain with sector. these I A&D, looking growth the at performance medical target pleased and two of

the We of expect in half second continued ‘XX. growth

teams regulated job product. complex growing business doing Our market, and great are very highly a our these two with

expectations industrial flat. achieved our important growth is fresh bring leader an our had hoped believe sector new a near relatively focus sector And We is this Industrial, with for. well that And believe the sector outlook our the term and not space. to will we perspective has we the renewed a fits capabilities.

also to With Turning sectors, to telco. legacy and remaining on programs target complexity wanted sub business will generation computing complete, model. our contract next computing we portfolio in and focus an selected update continue higher of on computing to our telco. our provide I

model former love we of achieve the are customer by XXXX. weakness our and target legacy clear revenue the would in it's out compute While on model, semi-cap business now within $X.X vertical to adopt industrial billion the I to the performance CEO's transition the path the a with target large objective our

which in this through our the fall planning analyzing call. end year However, the process we provide cycle. XXXX updates business of is are effort updated year We'll on outlook, three being our in

near is focus And for will value as us resources shareholders. highlighted. Our will our enable benefit to objectives priority provide on portfolio, Over action. these time, while we these I meaningful efforts strategic and on creating term actions meaningful execute and our initiatives the our high optimized focus

to these continue will We our on unlock make initiatives fully potential to progress steady the of business.

providing We the that, the quarter. coming to progress look the forward with over I call the turn on updates operator conduct our Q&A. will to And in to

Operator

begin the question Company. from will comes with Our first session. go now [Operator We & Instructions] Ricchiuti Jim Needham ahead. question-and-answer Please

James Ricchiuti

afternoon. Good you. Thank

performance just light shed the you was number had different because wonder in encompasses more little subsets. bit some a could a industrial I respect of assume to I question if that First I with vertical, maybe maybe the customers that, and vertical

So where short you of seeing your where some weakness fallen has of are the and/or expectation? it

Jeff Benck

I'll of the Yeah, Jeff, you to it. factors, contributing color. that number let -- and said take so I'll there's then is lead that's a add some this Roop We as

look quarter there's our at was we you growth revenue and opportunity here. If current, outlook the believe flatter,

didn't perform to longer we had for wins So a expect the as when number taken a of number to expected, that future. grow ramp to that really we be here able customer we But see had have we say growth we've have and to here issues. in intended it of

Sometimes their trying to company it's to go customers' the develop, a dynamics a market. plans and they're in that some issue to design particular with product cases

have elongated we that not have So seen ramped as some programs quickly.

factor. one certainly that's So

our When were weaker is you certainly a because a industrial contributor they bookings at bookings to quarter. look -- performance,

there. number do of changes ability our on we to have interactions made and that. close a execution to our right that, of some think I the pipeline, And

quite there. a about to I'm VP help think coming We excited is new industrial on think board that's going that have sector and bit a I --

we gas segments we're wins the complete these of were have measurement in and but We the the industry into areas. participation look when we there, oil in really per area the have taken see expanded industrial, longer. and other but and growth it In that And may se general don’t as were we we that's economic an not trying gotten to in you where play highest some strong sector. expand certainly we for just our at profile slowdown have

You want to to that. add

Roop Lakkaraju

think well, covered it I No you Jeff.

Jeff Benck

Okay.

James Ricchiuti

that it now thinking met sounds Semi-Cap token like just signal as And by lot second we're more of happen? XXXX. you the really you're particular a of But that major to you about the talk it, the sounds to might actually about starting with when Jeff same get you're your have to indicators respect is leading way hearing basically the it any looking recovery all customers of this like with way indication half folks at and is

Jeff Benck

I here. that let comment interaction lot So a me and deeper. of on have little go a customer that

So feel some here, go do the I that’s -- with have we got that customer the that important I I is strongly met there know work from a there of more XXXX. consistent see than be will I been in so to pretty think was haven't definitely I had every and really [ph] been and we after given have that that. belief with pretty ones, it's XXXX improvement XXXX but better discussions will we you

saying But for bookings we of is second which also does where the heard consistent We that look end half customer think XXXX. probably in more start in we've kind loaded it's to in what sort happen? we we quarter the seen and the back XXXX, from with also will are of

position. really That strategic like this I being said space, I like our

share. that seen we as has seen supplier we suppliers significant this it that We've asked also this segment, We when we're consolidation as believe by that we past. bookings pretty we come of some customers a the you could happens. be in been gaining us strategic want have And and hey, strong there in to recovery

and And bullish the it position. So our be second we to here. standpoint a flat going downturn ground. last for that it And we're reconfirming half pronounced that there gained we're down very not further always think -- that longer more frankly quarter, 'XX. is on some than 'XX, in from I of we taking us had have is definitely But we still just said and segment wasn’t probably might

Roop Lakkaraju

things. additional two add probably I'll just Jim,

customers leading think obviously companies there of comments the better of conversations. your the they to customer will us our indication some what of question say that might are give indicators I who leading

I'll load confidence that obviously start the echo will mentioned other thing Jeff we communicate that that we how as The at when in time. appropriate is kind recovery of the will and to see and profiles as just order to give obviously us

James Ricchiuti

back Thanks. the I'll in jump queue.

Operator

Company. next is go [Operator question from Ricchiuti Instructions] ahead. a Please and Jim Needham follow-up The with

James Ricchiuti

consolidation, to you Just anticipate the from if bit for in with a wonder go to and just a the servicing want facilities could And talk types I you facility respect the closing little savings are over about two facilities. start customers benefits of flow those cost those some timeline I of again might when to in? we the

Jeff Benck

a of and we sites, geographic the needs, scale I placement, utilization, through been so the think at about strategic we have and of Yeah, looking tough cost script. I impact. impact team financial is on comment lot context strategic going talk let then this me to mentioned decision and customer don’t a This but assessment and that our the will our I the want in Roop

support do sectors. really sites These all

looked some specific it's all So close have that we when and that well, semi-cap there made at the strategy we decision small. looked but network, They business the as not, just our to we elements, sector. considering would But those site. the even would at we a it's

looking We're more programs we XX a sides. not both those large with customers. serve a customers and can a And in program less still exist. we the are majority other really tremendously of and those many talking customers -- those customers of move be to teams way. It's But yet of sites number great across to than with kind where consolidate efficient already already customers

a customers' Then first maybe XXXX. you the you communication of actual bit very the our in timeline, on… When much at having look Roop transition is comment quarter can the about little

Roop Lakkaraju

off to finish the Yeah, there. thought just

Jeff by said, of customers QX As for XXXX. to be transitioned timing the is the end

be closure We QX expect details final XXXX. in to

things. think terms of termination, these also I lease asked savings and In of you about Jim, sort timing.

QX of indicated as will million comments, in in indicated, kick timeframe my annualized We we savings in prepared XXXX. to start think we the those I savings. $X the expect As

James Ricchiuti

Great, okay, a thanks lot.

Operator

question-and-answer our any back the Lisa remarks. would concludes like to This session. I turn over for conference Weeks to closing

Lisa Weeks

wanted also just Sidoti on be a supporting tech I industrial and the the reminder, advanced Yes, to that September, this September XX Needham year, day Benchmark in put will Conference XX. Fall August

So have to York, to will joining any our of me you forward I will all be questions, happy you out that please reach today. to thank we and you look and And those with free Thank up in with midtown you call we New seeing need. to anything feel that there. both be And you. if for follow

Operator

is you conference now Thank The for attending today's concluded. presentation.

disconnect. now may You

Benchmark Electronics (BHE) 24 Jul 192019 Q2 Earnings call transcript