PR Newswire | Jul 29, 2020 04:07PM EDT

07/29 15:07 CDT

Benchmark Reports Second Quarter 2020 Results- Quarterly revenue of $491 million- Semi-Cap revenue growth of 39% year-over-year- Medical revenue growth of 18% year-over-year- Quarterly GAAP diluted loss per share of $(0.09) and non-GAAP diluted EPS of $0.07- Operating cash flow of $23 million TEMPE, Ariz., July 29, 2020

TEMPE, Ariz., July 29, 2020 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the second quarter ended June 30, 2020.

Three Months Ended

Jun 30, Mar 31, Jun 30,

In millions, except EPS 2020 2020 2019

Sales $491 $515 $602

Net income (loss)^(2) $(3) $4 $9

Net income - non-GAAP^(1)(2) $3 $8 $14

Diluted earnings (loss) per share^(2) $(0.09) $0.10 $0.24

Diluted EPS - non-GAAP^(1)(2) $0.07 $0.22 $0.36

Operating margin^(2) (0.4)% 1.3% 2.0%

Operating margin - non-GAAP^(1)(2) 1.2% 2.3% 3.1%



^ (1)A reconciliation of GAAP and non-GAAP results is included below.

^ Results for the second quarter ended June 30, 2020 include the impact of (2)approximately $4.1 million of COVID-19 related costs.

"Thanks to the commitment and tireless work of our global Benchmark team, we continue to successfully navigate this challenging pandemic environment. Protecting our people remains our highest priority and we will continue our vigilance to keep people safe and our locations operational," said Jeff Benck, Benchmark President and CEO.

"Despite the current macro conditions, our team has focused on delivering products to meet the needs of our customers. Our diversified portfolio remains a strength at this time as we saw strong second quarter growth in our Medical and Semi-cap sectors. Moving into the third quarter, we expect sequential improvements in revenue, profit and utilization underpinned by stronger demand from our Semi-Cap and Defense customers where we have industry leading positions."

Cash Conversion Cycle

Jun 30, Mar 31, Jun 30,

2020 2020 2019

Accounts receivable days 55 56 54

Contract asset days 28 28 23

Inventory days 72 65 52

Accounts payable days (61) (61) (60)

Customer deposits (10) (7) (3)

Cash Conversion Cycle days 84 81 66

Second Quarter 2020 Industry Sector Update

Revenue and percentage of sales by industry sector (in millions) was asfollows.

Jun 30, Mar 31, Jun 30,

Higher-Value Markets 2020 2020 2019

Medical $ 135 27 % $ 118 23 % $ 114 19 %

Semi-Cap 87 18 83 16 63 10

A&D 88 18 119 23 107 18

Industrials 87 18 103 20 115 19

$ 397 81 % $ 423 82 % $ 399 66 %

Jun 30, Mar 31, Jun 30,

Traditional Markets 2020 2020 2019

Computing $ 44 9 % $ 36 7 % $ 133 22 %

Telecommunications 50 10 56 11 70 12

$ 94 19 % $ 92 18 % $ 203 34 %

Total $ 491 100 % $ 515 100 % $ 602 100 %

Overall, higher-value market revenues during the second quarter were down 6% quarter-over-quarter and flat year-over-year. Demand strength in Medical supporting COVID-19 solutions and new product ramps, as well as the continued Semi-cap recovery, were offset by weakness in commercial Aerospace and Industrial markets. Traditional market revenues were up 2% quarter-over-quarter due to stronger demand for high performance computing products and down 54% year-over-year primarily from the Company's conscious exit of a legacy computing contract in 2019.

Third Quarter 2020 Outlook

* Revenue between $490 - $530 million * Diluted GAAP earnings per share between $0.21 - $0.26 * Diluted non-GAAP earnings per share between $0.26 - $0.30 (excluding restructuring charges and other costs and amortization of intangibles) * Our guidance includes known constraints due to COVID-19 and assumes no further significant interruptions occur to our supply base, operations, or customers. Guidance also assumes no material changes to market conditions due to COVID-19.

Restructuring charges are expected to range between $0.8 million to $1.2 million in the third quarter and the amortization of intangibles is expected to be $2.4 million in the third quarter.

Second Quarter 2020 Earnings Conference CallThe Company will host a conference call to discuss the results today at 5:00 p.m. Eastern Time. The live webcast of the call and accompanying reference materials will be accessible by logging on to the Company's website at www.bench.com. A replay of the broadcast will also be available until Wednesday, August 5, 2020 on the Company's website.

About Benchmark Electronics, Inc.Benchmark provides comprehensive solutions across the entire product life cycle by 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: commercial aerospace, defense, advanced computing, next generation telecommunications, complex industrials, medical, and semiconductor capital equipment. Benchmark's global operations include facilities in seven countries and its common shares trade on the New York Stock Exchange under the symbol BHE.

Forward-Looking StatementsThis press release 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," "could", "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, the estimated financial impact of the COVID-19 pandemic, our outlook and guidance for third quarter 2020 results, the company's anticipated plans and responses to the COVID-19 pandemic, statements (express or implied) concerning future operating results or margins, the ability to generate sales and income or cash flow, and expected revenue mix, and Benchmark's business and growth strategies. Although the company believes these statements are based on and derived from reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally. These statements also depend on the duration and severity of the COVID-19 pandemic and related risks, including government and other third-party responses to the crisis and the consequences for the global economy, our business and the businesses of our suppliers and customers. Events relating to or resulting from the COVID-19 pandemic, including the possibility of customer demand fluctuations, supply chain constraints, or the ability to utilize our manufacturing facilities at sufficient levels to cover our fixed operating costs, may have resulting impacts on the company's business, financial condition, results of operations, and the company's ability (or inability) to execute on its plans to respond to the COVID-19 pandemic. 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 Part 1, Item 1A, "Risk Factors" of the company's Annual Report on Form 10-K for the year ended December 31, 2019 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 MeasuresManagement 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 "free cash flow", which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software. 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

Condensed Consolidated Statements of Income

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Sales $ 490,966 $ 601,602 $ 1,005,930 $ 1,204,422

Cost of sales 456,294 552,379 927,897 1,105,162

Gross profit 34,672 49,223 78,033 99,260

Selling, general and administrative expenses 28,516 31,507 60,091 61,514

Amortization of intangible assets 2,371 2,361 4,752 4,728

Restructuring charges and other costs 5,657 3,414 8,572 4,990

Income (loss) from operations (1,872) 11,941 4,618 28,028

Interest expense (2,351) (1,718) (4,053) (3,327)

Interest income 287 1,053 886 2,350

Other income (expense), net 32 808 (630) 2,412

Income (loss) before income taxes (3,904) 12,084 821 29,463

Income tax expense (benefit) (497) 2,637 376 6,243

Net income (loss) $ (3,407) $ 9,447 $ 445 $ 23,220

Earnings (loss) per share:

Basic $ (0.09) $ 0.25 $ 0.01 $ 0.59

Diluted $ (0.09) $ 0.24 $ 0.01 $ 0.58

Weighted-average number of shares used in calculating

earnings (loss) per share:

Basic 36,439 38,426 36,614 39,522

Diluted 36,439 38,583 36,863 39,843

For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation.

Benchmark Electronics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)

June 30, December 31,

2020 2019

Assets

Current assets:

Cash and cash equivalents $ 356,419 $ 363,956

Accounts receivable, net 302,068 324,424

Contract assets 153,641 161,061

Inventories 363,665 314,956

Other current assets 32,326 30,685

Total current assets 1,208,119 1,195,082

Property, plant and equipment, net 198,001 205,819

Operating lease right-of-use assets 74,170 76,859

Goodwill and other, net 277,745 282,114

Total assets $ 1,758,035 $ 1,759,874

Liabilities and Shareholders' Equity

Current liabilities:

Current installments of long-term debt and finance lease obligations $ 8,912 $ 8,825

Accounts payable 304,601 302,994

Accrued liabilities 151,107 147,426

Total current liabilities 464,620 459,245

Long-term debt and finance lease obligations, less current installments 164,664 138,912

Operating lease liabilities 64,768 67,898

Other long-term liabilities 79,623 78,987

Shareholders' equity 984,360 1,014,832

Total liabilities and shareholders' equity $ 1,758,035 $ 1,759,874

Benchmark Electronics, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)

Six Months Ended

June 30,

2020 2019

Cash flows from operating activities:

Net income $ 445 $ 23,220

Depreciation and amortization 24,531 24,125

Stock-based compensation expense 6,044 5,720

Accounts receivable, net 20,356 106,749

Contract assets 7,420 (15,464)

Inventories (48,668) (6,327)

Accounts payable 6,980 (49,428)

Other changes in working capital and other, net 2,810 (19,823)

Net cash provided by operations 19,918 68,772

Cash flows from investing activities:

Additions to property, plant and equipment and software (23,290) (15,495)

Other investing activities, net 2,576 49

Net cash used in investing activities (20,714) (15,446)

Cash flows from financing activities:

Share repurchases (19,329) (100,039)

Net debt activity 25,608 (2,441)

Other financing activities, net (12,802) (12,628)

Net cash used in financing activities (6,523) (115,108)

Effect of exchange rate changes (218) 293

Net decrease in cash and cash equivalents (7,537) (61,489)

Cash and cash equivalents at beginning of year 363,956 458,102

Cash and cash equivalents at end of period $ 356,419 $ 396,613

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,

2020 2020 2019 2020 2019

Income (loss) from operations (GAAP) $ (1,872) $ 6,490 $ 11,941 $ 4,618 $ 28,028

Restructuring charges and other costs 5,657 1,908 3,414 7,565 4,990

Settlement - - 773 - 773

Impairment - 1,007 - 1,007 -

Customer insolvency (recovery) (353) - (16) (353) (2,758)

Amortization of intangible assets 2,371 2,381 2,361 4,752 4,728

Non-GAAP income from operations $ 5,803 $ 11,786 $ 18,473 $ 17,589 $ 35,761

Gross Profit (GAAP) $ 34,672 $ 43,361 $ 49,223 $ 78,033 $ 99,260

Settlement - - 773 - 773

Customer insolvency (recovery) (353) - (16) (353) (1,040)

Non-GAAP gross profit $ 34,319 $ 43,361 $ 49,980 $ 77,680 $ 98,993

Net income (loss) (GAAP) $ (3,407) $ 3,852 $ 9,447 $ 445 $ 23,220

Restructuring charges and other costs 5,657 1,908 3,414 7,565 4,990

Customer insolvency (recovery) (353) - (16) (353) (2,758)

Amortization of intangible assets 2,371 2,381 2,361 4,752 4,728

Settlements - - (330) - (2,166)

Impairment - 1,007 - 1,007 -

Income tax adjustments^(1) (1,584) (1,078) (1,039) (2,623) (833)

Non-GAAP net income $ 2,684 $ 8,070 $ 13,837 $ 10,793 $ 27,181

Diluted earnings (loss) per share:

Diluted (GAAP) $ (0.09) $ 0.10 $ 0.24 $ 0.01 $ 0.58

Diluted (Non-GAAP) $ 0.07 $ 0.22 $ 0.36 $ 0.29 $ 0.68

Weighted-average number of shares used in

calculating diluted earnings (loss) per share:

Diluted (GAAP) 36,439 37,071 38,583 36,863 39,843

Diluted (Non-GAAP) 36,689 37,071 38,583 36,863 39,843

^(1) This amount represents the tax impact of the non-GAAP adjustments usingthe applicable effective tax rates.

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SOURCE Benchmark Electronics, Inc.