Benchmark Electronics(US:BHE)2022-02-04 03:30Financial Data and Key Metrics Changes - The company reported Q4 2021 revenue of $633 million, which was $48 million above the midpoint of guidance and represented a 21% year-over-year increase [10] - Non-GAAP gross margins were 9.8%, and operating margins were 3.8%, with earnings per share (EPS) of $0.48, reflecting a 41% increase from the previous year [11][12] - The cash conversion cycle improved to 69 days, a 2-day improvement over Q3 [12][44] Business Line Data and Key Metrics Changes - Medical revenues increased by 14% year-over-year, driven by demand in cardiac and respiratory care markets [30] - Semi-Cap revenues surged by 62% year-over-year, indicating strong demand for precision machining and electromechanical assembly services [31] - A&D revenues decreased by 15% year-over-year due to program transitions and lower demand in commercial aerospace [31] - Industrial revenues rose by 29% year-over-year, supported by demand improvements in oil and gas and building infrastructure [32] - Computing revenues increased by 28% year-over-year, while telco revenues grew by 16% year-over-year [33] Market Data and Key Metrics Changes - Higher-value markets accounted for 81% of Q4 revenue, while traditional markets represented 19% [32][40] - The top 10 customers contributed 49% of sales in Q4, with one customer, Applied Materials, exceeding 10% of total revenue for the year [33][41] Company Strategy and Development Direction - The company aims to grow revenue by securing new bookings exceeding $900 million for 2022, focusing on complex manufacturing and engineering capabilities [71] - Investments in sustainable infrastructure and talent are ongoing, with a commitment to ESG initiatives [26][66] - The company plans to increase the engineering attach rate from 50% to over 70% for 2022, reflecting a strategic focus on engineering alongside manufacturing [25][91] Management's Comments on Operating Environment and Future Outlook - Management indicated that demand continues to outpace supply, with over $100 million of unfulfilled demand expected to roll into future quarters [51][76] - The supply chain environment remains constrained, with no broad recovery anticipated in 2022 [15][101] - The company expects strong growth in the Medical sector, with Semi-Cap and Industrial revenues also projected to remain robust [58][60] Other Important Information - The company invested $42 million in capital expenditures in 2021 and plans to increase CapEx spending to between $50 million and $60 million in 2022 [47] - The cash balance at the end of Q4 was $272 million, with a positive cash net of debt of $141 million [46] Q&A Session Summary Question: What is the shelf life of the $100 million unfulfilled demand? - Management believes that most of the unfulfilled demand will roll into Q2, Q3, and the second half of the year [76][77] Question: Is the unfulfilled demand spread across verticals? - The unfulfilled demand is spread across various sectors, with no specific concentration [78] Question: How much of the unfulfilled demand relates to new bookings in Q4? - A mix of new bookings and unfulfilled demand from previous quarters contributes to the unfulfilled demand [86][87] Question: What pressures are being faced regarding labor and costs? - The company is experiencing a "war on talent" and is investing more in recruitment and managing inflationary costs [81][83] Question: Are customers more prone to increase outsourcing due to supply chain constraints? - Customers are seeking help with supply chain issues, but it is unclear if this will lead to increased outsourcing [96] Question: What needs to happen for supply chain improvements? - Additional capacity needs to be put in place to support the strong demand environment [102][106]