BENCHMARK REPORTS FIRST QUARTER 2023 RESULTS

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May 03, 2023, 16:07 ET

First quarter 2023 results:

Revenue of $695 million, up 9% year-over-year led by:

Advanced Computing growth of 74%
Medical growth of 17%
Next Generation Communications growth of 45%

GAAP operating income of $23 million, up 48% year-over-year
Non-GAAP⁽¹⁾ operating income of $26 million, up 21% year-over-year
GAAP diluted EPS of $0.35, up 13% year-over-year

TEMPE, Ariz., May 3, 2023 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the first quarter ended March 31, 2023.

	Three Months Ended
	March 31,			Dec 31,			March 31,
In millions, except EPS	2023			2022			2022
Sales	$	695		$	751		$	636
Net income	$	12		$	21		$	11
Income from operations	$	23		$	27		$	15
Net income – non-GAAP⁽¹⁾	$	15		$	21		$	16
Income from operations – non-GAAP⁽¹⁾	$	26		$	33		$	21
Diluted earnings per share	$	0.35		$	0.60		$	0.31
Diluted EPS – non-GAAP⁽¹⁾	$	0.42		$	0.60		$	0.44
Operating margin		3.3	%		3.6	%		2.4	%
Operating margin – non-GAAP⁽¹⁾		3.7	%		4.3	%		3.4	%


⁽¹⁾ A reconciliation of GAAP and non-GAAP results is included below.

"Our first quarter results include double-digit year-over-year product shipment growth despite the pause in Semi-Cap spending, demonstrating the power of our sector diversification," said Jeff Benck, Benchmark's President and CEO.

Benck continued "While 2023 has already been a dynamic year, we are encouraged by the demand trends we are experiencing across the majority of our sectors. Coupled with our continued execution, we remain confident in our outlook for the current year as well as our ability to execute to our long-term targets."

Cash Conversion Cycle

	Mar 31,		Dec 31,		Mar 31,
	2023		2022		2022
Accounts receivable days		60		59		54
Contract asset days		25		22		24
Inventory days		111		97		95
Accounts payable days		(60)		(56)		(71)
Advance payments from customers days		(27)		(26)		(20)
Cash Conversion Cycle days		109		96		82

First Quarter 2023 Industry Sector Update

Revenue and percentage of sales by industry sector (in millions) were as follows.

	Mar 31,				Dec 31,				Mar 31,
Higher-Value Markets	2023				2022				2022
Medical	$	137	20	%	$	144	19	%	$	117	18	%
Semi-Cap		149	21			178	24			183	29
A&D		79	11			90	12			82	13
Industrials		144	21			143	19			137	22
Advanced Computing		96	14			92	12			55	8
Next Gen Communications		90	13			104	14			62	10
Total	$	695	100	%	$	751	100	%	$	636	100	%

Overall, revenues were up 9% year-over-year from strength in the Advanced Computing, Next Gen Communications, Industrials, and Medical sectors.

Second Quarter 2023 Guidance

Revenue between $670 - $710 million
Diluted GAAP earnings per share between $0.35 - $0.41
Diluted non-GAAP earnings per share between $0.43 - $0.49 (excluding restructuring charges and other costs and amortization of intangibles)
This guidance takes into consideration all known constraints for the quarter and assumes no further significant interruptions to our supply base, operations or customers.

Restructuring charges are expected to range between $1.8 million and $2.2 million in the second quarter and the amortization of intangibles is expected to be $1.6 million in the second quarter.

First Quarter 2023 Earnings Conference Call
The Company will host a conference call to discuss the results today at 5:00 p.m. Eastern Time. The live webcast of the call and accompanying reference materials will be accessible by logging on to the Company's website at www.bench.com. A replay of the broadcast will also be available on the Company's website.

About Benchmark Electronics, Inc.
Benchmark provides comprehensive solutions across the entire product life cycle by leading through its innovative technology and engineering design services, leveraging its optimized global supply chain and delivering world-class manufacturing services in the following industries: commercial aerospace, defense, advanced computing, next generation telecommunications, complex industrials, medical, and semiconductor capital equipment. Benchmark's global operations include facilities in seven countries and its common shares trade on the New York Stock Exchange under the symbol BHE.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as "anticipate," "believe," "intend," "plan," "project," "forecast," "strategy," "position," "continue," "estimate," "expect," "may," "will," "could," "predict," and similar expressions of the negative or other variations thereof. In particular, statements, express or implied, concerning the Company's outlook and guidance for second quarter and fiscal year 2023 results, future operating results or margins, the ability to generate sales and income or cash flow, expected revenue mix, the Company's business strategy and strategic initiatives, the Company's repurchases of shares of its common stock, the Company's expectations regarding restructuring charges and amortization of intangibles, and the Company's intentions concerning the payment of dividends, among others, are forward-looking statements. Although the Company believes these statements are based on and derived from reasonable assumptions, they involve risks, uncertainties and assumptions that are beyond the Company's ability to control or predict, relating to operations, markets and the business environment generally, including those discussed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in any of the Company's subsequent reports filed with the Securities and Exchange Commission. Events relating to the possibility of customer demand fluctuations, supply chain constraints, continued inflationary pressures, the effects of foreign currency fluctuations and high interest rates, geopolitical uncertainties including trade restrictions, or the ability to utilize the Company's manufacturing facilities at sufficient levels to cover its fixed operating costs, may have resulting impacts on the Company's business, financial condition, results of operations, and the Company's ability (or inability) to execute on its plans. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of the Company's operations, may vary materially from those indicated. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and the Company assumes no obligation to update.

Non-GAAP Financial Measures

Management discloses non–GAAP information to provide investors with additional information to analyze the Company's performance and underlying trends. A detailed reconciliation between GAAP results and results excluding certain items ("non-GAAP") is included in the following tables attached to this document. In situations where a non-GAAP reconciliation has not been provided, the Company was unable to provide such a reconciliation without unreasonable effort due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. Management uses non–GAAP measures that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance. This document also references "free cash flow", which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software. The Company's non–GAAP information is not necessarily comparable to the non–GAAP information used by other companies. Non–GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as a measure of the Company's profitability or liquidity. Readers should consider the types of events and transactions for which adjustments have been made.

Benchmark Electronics, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Amounts in Thousands, Except Per Share Data) (UNAUDITED)

	Three Months Ended
	March 31,
	2023		2022
Sales	$	694,695	$	636,083
Cost of sales		630,737		578,481
Gross profit		63,958		57,602
Selling, general and administrative expenses		38,198		36,289
Amortization of intangible assets		1,592		1,609
Restructuring charges and other costs		1,426		4,297
Income from operations		22,742		15,407
Interest expense		(6,450)		(1,750)
Interest income		1,258		130
Other income (expense), net		(2,165)		(294)
Income before income taxes		15,385		13,493
Income tax expense		3,025		2,533
Net income	$	12,360	$	10,960
Earnings per share:
Basic	$	0.35	$	0.31
Diluted	$	0.35	$	0.31
Weighted-average number of shares used in calculating earnings per share:
Basic		35,336		35,245
Diluted		35,592		35,470

Benchmark Electronics, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (UNAUDITED) (in thousands)

	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	210,893	$	207,430
Restricted cash		797		—
Accounts receivable, net		461,905		491,957
Contract assets		194,134		183,613
Inventories		778,137		727,749
Other current assets		45,006		41,400
Total current assets		1,690,872		1,652,149
Property, plant and equipment, net		221,016		211,478
Operating lease right-of-use assets		95,156		93,081
Goodwill and other, net		271,604		270,623
Total assets	$	2,278,648	$	2,227,331

Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and finance lease obligations	$	3,456	$	4,275
Accounts payable		421,746		424,272
Advance payments from customers		185,808		197,937
Accrued liabilities		100,853		122,652
Total current liabilities		711,863		749,136
Long-term debt and finance lease obligations, less current installments		399,924		320,675
Operating lease liabilities		87,561		86,687
Other long-term liabilities		44,674		44,417
Shareholders' equity		1,034,626		1,026,416
Total liabilities and shareholders' equity	$	2,278,648	$	2,227,331

Benchmark Electronics, Inc. and Subsidiaries Condensed Consolidated Statement of Cash Flows (in thousands) (UNAUDITED)

	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	12,360	$	10,960
Depreciation and amortization		11,100		10,897
Stock-based compensation expense		4,790		4,206
Accounts receivable, net		30,398		(26,356)
Contract assets		(10,521)		(13,431)
Inventories		(49,864)		(85,751)
Accounts payable		15,375		35,869
Advance payments from customers		(12,129)		34,002
Other changes in working capital and other, net		(26,415)		(38,421)
Net cash used in operations		(24,906)		(68,025)

Cash flows from investing activities:
Additions to property, plant and equipment and software		(38,731)		(17,975)
Other investing activities, net		19		1,330
Net cash used in investing activities		(38,712)		(16,645)

Cash flows from financing activities:
Share repurchases		—		(5,482)
Net debt activity		78,316		72,959
Other financing activities, net		(11,292)		(8,343)
Net cash provided by financing activities		67,024		59,134

Effect of exchange rate changes		854		(1,278)
Net increase (decrease) in cash and cash equivalents and restricted cash		4,260		(26,814)
Cash and cash equivalents and restricted cash at beginning of year		207,430		271,749
Cash and cash equivalents and restricted cash at end of period	$	211,690	$	244,935

Benchmark Electronics, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Results (Amounts in Thousands, Except Per Share Data) (UNAUDITED)

	Three Months Ended
	Mar 31,			Dec 31,			Mar 31,
	2023			2022			2022
Income from operations (GAAP)	$	22,742		$	26,946		$	15,407
Amortization of intangible assets		1,592			1,592			1,609
Restructuring charges and other costs		1,426			799			2,314
Loss on the sale of property, plant and equipment		—			—			1,983
Settlement		—			3,250			—
Non-GAAP income from operations	$	25,760		$	32,587		$	21,313
GAAP operating margin		3.3	%		3.6	%		2.4	%
Non-GAAP operating margin		3.7	%		4.3	%		3.4	%

Gross Profit (GAAP)	$	63,958		$	72,127		$	57,602
Non-GAAP gross profit	$	63,958		$	72,127		$	57,602
GAAP gross margin		9.2	%		9.6	%		9.1	%
Non-GAAP gross margin		9.2	%		9.6	%		9.1	%

Selling, general and administrative expenses	$	38,198		$	39,540		$	36,289
Non-GAAP selling, general and administrative expenses	$	38,198		$	39,540		$	36,289

Net income (GAAP)	$	12,360		$	21,219		$	10,960
Amortization of intangible assets		1,592			1,592			1,609
Restructuring charges and other costs		1,426			799			2,314
Loss on the sale of property, plant and equipment		—			—			1,983
Settlement		—			(2,344)			—
Income tax adjustments⁽¹⁾		(516)			(5)			(1,206)
Non-GAAP net income	$	14,862		$	21,261		$	15,660

Diluted earnings per share:
Diluted (GAAP)	$	0.35		$	0.60		$	0.31
Diluted (Non-GAAP)	$	0.42		$	0.60		$	0.44

Weighted-average number of shares used in calculating diluted earnings per share:
Diluted (GAAP)		35,592			35,630			35,470
Diluted (Non-GAAP)		35,592			35,630			35,470

Net cash used in operations	$	(24,906)		$	(52,749)		$	(68,025)
Additions to property, plant and equipment and software		(38,731)			(13,180)			(17,975)
Free cash flow (used)	$	(63,637)		$	(65,929)		$	(86,000)