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Benchmark Electronics Reports Fourth Quarter And Full Year 2019 Results

Full year 2019 results:

- Full year revenue of $2.27 billion

- Higher-value markets revenue mix greater than 70%

- Medical sector revenue up 14% compared to 2018

- Cash flow generated from operations of $93 million and free cash flow of $58 million

- Annual GAAP diluted EPS of $0.60 and non-GAAP diluted EPS of $1.32

Fourth quarter 2019 results:

- Quarterly revenue of $508 million

- Semi-Cap revenue growth of 17% year-over-year

- Quarterly GAAP diluted loss per share of $(0.19) and non-GAAP diluted EPS of $0.27

TEMPE, Ariz., Feb. 6, 2020 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the fourth quarter and year ended December 31, 2019.  As previously reported, 2019 results were impacted by the ransomware incident in the fourth quarter.

Benchmark Electronics (PRNewsfoto/Benchmark Electronics, Inc.)

 



Three Months Ended



Dec 31,



Sep 30,


Dec 31,

In millions, except EPS

2019



2019


2018

Sales

$508



$555


$657

Net income (loss)

$(7)



$7


$28

Net income – non-GAAP(1)

$10



$14


$18

Diluted earnings (loss) per share

$(0.19)



$0.19


$0.64

Diluted EPS – non-GAAP(1)

$0.27



$0.36


$0.41

Operating margin

(1.8)%



1.8%


2.3%

Operating margin – non-GAAP(1)

2.6%



3.2%


3.2%

 



Twelve Months Ended



Dec 31,



Dec 31,

In millions, except EPS

2019



2018

Net sales

$2,268



$2,566

Net income

$23



$23

Net income – non-GAAP(1)

$51



$68

Diluted EPS

$0.60



$0.49

Diluted EPS – non-GAAP(1)

$1.32



$1.45

Operating margin

1.3%



2.3%

Operating margin – non-GAAP(1)

3.0%



3.1%



(1)

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

Jeff Benck, Benchmark's President and CEO stated, "As we enter 2020, we continue to see momentum in our higher-value markets: Aerospace & Defense (A&D), Medical and Semi-Cap markets are each expected to grow 10% year-over-year.  With these increases, we expect the higher value markets mix to approach 80% of our revenue for the year."

Benck stated, "Additionally, we generated over $50 million of free cash flow and returned over $140 million to shareholders through share repurchases and dividends in 2019.  We expect operating cash flows in 2020 to be between $70 million and $90 million and provide further opportunities to return capital to our shareholders."

"Our key strategic focus will underpin how we are creating a better Benchmark and it all starts with our focus on the customer.  We are changing the relationships with our customers by delivering incremental value through our expanded set of services and differentiated technology.  We are also attracting new customers that are seeking us out based on our unique capabilities and broad solutions portfolio as they look to outsource more work to a strategic partner like Benchmark."

Cash Conversion Cycle


























Dec 31,




Sep 30,




Dec 31,




2019




2019




2018











Accounts receivable days


57




56




64


Contract asset days


29




26




19


Inventory days


61




57




46


Accounts payable days


(59)




(53)




(63)


Customer deposits


(7)




(7)




(4)


Cash Conversion Cycle days 


81




79




62


With the completion of the legacy computing contract, the cash conversion cycle days increased as expected.

Fourth Quarter 2019 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.




Dec 31,




Sep 30,




Dec 31,



Higher-Value Markets


2019




2019



2018

Industrials

$

107


21

%


$

115


21

%


$

121


18

%

A&D


106


21




115


21




105


16


Medical


103


20




128


23




104


16


Semi-Cap


81


16




68


12




70


11




$

397


78

%


$

426


77

%


$

400


61

%










































Dec 31,




Sep 30,




Dec 31,



Traditional Markets


2019




2019



2018

Computing

$

45


9

%


$

59


11

%


$

171


26

%

Telecommunications


66


13




70


12




86


13




$

111


22

%


$

129


23

%


$

257


39

%


Total

$

508


100

%


$

555


100

%


$

657


100

%

Overall, revenues during the fourth quarter were down due to the impact of the ransomware incident, although revenues from Semi-Cap were up quarter-over-quarter and year-over-year.  Traditional market revenues were down 57% year-over-year primarily from our exit of the legacy computing contract.

First Quarter 2020 Outlook

  • Revenue between $530 - $570 million
  • Diluted GAAP earnings per share between $0.22 - $0.28
  • Diluted non-GAAP earnings per share between $0.32 - $0.38 (excluding restructuring charges and other costs and amortization of intangibles)

Restructuring charges are expected to range between $1.5 million to $2.5 million in the first quarter and the amortization of intangibles is expected to be $2.4 million in the first quarter.

Fourth Quarter 2019 and CY2019 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 until Thursday, February 13, 2020 on the Company's website.

About Benchmark Electronics, Inc.
Benchmark provides comprehensive solutions across the entire product life cycle; 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 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "could" "predict" and similar expressions, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts. Forward-looking statements include, among other things, guidance for first quarter 2020 results; statements, express or implied, concerning future operating results or margins, the ability to generate sales and income or cash flow, and expected revenue mix; and Benchmark's business and growth strategies.  Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally.  If one or more of these risks or uncertainties materializes, or underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Readers are advised to consult further disclosures on these risks and uncertainties, particularly in Part 1, Item 1A, "Risk Factors", of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and in Part II, Item 1A, "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and in its subsequent filings with the Securities and Exchange Commission. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and it assumes no obligation to update them.

Non-GAAP Financial Measures
Management discloses non‐GAAP information to provide investors with additional information to analyze the Company's performance and underlying trends. 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
















Reconciliation of GAAP to Non-GAAP Financial Results


(Amounts in Thousands, Except Per Share Data)


(UNAUDITED)



















Three Months Ended



Year Ended





Dec 31,


Sep 30,


Dec 31,



Dec 31,





2019


2019


2018



2019


2018












Income (loss) from operations (GAAP)

$

(9,281)

$

9,798

$

15,265


$

28,545

$

58,538


Restructuring charges and other costs


2,268


5,843


3,527



13,101


9,365


Ransomware incident related costs, net


7,681


-


-



7,681


-


Settlement


(773)


-


-



-


-


Customer insolvency (recovery)


11,036


-


(113)



8,278


2,511


Amortization of intangible assets


2,366


2,367


2,384



9,461


9,485


Non-GAAP income from operations

$

13,297

$

18,008

$

21,063


$

67,066

$

79,899
















Gross Profit (GAAP)

$

40,725

$

52,883

$

55,199


$

200,406

$

220,593


Settlement


(773)


-


-



-


-


Customer insolvency (recovery)


967


-


(113)



(73)


797


Non-GAAP gross profit

$

40,919

$

52,883

$

55,086


$

200,333

$

221,390
















Net income (loss) (GAAP)

$

(6,931)

$

7,136

$

27,716


$

23,425

$

22,817


Restructuring charges and other costs


2,268


6,168


3,527



13,426


9,365


Ransomware incident related costs, net


7,681


-


-



7,681


-


Customer insolvency (recovery)


11,036


-


(113)



8,278


2,511


Amortization of intangible assets


2,366


2,367


2,384



9,461


9,485


Settlements


(773)


(83)


-



(3,021)


-


Refinancing of credit facilities


-


-


-



-


1,982


Income tax adjustments(1)


(5,385)


(1,879)


(1,050)



(8,095)


(4,592)


Tax Cuts and Jobs Act(2)


-


-


(14,529)



-


26,008


Non-GAAP net income

$

10,262

$

13,709

$

17,935


$

51,155

$

67,576
















Diluted earnings (loss) per share:














Diluted (GAAP)

$

(0.19)

$

0.19

$

0.64


$

0.60

$

0.49



Diluted (Non-GAAP)

$

0.27

$

0.36

$

0.41


$

1.32

$

1.45
















Weighted-average number of shares used in calculating diluted earnings (loss) per share:














Diluted (GAAP)


36,928


37,645


43,229



38,763


46,655



Diluted (Non-GAAP)


37,374


37,645


43,229



38,763


46,655




(1) 

This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.

(2) 

This amount represents the impact of repatriating foreign earnings from our foreign jurisdictions to the U.S., offset by available U.S. foreign tax credits, and a non-recurring tax true-up benefit as a result of finalizing our federal and state income tax accounting for the U.S. transitions toll tax from the 2017 Tax Cuts and Jobs Act.

 

Benchmark Electronics, Inc. and Subsidiaries












Condensed Consolidated Statements of Income

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)





Three Months Ended



Year Ended




December 31,



December 31,



2019


2018



2019


2018










Sales

$

508,444

$

657,050


$

2,268,095

$

2,566,465

Cost of sales


467,719


601,851



2,067,689


2,345,872


Gross profit


40,725


55,199



200,406


220,593

Selling, general and administrative expenses


37,691


34,023



141,618


143,205

Amortization of intangible assets


2,366


2,384



9,461


9,485

Restructuring charges and other costs


2,268


3,527



13,101


9,365

Ransomware incident related costs, net


7,681


-



7,681


-


Income (loss) from operations


(9,281)


15,265



28,545


58,538

Interest expense


(1,650)


(1,930)



(6,664)


(10,473)

Interest income


745


1,651



3,829


6,848

Other income (expense), net


(717)


(199)



1,559


628


Income (loss) before income taxes


(10,903)


14,787



27,269


55,541

Income tax expense


(3,972)


(12,929)



3,844


32,724


Net income (loss)

$

(6,931)

$

27,716


$

23,425

$

22,817












Earnings (loss) per share:











Basic

$

(0.19)

$

0.64


$

0.61

$

0.49


Diluted

$

(0.19)

$

0.64


$

0.60

$

0.49












Weighted-average number of shares used in calculating










   earnings (loss) per share:










Basic


36,928


43,120



38,338


46,332


Diluted


36,928


43,229



38,763


46,655

 

Benchmark Electronics, Inc. and Subsidiaries











Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)







December 31,



December 31,







2019



2018











Assets







Current assets:








Cash and cash equivalents

$

363,956


$

458,102



Accounts receivable, net


324,424



468,161



Contract assets


161,061



140,082



Inventories


314,956



309,975



Other current assets


30,685



27,230





Total current assets


1,195,082



1,403,550


Property, plant and equipment, net


205,819



210,954


Operating lease right-of-use assets


76,859



-


Goodwill and other, net


282,114



285,279





Total assets

$

1,759,874


$

1,899,783











Liabilities and Shareholders' Equity







Current liabilities:








Current installments of long-term debt and finance lease obligations

$

8,825


$

6,793



Accounts payable


302,994



422,053



Accrued liabilities


147,426



108,313





Total current liabilities


459,245



537,159


Long-term debt and finance lease obligations, less current installments


138,912



147,277


Operating lease liabilities


67,898



-


Other long-term liabilities


78,987



83,122


Shareholders' equity


1,014,832



1,132,225





Total liabilities and shareholders' equity

$

1,759,874


$

1,899,783

 

Benchmark Electronics, Inc. and Subsidiaries











Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)

















Year Ended







December 31,







2019



2018











Cash flows from operating activities:







Net income

$

23,425


$

22,817


Depreciation and amortization


48,427



51,839


Stock-based compensation expense


10,194



10,089


Accounts receivable, net


134,926



(33,952)


Contract assets


(20,979)



6,414


Inventories


(5,238)



(43,264)


Accounts payable


(121,860)



61,391


Other changes in working capital and other, net


24,241



1,353



Net cash provided by operations


93,136



76,687








Cash flows from investing activities:







Additions to property, plant and equipment and software


(35,118)



(66,732)


Other investing activities, net


255



(2,117)



Net cash used in investing activities


(34,863)



(68,849)











Cash flows from financing activities:







Share repurchases


(122,110)



(211,858)


Net debt activity


(6,794)



(58,024)


Other financing activities, net


(23,933)



(21,085)



Net cash used in financing activities


(152,837)



(290,967)











Effect of exchange rate changes


418



(1,315)

Net decrease in cash and cash equivalents


(94,146)



(284,444)


Cash and cash equivalents at beginning of year


458,102



742,546


Cash and cash equivalents at end of period

$

363,956


$

458,102











 

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SOURCE Benchmark Electronics, Inc.