BHE - Earnings call transcript Q1 2024 | Benchmark Electronics, Inc.

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Operator

Hello, and welcome to the Benchmark Electronics to report First Quarter 2024 Results Conference. [Operator Instructions] Please note that this call is being recorded, and I will be standing by should you need any assistance.I would now like to turn the conference over to Paul Mansky, Benchmark Investor Relations and Corporate Development. Please begin.

Paul Mansky

Thank you, Dien, and thanks, everyone, for joining us today for Benchmark's First Quarter Fiscal Year 2024 Earnings Call.

Joining me this afternoon are: Jeff Benck, CEO and President; and Arvind Kamal, Interim CFO. presentation today, performance an of for we prepared closed to release XXXX, market reference have financial will our the a the we call. earnings issued pertaining and on After this we that first quarter under Both section of Investor our are the Relations at website, available bench.com. online as to live, release a company reconciliation a has will is the non-GAAP in available earnings be in GAAP the measures call well the This and online to being as provided of webcast replay presentation. following call.The appendix our the Please disclosure take the forward-looking a moment to review presentation. on the statements in Slide X

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

releases a historical SEC may results materially today's fact call, As risks quarter to any filings. remarks performance. from quarter of statements, guidance. differ CEO, our close final Benchmark second will Jeff will our more to begin wins, then return new undertakes by results today's will the of insight to statements.For I these forward-looking update not Jeff press turn which business remarks.If providing to includes statements our will Arvind described of share financial no over some sector, discuss first please our by and and demand provide Jeff any Slide trends and will X, are summary forward-looking as with obligation then and Actual which reminder, into turn uncertainties statements. are our you a detailed call in Benck.

Jeffrey Benck

everyone, and you, Thank today. Paul. afternoon for joining call thanks, our Good

continued progress of continue end control. indicators cash industry across were $XXX margin, best free we by solid macro-driven objectives. the quarter.Let and strong was the in sequentially. by pleased described or year-over-year our controlling of toward was flow Total These to We of our down Semi-cap, another many Despite million step A&D long-term despite growth and were revenue through recovery. and can exceed challenges of quarter persistent double-digit results first we few X% lack with a objectives team, our revenue in clear highlights. markets, performance meet EPS in performance our X% me continued non-GAAP the The what the

However, these primarily our sectors. and in were Medical Communications offset weakness by positives

gross exceeded of continuation non-GAAP our reflected margins trend margin which year-on-year XX%, gross Our again expansion. a of multi-quarter

we high-end our initiatives delivering QX, Excluding us a in stock-based first of quarter above $X.XX compensation non-GAAP At us basis year-over-year.On down last share are XX was on deliver place cash our earnings sequential to points enabler a when were capital variable to results We last including compensation, These share, of operating $X.XX Notably, to key margin achieved $X.XX place basis, down and being margins per operating million free $XX X.X% seasonally positive able of non-GAAP results. year-over-year, over non-GAAP achieved which of year a $XXX to flow are earnings was year, million. operating in us deliver basis to the in was inventory was a same due payroll per which taxes working expenses. guidance of $X.XX higher allowed the stock-based $X.XX like-for-like $X.XX. quarter. time, in -- the which expense, range delivering put in put up

forward, this $XX QX, consistently March to particularly for like to deliver to our free marketplace, target flow Arvind over now have expectations, $XX of XXXX. to $XXX We pass now cash once over the looking just quarters million to been guidance our X details to million say year from and pleased me we ability how again north the let performance free together, and more $XX volatile raising share million totaling for in again are on million. positive I results.Now period.Given I'd $XX it to with for team's am this quarter flow consecutive the come this million cash and

Arvind Kamal

good to for turn and Jeff, market you, afternoon. Slide Thank Please X our by revenue sector.

mentioned, X%, large and in revenues Semi-cap was program the in was increased general programs to revenue delays large next-generation rebalancing QX ramps. Defense, sector inventory from program ahead general driven modest down expectations. HPC decreased in disengagement A&D slightly a Commercial for year-over-year, This total existing from million. new year-over-year. ramps. both was expectations. the new commenced first some up was benefit which by impacted to demand X%, the existing X. are benefiting consistent incremental outpaced due communications from we continued XX% customer, This revenue Medical Slide not increased Jeff to in customers, In sector decrease from into Sector do normalization. XX%, we reduced our will during our of to XXXX.Please decline driven across revenue driven build we $XXX some subsector revenue partially was program was revenue demand turn QX. specific over by minor expect with decreased support down QX with due XX% Advanced XX%. carry our As and Computing quarter of that dynamics. performance Coupled with and softness improve by was softness Industrial industry, revenue strength demand Aerospace.Within the by

quarter Our GAAP for earnings $X.XX. was share the per

quarter, it we to last approach assessment an stock-based during undertook to our indicated relates we of specifically As reporting, compensation. non-GAAP QX, as

believe non-GAAP more our continue GAAP basis, providing on we comparability Although a enables compensation direct to measure to our peers. excluding a business stock-based results, will we

for compensation. by sequentially expense. higher XX gross margin payroll and without stock-based driven Non-GAAP effects seasonal was with and compensation was basis excluding perspective, SG&A million, XX presentation point As QX, of such, a the X% year-over-year. in X% was and of SG&A basis $X.X press with all and This our The non-GAAP million a compensation. year-over-year. QX, beginning reconciliation decrease sequential was XX%, the increase increase represents sequentially both point expense references coupled to non-GAAP, information.For release taxes earnings both to compensation. $XX.X stock-based up and stock-based both Please variable refer historical exclude

was operating down expenses, was non-GAAP points seasonal gross up aided stock-based margin tax effective year-over-year XX by quarter due XX%. expense, rate margin Excluding while operating basis basis points the X.X%, of in first expansion.Our XX to increase approximately basis points non-GAAP XX compensation sequentially

Slide range quarter the First $X.XX. On above non-GAAP basis, of if we $X.XX EPS Non-GAAP of was to discussion conversion of $X.XX. definitions the the turn over compensation cycle $X.XX in of quarter $X.XX for our ROIC turn in and the current our EPS a Slide the our course of our first X performance. include to former expense a non-GAAP like-for-like was X cash trended non-GAAP last was year.Please to stock-based under guidance of X.X%.Please higher-end financials for of quarter,

company. the in performance operating million To capital were period. the our compared to that working an to X quarter was flow combined X-day QX. inventory quarter.Please end, key liquidity. our the primarily generation in Slide days flow cycle conversion we in $XX improvement XX driven of in efficiency and for free by in enabled generate update with cash which the a continued metric turn cash This flow reduction cash during XX, in cash $XX net a efforts, Free $XX QX, Our us on performance, million for to million is income

are coupled to $XX target-free full $XX cash Given forecast with raising year our current million. flow balance year, throughout this performance, to million we our XXXX the the of

March $XXX increase on a million. cash sequential Our was balance XX $XX million, of

short-term QX use of million net As both for of Technologies Mexico growth down $XXX and to term in cash capabilities on outstanding invested $XXX debt, support our in revolver. as in of unit. turn a borrow free $XXX continued improved our pay in we to our allocation Slide under our XX, of in and March by to We flow debt.Please our had million Penang Overall, revolver Precision cash million XX activity. against sequentially our $XX to CapEx million loan, continue outstanding $X available and we approximately facilities, discussion enhanced capital million

QX, million. We be CapEx we million in to In $XX basis, anticipate of $XX range $XX a million. not million. cash we paid We million expect of full-year repurchase QX. be in $XX shares to QX the $X.X did On any and dividends CapEx and between

existing we XX. We in in authorization. March XX, million repurchase of As $XXX our resuming advance XXXX.Please Slide repurchases XXXX, to had share remaining anticipate approximately share

guidance. to Turning

of revenue We within to million be QX expect range $XXX a $XXX million. to

expected Excluding is within stock-based million and SG&A compensation, we range expect $XX of XX%. to non-GAAP gross expense be margin be to million. approximately a $XX

in be other expenses. approximately compensation, Our estimated income non-GAAP to margin intangible million of $X.X expected of operating assets stock-based amortization Non-GAAP between operating and X.X% is and million $X.X restructuring and of X.X%. million excludes $X

million. to diluted of share non-GAAP $X.XX.Other Our per range the $X to to expected expenses, be be in is $X.XX net are expected earnings approximately

exchange foreign sequentially, interest is will decline to Although offset increased this partially expense be by expected headwinds.

that average tax be approximately with to weighted count share We XX% will XX%, expect QX non-GAAP million. effective $XX our of a rate

over XXXX Our implementation global tax XX%.And a XX% due the tax of you, and at will expiration we XXXX. back to be effective XXXX, our minimum to for On incentives the China should end tax our laws beginning operations turn fiscal to in basis, tax the Jeff. call average the jurisdictions in year some rate of foreign believe the effective in I rate with is of in higher of approximately that,

Jeffrey Benck

Please Slide turn Arvind. to XX. Thanks,

fab better but was This quarter some sector. Let performance first our our market with overall color integration. share new I'm program on slightly [ Technology was driven continued expanded awarded OEM. continued down further level ] quarter our This the higher modestly in the win up customer, with year-over-year, we which (sic) a our momentum wafer by existing than expectations. a performance, Precision believe that an sequentially, by several me which XX% includes Semi-cap, with start also Within was which performance exceeded gain. facility new a was that assembly Penang first Precision pleased wins Technologies with equipment our

demand and and continued quarter investment. continue continued manufacturing be about we the beginning Our as in driving growth remains only are On include in both catalysts pressure broader future environment awarded. and Act to the a expect to in under the the the sector optimistic funding CHIPS this with is wins be capital multiple CapEx near-term services.We basis, now Semi-cap pursuing volatility engineering U.S.

sector, beyond, exposed share both end December recovery been subsector. gaining in However, the more and has looking are tech who a demand in and look function further expect the many out we to particularly to as forward from heard our space, This have to a XXXX saw Medical, and we normalization. challenged, the health of is business.In performance than sector broad-based in and the inventory quarter of fair

in Our was with March expectations. down XX% our quarter line year-over-year, revenue

I'm the subsector, biotech the encompassing recent where momentum However, we both notably, continue wins in and encouraged to new closed seeing see we traction of the big in wins. been form engineering. positive by Most manufacturing we've several

begin to into XXXX.Turning XXXX. within contribute expect will Medical programs Looking growth weakness impacting quarters, Industrials. forward, new materially in continue we meantime, we few Complex expect into these to overall In in the late-XXXX next the to sector

growth We extend Energy to including our share in key markets, Management Automation Solutions. continue and

this manufacturing a for example, program automation application. we a key lab past For subsystems quarter, to won provide

be is which systems, our in to Another innovative. printing. sustainability.Finally, Guadalajara XD like in, our will win supports key opportunity That looks I'm manufactured win, mention facility, an commitment engineering thermal very which an automated interested control relates to to in which for that particularly I'd

we and select in macro pressure our under of momentum environment number both softness. existing a that are While to broad solid customers, from customers new new see continue industrial from wins, programs existing

availability we revenue We our strong or had year-on-year anticipate order expect commitment we within in wins of an translated us industrial demand late-XXXX will U.S. quarter, performance, continue competitor to manufacturing Defense, for strong resume early turning until relatively to system based will including to to has program. integrated subsectors, provide opportunity has displaced quarter both This Aerospace, trends. XXXX.Now and across on short-lived, providing improved spending, believe past this for both Although Aerospace engineering Commercial up in systems.Within since and our Defense, an we increase Meanwhile, another a along we A&D. within also growth expanded services into don't year-over-year, the continues. new accelerated guidance control load. components, complex win into defense momentum be sector with Commercial XX% we significant which government's remained revenue XXXX, our saw business of

at principally support also defense existing We major guidance an wins of new expansion saw introduction product customer, and in applications. program another

careful XXXX, are us XXXX.Before flat for has end a primarily win Computing our aligns in is revenue program accurately strength our how nature does positioned quarter, X. the this June, continued expectation mid-single we in Advanced function timing. increasing and relatively QX, While into after sectors these during with more sequentially tightly of on quarter for is we our with design turning we'll be The combining Communications QX but better discussions, to analysis, these beginning reflect coupled X performance, slightly ending Next-generation A&D demand seeing, more Sector and it our growth these was of sectors, only interrelated sectors down internally.Within Computing, reporting the this year-over-year. approach Not forecast Advanced digits than momentum with

As percentage supercomputer who large program at for OEM of a lab. in previously significant deploying shared for us QX, delivered new a the early in we wrap a This program will up HPC is QX. national a

these next-gen these which build-outs and large environments growth, cluster should in we sell platforms, our anticipate We future participating via opportunities. infrastructure are working enable the on OEMs as into several AI

are we in a challenges Next-generation Computing is a anticipated having given not Communications, through we've The the opportunities, the timing highlighting broad at capital return to now. in XXXX.Finally, seeing with level anticipating sector manage growth inventory annual quarters been currently comparisons, Communications anticipated year-over-year the own during of these pressure at Advanced spending, However, industry to coupled same for positions. on few while their the difficult time,

weakness quarters large been several led has this specific customer disengagement. also in We of to a with which segment, experiencing have a

share significant We XX. please again, summary, want year course their on customers. and the challenging remain with to we Despite to XXXX.In turn sector expect with congratulate Slide to under in dynamics, continue our revenue performance new invest market to team Once throughout existing the business pressure quarter. for the in the logos Benchmark future the extended growth, expanding both to in of building I our continue

down In look our objectives. I gross we demand to for continuing in towards we're XXXX objectives cash that To and delivered in non-GAAP our XXXX profitability grades. quarter review, and last to year-on-year since managing of I committed working target target inventory expansion each this model believe As XXXX.We you committed driving end, our volatility further free at QX laid margin we progress operating out introducing have achieved while quarter, to we flow. high

inventory our for quarters raising quarter million row was free days are positive first of to for we've $XXX and flow in Our generated target cash inventory, free a XX down and cash XXXX. year-over-year, equal X flow

We a any intend to minimum, enough to on and confident in XXXX did this we that of the offsetting committed continued last the buybacks in this other dilution.I our so market with remain stock be in We an didn't to we the Lastly, returning to objective navigate capital form investors. but quarter. complete dividend, of economic nonetheless successfully buying will annual dynamic environment stronger come side. out back

improvements and our the for investing are We making future. operations in

We several exciting and a meaningful in opportunities have further of significantly engagement deals number customers' closed new pipeline. our up our pursuing are while we along stepped

best where sure believe started end we in an experiencing control, outperform are that duration Semi-cap, demand remarks us growth of call maintain of in I'll we future to to we ourselves prepared that, turn in session. downturn those elements going to of quarters.I is market the our While environment that and can operator Q&A as unprecedented we continue We're the will to focus positioning front to to our the the coming over opportunities conduct improves.With the while in maximize the that arrive business the on them. now

Operator

Advisors. question [Operator Fox first with Fox today Instructions] Steven will We our from take

Steven Fox

HPC questions. the some Jeff, of made couple of a had comments Compute. I first you around on

-- a compute look build then services have with of winning see consistent I you remain that you how your customers do think a can As in or are look at your something like mind? back-end And it does at that as episodic of your cluster environment. that being book follow-up. Because large or winning do business, fitting you business? environment into kind And

Jeffrey Benck

Yes, good that's a question.

see particularly, for program-centric get One of and see meaning business been we're could new that. that a after might down, But on seeing we thing quarters. little very over where compute -- and a exposure years. we that have maybe then the in we've play a scale are that make it us, to next element one.Although some that to seen there'll while the we that probably be kind is we'll with large and the as pretty think strong these less general, broader think in, the for that smaller is have several sector those that smaller to of AI -- systems National some programs are, seeing seen doing builds we've we're They the one high-performance complete in I of like in lumpy, had supercomputer, last fills demand have Labs. XX,XXX-node AI, opportunities, that folks look because systems But we're that's while how not opportunity, the coming up I large of in

Steven Fox

the of you it market, of said growing terms the certain terms in investing And is engineering same then but sounds And more also areas. about messaging Semi-cap, like year-over-year. guys in in you're you the are end

could just in now, So the you've talk in in? lot invested that I right know, if a what was I mix had area of the downturn. you investing terms about the business wondering of you're machining success before precision and and

putting just together maybe So that all and...

Jeffrey Benck

Yeah.

right. All Okay.

that from to of forecast enabling us us starting there better. and bit 'XX.I have trend continued. see growth a to really is is better that we still But that's do significant from to significant think, script, capital weighted And a offsetting hearing quite are don't it, mean brand-new as investing had that's But pretty -- quarter in and is, the the had believe in we're We still kind investment, market you We in it we I we with have from equipment. what's flow precision that Arizona. spend, some ramp, all was didn't more also do large that more business Mesa, investment fab here, in the OEMs did Semi-cap won't bit we opening than and we won wafer we to the great we're and reflected step support, weakness to and when and work up. of a the and I Malaysia in a Sorry, which good Penang.We our seeing to heavily think we a on reports, there. particularly the we're right, It's that in what growth new a there, really starting grand was facility 'XX. see engineering we allowing expanding do we Governor in ago capital were a to speaking year in the footprint our machining while significant

we have continued last invest so, the because really upcycle, during to really, in were heavily we utilized. capacity And

got see back. we've So coming market the capacity. certainly We

those referenced build quicker, it's how that.So of we're going of feed see systems the 'XX, be fab flips the thinking out we're seeing that's that We year. same. we in 'XX of be that's buildings is Certainly, as but feel this are But have to get to and we right And kind growth we we that it started out. quarter in also of capital more can money now what for to that now, appreciate, modules creation really right right support those. first year, saying into you the put then CHIPS going is ground, like and equipment to doled a if Act, as of the subsystems come and wafer We'll about now. it

Operator

with Anja from Soderstrom Our next question Sidoti. comes

Anja Soderstrom

mentioned you you other a disengagement seen is, had one first a customer. decommits? with you The any Have

Jeffrey Benck

that customers. down, this seen mean, the we've with -- up And in being demand I and that end the sector. you with know the comms there challenges particularly No. specifically was is

that's broad really growth led And we But to as along there. our reflected we has that were a disengagement, it's that's little comms. bit the going this is that, down unique. beyond with because -- And the come in of softness on business this explaining on dynamic was kind and what shrunk weighing so why and

like We comms. any in even that in sectors an other others from -- haven't impact of seen or the

Anja Soderstrom

expect [ to when come And that Communications What in do of you talked hearing you sector, sort and the about you ] back? are

Jeffrey Benck

carriers Well, just specifically? the fiber In the the and the of the of what and Communications next-generation hearing there. large is that some deployment about some operators some you XG of slowed have large think we're of down and networking some solutions their sector, solutions,

So those broad area. the There's satellite of others. better and it's than number We sector. a put some of in support that have headwinds on also macro a customers lot done activity

everywhere about I in in capital So general, a few see that And customers. of the in could tougher they're have that macro.We this from broadband deploying broadband of some weighing particular I One do regions we spend build lower infrastructure on macro people environment for think where feather and that's that careful I serve seeing a build-out some also think supports think into and and have some. what growth. been

seen And peers, down, of sight so, things look just customer we're continuing and messaging sector not of we really we don't see But we're is the new a that in we in the happening line But but in to just just around opportunities, pursue there. softness phases we're we to of there. it's picking some of up good closing -- the in not necessarily broader a have alone at every some certainly And our as some 'XX. that comms.

just look to term, it's we long now growth more in 'XX. -- the So visibility optimistic right don't we're see we

Anja Soderstrom

helpful. you come Okay. that Medical, of you back And And normalized in when terms the of the inventory? what demand up anticipate are would to you was see that sort do and normalization after -- in have

Jeffrey Benck

seeing the because in we're Yes. what they're are you health we looking area, brought customers inventory are good the tech at Medical, adjusting inventory, medtech, It's their position that. in particularly seeing that up and think I

pronounced And more few a quarters, through at started having as that over probably of next the really it effect. think works I year. end the that's think I the

modulate quite what in devices exuberance not got pop see we'll where could sensitive But seeing again, the in inventory or supply to need that general inventory. we've -- I And done seen potential OEMs we've people times down. People getting medical is spaces their seen go. any one to don't that as Part there hold there to will be need better, we're they think, customers, that get are lead about a and on was don't is bit to quicker. levels. and be think factors of and Medical much it's those back more chain right that's a and hold that.Post-COVID, one I just coming customer, now of

So we more there. But a see we're sort of closely certainly that here, growth few sort we quarters adjusting back. start seeing QX, we're of that strength. unfortunately, seeing where come that and in But see in not we'll going broad-based to watch it demand anticipate

Anja Soderstrom

Okay.

back the about In XXXX, think at of when been terms that gross going of that's gross How And XXXX? very now you Semi-cap coming elevated. we margin, margin. at higher that a and think should margin you've the not good keeping into until

Arvind Kamal

Arvind. is this Anja,

of have into drive couple X-pronged sites me of saying or efficiency to margin align from there's cost let that off that start really is type One there's about it. the our here. things So as guided a demand underpin the for can just see operational we margin. build we And actions that part demand you approach. quarters by demand a XX% guidance, of we Then talked our gross is, the

we of rightsizing, when kind demand. we the don't on think naturally, that, you horizon. to addition we'll that's And that's the have revenue.So element mix ready And as of for and In we look of for where we're to not XX% -- about there's is, about that, that's where be. get where third also talk we beyond then where to this think the out that how XXXX, our

So margin XXXX. how about texture to thinking when we the we'll more further as you get into into we're give year,

Jeffrey Benck

Arvind's Let lower on. than the think spot down, add to But comms comment, you our even and corporate being just little he me down maybe I average. margin a with compute also if thought about they're was think I bit mix being

on little the mix side. helping that's So maybe a bit

profitability strongly, help. really We've we that things.And also disciplined resources are But until help. at protect as to Semi-cap Semi-cap we about right do enjoying there's margin aligning back pretty pressure do expect that softness, our We now. really right focused get looking this we just top we're we're margin on industry maintain continue to now, to have even making how expense But of when then to comes line we're top revenue. much been we sure on won't

Anja Soderstrom

queue. Okay. I'll in get back

Operator

Instructions] & Company. with We'll next question Jim Needham from take [Operator our Ricchiuti

Chris Grenga

provide This Jim. with can share Grenga to? you Or more areas just call is on on would you any bit Semi-cap? a that else gains is color add attention Could Chris for you there? And there anything the particular

Jeffrey Benck

was the Yes. end the across here, customers get been not things. because of working and as infinite this an there's number a we make little sure as on And tricky exposure well front particularly we memory heavily. where side to play logic, But we've of even

and well one-stop really room rides like XX had be continuing new excited in growing and so standpoint, machine, customers this customer platen our of of of because So share more right? a that we 'XX. logos. with just share a with build it EMS to just and looking with might to just gain months. about kind the mention that do customers that to increasingly win takes higher-level as solution to us cleaning assembly do both machining both and a more helping particular continue lot move integration should or to on. the and But in So of working frame a kind we manufacturing in from is new we're something things.And some solutions piece unique been wins, that, adding number had does 'XX new months, OEMs of also and not and new one that produce we a more a And with precision help quarter of as bookings wafer those region, metal thing, side shop, X wins 'XX a that the even existing slowdown we and advantage strong starting put existing everyone through.And wallet integrate a machining, grow continued can really also that of higher-level when Semi-cap we're we've support environment complex the that the year, was at where I gives assembly or energy was integration, the We've to a into. that back oftentimes We constantly pretty in we're the before look XX last space might a of the

bit those in that today. decline see or a the from and seeing the us bookings we're business wins others had this growth you So benefiting strong probably there. that's contributing space, are to they're rate our really And those double we why because half

Operator

you. Thank

We have further closing time. this time. Paul back this have questions like no remarks. questions or further we seems over call Mansky, to Instructions]It to additional for [Operator at the any I'd turn at no

Paul Mansky

you, again the you, in with to Please everyone, thank updates participating Thank speaking for and conferences. your With Earnings XXXX Call. thank the to coming for First and for Quarter section Investor you remember at, IR of Events check Benchmark's forward you Dien, to soon. that, we website ir.bench.com support look

Operator

concludes appreciate participation. This your everyone. you presentation. Thank We today's

time. at disconnect may You any

Benchmark Electronics (BHE) 1 May 242024 Q1 Earnings call transcript