Summary of Benchmark Electronics Conference Call Company Overview - **Company**: Benchmark Electronics - **Industry**: Electronics and Precision Technologies Manufacturing - **Market Capitalization**: $2.7 billion [3] Key Financial Highlights - **Free Cash Flow**: $140 million over the last twelve months, with a gross margin greater than 10% for six consecutive quarters [4][11] - **Net Cash**: $79 million at the end of Q1 [4][19] - **Revenue**: $632 million in Q1, in line with guidance [13] - **Gross Margin**: 10.1% in Q1, slightly up from 10.0% year-over-year [14] Operational Insights - **Global Manufacturing Footprint**: 21 locations, with 55% in the Americas and 36% in the U.S. [6] - **Employee Count**: 12,500 associates, including 420 engineers [4] - **Focus on Inventory Management**: Reduced inventory days from 94 to 89, aiming for 5-5.5 turns [20] Sector Performance - **Medical Sector**: 12% decline quarter-over-quarter due to demand softness, expected recovery in the latter half of the year [16][24] - **Aerospace and Defense**: 4% growth quarter-over-quarter, driven by strong defense demand [15][22] - **Industrial Sector**: Slight decline of 2% quarter-over-quarter, but positive outlook for growth [15][22] - **Semi Cap Sector**: Revenue decreased by 2%, but year-over-year growth of 18% indicates market share gains [14] Strategic Focus - **Outsourcing Trend**: Continued growth expected in outsourcing, particularly in industrial and medical sectors [8][30] - **Tariff Management**: Minimal impact from tariffs as they are considered a pass-through, with 36% U.S. footprint providing stability [12][13] - **Future Growth Areas**: Anticipated growth in semi cap and industrial sectors, with ongoing investments in technology and capacity [21][22] Capital Allocation and Shareholder Returns - **Dividends**: Commitment to maintaining dividends, with a focus on returning capital to shareholders [18][47] - **Share Buybacks**: $8 million in shares repurchased in Q1, aimed at offsetting dilution [19][47] - **M&A Strategy**: No recent acquisitions, focusing on organic growth and existing customer base [48][49] Conclusion - **Outlook**: Optimistic about future growth, particularly in semi cap and industrial sectors, while maintaining operational efficiency and margin stability [28][30]

Sales Performance - Sales for Q1 2025 were $631.8 million, a 6% decrease from $675.6 million in Q1 2024[109] - Total sales for Q1 2025 were $631.8 million, a decrease of 6.5% from $675.6 million in Q1 2024[121] - Semiconductor Capital Equipment sales increased by 18% to $195.1 million from $165.9 million in Q1 2024[117] - Aerospace and Defense sales increased by 15% to $121.9 million from $105.8 million in Q1 2024[118] - Medical sales decreased by 10% to $103.6 million from $114.7 million in Q1 2024[119] - Advanced Computing and Communications sales decreased by 50% to $74.5 million from $148.0 million in Q1 2024[119] - Sales in the Americas decreased by 24% to $284.3 million, primarily due to softness in AC&C and semi-cap sectors[121] - Sales in Asia increased by 10% to $284.0 million, driven by higher demand in the semi-cap sector[122] - Sales in Europe increased by 7% to $86.3 million, attributed to higher demand in the A&D and industrial sectors[123] - Sales to the top ten customers represented 54% of total sales for both Q1 2025 and Q1 2024[110] Financial Metrics - Gross profit margin for Q1 2025 was 10.0%, unchanged from Q1 2024[115] - Gross profit decreased by 6% to $63.2 million, with a gross profit margin remaining flat at 10.0%[124] - Net income for Q1 2025 was 0.6%, down from 2.0% in Q1 2024[115] - Income from operations decreased by 54% to $11.8 million, with a significant loss of $4.4 million reported in the Americas[125] Expenses - Selling, general and administrative expenses increased to 6.1% of sales in Q1 2025 from 5.5% in Q1 2024[115] - SG&A expenses increased to $38.8 million, primarily due to higher stock-based compensation and professional services[127] Cash and Capital Expenditures - Cash provided from operating activities was $31.5 million, with working capital reported at $0.9 billion[138] - As of March 31, 2025, the company had $355.3 million in cash and cash equivalents, including $344.0 million held outside the U.S.[136] - The company plans capital expenditures of approximately $60 million to $70 million over the next 12 months to increase production capacity[144] Debt and Interest Rate Management - As of March 31, 2025, the company had $121.4 million outstanding on the floating rate term loan facility[155] - The company has an interest rate swap agreement with a notional amount of $121.4 million and a fixed interest rate of 4.039%[155] - The interest rate swap agreement is designated as a cash flow hedge, converting floating rate interest expense to fixed interest rate expense[155] - The company is exposed to market risk for changes in interest rates on its financial instruments, particularly related to invested cash balances[154] - The company is also exposed to interest rate risk on borrowings under its Credit Agreement[155] Risk Management - The company mitigates default risk by generally investing in investment grade securities[154] - The company does not use derivative financial instruments in its investing activities[154] - The company places cash and cash equivalents and investments with various major financial institutions to protect invested principal funds[154] - Additional information regarding forward currency exchange contracts and interest rate swap agreements can be found in the financial statements[156]

Financial Data and Key Metrics Changes - First quarter revenue was $632 million, down 4% sequentially and 6% year over year [10][11] - Non GAAP earnings per share was $0.52, above the midpoint of guidance [6][10] - Non GAAP gross margin was 10.1%, a 30 basis point decrease quarter over quarter but a 10 basis point increase year over year [10][13] - Non GAAP operating margin was 4.6%, down 50 basis points sequentially and 30 basis points year over year [10][11] Business Line Data and Key Metrics Changes - Semi cap revenue grew 18% year over year but decreased 2% quarter over quarter [11][19] - A and D sector revenue was up 15% year over year and 4% quarter over quarter [11][22] - Industrial revenue was down 2% quarter over quarter due to demand softness [11][21] - Medical revenue decreased 12% quarter over quarter, reflecting ongoing demand softness [12][22] - AC and C revenue decreased 12% quarter over quarter due to timing-related weaknesses [12][22] Market Data and Key Metrics Changes - The company has a significant U.S. manufacturing footprint at 36% and over 55% in North America [8][25] - Demand in the semi cap sector is expected to continue growing despite tariff uncertainties [19][20] - Medical sector recovery is anticipated in the second half of 2025 as inventory levels normalize [22][64] Company Strategy and Development Direction - The company is focused on optimizing supply chains for customers amid tariff-related uncertainties [5][27] - Continued investment in strategic growth areas, including a new facility in Penang, Malaysia [20][96] - The company is evaluating M&A opportunities that align with strategic plans while maintaining a focus on organic growth [28][102] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are short-term risks due to global macroeconomic uncertainties, there are also mid to long-term opportunities [25][27] - The company expects to deliver sequential growth throughout the year, barring a recession caused by tariffs [27][28] - Management expressed confidence in returning to year-over-year growth in the second half of 2025 [16][40] Other Important Information - The company generated $27 million in free cash flow in the quarter, marking the eighth consecutive quarter of positive free cash flow [6][14] - Cash balance as of March 31 was $355 million, a year-over-year increase of $59 million [14] - The company paid cash dividends of $6.1 million and repurchased $8 million of outstanding shares during the quarter [14] Q&A Session Summary Question: Are customer pauses and pull-ins creating a net headwind? - Management indicated that the situation is balancing out, with some customers pausing and others pulling in orders, leading to uncertainty but not a significant bias in either direction [31][32] Question: What is the impact of supply chain optimization on existing customers? - Management noted that some bids are taking longer due to customers evaluating their supply chains, elongating the cycle for new bookings [33][34] Question: Where is the traction seen in the industrial sector? - Management highlighted a balance of new and existing customers, with strong follow-on business and new growth in automation solutions [36] Question: Is the expected rebound in medical driven by channel replenishment or new program launches? - Management indicated that both factors are contributing, with customers working through inventory and new competitive takeaways expected to drive growth [56][57] Question: What is the expected tax rate for the second half of the year? - Management projected a slight drop in the tax rate, estimating around 24% for the year [60] Question: How quickly can the company pivot or launch new programs? - Management stated that moving a customer to an existing facility is challenging, but new programs can ramp significantly in about six months if leveraging existing manufacturing knowledge [82] Question: Are there opportunities to acquire a customer's manufacturing facility? - Management expressed openness to discussions about taking over facilities if they align with existing operations but emphasized a preference against acquiring facilities at a premium [88][90]

Benchmark Electronics Financial Results April 29, 2025 Forward-Looking 2025 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," "project," "forecast," "strategy ...

Financial Data and Key Metrics Changes - First quarter revenue was $632 million, down 4% sequentially and 6% year over year [12][14] - Non-GAAP earnings per share (EPS) was $0.52, above the midpoint of guidance [8][12] - Non-GAAP gross margin was 10.1%, a 30 basis point decrease quarter over quarter but a 10 basis point increase year over year [12][15] - Non-GAAP operating margin was 4.6%, down 50 basis points sequentially and 30 basis points year over year [12][15] - Free cash flow generated in the quarter was $27 million, totaling slightly more than $140 million on a trailing twelve-month basis [9][16] Business Line Data and Key Metrics Changes - Semi cap revenue grew 18% year over year but decreased 2% quarter over quarter [13][20] - Aerospace and Defense (A&D) revenue was up 15% year over year and 4% quarter over quarter [13][22] - Industrial revenue was down 2% quarter over quarter due to existing customer demand softness [13][22] - Medical revenue decreased 12% quarter over quarter, reflecting demand softness in medical devices [13][22] - AC and C revenue decreased 12% quarter over quarter due to timing-related weaknesses [13][22] Market Data and Key Metrics Changes - The company noted a mixed recovery in the broader industry, particularly in semi cap and A&D sectors [20][22] - Demand in the medical sector is expected to improve in the second half of 2025 as inventory levels normalize [24][66] - The company has a significant U.S. manufacturing footprint, with 36% of its capacity in the U.S. and over 55% in North America [10][68] Company Strategy and Development Direction - The company aims to optimize supply chains for customers amid tariff-related uncertainties [6][27] - Continued investment in semi cap and A&D sectors is a focus, with a new facility in Penang, Malaysia, to support future growth [21][100] - The company is exploring M&A opportunities that align with strategic plans but remains focused on organic growth [28][109] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to revenue growth despite current headwinds [7][27] - The company anticipates mid-single-digit revenue growth in the second half of 2025 [18][44] - Management highlighted the importance of adapting to customer needs and optimizing supply chains in a dynamic environment [88][90] Other Important Information - The company paid cash dividends of $6.1 million and repurchased $8 million of outstanding shares in the quarter [16][17] - The cash balance as of March 31 was $355 million, a year-over-year increase of $59 million [16][17] Q&A Session Summary Question: Are customer pauses and pull-ins creating a net headwind? - Management indicated that customer activity is balancing out, with some customers pausing shipments while others are pulling in orders [31][32] Question: What is the outlook for existing customers optimizing their supply chains? - Management noted that some bids are taking longer due to customers evaluating their supply chains amid tariff uncertainties [34][35] Question: Where is the traction seen in the industrial sector? - Management reported a balance of new and existing customers driving growth in the industrial sector, particularly in electronic controls and automation solutions [37][38] Question: Is the first half expected to decline while the second half sees growth? - Management confirmed that the first half is expected to decline mid-single digits year over year, with growth anticipated in the second half [42][43] Question: What is the expected tax rate for the second half of the year? - The expected effective tax rate for the remainder of the year is projected to be around 24% [61][62] Question: Are inventory levels in the medical sector normalized? - Management believes that OEMs have worked through much of the inventory, leading to expected growth in the second half [65][66] Question: How quickly can new programs be launched in new facilities? - Management indicated that while moving existing customers can be challenging, new programs can ramp up significantly within six months if they are competitive takeaways [86][88] Question: Is the company considering acquiring customer manufacturing facilities? - Management expressed openness to discussions about taking over facilities but emphasized a preference for leveraging existing infrastructure rather than acquiring new factories [92][94]

Revenue and Earnings Performance - Revenue for Q1 2025 was $632 million, a decrease from $676 million in Q1 2024, representing a decline of approximately 6.5%[4] - GAAP diluted earnings per share (EPS) for Q1 2025 was $0.10, down from $0.38 in Q1 2024, a decline of 73.7%[4] - Non-GAAP diluted EPS for Q1 2025 was $0.52, compared to $0.55 in Q1 2024, a decrease of 5.5%[4] - The company reported a GAAP operating income of $12 million for Q1 2025, down from $25.5 million in Q1 2024[4] - The diluted earnings per share (GAAP) for the quarter was $0.38, compared to $0.49 in the previous quarter, indicating a decline in earnings per share[19] Cash Flow and Financial Position - Free cash flow generated in Q1 2025 was over $27 million, despite a sequential revenue decline[2] - Cash flows from operating activities provided $48,457,000, down from $137,079,000 in the previous quarter, indicating a significant decrease in operational cash generation[19] - The company reported a net cash increase of $12,842,000 for the quarter, contrasting with a net cash increase of $126,053,000 in the previous quarter[19] - Free cash flow for the three months ended March 31, 2024, was $42,554,000, a decrease from $126,053,000 in the previous quarter[19] - The company’s cash and cash equivalents at the end of the period totaled $296,055,000, compared to $283,213,000 at the beginning of the year[19] Operational Efficiency - Non-GAAP gross margin for Q1 2025 was 10.1%, slightly down from 10.0% in Q1 2024[3] - The GAAP operating margin for the quarter was 3.8%, down from 4.6% in the previous quarter, indicating a decline in operational efficiency[19] - Days in cash conversion cycle improved to 86 days in Q1 2025, down from 94 days in Q1 2024[5] Future Guidance - The company anticipates Q2 2025 revenue guidance between $615 million and $665 million[9] - Non-GAAP EPS guidance for Q2 2025 is projected to be between $0.52 and $0.58[9] Manufacturing and Compensation - Benchmark operates 10 manufacturing facilities in the U.S. and has significant global manufacturing capacity to meet customer needs[3] - Stock-based compensation expense increased to $4,397,000 for the three months ended March 31, 2025, from $2,176,000 in the previous quarter[19] Profitability - The company’s gross profit (GAAP) for the quarter was $67,408,000, down from $71,004,000 in the previous quarter, reflecting a decrease in profitability[19] - Non-GAAP income from operations for the same period was $33,107,000, compared to $38,313,000 in the previous quarter, reflecting a decline of approximately 13.4%[19]

Sales Performance - Sales for 2024 were $2.7 billion, a 6% decrease from $2.8 billion in 2023, primarily due to decreases in medical and AC&C sales [173]. - Sales to the ten largest customers represented 50% of total sales in 2024, with the largest customer, Applied Materials, accounting for 14% of total sales [174]. - Sales in the Semi-Cap sector increased by 12% to $723.2 million in 2024, driven by demand from existing and new customers [181]. - Medical sales decreased by 19% to $450.7 million in 2024, attributed to inventory rebalancing and end-demand weakness [182]. Financial Performance - Net income for 2024 was $63.3 million, or $1.72 per diluted share, compared to $64.3 million, or $1.79 per diluted share, in 2023 [203]. - Gross profit margin increased to 10.2% in 2024 from 9.5% in 2023, despite gross profit remaining relatively consistent at $270.0 million [188]. - Operating income in the Americas decreased by 37% to $40.2 million in 2024, primarily due to lower revenue [190]. - Interest expense decreased to $26.9 million in 2024 from $31.9 million in 2023, mainly due to decreased borrowings [198]. Cash Flow and Investments - Cash and cash equivalents totaled $328.0 million at December 31, 2024, up from $283.2 million at December 31, 2023 [204]. - Cash provided from operating activities was $189.2 million in 2024, consisting of $63.3 million net income and $46.1 million depreciation and amortization [207]. - Cash used in investing activities was $32.8 million in 2024, primarily for capital expenditures of $31.3 million for property, plant, and equipment [209]. - Cash used in financing activities was $109.1 million in 2024, including $600.0 million in borrowings and $674.1 million in principal payments under the Credit Agreement [210]. Capital Expenditures and Borrowings - The Company plans capital expenditures of approximately $65 million to $75 million over the next 12 months to increase production capacity [217]. - As of December 31, 2024, the Company had $123.0 million in borrowings outstanding under the term loan facility and $135.0 million under the revolving credit facility [215]. - The Company amended its Credit Agreement to increase the revolving credit facility commitments from $450 million to $550 million [214]. - As of December 31, 2024, the Company had $410.6 million available for borrowings under the Credit Agreement [217]. Shareholder Returns - The Company repurchased 0.1 million shares for $5.1 million in 2024, with an average price of $40.27 per share [220]. - Cash dividends paid in 2024 totaled $23.9 million, compared to $23.5 million in 2023 and $23.2 million in 2022 [221]. Risk Management - The company is exposed to foreign currency fluctuation risks and utilizes natural hedging and forward contracts to manage transactional exposure [241]. - Sales are primarily denominated in U.S. dollars, with foreign currency cash flows generated in certain European and Asian countries and Mexico [242]. - The company is also exposed to market risks related to interest rates on financial instruments, particularly on invested cash balances [243]. - The company does not use derivative financial instruments for speculative purposes, focusing instead on managing risks associated with foreign currency and interest rates [241]. Compliance and Obligations - The Company is in compliance with all financial covenants related to its Credit Agreement as of December 31, 2024 [216]. - The company has contractual obligations extending beyond 2024 related to lease obligations and debt arrangements, with some electronic component manufacturers experiencing lead-times exceeding 52 weeks due to supply chain constraints [236]. - The company has not guaranteed obligations of any entity outside of its wholly owned subsidiaries, maintaining a conservative financial approach [236]. Goodwill and Impairment - As of December 31, 2024, the fair value of the Americas and Asia reporting units was determined to be greater than their carrying amounts, indicating no further goodwill impairment testing was required [234]. - Changes in economic and operating conditions may lead to future goodwill impairment charges, highlighting the importance of ongoing assessments [234].

Core Insights - The individual has extensive experience in the energy industry, having worked for 22 years in various roles including engineering, planning, and financial analysis [1] - The investment strategy focuses on achieving returns that match the S&P 500 with lower volatility and higher income, emphasizing long-term holdings unless compelling reasons to sell arise [1] - The approach to investment is agnostic to asset class, market cap, sector, or yield, prioritizing total return by purchasing undervalued assets [1] Company and Industry Insights - The individual has been managing their own investment portfolio since 1998, indicating a long-term commitment to investment strategies [1] - There is a beneficial long position in BRK.B shares, suggesting confidence in the company's performance and potential for growth [2] - The article reflects personal opinions and does not represent any business relationship with companies mentioned, indicating an independent analysis [2]

Benchmark Electronics Fourth Quarter and Fiscal Year 2024 Results January 29, 2025 Today's Speakers Jeff Benck, President and CEO Bryan Schumaker, EVP and CFO * See APPENDIX 1 for a reconciliation of GAAP to non-GAAP Financial Results | 4 • Revenue of $657M was in-line with guidance - Solid year-over-year growth in Semi-Cap, A&D and Industrials - Offset by anticipated softness in Medical and AC&C • GAAP EPS of $0.50 and non-GAAP EPS of $0.61 • GAAP and non-GAAP gross margin of 10.3% and 10.4% • GAAP operati ...

Revenue Performance - Fourth quarter 2024 revenue was $657 million, a decrease of 4.9% year-over-year from $691 million, primarily due to declines in Medical and AC&C sales[1] - Full year 2024 revenue totaled $2.656 billion, down from $2.839 billion in 2023, reflecting a decrease of 6.4%[1] - The Semiconductor Capital Equipment sector contributed $198 million in revenue for Q4 2024, representing 30% of total sales, up from 24% in Q4 2023[5] - First quarter 2025 guidance projects revenue between $620 million and $660 million, with diluted GAAP earnings per share expected between $0.34 and $0.40[7] Net Income and Earnings Per Share - Net income for Q4 2024 was $18 million, compared to $18 million in Q4 2023, while full year net income was $63 million, slightly down from $64 million in 2023[1] - Diluted earnings per share for Q4 2024 were $0.50, up from $0.49 in Q4 2023, and full year diluted earnings per share were $1.72, down from $1.79 in 2023[1] - Net income for 2024 was $63,327, slightly down from $64,315 in 2023, a decrease of approximately 1.54%[18] Operating Performance - The company achieved a GAAP operating margin of 4.3% in Q4 2024, consistent with Q4 2023, and a full year operating margin of 4.1%, up from 3.9% in 2023[1] - GAAP income from operations for Q4 2024 was $28,524 million, an increase from $25,529 million in Q1 2024[20] - Non-GAAP income from operations for Q4 2024 was $33,320 million, compared to $33,107 million in Q1 2024[20] - GAAP operating margin for Q4 2024 was 4.3%, consistent with Q1 2024[20] - Non-GAAP operating margin for Q4 2024 was 5.1%, compared to 4.9% in Q1 2024[20] Cash Flow and Working Capital - The company delivered $156 million in free cash flow for the full year 2024, marking the seventh consecutive quarter of positive free cash flow[1] - Cash conversion cycle improved to 89 days in Q4 2024, down from 98 days in Q4 2023, indicating better efficiency in managing working capital[3] - Net cash provided by operating activities increased to $189,225 in 2024 from $174,294 in 2023, an increase of about 8.57%[18] - Free cash flow for Q4 2024 was $36,884 million, an increase from $42,554 million in Q1 2024[20] - Net cash provided by operations for Q4 2024 was $45,916 million, compared to $48,457 million in Q1 2024[20] Balance Sheet and Shareholder Equity - Total assets decreased from $2,274,755 in 2023 to $2,139,464 in 2024, a decline of approximately 5.95%[16] - Current assets fell from $1,635,747 in 2023 to $1,504,229 in 2024, representing a decrease of about 8.03%[16] - Total liabilities decreased from $1,195,670 in 2023 to $1,026,151 in 2024, a reduction of about 14.18%[16] - Long-term debt, net of current installments, decreased from $326,674 in 2023 to $250,457 in 2024, a decline of approximately 23.29%[16] - Shareholders' equity increased from $1,079,085 in 2023 to $1,113,313 in 2024, an increase of about 3.16%[16] - The company repurchased shares worth $5,100 in 2024, indicating a commitment to returning value to shareholders[18] Cash and Cash Equivalents - Cash and cash equivalents and restricted cash at the end of 2024 rose to $328,027 from $283,213 in 2023, an increase of approximately 15.77%[18] - The net increase in cash and cash equivalents and restricted cash for the year was $44,814, down from $75,783 in 2023, a decrease of approximately 40.94%[18]