Q1 2023 Benchmark Electronics Inc Earnings Call
Participants
Jeffrey W. Benck; President, CEO & Director; Benchmark Electronics, Inc.
Paul Mansky; IR & Corporate Development Officer; Benchmark Electronics, Inc.
Roop K. Lakkaraju; Executive VP & CFO; Benchmark Electronics, Inc.
Anja Marie Theresa Soderstrom; Senior Equity Research Analyst; Sidoti & Company, LLC
Jaeson Allen Min Schmidt; Senior Research Analyst & Director of Research; Lake Street Capital Markets, LLC, Research Division
Steven Bryant Fox; Founder & CEO; Fox Advisors LLC
Presentation
Operator
Hello, and welcome to the Benchmark Electronics, Inc. First Quarter 2023 Earnings Conference Call. (Operator Instructions). Please note, this event is being recorded.
I would now like to turn the conference over to Paul Mansky, with the Benchmark Electronics Company. Please go ahead.
Paul Mansky
Thank you, MJ and thanks everyone for joining us today for Benchmark's First Quarter Fiscal Year 2020 Earnings Call. Joining me this afternoon are Jeff Benck, CEO and President; and Roop Lakkaraju, CFO.
After the market closed today, we issued an earnings release pertaining to our financial performance for the first quarter of 2023, and we have prepared a presentation that we will reference on this call. Both are available on the Investor Relations section of our website at beg.com. This call is being webcast live, and a replay will be available online following the call.
The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as an appendix of the presentation. 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 as described in our press releases and SEC filings. Actual results may differ materially from these statements and most notably due to the global supply chain constraints, macroeconomic conditions and (inaudible) equipment spending.
Benchmark takes no obligation to update any forward-looking statements. For today's call, Jeff will begin by providing a summary of our first quarter results. Roop will then discuss our detailed financial results and our second quarter guidance. Jeff will then return to provide more insight on sector demand trends, business wins and closing commentary.
If you will, please turn to Slide 3, I'll turn the call over to our CEO, Jeff Benck.
Jeffrey W. Benck
Thank you, Paul. Good afternoon, and thanks to everyone for joining our call today. Our first quarter was once again demonstrated our ability to continue to grow our business without compromising our margin objectives, even in a less certain macro environment.
Total revenue in the quarter was up 9% year-over-year. Both GAAP and non-GAAP gross margins were 9.2%. GAAP operating margin was 3.3%. On a non-GAAP basis, we delivered operating margin of 3.7%. As a reminder, unlike most of our peers, our non-GAAP operating margin includes stock-based compensation, which in the March quarter equated to approximately 70 basis points.
Our first quarter GAAP earnings were $0.35 per share, and our non-GAAP earnings were $0.42 in line with our prior guidance. Supply chain premiums, which we previously disclosed to be 0 margin pass-through revenue came in at $18 million in the quarter. This was down nearly 70% year-over-year. Excluding the effect of this low margin revenue, we delivered non-GAAP gross margin of 9.5% and non-GAAP operating margin of 3.8%.
Before turning the call over to Roop, I'd like to share a few high-level thoughts on demand and our outlook. In the first quarter, we continue to experience strength across the majority of our market sectors, led by healthy double-digit year-over-year growth in our advanced computing, industrial, medical and next-generation communications sectors. As we guided to last quarter, semi-cap was a challenge during the period.
However, I should note, unlike last quarter, we did not see incremental weakening during the first quarter. We believe in the secular trends that will support our future growth in this sector and are investing accordingly even in this downturn, an example of which is the grand opening in March of our new precision technology facility in Mesa, Arizona, which was supported by our Governor, Katie Hobbs.
We have and expect to continue to outperform the broader wafer front-end market. Indicators are pointing to a better second half of 2023 at a potentially much stronger 2024. Looking at the broader market, although we see growth across the majority of the sectors we serve for.
Based on that, we began proactively implementing expense controls in the quarter, which will continue into Q2. This a design will enable us to continue investing in future growth while protecting profitability amidst the current environment. Our committed to operational discipline, combined with our continued success in gaining share in the market, positions us exceptionally well to deliver to our financial targets.
Finally, I want to take a moment to highlight our continued commitment to ESG. In February, we published our second annual sustainability report. This report builds upon last year's inaugural addition and that for the first time, we established specific intensity targets for greenhouse gases. I encourage you to read the report which can be found at bench.com/sustainability.
Now let me pass it over to Roop to share more details on the quarter and our guidance for 2Q.
Roop K. Lakkaraju
Thanks, Jeff, and good afternoon. Please turn to Slide 5 for our revenue by market sector. Total Benchmark revenue was $695 million in Q1, which is 7% lower sequentially and 9% higher year-over-year. Excluding the effect of supply chain premiums, revenue was up 17% year-over-year in the period. A reconciliation of this and our sector level performance, excluding supply chain premiums can be found in the appendix section of the presentation material.
Turning to Slide 6. Excluding supply chain premiums, medical revenue for the first quarter was up 26% versus the prior year. Our growth was fueled by strength in existing programs, new programs ramping and an improving supply chain environment. Semi-cap revenue decreased 16% year-over-year, in line with our expectations.
A&D revenue was down 2% year-over-year. Defense for us continues to be challenged by supply availability, coupled with the timing of program ramps. We expect this to improve as we go through the year. Meanwhile, commercial aerospace continues to show strength. Industrial's revenue for the first quarter increased 24% year-over-year as new customer programs (technical difficulty) measurement and energy efficiency.
Advanced computing increased an impressive 81% year-over-year as we benefited from the continued execution of our -- of multiple high-performance computing programs. In the next-gen communications sector, revenue was up an equally impressive 53% year-over-year. Our year-over-year performance was driven by continued secular strength in 5G infrastructure and satellite communications. In the first quarter, our top 10 customers represented 51% of total revenue.
Please turn to Slide 7. Our GAAP earnings per share for the quarter was $0.35, which represents 13% growth on a year-over-year basis. Our GAAP results included restructuring and other onetime costs totaling $1.4 million related to both the previously announced closure of our site in Moorpark, California and the more recent 2023 expense actions discussed earlier.
For Q1, our non-GAAP gross margin of 9.2% decreased 40 basis points sequentially, primarily due to lower revenue, specifically within our semi-cap sector. Excluding supply chain premiums, our gross margin was 9.5%, which is in line with guidance. Our SG&A was $38.2 million, down sequentially as a result of the expense actions begun in Q1, coupled with lower variable compensation.
Non-GAAP operating margin was 3.7%, excluding supply chain premiums, operating margin was 3.8%, representing the high end of our guidance range. In Q1 2023, our non-GAAP effective tax rate was 19.2%. For the quarter, non-GAAP EPS was $0.42, which is in line with the midpoint of our Q1 guidance. Non-GAAP ROIC in the first quarter was 9.6%, a 30 basis point improvement year-over-year.
Please turn to Slide 8 to discuss the effects of supply chain premiums on a trended basis. In Q1, supply chain premiums declined to $18 million versus $46 million in Q4 2022 and $57 million in Q1 2022. Excluding supply chain premiums, our revenue in the first quarter was $677 million, a sequential decrease of $28 million or 4% and a year-over-year increase of $98 million or 17%. The growth on a year-over-year basis was driven by advanced computing, next-generation communications and medical.
Please turn to Slide 9 to review our cash conversion cycle performance. Our cash conversion cycle days were 109 in the first quarter of 2023 compared to 96 days in Q4 2022. The largest contributor to the increase was investment in inventory as we continue to manage through pockets of supply chain constraints. Total inventory increased sequentially in Q1 by $50 million, which was partially offset by a reduction in accounts receivable of approximately $30 million.
Please turn to Slide 10 for an update on liquidity and capital resources. In Q1, we used $25 million of cash in operations and invested $39 million in CapEx to support continued growth in our Mexico facility and enhanced capabilities in our Precision Technologies business unit. While we will continue to invest throughout the year, given the timing of these specific initiatives, we anticipate annual CapEx to be first half weighted in 2023.
We expect our CapEx spending in Q2 to be between $10 million and $15 million. Our cash balance on March 31 was $212 million. As of March 31, we had $130 million outstanding on our term loan, $275 million outstanding borrowings against our revolver and $171 million available to borrow under our revolver. As announced today, to further support our strong liquidity position and growth, we expanded our revolver capacity by $100 million by executing the accordion within our existing credit facilities. The expansion of the revolver was done at the same terms as the current credit facility.
Turning to Slide 11 to review our capital allocation activity. In Q1, we paid our regular quarterly cash dividend equating to $5.8 million. Turning to Slide 12 for a review of our second quarter 2023 guidance. We expect revenue to range from $670 million to $710 million. Excluding the effect of supply chain premiums, we expect gross margin to be between 9.4% to 9.6% in the quarter.
SG&A expense will range between $36 million and $39 million. Also excluding supply chain premiums, our non-GAAP operating margin range is forecasted to be 3.9% to 4.1%. Our non-GAAP guidance does exclude the impact of amortization of intangible assets and estimated restructuring and other costs.
Between the previously announced site closure and our more recent expense actions mentioned earlier, we expect to incur restructuring and other nonrecurring costs in Q2 of approximately $1.8 million to $2.2 million. Our non-GAAP diluted earnings per share is expected to be in the range of $0.43 to $0.49 or a midpoint of $0.46. Other expenses net are expected to be $7 million due primarily to interest expense. We expect that for Q2, our non-GAAP effective tax rate will be between 18% and 20%, so weighted average share count of $35.6 million.
Now turning to free cash flow for 2023. We continue to expect improved working capital throughout the year. This will be driven primarily by reducing inventory. We have a number of working capital initiatives in place, including increasing advanced deposits, inventory claims and aligning clear-to-build schedules. For the year, we continue to anticipate 2023 free cash flow generation of $70 million to $90 million.
And with that, I'll turn the call back over to Jeff.
Jeffrey W. Benck
Thanks, Roop. Please turn to Slide 14. First, let me provide some additional color on what we're expecting by way of sector level demand for the upcoming quarter and full year. All metrics are referenced excluding the effect of supply chain premiums, which we believe provides the best insight into the performance of our sectors.
In Medical, revenue grew 26% in the first quarter, better than our expectations coming into the period. We will help us on improving the supply chain during the quarter, but still remain constrained in our ability to fully meet demand. With the strength and macro resiliency of our existing customer base and programs, new wins continuing to ramp throughout the year and with expected easing of supply conditions, we anticipate medical to continue to deliver growth for us in the current quarter and for the full year.
Following 30% growth in semi cap in 2022, first quarter of 2023 saw a correction, declining 16% versus both the prior year and quarter. This was in line with our expectations provided with our Q4 earnings call. With our customers' latest forecast, share gains and the timing of new program ramps, we are somewhat more optimistic on the second half of the year than we were 90 days ago.
In Q2, we expect Semi-cap to be flat to up sequentially, albeit still down modestly year-on-year. Looking further out, everything we are hearing today points to the potential for a broadly improved environment in 2024. We remain confident that even during this down cycle, we will significantly outperform the end market for (inaudible) capital equipment.
While the majority of industry forecasts are centering around a 25% decline for the market in 2023, we expect our revenue to be down only in the high single digits this year. We remain as committed as ever to semi cap and are actively investing to continue to capture more than our share of the long-term growth of this market, which is supported by increased silicon content in all things, the geographic diversification of semiconductor manufacturing and state and federally sponsored investments via measures, including the CHIPS Act.
Moving to the A&D sector. Revenue was flattish year-on-year in the quarter, slightly below our guidance. Commercial aero demand continues to improve for us, but our defense subsector remains the most heavily supply constrained. Also impacting growth is the timing of defense program ramps. In Q2, we expect these conditions to improve, resulting in growth in the quarter and for the year.
Turning to Industrials. Here, too, we saw solid growth with revenue up 24% versus the prior year. We have positioned ourselves to participate in megatrends, specifically automation, environmental and energy efficiency solutions. Similar to medical, supply conditions are showing some improvement, which we expect to continue throughout the year. This leads us to anticipate year-on-year growth in the quarter and for the full year.
In advanced computing, we delivered an exceptionally strong quarter with revenue growth above 80%. As a reminder, our advanced computing efforts are not in support of cloud or data center infrastructure, rather we help build some of the largest and most sophisticated high-performance computing machines in the world.
These are often government agency-sponsored and by definition, relatively macro resilient. They are, however, programmatic, which can lead to some lumpiness quarter-to-quarter, driven by build schedules with existing programs and the timing of new wins. Our first quarter revenue benefited from revenue that pushed out of Q4 as we discussed on our last call.
For Q2, we expect completion of one of our large HPC programs. As such, we anticipate sector revenue to be down sequentially. On a full year basis, we are forecasting flattish performance. Lastly, next-generation communications revenue grew greater than 50% year-on-year, coming off the year with the sector revenue was up 24%.
We are well positioned to capture investment in broadband infrastructure, demand for satellite communications and new broadband connectivity programs focused on rural areas. While some of these initiatives are potentially exposed to infrastructure deployment delays, we believe each are supported by multiyear catalysts and strategic imperatives for our customers. As such, we may see demand modulate in the near term, but we continue to anticipate sector growth for the full year.
Turning to Slide 15. Let me finish our sector discussion by highlighting some key programs we secured in the March quarter. We again saw good balance of wins across our sectors, reflecting the diversity of complex projects that we take on in support of our customers throughout the life cycle, from design to manufacturing.
In Medical, we continue to be awarded programs based on our ability to deliver highly sophisticated products in the medical device and life science markets. This quarter, we won new manufacturing business for products, including an automatic external (inaudible), a minimally invasive surgical system and a next-gen CT scanning platform.
In Semi-cap, despite the near-term capital spending constraints, we continue to secure new wins that positions us for the future growth driven by the evolution to next-generation processes and geometries. To that end, this past quarter, we awarded a new engineering win for a test platform and a vacuum system serving these leading-edge processes.
In the A&D sector, we secured multiple manufacturing wins in the commercial electric aeronautics market. Within defense, we are pleased to win the manufacturing business for optical sensors to be used in a space application. Also in defense, we won RF design opportunities spanning multiple projects, which speaks to our experience and skill set in this space.
In Industrial, we continue to benefit from our track record, particularly within the energy efficiency and management, automation and test and measurement markets. Examples of which are wins this quarter that include the manufacturing of a wireless seismic detection and prediction device as well as flow control devices, both going into the energy market to improve safety and efficiency.
Within engineering, we were awarded a next-gen inspection tool designed to ensure compliance with electrical wiring standards in buildings. In advanced computing and next-gen communications, as an example of the synergy between engineering and manufacturing, this quarter, we won a combined opportunity at a household name to provide IoT-enabled smart sensors for municipalities, which will be used to improve energy efficiency and management. This is a great example of our deep partnership with our customers from concept to manufacturing.
In summary, please turn to Slide 16. Our diversified sector positioning and focus on execution enabled us to again deliver to our targets. Excluding supply chain premiums, we delivered 17% revenue growth and 21% non-GAAP operating income growth in the quarter. We grew 4 of our 6 sectors and are expecting growth in 4 and potentially 5 of the 6 for the year.
The one notable exception we see is in semi-cap, where our business will contract, but we expect to perform significantly better than the market in 2023. While we are optimistic about the resilient demand forecast we are seeing across the majority of our sectors, we are also being proactive to manage discretionary spending while protecting our investment in our future growth.
Although our inventory growth has impacted our cash flow in recent periods, we expect this trend will change in the quarters to come as the supply chain improves, we execute our working capital initiatives, and we continue to enjoy demand strength. This provides me confidence in our ability to execute to our commitments both in 2023 and beyond.
With that, I'll now turn the call over to the operator to conduct our Q&A session.
Question and Answer Session
Operator
Great. Thank you. We will now begin the question-and-answer session. (Operator Instructions). At this time, we will pause momentarily to assemble our roster. Today's first question comes from Jason Schmidt with Lake Street.
Jaeson Allen Min Schmidt
Just the first one, I want to start with, just to confirm that you still feel comfortable with that 2023 guidance you laid out last quarter of kind of 7% to 9% growth ex those supply chain premiums?
Jeffrey W. Benck
Yes, I'll start that and let Roop add to it. We still feel that things are tracking essentially to where we were a quarter ago. So you see Q1 kind of came in, in line with expectations, and we're certainly guiding in line with our last update there. So we still -- obviously, there's a lot of macro uncertainty, but as we look at our feedback from our customers and what we're seeing, we feel pretty good about what we laid out last quarter.
Roop K. Lakkaraju
Yes, Jason, this is Roop. I'll just add to Jeff, that just in terms of the profile of it overall, obviously, there are some things we're monitoring that can influence. But overall for the full year, we're still comfortable with what we laid out in Q1 or at the February call.
Jaeson Allen Min Schmidt
Okay. That's helpful. And then you noted increased confidence in the semi-cap business. Just curious if that is more due to order patterns that you're seeing or the fact that it bottomed in Q1 when maybe you thought it wouldn't bottom until Q2?
Jeffrey W. Benck
Yes. I mean obviously, it's a dynamic environment, right? But we obviously, particularly with the supply chain environment, we have good forecast now through the end of the year. So certainly, we look at the forecast. It doesn't mean that we can't see changes there. But probably had less a little less turmoil in the quarter.
In fourth quarter, we saw quite a bit of demand moving in the quarter. First quarter was not that there weren't some ins and outs, but it was a lot more consistent. And then obviously, with the guide this quarter. And then just talking to a lot of the customers about what they're seeing, we still know there's memory weakness and concerns about China and some of that.
But the legacy nodes seem to be doing pretty well. And from that standpoint, there's pretty good demand strength. And we know we have a number of new wins that we're working on that is driving some revenue, particularly as you get into the back half of the year. And then everyone is sort of looking at 24%. If you look at over the last 4 down cycles, these typically have lasted frankly, less than a year. And I don't this cycle may be different, but we sort of think of it similar way.
So I guess that's what's led us to where we believe that we're a little more constructive. We're not ready to say, hey, we're off to the races, but we feel good about where we're headed for 2Q.
Jaeson Allen Min Schmidt
Okay. That makes sense. And then just the last one, and I'll jump back into queue. Are you seeing attach rates for your engineering and design services remaining fairly consistent? And then I guess relatedly, is that attach rate pretty consistent across all segments? Or are there some segments that are lagging?
Jeffrey W. Benck
Good question. We did have a good quarter of engineering bookings and the attach rate. I shifted that goal to be over 70%, and the team cleared that again in the first quarter. So I feel pretty good about the engineering pipeline. We obviously have a long history in medical engineering devices and quite a bit of work going on in aerospace and defense and industrial. We've had a nice spread of engineering projects across this sector.
So I can't say it's more heavily necessarily dominated. It's good to see some work going on in the communication and the semi-cap space. We talked about a couple of new wins actually in that realm. So I would say pretty pleased with the diversity of engineering projects right now that we're winning.
And it's also some of those lead to winning the manufacturing as well, which is -- while it's great to be a really strong design out, we do it with the intent of the product to down the road.
Operator
The next question comes from Steven Fox with Fox Advisors.
Steven Bryant Fox
I guess, first of all, just again on the semi-cap side. There's a lot of different conclusions coming out of the supply chain right now in terms of what's going on. I know everyone's got a different mix, et cetera, and different rate of new programs. But getting back to what you're seeing, like how much -- can you dive deeper into like sort of the on the semi-cap trends that are benefiting you to see more stable outlook? And then two, maybe just remind us where the new program momentum is coming from? And then I had a follow-up.
Operator
Ladies and gentlemen, please stand by. It appears we have lost connection with our speakers.
(technical difficulty)
Ladies and gentlemen, we have reestablished our speaker connection. Let's start again with Mr. Steven Fox from Fox Advisors.
Jeffrey W. Benck
So Stephen, I heard your question. I presume you didn't get my answer. I guess the line drop.
Steven Bryant Fox
Yes, Great.
Jeffrey W. Benck
So what I was trying to articulate was that we have judicially been more exposed to logic than memory. We do have wins across both and tools that we work on across both. But we've been more traditionally more logic heavy. The other thing I mentioned was that depending on the position on tools with different OEMs, some are seeing different impacts there.
As we talked in the past about the backlog on EUV and consistent in our strong demand there benefit us a bit because of our involvement there with customers that are engaged in that. When it comes to the -- I think you also asked about some of the new tools. Some of the new tools are certainly on sort of the leading edge.
So it's technology that hasn't necessarily come to market yet. And when you talk the new geometries and some of that are going to benefit us down the road as customers move there. And I think we saw some of those schedules move a bit just because of introduction of a branded platform if an OEM is looking at trying to manage their spending and when they think the introduction makes sense, do we do it in a downturn or not, but I'll leave that to the OEMs to decide how that plays out.
The other dynamic is just -- we also have a pretty good exposure to some of the 200-million or 300 millimeter solutions, which there's been a lot of talk about some of those legacy nodes. And is there still a demand there, particularly in areas that are like IoT and some of the technology solutions that may not require 5-nanometer in smaller geometries.
So that's a little bit -- and then lastly, we are more front-end exposed, we have the -- we had the privilege of being in the chamber. And so I know some of our competitors do more back-end test and measurement and those kind of solutions, we tend to be more front-end domain.
Steven Bryant Fox
Yes. No, it really does. But I just want to make sure I was clear on that. And then secondly, Roop you've taken some costs out, you seem to be seeing like stable trends with new programs ramping, et cetera. So how do we think about operating leverage into the second half? I mean it seems like you have sort of some pent-up profit that could flow through the income statement even if you're just like on your sales targets. Can you just talk a little bit about that potential?
Roop K. Lakkaraju
Yes. No, that's right, Steve, Stephen. It's -- from a margin profile standpoint, we'll continue to see second half strength from a margin standpoint and that top line growth that fills in towards the growth rate that Jeff mentioned earlier. So we'll get continued operating leverage as we go through the year.
Steven Bryant Fox
Great. Got it. And I'm sorry, just one more. On the supply chain premiums. So like how would you think it plays out? What's the updated view on how it plays out from here? And like any other comments around just supply chain -- that's it.
Roop K. Lakkaraju
No, absolutely. I appreciate you asking on supply chain premiums. It's -- as we predicted, we thought it would continue to come down. It's come down as we see it throughout the year. I mean, supply chain as a whole is still -- has pockets of constraints. Some lead times are improving here and there. Supply chain premiums have been reduced, and we think it's going to continue to come down likely as we go through the year as the market continues to stabilize around it.
Jeffrey W. Benck
Yes, we don't see that trend reversing at this point. I think that as things start to free up, we'll probably see less propensity for that. And frankly, nobody at this point, wants to be doing -- paying those premiums. So from that standpoint, I think we would say directionally, it will continue to come down, although not evaporate overnight. So we'll continue to report kind of what we're seeing as we come through it a little hard to predict in front of it other than it's a downward trajectory.
Operator
(Operator Instructions).The next question comes from Anja Soderstrom with Sidoti.
Anja Marie Theresa Soderstrom
I have a follow-up to Jason's question on the 2023 guidance. What's the biggest risk there? Have you sort of secured all the components for that? Or could there be some hiccups there? Or are there other risks -- what are the biggest risks you see to achieving that guidance range?
Jeffrey W. Benck
Yes. I mean , thanks for your questions. I think first of all, we just said, supply chain environment is improving, but there's still pockets of constraints. So there are still parts to be worked and figured out and ensure we have clear to build from that standpoint for the rest of the year. So that's number one.
Number two, as we think about possible headwinds, I mean, it's probably more to do with -- we've got a portfolio that is, we think largely resistant to recessionary considerations. If you think about medical technologies or these sort of things, but there are pockets where its next-gen communications and broadband infrastructure deployment, where it could be a little bit slower, and we're hearing some headwinds around that.
So I think it's more so that. Now on the other hand, as we talked about, folks are saying that semi-cap could get stronger as you go through the year and exiting 23 to 24 should likely be much stronger.
So it's a matter of some of these aspects that might offset some of those headwinds as well that we're monitoring.
Anja Marie Theresa Soderstrom
Okay. And then with -- how should we think about the inventory levels going forward?
Jeffrey W. Benck
Well, there's a lot of effort right now in inventory, as you can imagine, really trying to match things up to be able to build what customers want. At the same time, we have a number of initiatives around this, right, working obviously, not only to how do we bring our inventory down, but then also working through as customers have incremental demand, we're really saying, how do we -- if we can't get things aligned that we pursue advanced deposits for customers to say, look, in this environment, we really want to make sure that we've got everyone's skin in the game to go drive inventory beyond what we might have line of sight to clearing in the quarter.
I think you see everybody industry sort of doing with this, and it's certainly an explicit focus for our team. But we kind of knew it was a multi-quarter challenge. That wasn't going to just resolve itself overnight. But we clearly believe and really reiterating the free cash flow guidance for the full year that you'll see as we get through the second half, some of that inventory coming down is going to contribute to that along with some of the other initiatives to getting that improvement.
Operator
Thank you. This concludes our question-and-answer session. I would now like to turn the call back to Paul Mansky, for any closing remarks.
Paul Mansky
Thank you, MJ and thank you, everyone, for participating in Benchmark's First Quarter 2023 earnings call. Before we go, I'd like to remind everyone that we be presenting at 2 conferences in the quarter. First would be the Sidoti Virtual Conference on the 14th of June. We will then be in New York on the 15th of June, presiding at the 2023 Cantor Tech Conference.
With that, thank you again for your support, and we look forward to speaking with you soon.
Operator
The call has now concluded. Thank you for attending today's presentation. You may now disconnect.
