Benchmark Electronics(BHE)2025-04-30 02:00Financial Data and Key Metrics Changes - First quarter revenue was 0.52, above the midpoint of guidance [6][10] - Non GAAP gross margin was 10.1%, a 30 basis point decrease quarter over quarter but a 10 basis point increase year over year [10][13] - Non GAAP operating margin was 4.6%, down 50 basis points sequentially and 30 basis points year over year [10][11] Business Line Data and Key Metrics Changes - Semi cap revenue grew 18% year over year but decreased 2% quarter over quarter [11][19] - A and D sector revenue was up 15% year over year and 4% quarter over quarter [11][22] - Industrial revenue was down 2% quarter over quarter due to demand softness [11][21] - Medical revenue decreased 12% quarter over quarter, reflecting ongoing demand softness [12][22] - AC and C revenue decreased 12% quarter over quarter due to timing-related weaknesses [12][22] Market Data and Key Metrics Changes - The company has a significant U.S. manufacturing footprint at 36% and over 55% in North America [8][25] - Demand in the semi cap sector is expected to continue growing despite tariff uncertainties [19][20] - Medical sector recovery is anticipated in the second half of 2025 as inventory levels normalize [22][64] Company Strategy and Development Direction - The company is focused on optimizing supply chains for customers amid tariff-related uncertainties [5][27] - Continued investment in strategic growth areas, including a new facility in Penang, Malaysia [20][96] - The company is evaluating M&A opportunities that align with strategic plans while maintaining a focus on organic growth [28][102] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are short-term risks due to global macroeconomic uncertainties, there are also mid to long-term opportunities [25][27] - The company expects to deliver sequential growth throughout the year, barring a recession caused by tariffs [27][28] - Management expressed confidence in returning to year-over-year growth in the second half of 2025 [16][40] Other Important Information - The company generated 355 million, a year-over-year increase of 6.1 million and repurchased $8 million of outstanding shares during the quarter [14] Q&A Session Summary Question: Are customer pauses and pull-ins creating a net headwind? - Management indicated that the situation is balancing out, with some customers pausing and others pulling in orders, leading to uncertainty but not a significant bias in either direction [31][32] Question: What is the impact of supply chain optimization on existing customers? - Management noted that some bids are taking longer due to customers evaluating their supply chains, elongating the cycle for new bookings [33][34] Question: Where is the traction seen in the industrial sector? - Management highlighted a balance of new and existing customers, with strong follow-on business and new growth in automation solutions [36] Question: Is the expected rebound in medical driven by channel replenishment or new program launches? - Management indicated that both factors are contributing, with customers working through inventory and new competitive takeaways expected to drive growth [56][57] Question: What is the expected tax rate for the second half of the year? - Management projected a slight drop in the tax rate, estimating around 24% for the year [60] Question: How quickly can the company pivot or launch new programs? - Management stated that moving a customer to an existing facility is challenging, but new programs can ramp significantly in about six months if leveraging existing manufacturing knowledge [82] Question: Are there opportunities to acquire a customer's manufacturing facility? - Management expressed openness to discussions about taking over facilities if they align with existing operations but emphasized a preference against acquiring facilities at a premium [88][90]