Benchmark Electronics Reports Second Quarter 2019 Results
TEMPE, Ariz., July 24, 2019 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the second quarter ended June 30, 2019.
Three Months Ended
Jun 30,
Mar 31,
Jun 30,
In millions, except EPS 2019 2019 2018
---
Sales $602 $603 $661
Net income $9 $14 $11
Net income - non-GAAP(1) $14 $13 $14
Diluted EPS $0.24 $0.34 $0.23
Diluted EPS - non-GAAP(1) $0.36 $0.33 $0.30
Operating margin 2.0% 2.7% 2.2%
Operating margin - non-GAAP(1) 3.1% 2.9% 2.7%
(1) A reconciliation of GAAP and non-
GAAP results is included below.
Jeff Benck, Benchmark's President and CEO stated, "We delivered solid results in the quarter reflecting both year-over-year and sequential non-GAAP operating margin growth. More importantly, non-GAAP gross margins were over 10% excluding our legacy computing contract revenue, which reflects the potential leverage in our model with an improving portfolio. We also refined our strategic priorities for the coming year and we made progress on these initiatives in the quarter."
Benck continued, "I am excited about the recent executive leadership additions of our Chief Revenue Officer, Rob Crawford and Chief Human Resources Officer, Rhonda Turner. Their broad experience and previous accomplishments position them both to meaningfully contribute to the next phase of growth for Benchmark. After visiting most of our sites, and engagement with many of our large customers since I joined in March, I am even more energized about our future opportunities and the incremental value we can bring to our customers as an innovation conduit and strategic partner."
Cash Conversion Cycle
Jun 30,
Mar 31,
Jun 30,
2019 2019 2018
Accounts receivable days 54 61 61
Contract asset days 23 23 20
Inventory days 52 52 47
Accounts payable days (61) (61) (57)
Customer deposits (3) (3) (2)
65 72 69
Second Quarter 2019 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.
Jun 30, Mar 31, Jun 30,
Higher-Value Markets 2019 2019 2018
---
Industrials $
115 19 $
116 20 $
118 18
% % %
A&D 107 18 104 17 100 15
Medical 114 19 103 17 97 15
Semi-Cap 63 10 66 11 106 16
$
399 66 $
389 65 $
421 64
% % %
Jun 30, Mar 31, Jun 30,
Traditional Markets 2019 2019 2018
---
Computing $
133 22 $
124 21 $
161 24
% % %
Telecommunications 70 12 90 14 79 12
$
203 34 $
214 35 $
240 36
% % %
Total $
602 100 $
603 100 $
661 100
% % %
Overall, higher-value markets were down 5% year-over-year from softer demand in Semi-Cap, despite year-over-year growth in Medical and A&D. Traditional market revenues were down 15% year-over-year primarily from legacy Computing revenues.
Second Quarter 2019 Bookings Update
-- New program bookings of approximately $130 million of projected
annualized revenue
-- 25 engineering awards supporting early engagement opportunities
-- 28 manufacturing wins across all market sectors
Third Quarter 2019 Outlook
-- Revenue between $525 - $555 million
-- Diluted GAAP earnings per share between $0.21 - $0.24
-- Diluted non-GAAP earnings per share between $0.33 - $0.39 (excluding
restructuring charges and other costs and amortization of intangibles)
Third quarter guidance reflects the substantial completion of a long standing legacy computing contract in the second quarter and continued muted recovery in the semi-cap sector. Additionally, we have elected to close manufacturing operations at our San Jose, California and Guaymas, Mexico sites with customer transitions expected into other locations in the Benchmark network by mid 2020. Restructuring charges associated with these consolidations are expected to range between $1 million to $2 million in the third quarter.
Second 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 better assess operating performance 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 Six Months Ended
Jun, 30
Mar 31,
Jun, 30
Jun, 30
2019 2019 2018 2019 2018
Income from operations (GAAP) $
11,941 $
16,087 $
14,349 $
28,028 $
32,316
Restructuring charges and other costs 3,414 1,576 1,758 4,990 3,993
Settlement 773 773
Customer recovery (16) (2,742) (330) (2,758) (671)
Amortization of intangible assets 2,361 2,367 2,367 4,728 4,733
Non-GAAP income from operations $
18,473 $
17,288 $
18,144 $
35,761 $
40,371
Gross Profit (GAAP) $
52,998 $
53,800 $
54,299 $
106,798 $
112,617
Settlement 773 773
Customer recovery (16) (1,024) (330) (1,040) (671)
Non-GAAP gross profit $
53,755 $
52,776 $
53,969 $
106,531 $
111,946
Net income (loss) (GAAP) $
9,447 $
13,773 $
10,943 $
23,220 $
(12,698)
Restructuring charges and other costs 3,414 1,576 1,758 4,990 3,993
Customer recovery (16) (2,742) (330) (2,758) (671)
Amortization of intangible assets 2,361 2,367 2,367 4,728 4,733
Settlements (330) (1,836) (2,166)
Income tax adjustments(1) (1,039) 206 (811) (833) (1,629)
Tax Cuts and Jobs Act(2) 423 40,537
Non-GAAP net income $
13,837 $
13,344 $
14,350 $
27,181 $
34,265
Diluted earnings (loss) per share:
Diluted (GAAP) $
0.24 $
0.34 $
0.23 $
0.58 $
(0.26)
Diluted (Non-GAAP) $
0.36 $
0.33 $
0.30 $
0.68 $
0.71
Weighted-average number of shares used in calculating diluted earnings (loss) per share:
Diluted (GAAP) 38,583 40,853 47,631 39,843 47,981
Diluted (Non-GAAP) 38,583 40,853 47,631 39,843 48,314
(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 Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
Sales $
601,602 $
660,591 $
1,204,422 $
1,268,727
Cost of sales 548,604 606,292 1,097,624 1,156,110
Gross profit 52,998 54,299 106,798 112,617
Selling, general and administrative expenses 35,282 35,825 69,052 71,575
Amortization of intangible assets 2,361 2,367 4,728 4,733
Restructuring charges and other costs 3,414 1,758 4,990 3,993
Income from operations 11,941 14,349 28,028 32,316
Interest expense (1,718) (2,293) (3,327) (4,721)
Interest income 1,053 1,645 2,350 3,578
Other income (expense), net 808 (355) 2,412 (312)
Income before income taxes 12,084 13,346 29,463 30,861
Income tax expense 2,637 2,403 6,243 43,559
Net income (loss) $
9,447 $
10,943 $
23,220 $
(12,698)
Earnings (loss) per share:
Basic $
0.25 $
0.23 $
0.59 $
(0.26)
Diluted $
0.24 $
0.23 $
0.58 $
(0.26)
Weighted-average number of shares used in calculating
earnings (loss) per share:
Basic 38,426 47,451 39,522 47,981
Diluted 38,583 47,631 39,843 47,981
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
June 30,
December 31,
2019 2018
Assets
Current assets:
Cash and cash equivalents $
396,613 $
458,102
Accounts receivable, net 362,881 468,161
Contract assets 155,546 140,082
Inventories 316,237 309,975
Other current assets 26,533 27,230
Total current assets 1,257,810 1,403,550
Property, plant and equipment, net 202,665 210,954
Operating lease right-of-use assets 83,985
Goodwill and other, net 283,418 285,279
Total assets $
1,827,878 $
1,899,783
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and finance lease
obligations $
8,744 $
6,793
Accounts payable 372,106 422,053
Accrued liabilities 106,810 108,313
Total current liabilities 487,660 537,159
Long-term debt and finance lease obligations, less current
installments 143,115 147,277
Operating lease liabilities 73,878
Other long-term liabilities 78,175 83,122
Shareholders' equity 1,045,050 1,132,225
Total liabilities and shareholders' equity $
1,827,878 $
1,899,783
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Six Months Ended
June 30,
2019 2018
Cash flows from operating activities:
Net income (loss) $
23,220 $
(12,698)
Depreciation and amortization 24,125 25,083
Stock-based compensation expense 5,720 5,405
Accounts receivable, net 106,749 (8,980)
Contract assets (15,464) (1,735)
Inventories (6,327) (52,063)
Accounts payable (49,428) 23,103
Other changes in working capital and other, net (19,823) 5,703
Net cash provided by (used in) operations 68,772 (16,182)
Cash flows from investing activities:
Additions to property, plant and equipment and
software (15,495) (38,363)
Other investing activities, net 49 (2,201)
Net cash used in investing activities (15,446) (40,564)
Cash flows from financing activities:
Share repurchases (100,039) (65,868)
Equity forward contract related to accelerated share
repurchase (10,000)
Net debt activity (2,441) (9,121)
Other financing activities, net (12,628) (4,530)
Net cash used in financing activities (115,108) (89,519)
Effect of exchange rate changes 293 (642)
Net decrease in cash and cash equivalents (61,489) (146,907)
Cash and cash equivalents at beginning of year 458,102 742,546
Cash and cash equivalents at end of period $
396,613 $
595,639
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SOURCE Benchmark Electronics, Inc.
