Benchmark Electronics Conference Summary Company Overview - **Company**: Benchmark Electronics (NYSE:BHE) - **Industry**: Electronics Manufacturing Services (EMS) and Precision Technology - **Headquarters**: Texas - **History**: Established for 40 years, initially focused on medical devices, expanded into various sectors over time, with a shift towards organic growth in the last decade [3][4] Revenue Breakdown - **Current Revenue Exposure**: - **Semi-Cap**: High 20% range - **Industrial, Medical, and Aerospace & Defense (A&D)**: Roughly 20% - **Advanced Computing and Communications (AC&C)**: Focus on 5G infrastructure and supercomputing [4][5] Financial Performance - **Gross Margin**: Over 9 quarters of 10% or better gross margin; recent non-GAAP operating margin at 5.5% [5][6] - **Future Guidance**: Q1 guidance below 5%, with expectations for mid-single-digit growth in 2026 [6][32] Leadership Transition - **New CEO**: David, previously Chief Commercial Officer, effective end of March 2026; aims to continue existing growth strategies with fresh ideas [9][10] Market Dynamics - **Semi-Cap Market**: Emerging from a prolonged down cycle exceeding 2 years; investments made during downturn expected to yield returns as demand improves [11][12] - **Competitive Advantage**: Precision machining capabilities and strong customer relationships differentiate Benchmark from competitors [13][14] Sector Insights - **Industrial Sector**: Stable with gradual improvement driven by new bookings and demand [15][16] - **Medical Sector**: Anticipated growth due to new program ramps and improved demand; double-digit growth expected to continue into 2026 [16][17] - **A&D Sector**: Moderating growth anticipated after two years of double-digit increases, with focus on space applications [17][18] - **AC&C Sector**: Increased interest in AI equipment and supercomputing; targeting enterprise and sovereign AI markets [19][20][23] Supply Chain and Geopolitical Impact - **Supply Chain Management**: Proactive approach to component pricing and availability; minimal direct exposure to geopolitical tensions [36][39] - **Cost Pass-Through**: Majority of contracts allow for passing cost increases to customers [41] Free Cash Flow and Capital Allocation - **Free Cash Flow Guidance**: Expected in the range of $70 million to $90 million for 2026, with focus on improving inventory turns and cash conversion cycle [42][43] - **Capital Allocation Strategy**: Continued support for dividends, share buybacks, and selective M&A activity anticipated [49][50] Conclusion - **Growth Strategy**: Focus on organic growth, precision technology, and maintaining strong customer relationships; potential for increased M&A activity in the near future [50][51]

Sales Performance - Sales for 2025 remained flat at $2.7 billion, with significant fluctuations across industry sectors, including a 19% increase in A&D and a 27% decrease in AC&C[185][189]. - Sales to the ten largest customers represented 51% of total sales in 2025, with Applied Materials, Inc. accounting for 14%[186]. Profitability - Gross profit was $270.1 million in 2025, maintaining a gross profit margin of 10.2% consistent with 2024[197]. - Income from operations declined to $76.0 million in 2025 from $109.4 million in 2024, primarily due to increased restructuring charges and other costs[198]. - Net income decreased to $24.9 million, or $0.68 per diluted share, in 2025 compared to $61.1 million, or $1.66 per diluted share, in 2024[211]. Expenses - SG&A expenses increased to $159.7 million in 2025 from $149.5 million in 2024, driven by variable compensation[200]. - Restructuring charges and other costs amounted to $7.4 million in 2025, primarily related to site closures and capacity reductions[202]. Cash Flow - Cash provided from operating activities was $124.0 million in 2025, consisting of $24.9 million net income and $47.6 million depreciation and amortization[215]. - Cash used in investing activities was $32.7 million in 2025, primarily for capital expenditures of $35.6 million for property, plant, and equipment[217]. - Cash used in financing activities was $105.9 million in 2025, including $891.1 million in borrowings and $936.0 million in principal payments under the Credit Agreement[218]. Financial Position - Cash and cash equivalents totaled $322.4 million at December 31, 2025, down from $328.0 million at December 31, 2024[212]. - As of December 31, 2025, the company had $148.1 million in borrowings outstanding under the term loan facility and $65.0 million under the revolving credit facility[220]. - The company had $480.6 million available for borrowings under the Credit Agreement as of December 31, 2025[222]. Shareholder Returns - The company repurchased 0.7 million shares for $26.8 million at an average price of $38.22 per share during 2025[225]. - Cash dividends paid in 2025 totaled $24.4 million, with a quarterly cash dividend of $0.17 per share declared on December 15, 2025[226]. Capital Expenditures - The company anticipates capital expenditures of approximately $60 million to $70 million over the next 12 months to increase production capacity[222]. - The company entered into a $700 million second amended and restated credit agreement on June 27, 2025, with a five-year revolving credit facility of $550 million[219]. Compliance and Risk Management - As of December 31, 2025, the company was in compliance with all financial covenants related to its Credit Agreement[221]. - The Company enters into forward currency exchange contracts designated as cash flow hedges for forecasted foreign currency expenses[245]. - The Company is exposed to market risk for changes in interest rates on its financial instruments, particularly related to invested cash balances[246]. - The Company mitigates default risk by generally investing in investment grade securities[246]. - The Company is also exposed to foreign currency exchange risk and economic and political instability[249]. - The Company faces risks from import and export duties, taxes, tariffs, and regulatory changes[249]. Derivative Instruments - Changes in the fair value of derivatives are recorded in accumulated other comprehensive loss until earnings are affected by cash flow variability[245]. - The Company does not use derivative financial instruments in its investing activities[246]. - Cash and cash equivalents are placed with various major financial institutions to protect invested principal funds[246]. - The Company has an interest rate swap agreement with a notional amount of $148.1 million to convert floating rate interest expense to fixed interest rate expense[247]. - As of December 31, 2025, the Company had $148.1 million outstanding on the floating rate term loan facility[247].

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Financial Data and Key Metrics Changes - The company reported Q4 revenue of $704 million, representing a high single-digit increase year-over-year and exceeding prior guidance [5][11] - Full year 2025 revenue was $2.66 billion, flat compared to the prior year, but showed improving momentum throughout the year [7][12] - Q4 non-GAAP EPS was $0.71, surpassing the guidance range of $0.62-$0.68 [11] - Gross margin for Q4 was 10.6%, up 50 basis points sequentially and 20 basis points year-over-year [11][12] - Operating margin for Q4 was 5.5%, demonstrating leverage in the company's model [5] Business Line Data and Key Metrics Changes - Semi-Cap revenue decreased 8% quarter-over-quarter and 14% year-over-year, but full year revenue grew 2% [12][13] - Industrial revenue was flat for the full year but up 3% year-over-year [13] - A&D revenue grew 17% year-over-year and 19% for the full year [13] - Medical revenue increased 23% year-over-year in Q4, leading to 7% growth for the full year [13] - AC&C revenue rebounded in Q4, up 27% year-over-year, with expectations for continued growth [14] Market Data and Key Metrics Changes - The company noted improved sell-through and healthier end demand across sectors as channel inventory normalized [20] - The semi-cap sector is expected to see a demand inflection in the back half of 2026, with early signs of improvement [21][22] - Industrial sector performance is expected to gradually improve throughout 2026, driven by demand in transportation and HVAC [22] - A&D revenue growth is expected to moderate in 2026 due to program timing, but bookings momentum in space applications is promising [23][24] - Medical sector is anticipated to maintain double-digit growth in 2026, supported by strong bookings in MedTech [24] Company Strategy and Development Direction - The company targets five core high-value markets, focusing on complex, high-mix opportunities while avoiding commoditized markets [8] - Continued investment in global precision technology and production equipment is planned to align with new business wins [10][16] - The company aims to improve working capital efficiency and maintain positive free cash flow while investing in growth [9][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of bookings and operational execution, particularly in medical and AC&C sectors [9][20] - The company anticipates a strong recovery in the semi-cap sector in 2026, with proactive capacity planning already in place [10][59] - Management remains optimistic about mid-single-digit growth guidance for 2026, with potential for further strengthening as visibility improves [26] Other Important Information - The company generated $85 million in free cash flow for fiscal year 2025 and maintained a net cash positive position of $111 million [15][16] - An $11.1 million non-cash impairment was recorded on certain assets due to program end-of-life [18] - The cash conversion cycle improved to 67 days, with significant improvements in inventory management [17][70] Q&A Session Summary Question: Areas of increased confidence beyond Semi-Cap - Management indicated that medical and AC&C sectors have shown improved momentum, with industrial gradually picking up as well [31][32] Question: Thoughts on gross margins and operating leverage - Management noted that while gross margins are stable, operating margins are where leverage can be realized as revenue accelerates [33][34] Question: Expansion of Total Addressable Market (TAM) in industrial - Management highlighted the broad nature of the industrial segment, with opportunities in HVAC, transportation, and agriculture [41][43] Question: Insights on space applications and bookings - Management expressed excitement about the momentum in space bookings, which is expected to contribute positively to A&D growth [44][45] Question: Details on medical program wins and momentum - Management confirmed ongoing success in medical devices and life sciences, with expectations for continued growth into 2026 [55][56] Question: Timeline for semi-cap recovery - Management indicated that they are prepared to respond to orders within 1-3 months, with proactive capacity planning already in place [58][59] Question: Expectations for cash cycle days and CapEx - Management aims to maintain stability in cash conversion cycle days while anticipating a slight increase in CapEx due to new projects [70][72]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $704 million, representing a high single-digit increase year-over-year, with earnings per share (EPS) of $0.71, exceeding prior guidance [5][11] - For the fiscal year 2025, total revenue was $2.66 billion, flat compared to the previous year, with non-GAAP EPS increasing by 5% to $2.40 [7][12] - Gross margin for Q4 was 10.6%, up 50 basis points sequentially and 20 basis points year-over-year, while full-year gross margin was 10.2% [11][12] Business Line Data and Key Metrics Changes - Semi-cap revenue decreased by 8% quarter-over-quarter and 14% year-over-year, but full-year revenue grew by 2% [12][13] - Aerospace and Defense (A&D) revenue increased by 7% sequentially and 17% year-over-year, with full-year growth at 19% [13] - Medical sector revenue grew by 14% quarter-over-quarter and 23% year-over-year, leading to a 7% increase for the full year [13] - AC&C revenue rebounded in Q4, up 22% sequentially and 27% year-over-year, with expectations for continued growth [14] Market Data and Key Metrics Changes - The semi-cap market experienced a cyclical downturn, but new bookings and capacity expansion are expected to position the company well for recovery [21] - Industrial revenue was flat for the full year but showed improvement in the second half, driven by demand in transportation and HVAC [22] - The medical sector is expected to see double-digit growth in 2026, supported by strong bookings momentum [24] Company Strategy and Development Direction - The company targets five core high-value markets, focusing on complex, high-mix opportunities while avoiding commoditized markets [8] - Continued investment in global precision technology and production equipment aligns with new business wins, particularly in space, MedTech, and enterprise AI [9][10] - The company aims to maintain a disciplined approach to operating expenses while driving improvements in working capital efficiency [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of bookings and improving end-market conditions, particularly in medical and semi-cap sectors [25][26] - The company anticipates mid-single-digit growth for 2026, with potential for further strengthening as visibility from customers improves [26] - Management highlighted the importance of operational execution and customer satisfaction in driving revenue growth [20][21] Other Important Information - The company generated $85 million in free cash flow for fiscal year 2025 and maintained a net cash positive position of $111 million [15][16] - An $11.1 million non-cash impairment was recorded on certain assets due to program end-of-life, with no impact on previously reported financials [18] - The cash conversion cycle improved to 67 days, with significant improvements in inventory management [17][70] Q&A Session Summary Question: Areas of increased confidence beyond Semi-Cap - Management indicated that medical and AC&C sectors have shown improved momentum, with expectations for continued growth [31][32] Question: Thoughts on gross margins and operating leverage - Management noted that while gross margins are stable, operating margins are expected to leverage as revenue accelerates [33][34] Question: Expansion of Total Addressable Market (TAM) in industrial - Management highlighted opportunities in various subsectors such as HVAC, transportation, and agriculture, indicating a broad TAM [41][43] Question: Insights on space bookings and future growth - Management expressed optimism about bookings momentum in space applications, contributing positively to A&D sector growth [44][45] Question: Timeline for Semi-Cap recovery - Management indicated that customer orders could be responded to within one to three months, with expectations for a significant recovery in 2026 [59][60]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $704 million, reflecting a high single-digit growth and exceeding prior guidance [5][11] - Full year revenue for 2025 was $2.66 billion, flat compared to the previous year, but showed improving momentum throughout the year [6][12] - Fourth quarter earnings per share (EPS) was $0.71, surpassing the guidance range of $0.62-$0.68 [11] - Non-GAAP gross margin for Q4 was 10.6%, up 50 basis points sequentially and 20 basis points year-over-year [11][12] - Full year non-GAAP EPS increased by 5% to $2.40, while non-GAAP operating margin was 4.9%, down 20 basis points year-over-year [12] Business Line Data and Key Metrics Changes - Semi-Cap revenue decreased by 8% quarter-over-quarter and 14% year-over-year, but grew 2% for the full year [12][13] - Industrial revenue was flat for the full year but up 3% year-over-year [13] - Aerospace & Defense (A&D) revenue grew 17% year-over-year and 19% for the full year [13] - Medical sector revenue increased by 23% year-over-year, with a full year growth of 7% [13][14] - AC&C revenue rebounded in Q4, up 27% year-over-year, and is expected to continue this momentum into Q1 [14] Market Data and Key Metrics Changes - The semi-cap market is expected to see a demand inflection in the back half of 2026, with early signs of improvement noted [22] - Industrial sector performance is gradually improving, driven by demand in transportation, HVAC, and automation [22] - A&D revenue growth is expected to moderate in 2026 due to program timing, but bookings momentum in space applications is strong [23][24] - Medical sector is anticipated to maintain double-digit growth in 2026, supported by new program ramps [24] - AC&C is expected to leverage strong performance in computing and AI infrastructure [25] Company Strategy and Development Direction - The company targets five core high-value markets, focusing on complex, high-mix opportunities while avoiding commoditized markets [7] - Continued investment in global precision technology and production equipment aligns with new business wins [10] - The company aims to maintain a disciplined approach to operational efficiency and working capital management [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of bookings and improving end-market conditions, particularly in medical and semi-cap sectors [25] - The company remains committed to shareholder-friendly capital allocation, including dividends and share repurchases [26] - Management anticipates mid-single-digit growth guidance for 2026, with potential for further strengthening as visibility improves [26] Other Important Information - The company generated $85 million in free cash flow for the fiscal year and maintained a net cash positive position of $111 million [16] - A non-cash impairment of $11.1 million was recorded on certain assets due to program end-of-life [19] - The cash conversion cycle improved to 67 days, with significant improvements in inventory management [18] Q&A Session Summary Question: Areas of increased confidence beyond Semi-Cap - Management noted improved performance in medical and AC&C sectors, with momentum expected to continue [31] Question: Insights on gross margins and operating leverage - Management indicated that while gross margins are stable, operating margin leverage is expected to improve as revenue accelerates [32] Question: Expansion of Total Addressable Market (TAM) in industrial - Management highlighted opportunities in various subsectors such as HVAC, transportation, and agriculture [41] Question: Details on medical program wins - Management confirmed wins in medical devices and life sciences, with momentum expected to carry into 2026 [54] Question: Timeline for semi-cap recovery - Management indicated that orders could be responded to within 1-3 months, with a positive outlook for 2026 [58]

Benchmark Electronics Fourth Quarter and Fiscal Year 2025 Results February 3rd, 2026 Forward-Looking Statements This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as "anticipate," "believe," "intend," "plan," "projec ...

Revenue and Earnings - Fourth quarter 2025 revenue reached $704 million, reflecting a high single-digit growth compared to the previous quarter[1] - Full year 2025 revenue totaled $2,659 million, slightly up from $2,656 million in 2024[4] - Diluted GAAP earnings per share for Q4 2025 were $0.17, while diluted non-GAAP earnings per share were $0.71[3] - The company expects Q1 2026 revenue guidance between $655 million and $695 million[7] - The company reported a diluted GAAP earnings per share of $1.66 in 2024, up from $0.68 in 2025, marking a growth of 144.1%[22] Profitability and Margins - Gross margin for Q4 2025 improved to 10.5% from 10.0% in Q3 2025[1] - Benchmark's operating margin for the full year 2025 was 2.9%, down from 4.1% in 2024[4] - GAAP operating margin improved to 4.1% in 2024 from 2.9% in 2025, indicating enhanced operational efficiency[22] Cash Flow and Assets - Operating cash flow for Q4 2025 was $59 million, with free cash flow of $48 million[3] - Cash and cash equivalents at the end of 2024 were $328,027 thousand, down from $322,400 thousand in 2025, reflecting a decrease of 1.9%[20] - Free cash flow for 2024 was $155,972 thousand, compared to $85,420 thousand in 2025, representing an increase of 82.2%[22] - Net cash provided by operating activities was $189,225 thousand in 2024, compared to $123,964 thousand in 2025, indicating a 52.7% increase[20] Sector Performance - The aerospace and defense (A&D) sector revenue increased to $137 million in Q4 2025, representing 20% of total revenue[5] Liabilities and Current Financial Position - Total current liabilities decreased from $635,577 thousand in 2025 to $649,105 thousand in 2024, a reduction of approximately 1.5%[17] - Total liabilities decreased from $971,912 thousand in 2025 to $1,029,872 thousand in 2024, a decline of approximately 5.9%[17] Strategic Direction - The company plans to continue executing its growth strategy under new leadership, focusing on creating value for stakeholders[2] Cash Conversion Cycle - The cash conversion cycle decreased to 67 days in Q4 2025, down from 89 days in Q4 2024[6]

Group 1 - Lake Street raised the price target on Benchmark Electronics (BHE) to $57 from $51 while maintaining a Buy rating on the shares as the analyst took over coverage of the stock [1] - The firm believes Benchmark is well-positioned for sustained, long-term growth in the Aerospace & Defense (A&D), Artificial Intelligence (AI), and Medical verticals [1] - The analyst expects the stock to increase as the company begins to ramp Semi orders throughout 2026 [1]

Benchmark Electronics Conference Call Summary Company Overview - **Company**: Benchmark Electronics - **Industry**: Electronic Manufacturing Services (EMS) - **Key Management**: Transition of CEO from Jeff Benck to David Moezidis effective April 1st, 2024 [6][3] Market Sector Breakdown - **Revenue Distribution**: - Semiconductor Equipment: 27% - Medical Sector: 20% - Industrial Sector: 20% - Aerospace and Defense (A&D): 20% - Advanced Communications and Compute: 13%-15% [7][8] Core Insights and Arguments - **Semiconductor Sector**: - Anticipation of growth in the semiconductor market in the second half of 2026 after a two-year slowdown [19] - Investments made in wafer fab equipment have allowed Benchmark to gain market share [28] - New facility in Malaysia expected to enhance capacity and support growth [29] - **Medical Sector**: - Medical sector has shown signs of recovery after an 18-month channel-clearing period [20] - Significant program win from a competitor has accelerated revenue generation [21] - **Aerospace and Defense (A&D)**: - A&D has experienced double-digit growth, with a focus on space programs [22][34] - Anticipated normalization of growth rates but at a higher level than previous years [36] - **Industrial Sector**: - Steady performance with numerous opportunities for growth due to the large total available market [22] - **AI and Advanced Computing**: - Early-stage participation in AI opportunities, particularly in government installations and commercial sectors [38] - Water-cooled infrastructure expertise positions Benchmark well for future AI developments [39] Financial Performance - **Margins**: - Consistent gross margins above 10% over the last nine quarters [44] - Potential for earnings growth to outpace revenue growth due to operational efficiencies [47] - **Working Capital Management**: - Reduction of $270 million in inventory since Q1 2023, with a cash conversion cycle of 77 days [49] - Focus on dividends, debt reduction, and stock buybacks as part of capital allocation strategy [50] Geopolitical Impact - **Manufacturing Footprint**: - 22 global locations with minimal impact from geopolitical issues; growth observed in Thailand and Mexico [41] - Ability to adapt to customer needs regarding manufacturing locations [42][43] Key Management Changes - **New Appointments**: - David Cummings appointed as Chief Commercial Officer [14] - Josh Holland appointed as Chief Technology Officer [15] Conclusion - Benchmark Electronics is strategically positioned for growth across multiple sectors, with a focus on operational efficiency and market share expansion. The company is navigating transitions in leadership while maintaining a strong financial profile and adapting to market dynamics.