Benchmark Electronics(BHE)2023-10-26 05:53Financial Data and Key Metrics Changes - Total revenue for Q3 2023 was 0.57, exceeding the high end of GAAP guidance and 10% above non-GAAP consensus [7][10] - Non-GAAP gross margin was 9.6%, a 50 basis point sequential increase and a 100 basis point improvement year-over-year [24][10] Business Line Data and Key Metrics Changes - Medical revenue increased by 8% year-over-year, driven by existing programs and improved supply availability [9] - Semi-cap revenue decreased by 10% year-over-year, aligning with expectations, but outperformed industry estimates [9] - A&D revenue rose by 20% year-over-year due to strength in commercial aerospace defense programs [9] Market Data and Key Metrics Changes - Industrials revenue increased by 9% year-over-year, supported by existing customers and new programs in energy efficiency [47] - Advanced computing revenue decreased by 30% year-over-year due to the completion of high-performance computing programs [47] - Next-generation communications revenue was up 20% year-over-year, driven by growth in broadband infrastructure programs [47] Company Strategy and Development Direction - The company is focusing on complex and highly regulated markets, emphasizing operational execution [6] - Plans to maintain a trajectory of greater than 70 million in annualized free cash flow, supported by inventory reductions [22] - The company expects to continue outperforming broader market growth rates in semi-cap due to unique customer exposure and new program wins [14] Management's Comments on Operating Environment and Future Outlook - Management noted that while some customers are moderating forecasts, others, particularly in A&D, are seeing incremental strength [32] - The company is cautious about investments and managing expenses closely due to an uncertain economic environment [33] - Management remains confident in the diversified portfolio's ability to weather economic challenges and capitalize on future growth opportunities [33] Other Important Information - The company generated 38 million in cash from operations and 10 million and 70 million to 261 million as of September 30, 2023 [49] Q&A Session Summary Question: Expected revenue flatness through the first half of 2024 - Management confirmed that revenue is expected to remain flat through the first half of 2024, with solid demand but cautious customer behavior [34][102] Question: Any decommits or cancellations in the pipeline backlog - Management indicated that there are always some adjustments in demand, but nothing unusual has been observed in the current environment [37][38] Question: Impact of economic environment on outsourcing decisions - Management noted that OEMs are reevaluating their manufacturing strategies, leading to increased willingness to consider outsourcing [93] Question: Semi-cap margins and growth expectations - Management stated that semi-cap margins are among the strongest and expect significant growth when the market rebounds [75][76] Question: Currency headwinds from the Mexican footprint - Management confirmed a significant footprint in Mexico and mentioned effective hedging programs to manage currency risks [96][81]