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Edited Transcript of BHE earnings conference call or presentation 19-Apr-17 9:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Benchmark Electronics Inc Earnings Call

ANGLETON Apr 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Benchmark Electronics Inc earnings conference call or presentation Wednesday, April 19, 2017 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Donald F. Adam

Benchmark Electronics, Inc. - CFO and VP

* Lisa K. Weeks

Benchmark Electronics, Inc. - VP of Strategy & IR

* Paul J. Tufano

Benchmark Electronics, Inc. - CEO, President and Non-Independent Director

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Conference Call Participants

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* Mitch Steves

RBC Capital Markets, LLC, Research Division - Associate

* Sean Kilian Flanagan Hannan

Needham & Company, LLC, Research Division - Senior Analyst, Electronic Manufacturing Services and Electronic Components

* Steven Bryant Fox

Cross Research LLC - MD

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Benchmark Electronics Incorporated First Quarter 2017 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms. Lisa Weeks. Ma'am, you may begin.

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Lisa K. Weeks, Benchmark Electronics, Inc. - VP of Strategy & IR [2]

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Thank you, operator, and thanks, everyone for joining us today for Benchmark's First Quarter 2017 Earnings Call. With me this afternoon, I have Paul Tufano, CEO and President; and Don Adam, CFO. Paul will provide introductory comments, and Don will provide a detailed review of our first quarter financial results and second quarter outlook. We will conclude our call with a Q&A session.

After the market close today, we issued an earnings release highlighting our financial performance for the first quarter, and we have prepared a presentation that we will reference on this call. The press release and presentation are available online under the Investor Relations section at our website at www.bench.com. This call is being webcast live and a replay will be available online following the call. Please take a moment to review the forward-looking statements advised on Slide 2 in the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks that are not statements of historical facts are forward-looking statements, which involve risks and uncertainties described in our press release and SEC filings. Actual results may differ materially from these statements and Benchmark undertakes no obligation to update any forward-looking statements. The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the appendix of the presentation.

I will now turn the call over to our CEO, Paul Tufano.

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [3]

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Thank you, Lisa, and good afternoon, everyone, and thank you for joining us. I am extremely pleased with the performance of the company in the first quarter. This is the third consecutive quarter that we have met or exceeded our commitments. And as we discussed before, this is a major focus for the organization and an endeavor to establish credibility. In this quarter, the company posted revenue of $567 million, a 3% growth year-on-year. This is the first quarter in over 11 quarters where the company has posted year-on-year revenue growth and hopefully this will continue as we move forward through the course of this year.

Gross margins were 9.3%, a 10-basis point improvement year-over-year. Our cash cycle days were 67 days, a quarter-over-quarter improvement of 7 days and a very impressive 32-day improvement from the same period a year ago. That drove operating cash flow of $78 million, which puts us on a very good start to achieving our guidance of $125 million to $150 million of operating cash flow for the year. And our ROIC was 9%, an increase of 60 basis points quarter-over-quarter. As we discussed last quarter, we thought the fourth quarter will be the low watermark and ROIC would improve throughout the course of 2017, and I'm pleased to see that it isn't going in that direction.

If you now turn to Slide 5. I like to have a little commentary on bookings. As you know, this is a major focus area of the company. Last quarter, we were very upfront in the fact that we need to increase our bookings on a quarterly basis to drive revenue growth. And we set a target of $150 million of quarterly bookings by the second half of '17. This quarter, we made modest progress in that endeavor. As you can see, we generated $134 million of bookings, up modestly from about $125 million run rate that we've seen for the last 7 quarters. And included in that $134 million bookings is 68% of which are on higher-value markets, which is an improvement of almost 8 full percentage points from the quarter before. If you look at those bookings, I'll provide a little bit of color. We have some interesting bookings as it relates to a number of our market segments. As I look at Industrial, we had a very nice win from the Tier 1 customer to be engaged in a Smart City project. In Telco, we received an award for next-generation satellite program. And in Medical, we received an award from a brand new customer in the oncology space. So we're extremely pleased with these awards going forward. As you can see from the chart, we had 21 engineering awards. We believe that approximately 50% of these awards will lead to manufacturing business in the future.

If you now turn to Slide #6. I like to give you a little bit of color on our progress and our key priorities. As we discussed last quarter, our primary goal is to drive revenue growth at the right balance and mix of profitability. And as we do that, to improve the execution and speed of the company. And we outlined 3 initiatives that we would be following to facilitate that. The first was the optimization of our global network and the improvement of our operational excellence; the second was the implementation of our market sector sales organization; and the third was the expansion of our engineering capabilities and solutions.

For the last 60 days, we made progress in each of these fronts and I'd like to give you a little color on what has happened. From an execution standpoint, a number of programs have been launched throughout the company to drive increased speed and greater execution, this ranges from training of the entirety of the program management teams in Benchmark, almost 150 people, to increase emphasis on operational excellence programs. As it relates to our market sector sales organization, we're approximately 85% staffed and we've implemented additional structures and rigors in those organizations to drive better quality of bookings and size of bookings. And lastly, yesterday, we announced the relocation of our corporate headquarters to Arizona and the consolidation of our corporate staff. I think this is the key milestone in the history of Benchmark. Maybe you know what we've discussed in the past that Benchmark had a virtual management team with very few of the senior leaders actually living in Texas. With the move to Arizona, we will consolidate all the senior staff plus their support staffs into 1 headquarters location under one roof. This will drive greater efficiency, greater rigor and improved speed. And I'm extremely excited with the move to Arizona. In addition to the consolidation of the headquarter staffs, we will establish 2 new engineering design centers in Arizona. The first will be in RF and high-speed design center, which will focus on providing our customers complex and ruggedized RF and high-speed designs. And we'll drive the expansion of our large filter business and additional micro-engineering, micro-remanufacturing capabilities for integrated microwave assembly. The second will be Internet of Things design center, which will integrate and optimize sensor interconnect products for our customers. And we will use our proprietary low-power Wideband Wireless Internet technologies to do this, which will be developed by our advanced technology groups in Southern California and Arizona. These 2 design centers will complement our existing design centers in Rochester, which focuses on Medical and in Almelo, the Netherlands, which is the mechatronic design center of excellence.

As we said in the past, increasing our engineering capabilities and leading with engineering will allow us to drive greater revenue growth with the right mix. And I'm also pleased to say that we will enter into a partnership with Arizona State University in a number of areas to enhance these engineering capabilities. We believe this is the first step in many to consolidate and drive better focus, better execution and better speed within the company. And we will keep you posted over the course of the next several quarters on additional progress that we're making.

Now as I turn to Slide 7. Last quarter, we were very articulate in providing real business model that supported our financial objectives of achieving operating margins greater than 5.5% and ROIC greater than 12%. We also provided you waypoints or milestones to track our progress on our path to achieving those goals. The chart in front of you illustrates what we've achieved in the first quarter, as it relates to our second half of '17 milestones. As you can see from the chart, bookings have improved modestly to $134 million. We've got a $16 million gap in bookings on a quarterly basis. Our objective is to close that gap and exceed $150 million in the second half of '17. From a gross margin standpoint, we're at 9.3%, about a 50 basis points, excuse me, 20-basis point delta from our target of 5 -- 9.5% or better. From SG&A, SG&A increased quarter-on-quarter, as planned. In Don's presentation, he will provide you additional color, as to the drivers of SG&A, what to expect going forward. Revenue mix is 68% generated by our high-value segments that's currently above the waypoint target. Now if you look at the second quarter, we believe we will be at or above the waypoint target. Then finally, profit per square foot on a trailing 12-quarter basis is about flat, and as we move through the course of the year, we believe we will be within that range. So we will update you every quarter on our progress towards these waypoints to ensure that we are communicating effectively, so that you can understand how we're going to achieve our ultimate goals and financial targets.

With that, I'm going to turn it to Don, who'll provide you color on the quarter, and then we'll open up for Q&A.

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Donald F. Adam, Benchmark Electronics, Inc. - CFO and VP [4]

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Thank you, Paul. Let's start on Slide 9 with a recap of our first quarter income statement. Revenues, we have revenues of $567 million, which exceeded the high end of our guidance and were up 3% year-over-year. And, again, as Paul mentioned, our first quarterly increase in 11 quarters. Our first quarter non-GAAP operating margin was 3.8% and down from the fourth quarter on lower revenues. Our non-GAAP EPS of $0.34 was above the high end of our guidance of $0.24 to $0.28 primarily due to better absorption on higher-than-expected revenues. We also had a lower-than-expected tax rate, which contributed about $0.01 per share to EPS. GAAP EPS for the quarter was $0.19. Our GAAP results include a $5.1 million charge or $0.10 per share for the write-down of inventory and a provision to accounts receivable associated with insolvency of a customer. These charges increased cost to sales by $3.4 million and SG&A by $1.7 million. It also includes $1.5 million of restructuring and other costs. For the quarter, our ROIC was 9%, up 60 basis points from the last quarter and our long-term target is 12%.

Please turn to Slide 10 for our quarterly results by market sector. Note that we are now separately reporting our Aerospace and Defense sector revenues. Industrial revenues for the quarter were slightly above our expectations and were down 2% quarter-over-quarter, and down 14% year-over-year due to continued soft demand for our Industrial customer base. Aerospace and Defense revenues were up 2% quarter-over-quarter and 14% year-over-year driven by demand in the Defense sector. Medical revenues were flat quarter-over-quarter and up 4% year-over-year. Medical revenues were adversely impacted by approximately $3 million due to the insolvency of a customer previously noted. Test & Instrumentation revenues grew 80% quarter-over-quarter and 45% year-over-year from share gains in our semi-cap customers where demand continues to remain strong.

In summary, our higher-value markets represented 68% of our first quarter revenues. Overall, the high-value sectors grew 3% sequentially and 5% year-over-year, which is still below our overall 10% target. Strength in A&D and Test & Instrumentation did not offset the headwinds associated with the overall soft Industrial demand.

Now turning to our traditional markets. Computing was up 10% year-over-year driven by strength from new and existing customers. Telco was down 13% year-over-year, primarily due to the reduction in revenue from a former top 10 customer as well as declines in demand for optical products. Our traditional markets, which represented 32% of first quarter revenues were down 1% from last year and 22% from the fourth quarter. Our top 10 -- our top 10 customers represented 44% of sales for the first quarter.

Turning to Slide 11, we'll have a discussion on our quarterly business trends. Overall, again, a very good quarter. Gross margins for the quarter were 9.3% and improved 10 basis points year-over-over on higher revenues and a better mix. SG&A of $30.9 million excludes the $1.7 million charge for the provision towards doubtful accounts related to the insolvent customer. As Paul indicated, we will provide some additional color on SG&A shortly. Our non-GAAP operating margins decreased 20 basis points last year due to the additional SG&A cost. Beyond the $1.5 million in restructuring for the first quarter, we still expect to incur restructuring charges of about $1.5 million to $2 million in the coming quarters.

Turning to Slide 12, we're providing a bridge of our SG&A expenses from 2016 to the 2017 projected run rate. So let me take a minute to explain this chart. Our quarterly SG&A expenses averaged about $28.5 million last year. Over the course of the year, we reduced our SG&A through previously announced restructuring activities, which have yielded about -- yielded savings of about a $1 million per quarter. We've reinvested those savings in our go-to-market and engineering investments, which add about $1.8 million a quarter. As we have noted in prior quarters, we believe these investments are essential to driving future revenue growth for the company. In addition, our employee expenses have increased about $1.5 million per quarter and include merit increases as well as adding talent to other areas of the company. We also expect higher variable employee expenses, which include bonuses and are subject to company's -- the company hitting its financial targets. And finally, stock compensation expense is expected to increase about $3.6 million or 900 -- $3.6 million for the year or about $900,000 per quarter this year. Last year, stock compensation was lower than expected as performance share grant targets were not achieved. Please note that we include stock compensation expense in our SG&A and non-GAAP operating income. Most companies exclude stock compensation when reporting non-GAAP operating income. As a reminder for 2016, we're expecting a total -- we expect total stock compensation expense to be about $8.9 million or approximately $0.14 per share.

Now let's turn to Slide 13, where I'll provide a few updates on cash flow and working capital. We generated $78 million in cash from operations for the quarter based on the solid execution of our working capital initiatives. Free cash flows were $70 million for the first quarter. Our cash balance was $752 million at March 31, with $93 million available in the U.S. Inventory at March 31 was $404 million, an increase of $23 million from year-end. Our accounts receivable balance was $381 million, a decrease of $59 million from year-end, and our accounts payable increased to $344 million.

Let's turn to Slide 14 to review our cash conversion cycle performance. We exceeded our cash conversion cycle target by 6 days ending the quarter at 67 days. This is a 7-day overall improvement from the fourth quarter and 32 days compared with the first quarter last year. You will note that our cash conversion cycle now includes customer deposits. Over the last year, we have focused on increasing customer deposits to improve our working capital performance. These deposits have become more meaningful and therefore, we will now report these deposits in determining our cash conversion cycle performance.

Let's turn to Slide 15 for a review of our second quarter guidance. Looking to the second quarter, our revenue is expected to range from $565 million to $585 million. Our non-GAAP diluted earnings per share is expected to range from $0.31 to $0.35 per share and implied in this guidance is a 3.6% to 3.9% operating margin range.

For modeling information for the second quarter, please turn to Slide 16. Overall, we expect Industrial revenues to be down slightly in the second quarter based on cyclical demand and persistent softness from our customers in this area. Aerospace and Defense is expected to be up modestly based on increased demand across multiple platforms and programs within our customer base. We expect Medical revenues to be up low single digits from the first quarter. In Test & Instrumentation, we expect the strong demand to continue and revenues are expected to be up in the low single digits from the first quarter.

Now turning to traditional markets. We expect Computing revenues to be up about 20% in the first quarter due to higher demand of storage and high-performance computing from a number of our customers. Telco revenue should be down greater than 10% due to weak demand from our optical and broadband customers. Interest expense is expected to be $2.3 million and the effective income tax rate is expected to range from 18% to 19%. The expected weighted average shares for the second quarter are $50.5 million. As Paul stated earlier, overall a solid quarter for Benchmark and a great way to start the year. We remain focused on accelerating our initiatives and look forward to providing you an update on our Q2 results in July.

And with that operator, please open the line for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Jim Suva from Citi.

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Unidentified Analyst, [2]

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This is Tim (inaudible) on behalf of Jim Suva. I guess my question is on top-line growth. You highlighted that in the first quarter, I mean March quarter, year-over-over revenue growth was impressive and the first year-over-over growth in 11 quarters. But in June quarter, revenue guidance implies flattish growth. Can you just -- is there like a demand pulling-in in March quarter? Can you just provide some color on that?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [3]

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Well I think we've provided a range. The range goes from -- up to $585 million. So that would imply growth at the top end of the range. I think as we look at the demand profile for the second quarter, it's kind of mixed. We're seeing some strength in certain sectors and that strength is, to some degree, being offset by weakness in the few others. And as we go through the course of the quarter, I think we'll get better feel for how customer demand fills in. And I'm hopeful that we can, again, post quarter-on-quarter growth.

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Unidentified Analyst, [4]

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Got you. And then the customer insolvency issue. Can you provide some color on that as well?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [5]

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All right, we can't go and give the name the customer. Unfortunately, we had 1 customer who has run into some business issues. We took a reserve against it. We're working with that customer.

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Operator [6]

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And our next question comes from Mitch Steves from RBC Capital Markets.

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Mitch Steves, RBC Capital Markets, LLC, Research Division - Associate [7]

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Just had a quick question on the networking side. It sounded like you guys are talking about an optical slowdown. Is that broad-based or was that a customer-specific issue you're calling out there?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [8]

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I think that -- I would characterize the optical market as seeing a little bit of weakness. And for those customers that we're supporting we're seeing some of that as well.

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Mitch Steves, RBC Capital Markets, LLC, Research Division - Associate [9]

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Got it. And then secondly on the semi-cap side, it sounds that we're just -- given the fact that [ we think these numbers jumps us out ] as well. It sounds that hasn't slowed down and year-over-year it's still growing. And you guys would expect it to grow throughout the full year?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [10]

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So in semi-cap, we are expanding our customer base. And with some of our key customers, we're seeing, what I would say, greater than industry demand -- industry-average demand.

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Operator [11]

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And our next question comes from Steven Fox from Cross Research.

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Steven Bryant Fox, Cross Research LLC - MD [12]

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I was wondering first off if you could talk a little bit about your Internet of Things initiatives. You mentioned some proprietary technologies that you're featuring at your new design center. And you also mentioned Smart City win. So is there a way to sort of tie those 2 comments together in a more strategic fashion and talk about what exactly is proprietary and how you're going about winning some of those businesses? And then I had a follow-up.

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [13]

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Sure. Let me take the first question. We have been investing in a series of technologies that allow you to have low-power radio networks that will enable sensor integration. This technology pretty much came from some of our Defense applications and we are now quoting it over to commercial applications. And it is perfect for sensor network infrastructure. As you know, sensors are pretty dumb devices, right. And as you interconnect them, unless it's one sensor to one device, it's pretty difficult to do an interconnect. We believe we have a technology that allows us to interconnect sensors, utilizing 9 different types of functionality that will provide an extensive array of capabilities for application developers and end users. We are now promoting that technology with our customers. And as we do so, we will use our new Arizona design center to prototype and to extend that technology working with customers and their solutions.

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Steven Bryant Fox, Cross Research LLC - MD [14]

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And in terms of the Smart City win, was that related to this technology? Or is that sort of leveraging different capabilities?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [15]

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Leveraging different capabilities.

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Steven Bryant Fox, Cross Research LLC - MD [16]

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Okay.

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [17]

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So...

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Steven Bryant Fox, Cross Research LLC - MD [18]

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And then just -- I'm sorry, go ahead.

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [19]

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Well, the point I'd make is, today, it's leveraging different capabilities. I believe in the future as we get some traction with this technology that there will be a fair amount of leverage and synergy with our existing and, most importantly, future customer base.

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Steven Bryant Fox, Cross Research LLC - MD [20]

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Great. And then just -- in terms of just the sales force reorganization, I think you said you're 80% through that transformation. And it looks like if you were to -- not that this is easy to continue to improve your order book at the progress you made in Q1 you've hit your bookings target for the second half. But I guess, I was curious whether you saw some of that improvement in the quarter, what markets you think are maybe the low-hanging fruit where you now reorganized successfully or any other color on how confident you are in getting to that sort of bookings target by the second half?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [21]

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Well, look our objective is to hit the number, and anything less than that is not going to be acceptable, put it that way. Now we'll see what kind of progress we make in the second quarter. As we look at our various market segments, we have different time to -- from time to initial contact with the customer, time to quote, it is a little bit elongated. And so what we have to do and what we are doing today, is we are managing portfolio of sectors and portfolio of accounts within each sector and try to drive such that we have enough pipeline in those longer time-to-quote segments such that we can get to that $150 million and above. And quite honestly, we're making progress at different rates and paces in each sector, but the objective is to get everybody to the same level of maturity and the same level of pipeline growth, and more importantly, quality of pipeline to allow us to get to $150 million and beyond with the right mix. And I think in 2 to 3 more quarters, I think we'll give you a more definitive state about how well we believe we are along that path.

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Operator [22]

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(Operator Instructions) And our next question comes from Sean Hannan from Needham & Company.

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Sean Kilian Flanagan Hannan, Needham & Company, LLC, Research Division - Senior Analyst, Electronic Manufacturing Services and Electronic Components [23]

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Just wanted to follow up on some of the commentary you've provided as well as some of the responses you've provided for questions a little bit earlier. The optical side of the exposure that you have within the Communications business. How big is optical for you folks. I have not had the impression that it was really that substantial, is this -- at this point today, is this kind of a 5% of revenue -- how large should we be thinking about that given that we're calling out some of the temporary weakness here?

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Donald F. Adam, Benchmark Electronics, Inc. - CFO and VP [24]

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Well, Sean, first of all, just on the -- if you're looking at year-over-year comparisons, really the driver and why we're down is the former top 10% customer that we had is really driving most of that. So in terms of the optical, it's probably in the 20% to 30% range on the Telco side.

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Sean Kilian Flanagan Hannan, Needham & Company, LLC, Research Division - Senior Analyst, Electronic Manufacturing Services and Electronic Components [25]

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20% to 30% of the Telco segment?

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Donald F. Adam, Benchmark Electronics, Inc. - CFO and VP [26]

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Correct. Just to be clear, Q1 versus Q1 last year this year, and that's driven by the former top 10% customer.

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Sean Kilian Flanagan Hannan, Needham & Company, LLC, Research Division - Senior Analyst, Electronic Manufacturing Services and Electronic Components [27]

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Right, right. absolutely that I followed. The calling out the optical was an incremental was more of a quarter-to-quarter observation?

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [28]

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Looking forward, correct.

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Sean Kilian Flanagan Hannan, Needham & Company, LLC, Research Division - Senior Analyst, Electronic Manufacturing Services and Electronic Components [29]

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Okay. And then in terms of the design centers, how have you folks kind of come to the decision to go after an IoT design center and RF high-speed design center. What really drove the thinking to go at number one, 2 different centers and then specifically within those specific areas. How is that ultimately being justified or driven even by your customers. A little bit more perspective around that would be fantastic.

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Paul J. Tufano, Benchmark Electronics, Inc. - CEO, President and Non-Independent Director [30]

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Sure. So we have a number of different -- I've always said the company has a number of outstanding capabilities that needed to be leveraged. I said that since the beginning -- since my first call, all right. One of those points of leverage is some of the technologies we have surrounding these low-power sensor networks and ultra-wideband radio. We are seeing a lot of traction with that in certain parts of our Defense portfolio. But the applicability to other parts of the market and especially other customers is extremely broad, in my opinion. And so the reason to invest in it is because we believe we can provide solutions to customers that have them, not only cut development time, but also time to market. And so we will be foolish not to leverage it, and so we're doing that. Now we've been -- we have been over the course of the last 6 months, refining it and we're now at the point where we're engaged with customers in this area. And as we look to engage with more customers, we need to have more capabilities in terms of prototyping and additional solution. And so it's time to put that center in place. So that's the rationale for the IoT center of excellence. As it relates to the RF center of excellence, we've always had good RF capabilities and I stated that in my first call. We do a lot of microsatellite work, microwave, so there's a lot of high-end RF skills that we have. We also have a high-end filter business that, in my opinion, has been willfully underutilized. And so as we attempt to take our high-end filter business, extend it with additional RF capability and bridging to some microelectronics work that our customers are demanding, I think it forms another capability to leverage with existing customers and new customers. And so that's the rationale for that second center of excellence. What I'll tell you is that these are not greenfield groups. We have critical mass in both of them. I think that we've never really elevated it or marketed it appropriately to our customers, we're in the process of doing that now. And as a result, we have to extend capabilities to support those customers and drive revenue growth. So we've chosen to do that and we've chosen the Phoenix area to do it because of the proximity to the existing design capabilities, existing support organizations for those 2 areas.

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Operator [31]

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And at this time, I'm showing no further questions. I'd now like to turn the call back over to Lisa Weeks for any closing remarks.

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Lisa K. Weeks, Benchmark Electronics, Inc. - VP of Strategy & IR [32]

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Great. Thank you all for joining us today. Please feel free to give us a call if you have any follow-up questions, and we look forward to speaking to you again in July. Thank you.

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Operator [33]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.