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.