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 ...

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $728 million, exceeding guidance by nearly $100 million and increasing by over $180 million year-over-year, representing a 34% growth [9][17] - Non-GAAP gross margin was 8.1%, impacted by supply chain premiums, with an adjusted gross margin of 9.2% if excluding these effects [11][12] - Non-GAAP earnings per share (EPS) was $0.50, an 85% increase from $0.27 in the same period last year [13][27] - The company expects full-year revenue growth of 20% or greater and non-GAAP EPS of $2 or better, which would be a record for the company [16][64] Business Line Data and Key Metrics Changes - Medical revenues increased 42% sequentially and 53% year-over-year, driven by growth with existing customers and new program ramps [17][53] - Industrial revenues rose 16% sequentially and 59% year-over-year, fueled by demand for energy-related products [19] - Computing revenues grew 25% sequentially and 73% year-over-year, supported by high-performance computing program ramps [20] - Aerospace and Defense (A&D) revenues increased 11% sequentially but decreased 7% year-over-year due to supply chain constraints [18] Market Data and Key Metrics Changes - The top 10 customers represented 53% of sales in Q2 2022 [21] - Approximately $91 million of revenue was attributed to pass-through revenue from supply chain premiums, which is expected to normalize in 2023 [22][28] - The company anticipates strong demand indicators across most market sectors, with over $200 million of demand unfulfilled due to supply constraints [14][35] Company Strategy and Development Direction - The company is focusing on higher value markets with complex programs, which has resulted in a more diversified portfolio and stronger long-term growth potential [49][61] - Significant investments in capital and operational efficiency are expected to support growth in the semi-cap sector, with revenues projected to grow over 25% for the full year [52] - The company aims to achieve all performance metrics of its midterm target model by the end of 2022, with expectations for improved gross and operating margins [59][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning within resilient industrial and enterprise markets despite potential recession risks [15][48] - The company is optimistic about demand trends, with no significant slowdown observed from customers, and expects to grow greater than 20% for the full year [63][64] - Management highlighted the importance of navigating supply chain challenges and maintaining operational efficiency to meet customer demand [63] Other Important Information - The company plans to host an Analyst Day on November 8, commemorating its 25th year listed on the NYSE [72] - Cash balance was $264 million as of June 30, with expectations to generate cash flow from operations in fiscal year 2023 [33][32] Q&A Session Summary Question: Which end market is least resistant to an economic slowdown? - Management indicated that the compute and telco markets might be more sensitive to a slowdown, but high-performance computing and next-gen broadband solutions are expected to remain resilient [67] Question: How are new program wins balanced between new logos and existing customers? - Management noted a balanced approach, with incremental wins from existing blue-chip customers and organic growth from new clients, particularly in the semi-cap sector [68]

[PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2022, covering balance sheets, income, equity, and cash flow statements with explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$2.17 billion** by June 30, 2022, driven by inventories and receivables, with liabilities and equity also rising Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $1,601,272 | $1,348,144 | | Inventories | $666,742 | $523,240 | | **Total Assets** | **$2,166,785** | **$1,903,880** | | **Total current liabilities** | $785,078 | $654,382 | | Long-term debt, less current installments | $262,185 | $129,289 | | **Total Liabilities** | $1,180,928 | $925,074 | | **Total shareholders' equity** | **$985,773** | **$973,802** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported significant year-over-year growth in Q2 2022 sales, up **33.7%** to **$728.0 million**, with net income more than doubling to **$17.2 million** Financial Performance Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YoY Change | Six Months 2022 | Six Months 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $728,029 | $544,662 | +33.7% | $1,364,112 | $1,050,383 | +29.9% | | Gross Profit | $58,756 | $47,913 | +22.6% | $116,358 | $90,140 | +29.1% | | Income from Operations | $22,432 | $10,699 | +109.7% | $37,839 | $22,633 | +67.2% | | Net Income | $17,221 | $7,369 | +133.7% | $28,181 | $15,286 | +84.3% | | Diluted EPS | $0.49 | $0.20 | +145.0% | $0.79 | $0.42 | +88.1% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash outflow from operations reached **$93.5 million** in H1 2022, driven by working capital investments, while financing activities provided **$110.8 million** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operations | $(93,510) | $40,273 | | Net cash used in investing activities | $(19,314) | $(18,431) | | Net cash provided by (used in) financing activities | $110,789 | $(49,066) | | **Net decrease in cash** | **$(7,830)** | **$(25,547)** | - The significant use of cash in operations was mainly due to changes in operating assets and liabilities, including a **$146.2 million increase in inventories** and a **$91.2 million increase in accounts receivable**, reflecting investments to support growth amid supply chain challenges[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover revenue recognition, credit agreement amendments, share repurchases, dividend payments, restructuring charges, and segment performance, highlighting Asia's growth - In May 2022, the company amended its credit agreement, increasing the Revolving Credit Facility from **$250 million to $450 million**. As of June 30, 2022, **$135.0 million was outstanding** under the revolver, with **$311.1 million available** for future borrowings[29](index=29&type=chunk)[35](index=35&type=chunk) - During the first six months of 2022, the company repurchased **0.4 million common shares** for **$9.4 million** and paid cash dividends totaling **$11.6 million**[43](index=43&type=chunk)[44](index=44&type=chunk) - Restructuring charges of **$3.6 million** were recognized in the first half of 2022, primarily related to the closures of sites in San Jose, Angleton, and Moorpark, California[80](index=80&type=chunk) Revenue by Reportable Segment for Six Months Ended June 30 (in thousands) | Segment | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Americas | $665,855 | $569,108 | +17.0% | | Asia | $607,708 | $410,843 | +47.9% | | Europe | $140,191 | $112,500 | +24.6% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022's strong **34%** revenue growth, driven by robust demand across sectors, while addressing supply chain challenges, liquidity, and capital return programs [Second Quarter 2022 Highlights](index=26&type=section&id=Second%20Quarter%202022%20Highlights) Q2 2022 sales surged **34%** year-over-year to **$728.0 million**, driven by broad-based growth across Higher-Value and Traditional markets, with Industrials, Medical, and Computing leading Q2 2022 Sales Growth by Market Sector (YoY) | Market Sector | YoY Growth | | :--- | :--- | | **Higher-Value Markets** | **+33%** | | Industrials | +59% | | A&D | -7% | | Medical | +53% | | Semi-Cap | +26% | | **Traditional Markets** | **+38%** | | Computing | +73% | | Telecommunications | +15% | - Component supply chain constraints continue to limit the company's ability to meet full customer demand, leading to operational inefficiencies and increased inventory levels[131](index=131&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q2 2022 sales increased **34%**, driving gross profit up **23%** to **$58.8 million**, despite gross margin contraction, leading to a **110%** rise in operating income to **$22.4 million** - Gross margin decreased in Q2 2022 primarily due to the mix of revenue, operational inefficiencies from supply chain challenges, and the dilutive impact of passing through supply chain premium costs with no margin[148](index=148&type=chunk) - Operating income for Q2 2022 increased by **110%** to **$22.4 million** from **$10.7 million** in Q2 2021, driven by higher revenue and gross profit[149](index=149&type=chunk) - Net income for Q2 2022 was **$17.2 million** (**$0.49 per diluted share**), a significant increase from **$7.4 million** (**$0.20 per diluted share**) in Q2 2021[163](index=163&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$263.9 million** cash and **$311.1 million** credit facility availability, despite **$93.5 million** negative operating cash flow due to inventory investment - Working capital increased from **$0.7 billion** at year-end 2021 to **$0.8 billion** at June 30, 2022, reflecting proactive investment in inventory to support revenue growth[166](index=166&type=chunk) - The company's credit facility was amended to increase the revolving credit commitment to **$450 million**. As of June 30, 2022, total debt outstanding was **$266.3 million**[170](index=170&type=chunk) - As of June 30, 2022, **$154.6 million** remained under the share repurchase authorization[176](index=176&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 manages market risks from foreign currency and interest rate fluctuations through hedging strategies, including forward contracts and an interest rate swap - The company uses forward currency contracts to hedge transactional exposure in currencies other than the functional currency of its operating entities[184](index=184&type=chunk) - An interest rate swap with a notional amount of **$125.6 million** is in place to convert a portion of floating-rate interest expense on the term loan to a fixed rate[188](index=188&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 disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls, while an ERP system upgrade continues - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[190](index=190&type=chunk) - The company is in the process of a phased, multi-year upgrade of its enterprise resource planning (ERP) system, which has been completed at certain locations[194](index=194&type=chunk) [PART II—OTHER INFORMATION](index=35&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings were reported from the 2021 10-K, with ongoing actions not expected to materially affect financial position or results - There have been no material changes to the legal proceedings previously reported, and management does not expect the outcomes to have a material adverse effect on the company[197](index=197&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K were reported - No material changes to the risk factors previously disclosed in the 2021 10-K were reported[198](index=198&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) In Q2 2022, the company repurchased **162,000 shares** for **$3.9 million**, with **$154.6 million** remaining under its share repurchase authorization Share Repurchases for Quarter Ended June 30, 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 147,000 | $24.14 | | May 2022 | 15,000 | $24.14 | | June 2022 | — | — | | **Total** | **162,000** | **$24.11** | - As of June 30, 2022, the company had **$154.6 million** remaining under its stock repurchase authorization[199](index=199&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 corporate governance documents, credit agreement amendments, and CEO/CFO certifications - Key exhibits filed include Amendment No. 1 to the Amended and Restated Credit Agreement, and the Section 302 and 1350 certifications by the Chief Executive Officer and Chief Financial Officer[201](index=201&type=chunk)