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Benchmark Electronics(BHE) - 2022 Q3 - Earnings Call Transcript
BHEBenchmark Electronics(BHE)2022-10-26 23:41
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Financial Data and Key Metrics Changes - Revenue for Q3 2022 was 772million,anincreaseofnearly772 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,whichis0.57, which is 0.05 above the midpoint of guidance [8][18] - GAAP EPS for the quarter was 0.53,reflectinga1300.53, 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 760millionand760 million and 800 million, reflecting a 23% year-over-year growth [26] - Supply chain premiums incurred in Q3 2022 were approximately 74million,adecreaseof74 million, a decrease of 17 million sequentially but an increase of 48millionyear−over−year[19]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusingonhigh−valuesubsectorswithincomputingandtelco,particularlyhigh−performancecomputingandnext−generationnetworking[15]−Thestrategyincludescapturingnewwinsandaddressinghigh−growthmarketswithinnovativeproducts[9][45]−Thecompanyisoptimisticaboutlong−termgrowthinthesemiconductorsector,drivenbynewprogramwinsandstrongseculardrivers[38]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedrobustdemandacrossmostmarketsectors,despitesomeconstraintsinsemiconductorfamilies[10]−Thecompanyiscautiouslyoptimisticaboutthefuture,expectingcontinuedrevenuegrowthandimprovedsupplychainconditions[10][36]−Managementacknowledgedpotentialrisksfromrecessionandinflationbutbelievesthecompany′sdiversificationwillprovidestability[36]OtherImportantInformation−Thecompanyplanstogeneratepositivecashflowfromoperationsandfreecashflowinfiscalyear2023[24]−Cashbalancewas48 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 131millionoutstandingonthetermloanand131 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]