Benchmark Electronics(US:BHE)2025-07-30 22:00Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $642 million, up 2% sequentially and at the midpoint of prior guidance [10] - Non-GAAP EPS was $0.55, also at the midpoint of prior guidance [10] - Non-GAAP gross margin was 10.2%, up 10 basis points sequentially and flat year over year [10] - Non-GAAP operating margin was 4.7%, up 10 basis points sequentially [10] - Cash balance decreased by $90 million from Q1 to $265 million, with a free cash outflow of $15 million during the quarter [13][15] Business Line Data and Key Metrics Changes - Semi cap revenue decreased 2% quarter over quarter but grew 11% year over year [11] - Industrial revenue was up 4% quarter over quarter and flat year over year [11] - A&D revenue increased 4% quarter over quarter and 16% year over year [11] - Medical revenue was up 6% quarter over quarter but down low single digits year over year [11] - AC and C revenue was flat quarter over quarter and down considerably year over year [11] Market Data and Key Metrics Changes - The semi cap sector is experiencing a slower recovery due to trade restrictions and tariff uncertainties, but is expected to outperform overall market growth [19] - The industrial sector showed mid single-digit sequential growth, with improvements in test and measurement and controls [20] - A&D sector is expected to maintain strong double-digit growth, driven by stable commercial air and strong defense demand [21] - Medical sector is anticipated to see sustained growth through the second half of the year, overcoming previous inventory challenges [21] Company Strategy and Development Direction - The company is focused on maintaining a customer-first approach and leveraging vertical integration to differentiate in the market [26] - Continued investments in semi cap and A&D sectors are expected to drive long-term growth [19][21] - The company successfully refinanced its debt, extending maturity to June 2030, and repatriated significant cash from overseas [8][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to growth in 2025, supported by strong bookings and a recovering market [26] - The company is managing spending prudently to protect profitability and free cash flow while supporting dividends and share repurchases [26] - There is confidence in the long-term growth potential of the semi cap industry, with expectations of a $1 trillion market by 2030 [19] Other Important Information - The company repatriated $152 million of cash from China and Thailand, using $95 million to pay down debt [14] - The cash conversion cycle improved to 85 days, with inventory days down six days sequentially [15] Q&A Session Summary Question: Can you provide more perspective on the recovery in AC and C? - Management highlighted their experience in liquid cooling and the complexity of high-performance computing systems, expecting growth to ramp in Q4 and into 2026 [31][36] Question: How much of the semi cap market challenges are due to political factors? - Management indicated that both capital spending adjustments and government restrictions are impacting recovery, but they remain optimistic about long-term growth [37][38] Question: Can you break down the sequential growth in the medical segment? - Most growth is attributed to the base business recovering from inventory challenges, with significant new bookings contributing as well [46][72] Question: What are the expectations for the aerospace and defense sector? - Management noted stabilization in commercial air travel and solid demand across various parts of the industry, with less exposure to Boeing [66] Question: How do you expect to achieve inventory improvements? - Focus on operational discipline and better systems to optimize inventory days, targeting inventory turns of 5 to 5.5 [60][62]