Benchmark Electronics Reports First Quarter 2018 Results
Benchmark Electronics Reports First Quarter 2018 Results
- Quarterly revenue of $608 million
- Quarterly operating margin of 3.0% (3.7% non-GAAP)
- Quarterly loss per share of $0.49 and non-GAAP EPS of $0.41
SCOTTSDALE, Ariz., April 25, 2018 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the first quarter ended March 31, 2018.
Three Months Ended
------------------
Mar 31, Dec 31, Mar 31,
In millions, except EPS 2018 2017(1) 2017(1)
----------------------- ---- ------ ------
Net sales $608 $666 $558
Net income (loss) (2) $(24) $(76) $9
Net income - non-GAAP $20 $25 $16
Diluted EPS (2) ($0.49) ($1.54) $0.17
Diluted EPS - non-GAAP $0.41 $0.49 $0.32
Operating margin 3.0% 3.3% 2.0%
Operating margin - non-GAAP 3.7% 4.1% 3.6%
(1) Prior period amounts have been
adjusted to reflect the
adoption of ASC 606 on a
retrospective basis.
(2) Includes $40 million ($0.82 per
share) for the three months
ended March 31, 2018 of foreign
withholding taxes and state tax
expense of repatriation of
foreign cash to US parent
company and $98 million ($1.95
per share) for the three months
ended December 31, 2017 of tax
expense related to the effects
of the U.S. Tax Cuts and Jobs
Act (U.S. Tax Reform).
On January 1, 2018, we adopted new accounting guidance, FASB ASC Topic 606 "Revenue from Contracts with Customers" (ASC 606), relating to revenue recognition. We adopted ASC 606 using the full retrospective transition method. Accordingly, we have adjusted prior period information to be consistent with ASC 606. The adoption of ASC 606 did not materially impact our overall financial position.
A reconciliation of GAAP and non-GAAP results is included below.
"Overall, performance in the first quarter was solid. Revenues were up 9% year-over-year and gross margins improved 40 bps to 9.5%. Non?GAAP EPS of $0.41 exceeded the high end of our guidance by $0.03; cash cycle days ended at 68 days, within our 73 to 68 day target range; and we achieved 11.2% ROIC, a 90 bps quarter?over?quarter improvement," said Paul Tufano, Benchmark's President and CEO.
"We continue to see good progress in bookings and are encouraged by the quality of our new customer engagements. For the second quarter, the convergence of timing dynamics related to mix shifts primarily in medical, new customer ramp headwinds, and planned investments in engineering and solutions will impact our reported financials. Consequently, our guidance reflects these factors with sequential revenue in the range of $590 million to $630 million and non-GAAP EPS between $0.26 and $0.34," continued Tufano. "We are confident in our ability to address these challenges and remain positive about the second half and our long-term model."
Cash Conversion Cycle
Mar 31, Dec 31, Mar 31,
2018 2017 2017
---- ---- ----
(as adjusted)
------------
Accounts receivable days 59 59 62
Contract asset days 22 20 24
Inventory days 50 40 48
Accounts payable days (60) (54) (61)
Customer deposits (3) (3) (4)
--- --- ---
68 62 69
=== === ===
First Quarter 2018 Industry Sector Update
Revenue by industry sector (in millions) was as follows.
Mar 31, Dec 31, Mar 31,
Higher-Value Markets 2018 2017 (as adjusted) 2017 (as adjusted)
-------------------- ---- ----------------- -----------------
Industrials $125 20% $129 19% $117 21%
A&D 98 16 95 15 100 18
Medical 97 16 100 15 85 15
Test & Instrumentation 102 17 93 14 76 14
--- --- --- --- --- ---
$422 69% $417 63% $378 68%
---- --- ---- --- ---- ---
Mar 31, Dec 31, Mar 31,
Traditional Markets 2018 2017 (as adjusted) 2017 (as adjusted)
------------------- ---- ----------------- -----------------
Computing $103 17% $172 26% $100 18%
Telecommunications 83 14 77 11 80 14
--- --- --- --- --- ---
$186 31% $249 37% $180 32%
---- --- ---- --- ---- ---
Total $608 100% $666 100% $558 100%
First quarter revenues from higher-value markets were in line with expectations, including strong demand in Test & Instrumentation from semi-capital equipment customers. Higher-value markets were up 12% year-over-year from Test & Instrumentation and Medical markets.
Traditional market revenues in Computing and Telecommunications were down sequentially from seasonality in Computing demand and up 3% year-over-year.
First Quarter 2018 Bookings Update
-- New program bookings of $171 million at the midpoint.
-- 17 engineering awards supporting early engagement opportunities.
-- 32 manufacturing wins across all market sectors.
The Company projects that new program bookings for the first quarter will result in annualized revenue of $141 to $201 million when fully launched in the next 12-24 months. The new program bookings align with Benchmark's strategic focus.
Second Quarter 2018 Outlook
-- Revenue between $590 - $630 million.
-- Diluted GAAP earnings per share between $0.21 - $0.29.
-- Diluted non-GAAP earnings per share between $0.26 - $0.34 (excluding any
additional impact related to U.S. Tax Reform, restructuring charges and
amortization of intangibles).
First Quarter 2018 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 worldwide engineering services, integrated technology solutions and manufacturing services (both electronics manufacturing services (EMS) and precision machining services) to original equipment manufacturers in the following industries: industrial controls, aerospace and defense, telecommunications, computers and related products for business enterprises, medical devices, and test and instrumentation. Benchmark's global operations include facilities in eight countries, and its 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 2018 results; 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, 2017 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.
All forward-looking statements included in this release are based upon information available to Benchmark as of the date hereof, and the Company 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 better assess operating performance and help investors compare results with our previous guidance. This document also references "ROIC", which the Company defines as operating income for the last twelve months excluding restructuring charges and other costs, amortization of intangible assets and stock-based compensation, adjusted for taxes, divided by the quarterly average of invested capital. Average invested capital is defined as shareholders' equity plus long-term debt minus cash as of the last five quarterly balance sheets. 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
------------------
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
(as adjusted)
------------
Income from operations (GAAP) $17,967 $21,910 $10,889
Restructuring charges and other costs 2,235 3,062 1,511
Customer insolvency (recovery) (341) (239) 5,120
Amortization of intangible assets 2,366 2,367 2,481
----- ----- -----
Non-GAAP income from operations $22,227 $27,100 $20,001
Net income (loss) (GAAP) $(23,641) $(76,361) $8,555
Restructuring charges and other costs 2,235 3,062 1,511
Customer insolvency (recovery) (341) (239) 5,120
Amortization of intangible assets 2,366 2,367 2,481
Income tax adjustments(1) (818) (1,793) (1,580)
Tax Cuts and Jobs Act(2) 40,114 97,633 -
------ ------ ---
Non-GAAP net income $19,915 $24,669 $16,087
Diluted earnings (loss) per share:
Diluted (GAAP) $(0.49) $(1.54) $0.17
Diluted (Non-GAAP) $0.41 $0.49 $0.32
Weighted-average number of shares used
in calculating earnings (loss) per share:
Diluted (GAAP)(3) 48,517 49,576 50,080
Diluted (Non-GAAP) 48,837 49,998 50,080
(1) This amount represents the tax
impact of the non-GAAP
adjustments using the applicable
effective tax rates.
(2) This amount represents the
estimated impact of the U.S. Tax
Reform and the impact of
repatriating foreign earnings from
our foreign jurisdictions to the
U.S. For the three months ended
March 31, 2018, this includes
estimated foreign withholding
taxes applicable to historical
earnings prior to December 31,
2017 and for the applicable state
tax impact of foreign cash
distributions into the U.S. For
the three months ended December
31, 2017, this includes the impact
of a one-time mandatory tax on
the deemed repatriation of
undistributed foreign earnings and
the re-measurement of U.S.
deferred tax assets and
liabilities for the decrease in
the U.S. federal tax rate from 35%
to 21%.
(3) Potentially diluted securities
totaling 0.3 million and 0.4
million for the three months ended
March 31, 2018 and December 31,
2017, respectively, were not
included in the computation of
GAAP diluted loss per share
because their effect would have
decreased the loss per share.
Benchmark Electronics, Inc. and Subsidiaries
Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended
March 31,
2018 2017
---- ----
(as adjusted)
Sales $608,136 $557,903
Cost of sales 549,818 510,371
------- -------
Gross profit 58,318 47,532
Selling, general and administrative expenses 35,750 32,651
Amortization of intangible assets 2,366 2,481
Restructuring charges and other costs 2,235 1,511
----- -----
Income from operations 17,967 10,889
Interest expense (2,428) (2,225)
Interest income 1,933 1,074
Other income (expense), net 43 (81)
--- ---
Income before income taxes 17,515 9,657
Income tax expense 41,156 1,102
------ -----
Net income (loss) $(23,641) $8,555
Earnings (loss) per share:
Basic $(0.49) $0.17
Diluted $(0.49) $0.17
Weighted-average number of shares used in calculating
earnings (loss) per share:
Basic 48,517 49,511
Diluted 48,517 50,080
For the three months ended March 31, 2017, the adoption of ASC 606 reduced revenue by $8.6 million, operating income by $1.5 million, net income by $1.1 million and diluted earnings per share by $0.02.
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
March 31, December 31,
2018 2017
---- ----
(as adjusted)
Assets
Current assets:
Cash and cash equivalents $676,327 $742,546
Accounts receivable, net 403,767 436,560
Contract assets 147,623 146,496
Inventories 305,980 268,917
Other current assets 31,795 36,138
------ ------
Total current assets 1,565,492 1,630,657
--------- ---------
Property, plant and equipment, net 200,422 186,473
Goodwill and other, net 292,092 292,174
Total assets $2,058,006 $2,109,304
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and capital
lease obligations $19,746 $18,274
Accounts payable 368,625 362,701
Accrued liabilities 96,460 97,342
------ ------
Total current liabilities 484,831 478,317
Long-term debt and capital lease obligations, less current
installments 187,601 193,406
Other long-term liabilities 138,243 98,443
Shareholders' equity 1,247,331 1,339,138
Total liabilities and shareholders' equity $2,058,006 $2,109,304
========== ==========
As of December 31, 2017, the adoption of ASC 606 increased current assets by $12.0 million, increased total liabilities by $1.7 million and increased shareholder's equity by $10.3 million.
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Three Months Ended
March 31,
2018 2017
---- ----
(as adjusted)
Cash flows from operating activities:
Net income (loss) $(23,641) $8,555
Depreciation and amortization 12,384 12,273
Stock-based compensation expense 2,870 2,160
Accounts receivable, net 33,419 59,685
Contract assets (1,127) 6,561
Inventories (38,210) (29,582)
Accounts payable 2,337 16,225
Other changes in working capital and other, net 36,498 2,028
Net cash provided by operations 24,530 77,905
------ ------
Cash flows from investing activities:
Additions to property, plant and equipment and software (20,877) (7,578)
Other investing activities, net (122) 109
Net cash used in investing activities (20,999) (7,469)
------- ------
Cash flows from financing activities:
Share repurchases (58,381) (1,000)
Equity forward contract related to accelerate share
repurchase (10,000) -
Net debt activity (4,551) (3,082)
Other financing activities, net 2,316 4,349
Net cash provide by (used in) financing
activities (70,616) 267
------- ---
Effect of exchange rate changes 866 341
--- ---
Net increase (decrease) in cash and cash equivalents (66,219) 71,044
Cash and cash equivalents at beginning of year 742,546 681,433
Cash and cash equivalents at end of period $676,327 $752,477
CONTACT: Lisa K. Weeks, VP of Strategy & Investor Relations, 623-300-7052 or lisa.weeks@bench.com
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SOURCE Benchmark Electronics, Inc.
