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Benchmark Electronics Reports Third Quarter 2019 Results

- Quarterly revenue of $555 million

- Medical revenue growth of 33% year-over-year

- A&D revenue growth of 10% year-over-year

- Quarterly gross margin expansion of 60 bps to 9.5%

- Quarterly EPS of $0.19 ($0.36 non-GAAP)

TEMPE, Ariz., Oct. 24, 2019 /PRNewswire/ -- Benchmark Electronics, Inc. (BHE) today announced financial results for the third quarter ended September 30, 2019.

Benchmark Electronics (PRNewsfoto/Benchmark Electronics, Inc.)


Three Months Ended



Sep 30,


Jun 30,


Sep 30,

In millions, except EPS

2019


2019


2018

Sales

$555


$602


$641

Net income

$7


$9


$8

Net income – non-GAAP(1)

$14


$14


$15

Diluted EPS

$0.19


$0.24


$0.17

Diluted EPS – non-GAAP(1)

$0.36


$0.36


$0.33








Operating margin

1.8%


2.0%


1.7%

Operating margin – non-GAAP(1)

3.2%


3.1%


2.9%



(1) 

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

Jeff Benck, Benchmark's President and CEO stated, "We are pleased with the solid execution of our team in the third quarter.  Revenues were up year-over-year in our Medical and Aerospace & Defense (A&D) markets with non-GAAP gross margins improving 60 bps sequentially to 9.5% and operating margins up 10 bps sequentially to 3.2% respectively."

"We are laying the groundwork for an even stronger Benchmark with the progress our engaged team has made on our strategic priorities which are focused on:  improving our go-to-market approach, driving continued operational efficiencies, centralizing our G&A organization, and accelerating our solutions in the market." 

Cash Conversion Cycle



Sep 30,


Jun 30,


Sep 30,



2019


2019


2018


Accounts receivable days


56


54


64

Contract asset days


26


23


22

Inventory days


57


52


49

Accounts payable days


(53)


(61)


(57)

Customer deposits


(7)


(3)


(4)

Cash Conversion Cycle days 


79


65


74

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




Sep 30,



Jun 30,



Sep 30,



Higher-Value Markets


2019



2019


2018

Industrials

$

115


21

%

$

115


19

%

$

128


20

%

A&D


115


21



107


18



105


16


Medical


128


23



114


19



96


15


Semi-Cap


68


12



63


10



77


12




$

426


77

%

$

399


66

%

$

406


63

%






































Sep 30,



Jun 30,



Sep 30,



Traditional Markets


2019



2019


2018

Computing

$

59


11

%

$

133


22

%

$

146


23

%

Telecommunications


70


12



70


12



89


14




$

129


23

%

$

203


34

%

$

235


37

%


Total

$

555


100

%

$

602


100

%

$

641


100

%

Overall, higher‐value markets were up 5% year‐over‐year due to growth in Medical and A&D, despite softer demand in Semi-Cap.  Traditional market revenues were down 45% year-over-year primarily from legacy Computing revenues.

Fourth Quarter 2019 Outlook

  • Revenue between $520 - $570 million
  • Diluted GAAP earnings per share between $0.21 - $0.29
  • Diluted non-GAAP earnings per share between $0.34 - $0.42 (excluding restructuring charges and other costs and amortization of intangibles)

Restructuring charges are expected to range between $3.5 million to $4.5 million in the fourth quarter.

Third Quarter 2019 Results Conference Call Details
A conference call hosted by Benchmark management will be held today at 5:00 p.m. Eastern Time to discuss the Company's financial results and outlook.  This call will be broadcast via the internet and may be accessed by logging on to the Company's website at www.bench.com.

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: aerospace and defense (A&D), medical, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation telecommunications and advanced computing.  Benchmark's global operations network includes facilities in seven countries and common shares trade on the New York Stock Exchange under the symbol BHE.

Forward-Looking Statements
This document 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," "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 2019 results; projected annual revenues resulting from new program bookings; statements, express or implied, concerning future operating results or margins, the ability to generate sales and income or cash flow; and Benchmark's business and growth strategies and expected growth and performance.  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 Item 1A, "Risk Factors", of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 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
This document includes certain financial measures that exclude items and therefore are not in accordance with U.S. generally accepted accounting principles ("GAAP").  A detailed reconciliation between GAAP results and results excluding special items ("non-GAAP") is included in the following tables attached to this document.  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 provide additional insight into operating results and underlying trends  and help investors compare results with our previous guidance.  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

Nine Months Ended




Sep 30,


Jun 30,


Sep 30,


Sep 30,




2019


2019


2018


2019


2018











Income from operations (GAAP)

$

9,798

$

11,941

$

10,957

$

37,826

$

43,273

Restructuring charges and other costs


5,843


3,414


1,845


10,833


5,838

Settlement


-


773


-


773


-

Customer insolvency (recovery)


-


(16)


3,295


(2,758)


2,624

Amortization of intangible assets


2,367


2,361


2,368


7,095


7,101

Non-GAAP income from operations

$

18,008

$

18,473

$

18,465

$

53,769

$

58,836













Gross Profit (GAAP)

$

52,883

$

52,998

$

52,777

$

159,681

$

165,394

Settlement


-


773


-


773


-

Customer insolvency (recovery)


-


(16)


1,581


(1,040)


910

Non-GAAP gross profit

$

52,883

$

53,755

$

54,358

$

159,414

$

166,304













Net income (loss) (GAAP)

$

7,136

$

9,447

$

7,799

$

30,356

$

(4,899)

Restructuring charges and other costs


6,168


3,414


1,845


11,158


5,838

Customer insolvency (recovery)


-


(16)


3,295


(2,758)


2,624

Amortization of intangible assets


2,367


2,361


2,368


7,095


7,101

Settlements


(83)


(330)


-


(2,248)


-

Refinancing of credit facilities


-


-


1,982


-


1,982

Income tax adjustments(1)


(1,879)


(1,039)


(1,914)


(2,711)


(3,542)

Tax Cuts and Jobs Act(2)


-


-


-


-


40,537

Non-GAAP net income

$

13,709

$

13,837

$

15,375

$

40,892

$

49,641













Diluted earnings (loss) per share:












Diluted (GAAP)

$

0.19

$

0.24

$

0.17

$

0.77

$

(0.10)


Diluted (Non-GAAP)

$

0.36

$

0.36

$

0.33

$

1.04

$

1.04













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




















Diluted (GAAP)


37,645


38,583


46,455


39,184


47,415


Diluted (Non-GAAP)


37,645


38,583


46,455


39,184


47,754


(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


Nine Months Ended




September 30,


September 30,



2019


2018


2019


2018









Sales

$

555,229

$

640,688

$

1,759,651

$

1,909,415

Cost of sales


502,346


587,911


1,599,970


1,744,021


Gross profit


52,883


52,777


159,681


165,394

Selling, general and administrative expenses


34,875


37,607


103,927


109,182

Amortization of intangible assets


2,367


2,368


7,095


7,101

Restructuring charges and other costs


5,843


1,845


10,833


5,838


Income from operations


9,798


10,957


37,826


43,273

Interest expense


(1,687)


(3,822)


(5,014)


(8,543)

Interest income


734


1,619


3,084


5,197

Other income (expense), net


(136)


1,139


2,276


827


Income before income taxes


8,709


9,893


38,172


40,754

Income tax expense


1,573


2,094


7,816


45,653


Net income (loss)

$

7,136

$

7,799

$

30,356

$

(4,899)











Earnings (loss) per share:










Basic

$

0.19

$

0.17

$

0.78

$

(0.10)


Diluted

$

0.19

$

0.17

$

0.77

$

(0.10)











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
















Basic


37,419


46,301


38,813


47,415


Diluted


37,645


46,455


39,184


47,415

 










Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)







September 30,


December 31,







2019


2018










Assets






Current assets:







Cash and cash equivalents

$

348,042

$

458,102



Accounts receivable, net


348,099


468,161



Contract assets


161,068


140,082



Inventories


315,835


309,975



Other current assets


25,071


27,230





Total current assets


1,198,115


1,403,550


Property, plant and equipment, net


199,256


210,954


Operating lease right-of-use assets


79,854


-


Goodwill and other, net


281,521


285,279





Total assets

$

1,758,746

$

1,899,783










Liabilities and Shareholders' Equity






Current liabilities:







Current installments of long-term debt and finance lease obligations

$

8,784

$

6,793



Accounts payable


295,693


422,053



Accrued liabilities


136,760


108,313





Total current liabilities


441,237


537,159


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


141,017


147,277


Operating lease liabilities


70,167


-


Other long-term liabilities


77,553


83,122


Shareholders' equity


1,028,772


1,132,225





Total liabilities and shareholders' equity

$

1,758,746

$

1,899,783

 









Benchmark Electronics, Inc. and Subsidiaries









Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)














Nine Months Ended






September 30,







2019


2018










Cash flows from operating activities:






Net income (loss)

$

30,356

$

(4,899)


Depreciation and amortization


36,389


39,643


Stock-based compensation expense


8,461


8,229


Accounts receivable, net


121,171


(20,019)


Contract assets


(20,986)


(9,402)


Inventories


(6,557)


(54,342)


Accounts payable


(122,156)


12,620


Other changes in working capital and other, net


10,636


10,877



Net cash provided by (used in) operations


57,314


(17,293)







Cash flows from investing activities:






Additions to property, plant and equipment and software


(25,942)


(52,933)


Other investing activities, net


252


(2,102)



Net cash used in investing activities


(25,690)


(55,035)










Cash flows from financing activities:






Share repurchases


(118,350)


(122,053)


Net debt activity


(4,614)


(57,758)


Other financing activities, net


(17,699)


(13,897)



Net cash used in financing activities


(140,663)


(193,708)










Effect of exchange rate changes


(1,021)


(797)

Net decrease in cash and cash equivalents


(110,060)


(266,833)


Cash and cash equivalents at beginning of year


458,102


742,546


Cash and cash equivalents at end of period

$

348,042

$

475,713

 

Cision

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