[PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, with detailed notes on accounting policies and financial line items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets present the company's financial position as of March 31, 2023, and December 31, 2022, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Total Current Assets | $1,690,872 | $1,652,149 | | Total Assets | $2,278,648 | $2,227,331 | | Total Current Liabilities | $711,863 | $749,136 | | Long-term Debt, less current installments| $399,924 | $320,675 | | Total Shareholders' Equity | $1,034,626 | $1,026,416 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The Condensed Consolidated Statements of Income detail the company's financial performance for the three months ended March 31, 2023, and 2022, highlighting revenue, costs, and net income Condensed Consolidated Statements of Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales | $694,695 | $636,083 | | Gross profit | $63,958 | $57,602 | | Income from operations | $22,742 | $15,407 | | Net income | $12,360 | $10,960 | | Basic Earnings per share | $0.35 | $0.31 | | Diluted Earnings per share | $0.35 | $0.31 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents comprehensive income for the three months ended March 31, 2023, and 2022, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $12,360 | $10,960 | | Other comprehensive income | $2,424 | $1,271 | | Comprehensive income | $14,784 | $12,231 | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This statement outlines changes in shareholders' equity for the three months ended March 31, 2023, and 2022, detailing movements in common stock, retained earnings, and accumulated other comprehensive loss Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric | Balances, December 31, 2022 (in thousands) | Balances, March 31, 2023 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Total Shareholders' Equity | $1,026,416 | $1,034,626 | | Net income | - | $12,360 | | Dividends declared | - | $(5,878) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows present cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operations | $(24,906) | $(68,025) | | Net cash used in investing activities | $(38,712) | $(16,645) | | Net cash provided by financing activities| $67,024 | $59,134 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $4,260 | $(26,814) | | Cash and cash equivalents and restricted cash at end of period | $211,690 | $244,935 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, financial instruments, and segment information [Note 1 – Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, reflecting management's estimates and assumptions - The financial statements are unaudited and prepared in accordance with SEC rules and U.S. GAAP, reflecting management's estimates and assumptions[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 2 – New Accounting Pronouncements](index=8&type=section&id=Note%202%20%E2%80%93%20New%20Accounting%20Pronouncements) The Company has assessed recently issued accounting standards and determined they will not materially impact its financial position, results of operations, or cash flows - The Company determined that other recently issued accounting standards will not have a **material impact** on its consolidated financial position, results of operations, or cash flows[36](index=36&type=chunk) [Note 3 – Inventories](index=8&type=section&id=Note%203%20%E2%80%93%20Inventories) This note provides a summary of inventory costs, categorized into raw materials, work in process, and finished goods, as of March 31, 2023, and December 31, 2022 Inventories (in thousands) | Inventory Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Raw materials | $757,586 | $710,494 | | Work in process | $18,077 | $15,546 | | Finished goods | $2,474 | $1,709 | | Total Inventories | $778,137 | $727,749 | [Note 4 – Goodwill and Intangible Assets](index=9&type=section&id=Note%204%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) This note details the composition and amortization of goodwill and identifiable intangible assets, including customer relationships and capitalized software, as of March 31, 2023, and December 31, 2022 Intangible Assets Net Carrying Amount (in thousands) | Intangible Asset Category | March 31, 2023 Net Carrying Amount (in thousands) | December 31, 2022 Net Carrying Amount (in thousands) | | :------------------------ | :------------------------------------------------ | :--------------------------------------------------- | | Customer relationships | $32,528 | $34,114 | | Capitalized software costs| $17,456 | $15,781 | | Technology licenses | — | — | | Trade names and trademarks| $7,800 | $7,800 | | Other | $488 | $491 | | Total Intangible Assets | $58,272 | $58,186 | Amortization Expense (in thousands) | Amortization Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | | Intangible assets | $1,592 | $1,609 | | Capitalized software costs | $1,050 | $909 | | Debt costs | $114 | $85 | | Total Amortization| $2,756 | $2,603 | Estimated Future Amortization Expense (in thousands) | Year Ending December 31, | Estimated Future Amortization Expense (in thousands) | | :----------------------- | :--------------------------------------------------- | | 2023 (remaining nine months) | $4,388 | | 2024 | $4,817 | | 2025 | $4,817 | | 2026 | $4,817 | [Note 5 – Borrowing Facilities](index=9&type=section&id=Note%205%20%E2%80%93%20Borrowing%20Facilities) This note describes the company's credit agreements, including the Revolving Credit Facility and Term Loan Facility, their terms, outstanding balances, and compliance with financial covenants Debt Balances (in thousands) | Debt Type | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------ | :---------------------------- | :------------------------------- | | Revolving credit facility | $275,000 | $195,000 | | Term loan | $129,609 | $131,250 | | Less unamortized debt issuance costs | $(1,715) | $(1,829) | | Long-term debt | $402,894 | $324,421 | - As of March 31, 2023, the Company had **$129.6 million** outstanding under the Term Loan Facility, **$275.0 million** under the Revolving Credit Facility, and **$3.9 million** in letters of credit[72](index=72&type=chunk) - **$171.1 million** was available for future borrowings under the Revolving Credit Facility[72](index=72&type=chunk) - The Credit Agreement was amended on May 20, 2022, increasing the Revolving Credit Facility from **$250 million** to **$450 million**, and on February 3, 2023, increasing the maximum amount of trade accounts that can be sold to **$200.0 million**[63](index=63&type=chunk)[54](index=54&type=chunk) - A portion of the outstanding debt (**$129.6 million**) is effectively at a fixed interest rate of **2.928%** due to an interest rate swap contract[56](index=56&type=chunk) [Note 6 – Leases](index=11&type=section&id=Note%206%20%E2%80%93%20Leases) This note outlines the company's lease arrangements, primarily operating leases for facilities, vehicles, and equipment, detailing lease assets, liabilities, and associated costs Lease Metrics (in thousands) | Lease Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Operating lease right-of-use assets | $95,156 | $93,081 | | Operating lease liabilities, noncurrent | $87,561 | $86,687 | | Weighted average remaining lease term – operating leases | 9.3 years | 9.8 years | | Weighted average discount rate – operating leases | 4.1 % | 4.1 % | Lease Costs (in thousands) | Lease Cost Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $4,571 | $4,274 | | Short-term lease cost | $140 | $80 | | Variable lease cost | $456 | $469 | | Total lease cost | $5,197 | $4,855 | - Future operating leases not yet commenced include a new facility lease in the Americas, expiring in **2032**, with initial annual minimum lease payments of approximately **$2.4 million**[75](index=75&type=chunk) [Note 7 – Common Stock and Stock-Based Awards Plans](index=13&type=section&id=Note%207%20%E2%80%93%20Common%20Stock%20and%20Stock-Based%20Awards%20Plans) This note details the company's dividend policy, share repurchase authorization, and stock-based compensation plans, including stock options and restricted stock units - The Company declared a quarterly cash dividend of **$0.165 per share** for both Q1 2023 and Q1 2022, totaling **$5.8 million** in cash dividends paid for both periods[5](index=5&type=chunk) - As of March 31, 2023, the Company had an aggregate of **$154.6 million** remaining under its stock repurchase program, with no repurchases made during Q1 2023[76](index=76&type=chunk) Unrecognized Compensation Cost and Amortization Period | Stock-Based Award Type | Unrecognized Compensation Cost (in thousands) | Remaining Weighted-Average Amortization Period | | :--------------------- | :-------------------------------------------- | :--------------------------------------------- | | Restricted Stock Units | $32,123 | 3.0 years | | Performance-based Restricted Stock Units | $8,890 | 2.2 years | - Total compensation cost recognized for stock-based awards was **$4.8 million** for Q1 2023, up from **$4.2 million** for Q1 2022[84](index=84&type=chunk) [Note 8 – Income Taxes](index=15&type=section&id=Note%208%20%E2%80%93%20Income%20Taxes) This note details the components of income tax expense, the impact of tax incentives, and the company's policy regarding undistributed foreign earnings and uncertain tax benefits Income Tax Expense (in thousands) | Income Tax Component | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------- | :--------------------------------------- | :--------------------------------------- | | Current: U.S. Federal| $525 | $97 | | Current: State and local | $66 | $171 | | Current: Foreign | $3,444 | $3,466 | | Deferred | $(1,010) | $(1,201) | | Total Income Tax Expense | $3,025 | $2,533 | - Tax incentives and holidays in China (through **2023**) and Thailand (through **2030**) lowered foreign income tax expense by approximately **$1.9 million** (**$0.05 per diluted share**) in Q1 2023, compared to **$1.2 million** (**$0.03 per diluted share**) in Q1 2022[82](index=82&type=chunk)[89](index=89&type=chunk) - As of December 31, 2022, the Company had **$365.2 million** in cumulative undistributed foreign earnings not subject to U.S. income tax if distributed[16](index=16&type=chunk) [Note 9 – Revenue](index=16&type=section&id=Note%209%20%E2%80%93%20Revenue) This note details the company's revenue recognition policies, primarily from manufacturing services, and provides a disaggregation of revenue by market sector and geographic segment - Revenue is primarily generated from manufacturing services (sale of manufactured products built to customer specifications) and design, development, and engineering services[83](index=83&type=chunk)[98](index=98&type=chunk) - For Q1 2023 and Q1 2022, **90.4%** and **89.3%** of revenue, respectively, was recognized for products and services transferred over time[94](index=94&type=chunk) External Revenue by Market Sector (in thousands) | Market Sector | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Industrials | $143,526 | $137,146 | | A&D | $79,415 | $81,187 | | Medical | $137,049 | $116,873 | | Semi-Cap | $148,469 | $183,437 | | Advanced Computing | $95,998 | $55,056 | | Next Generation Communications | $90,238 | $62,384 | | Total External Revenue | $694,695 | $636,083 | - Contract assets increased to **$194.1 million** as of March 31, 2023, from **$183.6 million** as of December 31, 2022, primarily representing consideration for work completed but not yet billed[95](index=95&type=chunk) [Note 10 – Accounts Receivable Sale Programs](index=19&type=section&id=Note%2010%20%E2%80%93%20Accounts%20Receivable%20Sale%20Programs) This note describes the company's programs for selling accounts receivable to unaffiliated financial institutions at a discount to manage liquidity - As of March 31, 2023, the Company could sell up to **$200.0 million** of specific accounts receivable at any one time[104](index=104&type=chunk) - During Q1 2023, the Company sold **$152.8 million** of accounts receivable, receiving **$151.8 million** in cash proceeds (net of discount), compared to **$107.2 million** sold and **$107.0 million** received in Q1 2022[105](index=105&type=chunk) [Note 11 – Contingencies](index=19&type=section&id=Note%2011%20%E2%80%93%20Contingencies) The company is involved in various legal actions in the ordinary course of business, but management believes their ultimate disposition will not materially adversely affect its financial position or results of operations - Management believes that the ultimate disposition of ongoing legal actions will not have a **material adverse effect** on the Company's consolidated financial position or results of operations[106](index=106&type=chunk) [Note 12 – Restructuring Charges](index=19&type=section&id=Note%2012%20%E2%80%93%20Restructuring%20Charges) This note details restructuring initiatives undertaken to improve utilization and reduce costs, including site closures and staff reductions, and the associated charges recognized - The Company recognized **$1.4 million** in restructuring charges during Q1 2023, primarily related to the closure of its Moorpark, California site and other capacity reductions[108](index=108&type=chunk) Restructuring Charges (in thousands) | Restructuring Component | Balance as of Dec 31, 2022 (in thousands) | Restructuring Charges (in thousands) | Cash Payment (in thousands) | Balance as of Mar 31, 2023 (in thousands) | | :---------------------- | :---------------------------------------- | :----------------------------------- | :-------------------------- | :---------------------------------------- | | Severance | $3,683 | $868 | $(1,921) | $2,630 | | Lease facility costs | $17 | $46 | $(47) | $16 | | Other exit costs | $81 | $512 | $(512) | $81 | | Total | $3,781 | $1,426 | $(2,480) | $2,727 | [Note 13 – Earnings Per Share](index=20&type=section&id=Note%2013%20%E2%80%93%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per share, including the weighted-average number of shares outstanding and the impact of dilutive stock equivalents Earnings Per Share (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 (in thousands, except per share data) | Three Months Ended March 31, 2022 (in thousands, except per share data) | | :--------------------------------------- | :---------------------------------------------------------------------- | :---------------------------------------------------------------------- | | Net income | $12,360 | $10,960 | | Denominator for basic EPS | 35,336 | 35,245 | | Denominator for diluted EPS | 35,592 | 35,470 | | Basic earnings per share | $0.35 | $0.31 | | Diluted earnings per share | $0.35 | $0.31 | [Note 14 – Financial Instruments](index=20&type=section&id=Note%2014%20%E2%80%93%20Financial%20Instruments) This note discusses the company's financial instruments, including cash equivalents and long-term debt, and its use of derivative instruments to manage foreign currency and interest rate risks - The Company uses derivative instruments (forward currency exchange contracts and interest rate swaps) to manage foreign currency and interest rate variability, not for speculative purposes[112](index=112&type=chunk)[113](index=113&type=chunk)[119](index=119&type=chunk) Derivative Instrument Fair Values (in thousands) | Derivative Instrument | Balance Sheet Location | Fair Values as of March 31, 2023 (in thousands) | Fair Values as of December 31, 2022 (in thousands) | | :-------------------- | :--------------------- | :---------------------------------------------- | :----------------------------------------------- | | Forward currency exchange contracts | Other current assets | $2,071 | $407 | | Interest rate swap | Other current assets | $507 | $639 | - The interest rate swap agreement, with a notional amount of **$120.0 million** as of March 31, 2023, converts a portion of floating rate interest expense to a fixed rate of **2.928%**[119](index=119&type=chunk) [Note 15 – Accumulated Other Comprehensive Loss](index=21&type=section&id=Note%2015%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) This note presents the changes in accumulated other comprehensive loss by component, including foreign currency translation adjustments and unrealized gains/losses on derivative instruments Accumulated Other Comprehensive Loss (in thousands) | Component | Beginning Balance Dec 31, 2022 (in thousands) | Other Comprehensive Gain (Loss) before Reclassifications (in thousands) | Amounts Reclassified from AOCI (in thousands) | Net Current Period Other Comprehensive Gain (Loss) (in thousands) | Ending Balance Mar 31, 2023 (in thousands) | | :--------------------------------------- | :-------------------------------------------- | :---------------------------------------------------------------------- | :-------------------------------------------- | :---------------------------------------------------------------- | :----------------------------------------- | | Foreign Currency Translation Adjustments | $(15,877) | $1,050 | — | $1,050 | $(14,827) | | Net Derivative Instruments, Net of Tax | $788 | $1,576 | $(428) | $1,148 | $1,936 | | Other | $(1,144) | $226 | — | $226 | $(918) | | Total | $(16,233) | $2,852 | $(428) | $2,424 | $(13,809) | [Note 16 – Segment and Geographic Information](index=21&type=section&id=Note%2016%20%E2%80%93%20Segment%20and%20Geographic%20Information) This note provides financial information disaggregated by the company's three reportable operating segments (Americas, Asia, and Europe) and by geographic net sales and long-lived assets - The Company operates and is managed geographically, with three reportable segments: Americas, Asia, and Europe[123](index=123&type=chunk)[124](index=124&type=chunk) Segment Performance (in thousands) | Segment | Net Sales Q1 2023 (in thousands) | Net Sales Q1 2022 (in thousands) | Operating Income Q1 2023 (in thousands) | Operating Income Q1 2022 (in thousands) | | :-------- | :------------------------------- | :------------------------------- | :-------------------------------------- | :-------------------------------------- | | Americas | $397,208 | $305,580 | $13,331 | $10,365 | | Asia | $268,043 | $287,246 | $28,784 | $27,806 | | Europe | $77,855 | $70,341 | $6,686 | $4,638 | | Total Net Sales | $694,695 | $636,083 | $22,742 | $15,407 | Geographic Net Sales (in thousands) | Geographic Net Sales | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :------------------- | :--------------------- | :--------------------- | | United States | $431,185 | $329,110 | | Singapore | $86,956 | $105,672 | | Other Asia | $45,253 | $74,910 | | Europe | $104,693 | $99,265 | | Other | $26,608 | $27,126 | | Total | $694,695 | $636,083 | [Note 17 –Supplemental Cash Flow and Non-Cash Information](index=23&type=section&id=Note%2017%20%E2%80%93Supplemental%20Cash%20Flow%20and%20Non-Cash%20Information) This note provides additional disclosures regarding cash payments for income taxes and interest, as well as non-cash investing activities Supplemental Cash Flow Information (in thousands) | Supplemental Information | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :----------------------- | :--------------------------------------- | :--------------------------------------- | | Income taxes paid, net | $4,428 | $3,478 | | Interest paid | $5,874 | $1,562 | | Additions to property, plant and equipment in accounts payable | $5,555 | $3,744 | [Note 18 –Subsequent Events](index=23&type=section&id=Note%2018%20%E2%80%93Subsequent%20Events) This note discloses subsequent events, specifically Amendment No. 3 to the Credit Agreement, which further increased the Revolving Credit Facility commitments and updated interest rate terms - On May 1, 2023, Amendment No. 3 to the Credit Agreement increased the Revolving Credit Facility commitments from **$450 million** to **$550 million** and updated the interest rate basis to Term SOFR[141](index=141&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2023, discussing overall performance, segment results, liquidity, and capital resources [OVERVIEW](index=24&type=section&id=OVERVIEW) Benchmark Electronics, Inc. provides advanced manufacturing services, design, engineering, and technology solutions, serving diverse market sectors globally with integrated solutions and supply chain management - Benchmark provides advanced manufacturing services (EMS and PT), design and engineering services, and technology solutions to OEMs since **1979**[143](index=143&type=chunk)[144](index=144&type=chunk) - Key market sectors include aerospace and defense (A&D), medical technologies, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation communications, and advanced computing[144](index=144&type=chunk) - The company's competitive advantages include leading-edge technical capabilities in engineering, technology solutions (RF, microelectronics, miniaturization), and manufacturing services (precision machining, advanced metal joining)[138](index=138&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[151](index=151&type=chunk) [First Quarter 2023 Highlights](index=26&type=section&id=First%20Quarter%202023%20Highlights) The first quarter of 2023 saw a 9% increase in sales, driven by strong performance in Advanced Computing, Next Generation Communications, and Medical sectors, despite ongoing supply chain constraints - Sales for Q1 2023 increased **9%** to **$694.7 million** from **$636.1 million** in Q1 2022[158](index=158&type=chunk) - Sales growth was primarily driven by Advanced Computing (**+74%**), Next Generation Communications (**+45%**), and Medical (**+17%**)[158](index=158&type=chunk)[159](index=159&type=chunk) - Component supply chain constraints continue to impact production, leading to inefficiencies and increased costs, although lead times are improving[160](index=160&type=chunk) - Restructuring charges of **$1.4 million** were recognized in Q1 2023 due to site closures and workforce reductions[162](index=162&type=chunk) [RESULTS OF OPERATIONS](index=27&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance for the first quarter of 2023, comparing it to the same period in 2022, across key income statement items Key Financial Metrics as a Percentage of Sales | Metric | Q1 2023 (% of Sales) | Q1 2022 (% of Sales) | | :--------------------------------------- | :------------------- | :------------------- | | Sales | 100.0 % | 100.0 % | | Gross profit | 9.2 % | 9.1 % | | Selling, general and administrative expenses | 5.5 % | 5.7 % | | Restructuring charges and other costs | 0.2 % | 0.7 % | | Income from operations | 3.3 % | 2.4 % | | Net income | 1.8 % | 1.7 % | [Sales](index=27&type=section&id=Sales) Sales increased by 9% in Q1 2023 compared to Q1 2022, driven by growth in Advanced Computing, Next Generation Communications, and Medical sectors, with the Americas segment showing significant growth Sales by Market Sector (in thousands) | Market Sector | Q1 2023 Sales (in thousands) | Q1 2022 Sales (in thousands) | YoY Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :------------- | | Industrials | $143,526 | $137,146 | +5% | | A&D | $79,415 | $81,187 | -2% | | Medical | $137,049 | $116,873 | +17% | | Semi-Cap | $148,469 | $183,437 | -19% | | Advanced Computing | $95,998 | $55,056 | +74% | | Next Generation Communications | $90,238 | $62,384 | +45% | | Total | $694,695 | $636,083 | +9% | Net Sales by Geographic Segment (in thousands) | Geographic Segment | Q1 2023 Net Sales (in thousands) | Q1 2022 Net Sales (in thousands) | YoY Change (%) | | :----------------- | :------------------------------- | :------------------------------- | :------------- | | Americas | $397,208 | $305,580 | +30% | | Asia | $268,043 | $287,246 | -7% | | Europe | $77,855 | $70,341 | +11% | | Total Net Sales | $694,695 | $636,083 | +9% | - International operations accounted for **59%** of sales in Q1 2023, down from **61%** in Q1 2022[187](index=187&type=chunk) [Gross Profit](index=28&type=section&id=Gross%20Profit) Gross profit increased by 11% in Q1 2023, primarily due to higher revenue and improved operational efficiencies - Gross profit increased **11%** to **$64.0 million** in Q1 2023 from **$57.6 million** in Q1 2022, driven by higher revenue and operational efficiencies[190](index=190&type=chunk) [Operating Income](index=28&type=section&id=Operating%20Income) Operating income surged by 48% in Q1 2023, mainly due to increased revenue, higher gross profit, and reduced restructuring charges, partially offset by higher SG&A expenses - Operating income increased **48%** to **$22.7 million** in Q1 2023 from **$15.4 million** in Q1 2022[191](index=191&type=chunk) Operating Income by Segment (in thousands) | Operating Segment | Q1 2023 Operating Income (in thousands) | Q1 2022 Operating Income (in thousands) | | :---------------- | :-------------------------------------- | :-------------------------------------- | | Americas | $13,331 | $10,365 | | Asia | $28,784 | $27,806 | | Europe | $6,686 | $4,638 | | Corporate and other costs | $(26,059) | $(27,402) | | Total Operating Income | $22,742 | $15,407 | [Selling, General and Administrative Expenses](index=29&type=section&id=Selling%20General%20and%20Administrative%20Expenses) SG&A expenses increased in Q1 2023 due to higher variable compensation and investments in IT infrastructure - SG&A expenses increased to **$38.2 million** in Q1 2023 from **$36.3 million** in Q1 2022, primarily due to increased variable compensation and IT infrastructure investments[195](index=195&type=chunk) [Amortization of Intangible Assets](index=29&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization of intangible assets remained consistent in Q1 2023 compared to Q1 2022 - Amortization of intangible assets was **$1.6 million** in both Q1 2023 and Q1 2022[196](index=196&type=chunk) [Restructuring Charges and Other Costs](index=29&type=section&id=Restructuring%20Charges%20and%20Other%20Costs) Restructuring charges decreased significantly in Q1 2023, mainly due to lower expenses from site closures and workforce reductions compared to the prior year - Restructuring charges and other costs decreased to **$1.4 million** in Q1 2023 from **$4.3 million** in Q1 2022[197](index=197&type=chunk) - The Q1 2022 figure included a **$2.0 million** loss on assets held for sale[38](index=38&type=chunk) [Interest Income](index=29&type=section&id=Interest%20Income) Interest income increased substantially in Q1 2023, driven by higher interest rates - Interest income increased to **$1.3 million** in Q1 2023 from **$0.1 million** in Q1 2022, primarily due to higher interest rates[206](index=206&type=chunk) [Interest Expense](index=29&type=section&id=Interest%20Expense) Interest expense rose significantly in Q1 2023 due to increased borrowings and higher interest rates - Interest expense increased to **$6.5 million** in Q1 2023 from **$1.8 million** in Q1 2022, primarily due to increased borrowings and higher interest rates[182](index=182&type=chunk) [Income Tax Expense](index=29&type=section&id=Income%20Tax%20Expense) Income tax expense increased in Q1 2023, with a slightly higher effective tax rate, mainly due to the mix of profits across different tax jurisdictions - Income tax expense was **$3.0 million** (**19.7% effective tax rate**) in Q1 2023, compared to **$2.5 million** (**18.8% effective tax rate**) in Q1 2022, reflecting changes in profit mix by jurisdiction[198](index=198&type=chunk) [Net Income](index=29&type=section&id=Net%20Income) Net income and diluted EPS increased in Q1 2023, driven by the factors discussed in the results of operations - Net income was **$12.4 million** (**$0.35 per diluted share**) in Q1 2023, up from **$11.0 million** (**$0.31 per diluted share**) in Q1 2022[199](index=199&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's sources and uses of cash, including operating, investing, and financing activities, as well as its credit facilities and dividend policy, highlighting its ability to meet future liquidity requirements - Cash and cash equivalents and restricted cash totaled **$211.7 million** at March 31, 2023, with **$192.1 million** held outside the U.S.[200](index=200&type=chunk) - Cash used in operating activities was **$24.9 million** in Q1 2023, primarily due to increases in inventories and contract assets, and decreases in accrued liabilities and advance payments from customers[201](index=201&type=chunk) - Cash used in investing activities was **$38.7 million** in Q1 2023, mainly for additions to property, plant and equipment (**$35.9 million**) and purchased software (**$2.8 million**)[202](index=202&type=chunk) - Cash provided by financing activities was **$67.0 million** in Q1 2023, including **$230.0 million** in borrowings and **$151.6 million** in principal payments under the Credit Agreement[210](index=210&type=chunk) - The Company believes existing cash, operating cash flows, and available borrowings (**$171.1 million** under the revolving credit facility) will be sufficient to meet liquidity requirements for the next **12 months**[214](index=214&type=chunk)[218](index=218&type=chunk) - Capital expenditures are projected to be **$50 million to $60 million** over the next **12 months** for production capacity and ongoing business[215](index=215&type=chunk) [CONTRACTUAL OBLIGATIONS](index=31&type=section&id=CONTRACTUAL%20OBLIGATIONS) This section states that there have been no material changes to the company's contractual obligations, outside of the ordinary course of business, since December 31, 2022, other than those discussed in the leases note - No material changes to contractual obligations since December 31, 2022, other than those discussed in Note 6 (Leases)[219](index=219&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND RECENTLY ENACTED ACCOUNTING PRINCIPLES](index=32&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES%20AND%20RECENTLY%20ENACTED%20ACCOUNTING%20PRINCIPLES) This section confirms that there have been no changes to the critical accounting estimates previously disclosed in the 2022 10-K and refers to Note 2 for a discussion of recently enacted accounting principles - No changes to critical accounting estimates disclosed in the **2022 10-K**[221](index=221&type=chunk) - Recently enacted accounting principles are discussed in Note 2[221](index=221&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily foreign currency exchange risk and interest rate risk, and the strategies employed to manage these risks, including natural hedging and derivative instruments - The Company is exposed to foreign currency exchange risk and interest rate risk[204](index=204&type=chunk)[205](index=205&type=chunk)[239](index=239&type=chunk) - Foreign currency risk is managed through natural hedging and forward contracts, primarily for transactional exposure in Mexico, Europe, and Thailand[204](index=204&type=chunk)[118](index=118&type=chunk)[223](index=223&type=chunk) - Interest rate risk on borrowings is managed with an interest rate swap agreement, converting floating rate interest to a fixed rate for a portion of the term loan facility[224](index=224&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, and states that there have been no material changes to internal control over financial reporting, while also noting ongoing ERP system upgrades - The CEO and CFO concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2023[225](index=225&type=chunk)[227](index=227&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[228](index=228&type=chunk) - The Company is upgrading its ERP system in phases, with ongoing assessment of its impact on internal control over financial reporting[229](index=229&type=chunk) [PART II—OTHER INFORMATION](index=34&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, but management believes their ultimate disposition will not materially adversely affect its consolidated financial position or results of operations - The Company is involved in various legal actions in the ordinary course of business, with management believing the ultimate disposition will not **materially affect** financial position or results of operations[244](index=244&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's 2021 10-K - No material changes to risk factors previously disclosed in the **2021 10-K**[245](index=245&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the company's equity security repurchases for the quarter ended March 31, 2023, indicating no repurchases during the period and the remaining authorization under the stock repurchase program Equity Security Repurchases (in millions) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------- | | January 1 to 31, 2023| — | $— | — | $154.6 million | | February 1 to 28, 2023| — | — | — | $154.6 million | | March 1 to 31, 2023 | — | — | — | $154.6 million | - As of March 31, 2023, the total remaining authorization under the stock repurchase program was **$154.6 million**[231](index=231&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, credit agreement amendments, and certifications - Exhibits include Restated Certificate of Formation, Amended and Restated Bylaws, Specimen form of Common Shares certificate, Amendment No. 3 to Amended and Restated Credit Agreement, and Section 302 and 1350 Certifications[250](index=250&type=chunk) [SIGNATURES](index=36&type=section&id=SIGNATURES) The report is duly signed on behalf of Benchmark Electronics, Inc. by its President and Chief Executive Officer, Jeffrey W. Benck, and Chief Financial Officer, Roop K. Lakkaraju - The report is signed by Jeffrey W. Benck, President and CEO, and Roop K. Lakkaraju, CFO[249](index=249&type=chunk)[251](index=251&type=chunk)

Benchmark Benchmark Electronics First Quarter 2023 Earnings May 3, 2023 | 1 Copyright © 2023 by original author Benchmark Electronics, Inc. Not to be reproduced, distributed, or used in any means without written permission by Benchmark. Forward-Looking 2023 Statements | 2 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 identifi ...

Sales Performance - Sales for 2022 were $2,886.3 million, a 28% increase from $2,255.3 million in 2020[6]. - Americas sales increased 23% to $1,475.9 million in 2022 from $1,203.5 million in 2021[13]. - Advanced Computing sales increased 56% to $310.5 million in 2022 from $199.4 million in 2021[11]. Profitability - Gross profit margin decreased to 8.8% in 2022 from 9.1% in 2021, while selling, general and administrative expenses decreased to 5.2% from 6.1%[9]. - Operating income for 2022 increased 70% to $90.1 million from $53.1 million in 2021[14]. - Net income for 2022 was 2.4% of sales, up from 1.6% in 2021[9]. Impairment and Charges - The company recorded $4.4 million in impairment charges in 2021 related to discontinued manufacturing capabilities[8]. Cash Flow and Investments - Cash used in investing activities was $41.2 million in 2022, primarily for property, plant, and equipment purchases of $43.4 million[22]. - As of December 31, 2022, the company had $154.6 million remaining under the share repurchase authorization[24]. Interest Income - Interest income increased to $1.7 million in 2022 from $0.5 million in 2021 due to higher interest rates[18].

Benchmark Benchmark Electronics Fourth Quarter and Fiscal Year 2022 Financial Results February 1, 2023 | 1 Forward-Looking 2023 Statements | 2 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," "beli ...

Financial Data and Key Metrics Changes - Revenue in Q4 2022 was $751 million, up 19% year-over-year, with a GAAP gross margin of 9.6% and a non-GAAP gross margin of 10.2% excluding supply chain premiums [20][54] - For the full year 2022, total revenue was $2.9 billion, an increase of $631 million year-over-year, with non-GAAP EPS of $2.09, representing a 55% increase year-over-year [49][29] - Non-GAAP operating margin for Q4 was 4.3%, while for the full year it was 3.6%, up 60 basis points year-over-year [54][49] Business Line Data and Key Metrics Changes - Semi-Cap revenues decreased 5% sequentially but increased 9% year-over-year, with a record year in 2022 growing revenue by 30% [51][36] - Medical revenues decreased 13% sequentially due to material constraints but increased 14% year-over-year [51] - Next-Gen Communications revenues were up 24% sequentially and 64% year-over-year, driven by demand for broadband infrastructure [25][39] Market Data and Key Metrics Changes - Industrials revenue for Q4 was down 8% sequentially but up 14% year-over-year, with increasing demand from energy-related products [24] - A&D revenues increased 5% sequentially but decreased 5% year-over-year due to supply chain constraints [51] - Advanced Computing revenues were down 2% sequentially but up 55% year-over-year due to high-performance computing program ramps [52] Company Strategy and Development Direction - The company aims to continue diversifying its business across sectors, with a focus on medical, industrials, and next-gen communications for growth [39][43] - The anticipated macro resiliency in the Medical sector and government-sponsored broadband programs are expected to drive growth in 2023 [38][39] - The company is committed to sustainable growth and has received a AA rating from MSCI, placing it in the top 10% of its peer group [42] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is softness in the Semi-Cap sector, they expect to outperform industry growth rates due to new program wins [63][95] - The company anticipates a sequential improvement in margins in the second half of 2023, despite near-term headwinds [33][96] - Management expressed confidence in the long-term targets set for 2025, despite current challenges [70] Other Important Information - The company expects Q1 2023 revenue to range from $640 million to $680 million, representing a 4% year-over-year growth [60] - Cash flow from operations in Q4 2022 fell short of projections, but the company expects to generate free cash flow in the range of $70 million to $90 million in 2023 [32] Q&A Session Summary Question: What is the outlook for the Semi-Cap market? - Management indicated that the Semi-Cap market is expected to see a decline in the first half of 2023 but anticipates recovery in the second half due to new fabs coming online and strong customer demand for 2024 [95][102] Question: Can you elaborate on the new bookings number? - The company reported $930 million in new bookings, reflecting a strong trajectory in winning new business, with a focus on projects that fit their margin profile [67][78] Question: What are the challenges in the labor market? - Management acknowledged ongoing labor challenges but expects improvements as the year progresses, particularly in international sites [114][126]

[PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :--------------------------------------- | :------------------- | :------------------ | | **Assets:** | | | | Cash and cash equivalents | $247,298 | $271,749 | | Total current assets | $1,708,203 | $1,348,144 | | Inventories | $746,920 | $523,240 | | Total assets | $2,276,507 | $1,903,880 | | **Liabilities and Shareholders' Equity:** | | | | Total current liabilities | $848,900 | $654,382 | | Long-term debt, less current installments | $296,425 | $129,289 | | Total shareholders' equity | $1,000,617 | $973,802 | | Total liabilities and shareholders' equity | $2,276,507 | $1,903,880 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This table outlines the company's revenues, expenses, and net income over specific reporting periods, including earnings per share Condensed Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales | $771,575 | $571,882 | $2,135,687 | $1,622,265 | | Gross profit | $66,750 | $53,705 | $183,108 | $143,845 | | Income from operations | $25,284 | $11,794 | $63,123 | $34,427 | | Income before income taxes | $23,330 | $10,429 | $58,115 | $29,327 | | Net income | $18,829 | $8,065 | $47,010 | $23,351 | | Basic EPS | $0.54 | $0.23 | $1.34 | $0.65 | | Diluted EPS | $0.53 | $0.23 | $1.32 | $0.64 | - Sales for the three months ended September 30, 2022, increased by **35%** year-over-year, while net income increased by **133.5%**[8](index=8&type=chunk) - For the nine months ended September 30, 2022, sales grew by **31.6%** and net income more than doubled, increasing by **101.3%** compared to the same period in 2021[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table details net income and other comprehensive income components, such as foreign currency translation adjustments and derivative gains/losses Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $18,829 | $8,065 | $47,010 | $23,351 | | Foreign currency translation adjustments | $(3,541) | $(1,438) | $(8,197) | $(3,146) | | Unrealized gain on derivatives, net of tax | $730 | $214 | $4,293 | $1,796 | | Other comprehensive loss | $(2,833) | $(1,111) | $(3,967) | $(981) | | Comprehensive income | $15,996 | $6,954 | $43,043 | $22,370 | - Comprehensive income for the three months ended September 30, 2022, increased by **130%** year-over-year, and for the nine months, it increased by **92.4%**[10](index=10&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This table tracks changes in shareholders' equity, including net income, dividends, share repurchases, and stock-based compensation Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Item | December 31, 2021 | September 30, 2022 | | :------------------------------------ | :------------------ | :------------------- | | Total Shareholders' Equity | $973,802 | $1,000,617 | | Net income (9 months ended Sep 30, 2022) | N/A | $47,010 | | Dividends declared (9 months ended Sep 30, 2022) | N/A | $(17,406) | | Shares repurchased and retired (9 months ended Sep 30, 2022) | N/A | $(9,391) | | Stock-based compensation expense (9 months ended Sep 30, 2022) | N/A | $13,282 | | Other comprehensive loss (9 months ended Sep 30, 2022) | N/A | $(3,967) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table categorizes cash flows into operating, investing, and financing activities, showing changes in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operations | $(124,717) | $(1,308) | | Net cash used in investing activities | $(27,928) | $(32,143) | | Net cash provided by (used in) financing activities | $139,785 | $(66,928) | | Net decrease in cash and cash equivalents and restricted cash | $(22,412) | $(104,793) | | Cash and cash equivalents and restricted cash at end of period | $249,337 | $291,197 | - Net cash used in operating activities significantly increased to **$(124.7) million** in the first nine months of 2022, primarily due to increases in inventories and accounts receivable[18](index=18&type=chunk) - Net cash provided by financing activities turned positive at **$139.8 million** in the first nine months of 2022, driven by increased borrowings under the credit agreement[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for specific line items and accounting policies presented in the financial statements [Note 1 – Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) Benchmark Electronics, Inc. provides advanced manufacturing services, including design, engineering, and technology solutions, to various industries globally. The unaudited interim financial statements are prepared in accordance with SEC rules and U.S. GAAP - The Company provides advanced manufacturing services, design and engineering services, and technology solutions[20](index=20&type=chunk) - Key industries served include aerospace and defense (A&D), medical technologies, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation telecommunications, and advanced computing[20](index=20&type=chunk) - Manufacturing operations are located in the United States, Mexico (Americas), Asia, and Europe[20](index=20&type=chunk) [Note 2 – New Accounting Pronouncements](index=8&type=section&id=Note%202%20%E2%80%93%20New%20Accounting%20Pronouncements) The company adopted ASU No. 2020-04 for reference rate reform (LIBOR to BSBY transition), which did not materially impact its consolidated financial statements. Other recently issued accounting standards are also not expected to have a material impact - The Company adopted ASU No. 2020-04 for the transition from LIBOR to the Bloomberg Short-Term Bank Yield Index Rate (BSBY)[23](index=23&type=chunk) - This transition and adoption did not have a material impact on the consolidated financial statements[23](index=23&type=chunk) [Note 3 – Inventories](index=8&type=section&id=Note%203%20%E2%80%93%20Inventories) Inventory costs increased significantly from December 31, 2021, to September 30, 2022, primarily driven by a substantial rise in raw materials Inventory Costs (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :---------------- | :------------------- | :------------------ | | Raw materials | $729,202 | $504,307 | | Work in process | $15,301 | $15,338 | | Finished goods | $2,417 | $3,595 | | Total Inventories | $746,920 | $523,240 | - Raw materials increased by **$224.9 million**, representing a **44.6%** increase from December 31, 2021, to September 30, 2022[25](index=25&type=chunk) [Note 4 – Goodwill and Other Intangible Assets](index=8&type=section&id=Note%204%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) The company's goodwill remained constant at $192.1 million, primarily allocated to the Americas segment. Net carrying amount of other intangible assets decreased slightly, with estimated future amortization expenses provided Goodwill and Intangible Assets (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------------- | :------------------ | | Goodwill | $192,116 | $192,116 | | Net Carrying Amount of Intangible Assets | $60,282 | $64,231 | | Amortization of intangible assets (9 months ended Sep 30) | $4,792 (2022) | $4,793 (2021) | | Amortization of capitalized purchased software costs (9 months ended Sep 30) | $3,019 (2022) | $1,490 (2021) | Estimated Future Amortization Expense of Acquired Intangible Assets (in thousands) | Year ending December 31, | Amount | | :----------------------- | :------- | | 2022 (remaining three months) | $1,592 | | 2023 | $5,979 | | 2024 | $4,817 | | 2025 | $4,817 | | 2026 | $4,817 | [Note 5 – Borrowing Facilities](index=9&type=section&id=Note%205%20%E2%80%93%20Borrowing%20Facilities) The company's long-term debt increased significantly, primarily due to new borrowings under its revolving credit facility, which was expanded to $450 million. As of September 30, 2022, the company had $276.1 million available for future borrowings and was in compliance with all debt covenants Long-term Debt Outstanding (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :--------------------------------- | :------------------- | :------------------ | | Revolving credit facility | $170,000 | — | | Term loan | $131,250 | $131,250 | | Less unamortized debt issuance costs | $(1,943) | $(1,670) | | Total Long-term debt | $299,307 | $129,580 | - The Revolving Credit Facility commitments were increased from **$250 million** to **$450 million** on May 20, 2022[33](index=33&type=chunk) - As of September 30, 2022, the Company had **$170.0 million** outstanding under the Revolving Credit Facility and **$131.3 million** under the Term Loan Facility[39](index=39&type=chunk) - The Company had **$276.1 million** available for future borrowings under the Revolving Credit Facility and was in compliance with all financial covenants[39](index=39&type=chunk)[38](index=38&type=chunk) [Note 6 – Leases](index=10&type=section&id=Note%206%20%E2%80%93%20Leases) The company's lease expenses primarily consist of operating lease costs, which increased slightly year-over-year. Operating lease right-of-use assets and liabilities remain significant, with a weighted-average remaining lease term of 9.9 years for operating leases Total Lease Cost (in thousands) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | $4,278 | $4,270 | $12,977 | $11,866 | | Total lease cost | $4,839 | $4,803 | $14,687 | $14,075 | Lease Assets and Liabilities (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------------- | :------------------ | | Operating lease right-of-use assets | $95,533 | $99,158 | | Operating lease liabilities, noncurrent | $87,983 | $90,878 | | Weighted average remaining lease term – operating leases | 9.9 years | 10.0 years | | Weighted average discount rate – operating leases | 4.1% | 4.1% | [Note 7 – Common Stock and Stock-Based Awards Plans](index=12&type=section&id=Note%207%20%E2%80%93%20Common%20Stock%20and%20Stock-Based%20Awards%20Plans) This note details the company's dividend policy, share repurchase program, and stock-based compensation plans, including the types of awards granted, associated costs, and unrecognized compensation expenses [Dividends](index=12&type=section&id=Dividends) This section details the company's cash dividend declarations and payments to shareholders - The Company declared a quarterly cash dividend of **$0.165 per share** for most of 2021 and 2022[47](index=47&type=chunk) Cash Dividends Paid (in millions) | Period | 2022 | 2021 | | :-------------------------------- | :--- | :--- | | Three months ended September 30 | $5.8 | $5.9 | | Nine months ended September 30 | $17.4 | $17.4 | [Share Repurchase Authorization](index=12&type=section&id=Share%20Repurchase%20Authorization) This section outlines the board-authorized share repurchase program and its utilization - The Board of Directors authorized a total of **$400 million** for share repurchases[48](index=48&type=chunk) - During the nine months ended September 30, 2022, the Company repurchased **0.4 million** common shares for **$9.4 million** at an average price of **$24.96 per share**[48](index=48&type=chunk) - As of September 30, 2022, **$154.6 million** remained under the stock repurchase program authorization[48](index=48&type=chunk) [Stock-Based Compensation](index=12&type=section&id=Stock-Based%20Compensation) This section describes the company's stock-based incentive plans, associated costs, and unrecognized compensation Total Stock-Based Compensation Cost (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $4,800 | $4,000 | | Nine months ended September 30 | $13,300 | $10,900 | Unrecognized Compensation Cost and Remaining Amortization Period (as of Sep 30, 2022, in thousands) | Award Type | Unrecognized Compensation Cost | Remaining Weighted-Average Amortization Period | | :------------------------------------ | :----------------------------- | :--------------------------------------------- | | Restricted Stock Units | $24,407 | 2.57 years | | Performance-based Restricted Stock Units | $6,892 | 1.7 years | - The Company's 2019 Omnibus Incentive Compensation Plan authorizes various awards, including stock options, restricted shares, and restricted stock units[49](index=49&type=chunk) [Note 8 – Income Taxes](index=14&type=section&id=Note%208%20%E2%80%93%20Income%20Taxes) Income tax expense increased for the nine months ended September 30, 2022, with the effective tax rate remaining stable. The company benefits from tax incentives in foreign locations, which significantly lowered foreign income tax expense Income Tax Expense (in thousands) | Item | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------- | :----------------------------- | :----------------------------- | | Current: | | | | U.S. Federal | $(9) | $(426) | | State and local | $609 | $528 | | Foreign | $14,715 | $8,734 | | Deferred | $(4,210) | $(2,860) | | Total | $11,105 | $5,976 | Effective Tax Rates | Period | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | 19.3% | 19.1% | | Nine months ended September 30 | 19.1% | 20.1% | - Tax incentives in China (expiring 2023) and Thailand (expiring 2030) lowered foreign income tax expense by approximately **$4.5 million** (**$0.13 per diluted share**) for the nine months ended September 30, 2022, compared to **$3.4 million** (**$0.09 per diluted share**) in 2021[64](index=64&type=chunk) [Note 9 – Revenue](index=15&type=section&id=Note%209%20%E2%80%93%20Revenue) The company primarily generates revenue from manufacturing services, recognizing it over time as products are built or upon shipment. Contract assets and advance payments from customers are significant, reflecting the timing of revenue recognition and cash collections [Disaggregation of revenue](index=16&type=section&id=Disaggregation%20of%20revenue) This section breaks down the company's external revenue by market sector and reportable operating segment External Revenue by Market Sector (in thousands) | Market Sector | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------- | :--------------------------------------------- | :-------------------------------------------- | | Industrials | $155,278 | $451,260 | | A&D | $86,238 | $257,322 | | Medical | $165,546 | $448,653 | | Semi-Cap | $186,325 | $544,661 | | Computing | $94,562 | $218,254 | | Telecommunications | $83,626 | $215,537 | | Total External Revenue | $771,575 | $2,135,687 | Segment Revenue by Reportable Operating Segment (in thousands) | Reportable Operating Segment | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--------------------------- | :--------------------------------------------- | :-------------------------------------------- | | Americas | $400,905 | $1,066,760 | | Asia | $337,726 | $945,434 | | Europe | $68,400 | $208,591 | | Elimination of intersegment sales | $(35,456) | $(85,098) | | Total Segment Revenue | $807,031 | $2,220,785 | - For the nine months ended September 30, 2022, **90.6%** of the Company's revenue was recognized over time[78](index=78&type=chunk) - The Company's revenues are primarily generated from manufacturing services, including the sale of manufactured products built to customer specifications, and design, development, and engineering services[67](index=67&type=chunk) - Under the majority of manufacturing contracts, revenue is recognized progressively based on the cost-to-cost method as the customer controls work-in-progress[68](index=68&type=chunk) Contract Assets and Advance Payments (in thousands) | Item | September 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------------- | :------------------ | | Contract assets | $187,730 | $155,243 | | Advance payments from customers | $211,601 | $118,124 | [Note 10 – Accounts Receivable Sale Programs](index=17&type=section&id=Note%2010%20%E2%80%93%20Accounts%20Receivable%20Sale%20Programs) The company utilizes accounts receivable sale programs, selling up to $120 million of specific receivables at a discount. During the first nine months of 2022, $330.0 million in receivables were sold, generating $328.9 million in cash proceeds - The Company may sell up to **$120.0 million** of specific accounts receivable at any one time under trade accounts receivable sale programs[81](index=81&type=chunk) Accounts Receivable Sold and Cash Proceeds (in millions) | Period | Accounts Receivable Sold | Cash Proceeds (net of discount) | | :-------------------------------- | :----------------------- | :------------------------------ | | Three months ended September 30, 2022 | $103.4 | $102.9 | | Nine months ended September 30, 2022 | $330.0 | $328.9 | | Three months ended September 30, 2021 | $109.1 | $108.8 | | Nine months ended September 30, 2021 | $275.4 | $274.8 | [Note 11 – Contingencies](index=17&type=section&id=Note%2011%20%E2%80%93%20Contingencies) The company is involved in various legal actions in the ordinary course of business, but management believes these matters will not have a material adverse effect on its consolidated financial position or results of operations - The Company is involved in various legal actions arising in the ordinary course of business[83](index=83&type=chunk) - Management believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations[83](index=83&type=chunk) [Note 12 – Restructuring Charges](index=17&type=section&id=Note%2012%20%E2%80%93%20Restructuring%20Charges) The company recognized $4.9 million in restructuring charges during the first nine months of 2022, primarily related to site closures and workforce reductions in the Americas. This also included a loss on asset sales and a gain on the sale of a facility - The Company recognized **$4.9 million** of restructuring charges during the nine months ended September 30, 2022[85](index=85&type=chunk) - Charges were primarily related to site closures in San Jose, CA, Angleton, TX, and Moorpark, CA, and workforce reductions[85](index=85&type=chunk) - During the nine months ended September 30, 2022, the Company recorded a **$2.0 million** loss on assets held for sale and a **$2.4 million** gain on the sale of a building in Angleton, Texas[88](index=88&type=chunk) Accrued Restructuring Activity (in thousands) | Item | Balance as of Dec 31, 2021 | Restructuring Charges (2022) | Cash Payment (2022) | Balance as of Sep 30, 2022 | | :----------------- | :------------------------- | :--------------------------- | :------------------ | :------------------------- | | Severance | $3,257 | $2,498 | $(1,665) | $3,803 | | Lease facility costs | $17 | $1,261 | $(1,262) | $16 | | Other exit costs | $237 | $1,152 | $(1,205) | $82 | | Total | $3,511 | $4,911 | $(4,132) | $3,901 | [Note 13 – Ransomware Incident](index=18&type=section&id=Note%2013%20%E2%80%93%20Ransomware%20Incident) The company incurred costs from a 2019 ransomware incident, with total insurance recoveries of $10.5 million collected by December 31, 2021. No further insurance recoveries are expected as of September 30, 2022 - A ransomware incident affected some of the Company's systems in the fourth quarter of 2019[89](index=89&type=chunk) - Total insurance recoveries collected as of December 31, 2021, amounted to **$10.5 million**[91](index=91&type=chunk) - No further insurance recoveries are expected as of September 30, 2022[91](index=91&type=chunk) [Note 14 – Earnings Per Share](index=18&type=section&id=Note%2014%20%E2%80%93%20Earnings%20Per%20Share) Basic and diluted earnings per share significantly increased for both the three and nine months ended September 30, 2022, compared to the prior year, reflecting improved net income Earnings Per Share | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.54 | $0.23 | $1.34 | $0.65 | | Diluted EPS | $0.53 | $0.23 | $1.32 | $0.64 | Weighted-Average Number of Shares Outstanding (in thousands) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic | 35,151 | 35,423 | 35,184 | 35,806 | | Diluted | 35,348 | 35,666 | 35,604 | 36,287 | [Note 15 – Financial Instruments](index=19&type=section&id=Note%2015%20%E2%80%93%20Financial%20Instruments) The company uses derivative instruments, including forward currency exchange contracts and an interest rate swap, to manage foreign currency and interest rate risks. These derivatives are designated as cash flow hedges, with changes in fair value recorded in accumulated other comprehensive loss - The Company uses forward currency exchange contracts to hedge forecasted foreign currency expenses, with a notional amount of **$12.5 million** as of September 30, 2022[95](index=95&type=chunk) - An interest rate swap agreement with a notional amount of **$123.8 million** as of September 30, 2022, hedges interest rate exposure on borrowings, converting floating rates to a fixed rate of **2.928%**[97](index=97&type=chunk) - Both derivative instruments are designated as cash flow hedges, with changes in fair value recorded in accumulated other comprehensive loss[95](index=95&type=chunk)[97](index=97&type=chunk) Fair Values of Derivative Instruments (in thousands, as of Sep 30, 2022) | Derivative Type | Balance Sheet Location | Asset Derivatives | | :------------------------------------ | :--------------------- | :---------------- | | Forward currency exchange contracts | Other current assets | $247 | | Interest rate swap | Other current assets | $976 | [Note 16 – Accumulated Other Comprehensive Loss](index=20&type=section&id=Note%2016%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss increased, primarily due to negative foreign currency translation adjustments, partially offset by unrealized gains on derivative instruments Changes in Accumulated Other Comprehensive Loss (in thousands) | Item | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $(17,158) | $(16,651) | | Foreign Currency Translation Adjustments | $(8,197) | $(3,146) | | Derivative Instruments, Net of Tax | $4,293 | $1,796 | | Ending balance | $(21,125) | $(17,632) | - Unrealized gains and losses relating to derivative instruments reclassified from accumulated other comprehensive loss were recognized as a component of cost of sales[104](index=104&type=chunk) [Note 17 – Segment and Geographic Information](index=21&type=section&id=Note%2017%20%E2%80%93%20Segment%20and%20Geographic%20Information) The company operates and manages its business geographically, with three reportable segments: Americas, Asia, and Europe. All segments showed significant net sales and operating income growth for the nine months ended September 30, 2022 - The Company has three reportable operating segments: Americas, Asia, and Europe, with performance evaluated and resources allocated on a geographic basis[105](index=105&type=chunk) Net Sales by Segment (in thousands) | Segment | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------- | :----------------------------- | :----------------------------- | | Americas | $1,066,760 | $888,224 | | Asia | $945,434 | $635,274 | | Europe | $208,591 | $162,484 | Income from Operations by Segment (in thousands) | Segment | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------- | :----------------------------- | :----------------------------- | | Americas | $41,094 | $31,282 | | Asia | $91,320 | $64,210 | | Europe | $10,526 | $7,918 | Total Assets by Segment (in thousands, as of Sep 30, 2022) | Segment | Total Assets | | :-------- | :------------- | | Americas | $1,085,331 | | Asia | $836,895 | | Europe | $186,256 | | Corporate | $168,025 | | Total | $2,276,507 | [Note 18 –Supplemental Cash Flow and Non-Cash Information](index=22&type=section&id=Note%2018%20%E2%80%93Supplemental%20Cash%20Flow%20and%20Non-Cash%20Information) This note provides additional cash flow details, including income taxes paid, interest paid, and non-cash investing activities such as additions to property, plant, and equipment in accounts payable Supplemental Cash Flow Information (in thousands) | Item | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Income taxes paid, net | $20,883 | $17,769 | | Interest paid | $6,807 | $6,336 | | Additions to property, plant and equipment in accounts payable | $21,921 (2022 only) | $7,980 (2021 only) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting the impact of the COVID-19 pandemic, supply chain constraints, and strategic initiatives. It includes detailed analysis of sales, profitability, and liquidity [OVERVIEW](index=23&type=section&id=OVERVIEW) Benchmark Electronics is a global provider of advanced manufacturing services, design, and technology solutions, serving high-value, regulated markets. The company emphasizes integrated concept-to-production solutions, technical capabilities, and strategic supply chain management as key competitive advantages - Benchmark provides advanced manufacturing services (EMS and precision technology services), design and engineering services, and technology solutions[116](index=116&type=chunk) - The Company serves industries such as aerospace and defense, medical technologies, complex industrials, semiconductor capital equipment, next-generation telecommunications, and advanced computing[117](index=117&type=chunk) - Key competitive advantages include leading-edge technical capabilities in engineering, technology solutions (e.g., high frequency RF, microelectronics), and manufacturing services, supported by a global manufacturing presence and strategic supply chain design[124](index=124&type=chunk) [COVID Pandemic Update](index=25&type=section&id=COVID%20Pandemic%20Update) The COVID-19 pandemic continued to negatively impact the company's revenue and operating results in 2021 and the first nine months of 2022, primarily due to operational inefficiencies, reduced productivity, and persistent global supply chain constraints across all commodity categories - The COVID-19 pandemic negatively impacted revenue and operating results during 2021 and the first nine months of 2022[132](index=132&type=chunk) - Impacts include operational inefficiencies, reduced productivity levels, and persistent component supply chain constraints across all commodity categories[132](index=132&type=chunk)[133](index=133&type=chunk) - The Company provides critical infrastructure products and essential services, allowing it to continue operations despite the pandemic[133](index=133&type=chunk) [Third Quarter 2022 Highlights](index=26&type=section&id=Third%20Quarter%202022%20Highlights) Sales for the third quarter of 2022 increased by 35% year-over-year, driven by strong demand in both Higher-value and Traditional markets. However, component supply chain constraints continue to create operational inefficiencies and increased costs Sales Performance (Three Months Ended Sep 30, 2022) | Metric | Value | | :------------------------------------ | :---------- | | Sales (in millions) | $771.6 | | Year-over-year increase (%) | 35 | | Higher-Value Markets revenue increase (%) | 29 | | Traditional Markets revenue increase (%) | 60 | - Higher-value market revenues saw strength in Semi-Cap, Medical, and Industrials sectors[138](index=138&type=chunk) - Traditional market revenues were strong in Computing and Telecommunications sectors[138](index=138&type=chunk) - Component supply chain constraints, extended lead times, and increased pushouts of committed orders continue to create operational inefficiencies and higher costs[139](index=139&type=chunk) [RESULTS OF OPERATIONS](index=27&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance for the three and nine months ended September 30, 2022, compared to 2021, covering sales, gross profit, operating income, and various expense categories Key Financial Ratios (Percentage of Sales) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Gross profit | 8.7% | 9.4% | 8.6% | 8.9% | | Selling, general and administrative expenses | 5.0% | 6.0% | 5.2% | 6.1% | | Income from operations | 3.3% | 2.1% | 3.0% | 2.1% | | Net income | 2.4% | 1.4% | 2.2% | 1.4% | [Sales](index=27&type=section&id=Sales) Sales for the third quarter of 2022 increased by 35% year-over-year, and by 31.6% for the first nine months, driven by strong demand across most market sectors and all geographic segments, with Asia showing the highest growth Sales by Market Sector (in thousands) | Market Sector | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------- | :--------------------------------------------- | :-------------------------------------------- | | Industrials | $155,278 | $451,260 | | Medical | $165,546 | $448,653 | | Semi-Cap | $186,325 | $544,661 | | Computing | $94,562 | $218,254 | | Telecommunications | $83,626 | $215,537 | | A&D | $86,238 | $257,322 | Sales by Geographic Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :-------- | :--------------------------------------------- | :-------------------------------------------- | | Americas | $400,905 | $1,066,760 | | Asia | $337,726 | $945,434 | | Europe | $68,400 | $208,591 | - International operations accounted for **61%** of sales in Q3 2022, up from 54% in Q3 2021[153](index=153&type=chunk) [Gross Profit](index=28&type=section&id=Gross%20Profit) Gross profit increased by 24% in Q3 2022 and 27.3% for the first nine months, but gross margin declined due to changes in revenue mix, operational inefficiencies from supply chain challenges, and the dilutive effect of supply chain premiums Gross Profit (in thousands) | Period | 2022 | 2021 | Change (YoY) | | :-------------------------------- | :------- | :------- | :----------- | | Three months ended September 30 | $66,750 | $53,705 | +24% | | Nine months ended September 30 | $183,108 | $143,845 | +27.3% | Gross Margin (Percentage of Sales) | Period | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | 8.7% | 9.4% | | Nine months ended September 30 | 8.6% | 8.9% | - Gross margin decreased primarily due to revenue mix, operational inefficiencies from supply chain challenges, and the dilutive impact of revenue from supply chain premiums with no margin[157](index=157&type=chunk) [Operating Income](index=28&type=section&id=Operating%20Income) Operating income significantly increased by 114% in Q3 2022 and 83% for the first nine months, driven by higher revenue and gross profit across all geographic segments, partially offset by increased selling, general, and administrative expenses Operating Income (in thousands) | Period | 2022 | 2021 | Change (YoY) | | :-------------------------------- | :------- | :------- | :----------- | | Three months ended September 30 | $25,284 | $11,794 | +114% | | Nine months ended September 30 | $63,123 | $34,427 | +83% | Operating Income by Reportable Segment (in thousands, Nine Months Ended Sep 30) | Segment | 2022 | 2021 | Change (YoY) | | :-------- | :------- | :------- | :----------- | | Americas | $41,094 | $31,282 | +31% | | Asia | $91,320 | $64,210 | +42% | | Europe | $10,526 | $7,918 | +33% | [Selling, General and Administrative Expenses](index=29&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) Selling, general, and administrative (SG&A) expenses increased in both the third quarter and first nine months of 2022, primarily due to higher variable compensation and ongoing investments in IT infrastructure Selling, General and Administrative Expenses (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $38,544 | $34,387 | | Nine months ended September 30 | $110,675 | $98,969 | - The increases were primarily due to higher variable compensation and expenses related to continued IT infrastructure investments[163](index=163&type=chunk) [Amortization of Intangible Assets](index=29&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization of intangible assets remained consistent for both the three and nine months ended September 30, 2022, compared to the same periods in 2021 Amortization of Intangible Assets (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $1,591 | $1,596 | | Nine months ended September 30 | $4,792 | $4,793 | [Restructuring Charges and Other Costs](index=29&type=section&id=Restructuring%20Charges%20and%20Other%20Costs) The company recognized $1.3 million in restructuring charges and other costs in Q3 2022 and $4.9 million for the first nine months, primarily from site closures, workforce reductions, a loss on asset sales, and a gain on a facility sale Restructuring Charges and Other Costs (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $1,331 | $6,428 | | Nine months ended September 30 | $4,518 | $9,600 | - Charges for the first nine months of 2022 were primarily due to expenses associated with announced site closures or exits, reductions in force, and other restructuring activities, mainly in the Americas[165](index=165&type=chunk) - This includes a **$2.0 million** loss on assets held for sale and a **$2.4 million** gain on the sale of the Angleton, Texas facility[165](index=165&type=chunk) [Ransomware Incident Related Costs, Net](index=29&type=section&id=Ransomware%20Incident%20Related%20Costs,%20Net) No insurance recoveries related to the 2019 ransomware incident were made in the third quarter or first nine months of 2022, as total recoveries reached $10.5 million by the end of 2021 and no further recoveries are expected Ransomware Related Incident Costs (Recovery), Net (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :--- | :------- | | Three months ended September 30 | $0 | $(500) | | Nine months ended September 30 | $0 | $(3,944) | - No insurance recoveries were made in the third quarter or first nine months of 2022[166](index=166&type=chunk) - As of September 30, 2022, no further insurance recoveries are expected[166](index=166&type=chunk) [Interest Expense](index=29&type=section&id=Interest%20Expense) Interest expense increased in both the third quarter and first nine months of 2022, primarily due to higher borrowings under the revolving credit facility to support working capital investments Interest Expense (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $(3,493) | $(1,987) | | Nine months ended September 30 | $(7,428) | $(6,215) | - The increases were primarily due to increased borrowings under the revolving credit facility to support investment in working capital[167](index=167&type=chunk) [Interest Income](index=30&type=section&id=Interest%20Income) Interest income increased in both the third quarter and first nine months of 2022, driven by higher prevailing interest rates Interest Income (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :--- | :--- | | Three months ended September 30 | $452 | $122 | | Nine months ended September 30 | $843 | $451 | - The increases were primarily due to higher interest rates[169](index=169&type=chunk) [Income Tax Expense](index=30&type=section&id=Income%20Tax%20Expense) Income tax expense increased for both the three and nine months ended September 30, 2022, with effective tax rates remaining relatively stable, influenced by the mix of profits across various jurisdictions Income Tax Expense (in thousands) | Period | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Three months ended September 30 | $4,501 | $2,364 | | Nine months ended September 30 | $11,105 | $5,976 | Effective Tax Rate | Period | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | 19.3% | 19.1% | | Nine months ended September 30 | 19.1% | 20.1% | - Differences in effective tax rates are related to the mix of taxable income by taxing jurisdiction[170](index=170&type=chunk) [Net Income](index=30&type=section&id=Net%20Income) Net income and diluted earnings per share significantly increased for both the third quarter and first nine months of 2022, reflecting the overall positive financial performance and factors discussed in the results of operations Net Income and Diluted EPS | Period | Net Income (in thousands) | Diluted EPS | | :-------------------------------- | :------------------------ | :---------- | | Three months ended September 30, 2022 | $18,829 | $0.53 | | Three months ended September 30, 2021 | $8,065 | $0.23 | | Nine months ended September 30, 2022 | $47,010 | $1.32 | | Nine months ended September 30, 2021 | $23,351 | $0.64 | - Net income for the third quarter of 2022 increased by **133.5%** year-over-year, and diluted EPS increased by **130.4%**[8](index=8&type=chunk)[172](index=172&type=chunk) - For the first nine months of 2022, net income increased by **101.3%** and diluted EPS by **106.3%** compared to the same period in 2021[8](index=8&type=chunk)[172](index=172&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=31&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity is supported by existing cash balances, operating cash flows, and an expanded $450 million revolving credit facility. Cash used in operating activities increased significantly due to proactive investments in inventory and accounts receivable to support revenue growth. The company maintains a quarterly dividend and has remaining share repurchase authorization Liquidity and Capital Resources (in millions) | Item | September 30, 2022 | December 31, 2021 | | :--------------------------------------------------- | :------------------- | :------------------ | | Cash and cash equivalents and restricted cash | $249.3 | $271.7 | | Working capital | $900 | $700 | | Available for future borrowings under Revolving Credit Facility | $276.1 | N/A | | Remaining share repurchase authorization | $154.6 | N/A | | Capital expenditures (next 12 months, estimated) | $50 - $60 | N/A | - Cash used in operating activities was **$124.7 million** during the first nine months of 2022, primarily due to a **$228.5 million** increase in inventories and a **$123.6 million** increase in accounts receivable[175](index=175&type=chunk) - The Revolving Credit Facility commitments were increased from **$250 million** to **$450 million** in May 2022[179](index=179&type=chunk) - The Company paid **$17.4 million** in cash dividends during the first nine months of 2022 and intends to continue paying quarterly dividends of **$0.165 per share**[186](index=186&type=chunk) [CONTRACTUAL OBLIGATIONS](index=32&type=section&id=CONTRACTUAL%20OBLIGATIONS) There have been no material changes to the company's contractual obligations since December 31, 2021, other than those related to operating and capital leases as discussed in Note 6 to the financial statements - No material changes to contractual obligations since December 31, 2021, outside of the ordinary course of business, other than items discussed in Note 6 (Leases)[188](index=188&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND RECENTLY ENACTED ACCOUNTING PRINCIPLES](index=33&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES%20AND%20RECENTLY%20ENACTED%20ACCOUNTING%20PRINCIPLES) This section refers to the company's 2021 10-K for significant accounting policies and notes that there have been no changes to critical accounting estimates. Recently enacted accounting principles are discussed in Note 2 - No changes to the items disclosed as critical accounting estimates in the 2021 10-K[190](index=190&type=chunk) - Recently enacted accounting principles are discussed in Note 2 to the condensed consolidated financial statements[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to various market risks, including foreign currency exchange risk from international operations and interest rate risk on its borrowings. It uses natural hedging, forward contracts, and an interest rate swap to manage these exposures - The Company is exposed to foreign currency exchange risk, import and export duties, taxes, regulatory changes, inflationary economies, and economic and political instability due to its international operations[191](index=191&type=chunk) - The Company uses natural hedging and forward contracts to economically hedge transactional exposure primarily associated with trade accounts receivable, other receivables, trade accounts payable, and lease liabilities denominated in foreign currencies[193](index=193&type=chunk) - The Company is exposed to interest rate risk on borrowings under its Credit Agreement and uses an interest rate swap to convert a portion of its floating rate interest expense to fixed[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022. No material changes to internal control over financial reporting occurred, although ERP system upgrades are ongoing - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022[199](index=199&type=chunk) - No material changes in the Company's internal control over financial reporting occurred during the last fiscal quarter[202](index=202&type=chunk) - The Company is currently upgrading its enterprise resource planning (ERP) system in phases, with related controls revised and updated at certain locations[203](index=203&type=chunk) [PART II—OTHER INFORMATION](index=35&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity security sales, and required exhibits [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions arising in the ordinary course of business. There have been no material changes to these proceedings since the 2021 10-K, and management believes their ultimate disposition will not materially affect the company's financial position or results of operations - The Company is involved in various legal actions arising in the ordinary course of business[206](index=206&type=chunk) - There have been no material changes to the legal proceedings previously reported in the 2021 10-K[206](index=206&type=chunk) - Management believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations[206](index=206&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the company's 2021 Form 10-K - No material changes to the risk factors previously disclosed in Part I, Item 1A of the 2021 10-K[207](index=207&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares of its equity securities during the quarter ended September 30, 2022. As of that date, $154.6 million remained authorized under the existing share repurchase program - The Company did not repurchase any common shares during the quarter ended September 30, 2022[208](index=208&type=chunk) - As of September 30, 2022, **$154.6 million** remained available under the share repurchase authorization[208](index=208&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and various XBRL-related documents - Exhibits include the Restated Certificate of Formation, Amended and Restated Bylaws, Section 302 and 1350 Certifications of the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents[210](index=210&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) This section contains the required signatures for the filing, certifying its accuracy and completeness

Benchmark Benchmark Electronics Q3-22 Earnings Results October 26, 2022 | 1 Copyright © 2022 by original author Benchmark Electronics, Inc. Not to be reproduced, distributed, or used in any means without written permission by Benchmark. Forward-Looking 2022 Statements | 2 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 identifi ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $772 million, an increase of nearly $200 million compared to the same quarter last year, representing a 35% year-over-year growth [8][12] - Non-GAAP earnings increased by 46% year-over-year, with non-GAAP EPS at $0.57, which is $0.05 above the midpoint of guidance [8][18] - GAAP EPS for the quarter was $0.53, reflecting a 130% growth year-over-year [16] - Non-GAAP gross margin improved by 50 basis points sequentially to 8.6% [17] - Non-GAAP ROIC was 9.8%, a 20 basis point increase sequentially and a 200 basis point improvement year-over-year [21] Business Line Data and Key Metrics Changes - Medical revenues were flat sequentially but increased by 41% year-over-year due to growth with existing customers and new program ramps [12] - Semi-Cap revenues increased by 7% sequentially and 39% year-over-year, driven by high demand for precision machining and electromechanical assembly services [13] - A&D revenues decreased by 4% sequentially and 14% year-over-year due to supply chain constraints [13] - Industrials revenue was down 2% sequentially but up 44% year-over-year, supported by demand improvements from energy-related products [14] - Computing revenues increased by 38% sequentially and 67% year-over-year, while telco revenues were up 20% sequentially and 52% year-over-year [15] Market Data and Key Metrics Changes - The company expects full-year revenue growth of around 30% and earnings of $2.11, representing year-over-year earnings growth of over 55% [10] - The midpoint of Q4 2022 guidance anticipates revenue between $760 million and $800 million, reflecting a 23% year-over-year growth [26] - Supply chain premiums incurred in Q3 2022 were approximately $74 million, a decrease of $17 million sequentially but an increase of $48 million year-over-year [19] Company Strategy and Development Direction - The company is focusing on high-value subsectors within computing and telco, particularly high-performance computing and next-generation networking [15] - The strategy includes capturing new wins and addressing high-growth markets with innovative products [9][45] - The company is optimistic about long-term growth in the semiconductor sector, driven by new program wins and strong secular drivers [38] Management's Comments on Operating Environment and Future Outlook - Management noted robust demand across most market sectors, despite some constraints in semiconductor families [10] - The company is cautiously optimistic about the future, expecting continued revenue growth and improved supply chain conditions [10][36] - Management acknowledged potential risks from recession and inflation but believes the company's diversification will provide stability [36] Other Important Information - The company plans to generate positive cash flow from operations and free cash flow in fiscal year 2023 [24] - Cash balance was $249 million as of September 30, with $131 million outstanding on the term loan and $170 million on the revolver [24] Q&A Session Summary Question: Signs of slowing in the Semi-Cap space - Management acknowledged seeing signs of reduced spending in the Semi-Cap sector but emphasized strong new wins in 2022 that will contribute to revenue in 2023 [47][48] Question: Growth from engineering design services - Over 75% of recent wins were tied to engineering services, indicating strong growth in this area alongside manufacturing [50][52] Question: Impact of supply chain on margins - Supply chain premiums were lower sequentially, but some constraints remain, particularly in critical semiconductor areas [59][62] Question: Effects of U.S. semiconductor restrictions on China - Management noted potential near-term risks due to new U.S. restrictions but emphasized the company's diversified portfolio [67] Question: Trends in unfulfilled demand - Over $200 million of unfulfilled demand remains, but management is optimistic about fulfilling this as supply chain constraints ease [70][73] Question: Impact of recession on outsourcing - Historically, recessions have led to increased outsourcing as OEMs evaluate efficiency and cost-effectiveness [81][83] Question: Demand drivers for outsourcing solutions - Demand is driven by both supply chain relationships and engineering capabilities, with a focus on near-shoring and reshoring [89][90] Question: Component shortages in A&D - Component shortages in A&D are primarily due to regulatory processes that delay substitutions, particularly in defense contracts [92][93]

Benchmark Oppenheimer 25th Annual Technology, Internet & Communications Conference August 10, 2022 | 1 Copyright © 2022 by original author Benchmark Electronics, Inc. Not to be reproduced, distributed, or used in any means without written permission by Benchmark. Forward-Looking 2022 Statements | 2 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-look ...

Benchmark Benchmark Electronics Q2-22 Earnings Results August 3, 2022 | 1 Copyright © 2022 by original author Benchmark Electronics, Inc. Not to be reproduced, distributed, or used in any means without written permission by Benchmark. Forward-Looking 2022 Statements | 2 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 ...