Benchmark Electronics(US:BHE)2025-11-04 23:00Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $681 million, representing a 6% sequential increase and a return to year-over-year growth [6][4] - Non-GAAP EPS was $0.62, at the high end of prior guidance [6][4] - Non-GAAP gross margin was 10.1%, down 10 basis points sequentially and year-over-year [7] - Non-GAAP operating margin increased to 4.8%, up 10 basis points sequentially [7] - Generated $25 million in free cash flow, totaling over $74 million in the last 12 months [5][9] Business Line Data and Key Metrics Changes - AC&C revenue increased by 18% quarter-over-quarter but decreased year-over-year [7] - Medical revenue rose 15% sequentially and 18% year-over-year [7] - Industrial revenue was up 8% quarter-over-quarter and 1% year-over-year [7] - A&D revenue increased by 2% quarter-over-quarter and 26% year-over-year [7] - Semicap revenue decreased by 3% quarter-over-quarter and 1% year-over-year [7] Market Data and Key Metrics Changes - Strong sequential growth was noted in medical and A&D sectors, with double-digit year-over-year growth in both [4] - Semicap faced softening demand due to increased restrictions in China and tariff changes [4] - The company anticipates continued growth in the fourth quarter across various sectors [4] Company Strategy and Development Direction - The company is focused on improving working capital management and inventory turns, achieving a record cash cycle quarter [5] - Investment in new facilities, such as the PT4 building in Malaysia, while maintaining a significant manufacturing footprint in the Americas [5] - The company aims to leverage its diversified portfolio across five high-value sectors to navigate market fluctuations [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to year-over-year growth and highlighted strong bookings momentum [17] - The company is optimistic about the second half of 2026 for Semicap demand recovery based on customer conversations [26] - Management noted minimal impact from government shutdowns on customer contracts [39] Other Important Information - The company has a cash balance of $286 million, with $149 million outstanding on its term loan [9] - Cash conversion cycle improved to 77 days, with inventory days down [9][48] - The company distributed $6 million in cash dividends and repurchased $10 million in stock during the quarter [9] Q&A Session Summary Question: High-performance compute comments and revenue timeline - Management discussed ongoing projects with top supercomputers and expected revenue from new solutions in 2026 [20][21] Question: Semicap demand timeline and machining capabilities - Management indicated optimism for Semicap demand recovery in the second half of 2026 based on customer feedback [25][26] Question: A&D space and subsector growth - Management highlighted strong performance in space and communications, with defense spending also increasing [31][32] Question: AI revenue potential in AC&C business - Management is cautious about estimating AI revenue percentage but sees significant demand in enterprise AI opportunities [33][34] Question: Impact of government shutdown on customers - Management reported minimal impact from the government shutdown due to long-range contracts [39] Question: Medical market demand and inventory levels - Management noted improved demand and inventory levels in the medical sector, projecting continued growth [41][43] Question: Cash conversion cycle improvement - Management confirmed ongoing focus on improving cash conversion and inventory management [47][48] Question: CapEx spend for 2026 - Management expects CapEx to increase slightly in 2026 to support growth initiatives [49][50]