Benchmark Electronics Reports Third Quarter 2019 Results
TEMPE, Ariz., Oct. 24, 2019 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2019.
Three Months Ended | |||||||
Sep 30, | Jun 30, | Sep 30, | |||||
In millions, except EPS | 2019 | 2019 | 2018 | ||||
Sales | $555 | $602 | $641 | ||||
Net income | $7 | $9 | $8 | ||||
Net income – non-GAAP(1) | $14 | $14 | $15 | ||||
Diluted EPS | $0.19 | $0.24 | $0.17 | ||||
Diluted EPS – non-GAAP(1) | $0.36 | $0.36 | $0.33 | ||||
Operating margin | 1.8% | 2.0% | 1.7% | ||||
Operating margin – non-GAAP(1) | 3.2% | 3.1% | 2.9% | ||||
(1) | A reconciliation of GAAP and non-GAAP results is included below. |
Jeff Benck, Benchmark's President and CEO stated, "We are pleased with the solid execution of our team in the third quarter. Revenues were up year-over-year in our Medical and Aerospace & Defense (A&D) markets with non-GAAP gross margins improving 60 bps sequentially to 9.5% and operating margins up 10 bps sequentially to 3.2% respectively."
"We are laying the groundwork for an even stronger Benchmark with the progress our engaged team has made on our strategic priorities which are focused on: improving our go-to-market approach, driving continued operational efficiencies, centralizing our G&A organization, and accelerating our solutions in the market."
Cash Conversion Cycle
Sep 30, | Jun 30, | Sep 30, | ||||||
2019 | 2019 | 2018 | ||||||
Accounts receivable days | 56 | 54 | 64 | |||||
Contract asset days | 26 | 23 | 22 | |||||
Inventory days | 57 | 52 | 49 | |||||
Accounts payable days | (53) | (61) | (57) | |||||
Customer deposits | (7) | (3) | (4) | |||||
Cash Conversion Cycle days | 79 | 65 | 74 | |||||
Third Quarter 2019 Industry Sector UpdateRevenue and percentage of sales by industry sector (in millions) was as follows.
Sep 30, | Jun 30, | Sep 30, | ||||||||||||||
Higher-Value Markets | 2019 | 2019 | 2018 | |||||||||||||
Industrials | $ | 115 | 21 | % | $ | 115 | 19 | % | $ | 128 | 20 | % | ||||
A&D | 115 | 21 | 107 | 18 | 105 | 16 | ||||||||||
Medical | 128 | 23 | 114 | 19 | 96 | 15 | ||||||||||
Semi-Cap | 68 | 12 | 63 | 10 | 77 | 12 | ||||||||||
$ | 426 | 77 | % | $ | 399 | 66 | % | $ | 406 | 63 | % | |||||
Sep 30, | Jun 30, | Sep 30, | ||||||||||||||
Traditional Markets | 2019 | 2019 | 2018 | |||||||||||||
Computing | $ | 59 | 11 | % | $ | 133 | 22 | % | $ | 146 | 23 | % | ||||
Telecommunications | 70 | 12 | 70 | 12 | 89 | 14 | ||||||||||
$ | 129 | 23 | % | $ | 203 | 34 | % | $ | 235 | 37 | % | |||||
Total | $ | 555 | 100 | % | $ | 602 | 100 | % | $ | 641 | 100 | % | ||||
Overall, higher‐value markets were up 5% year‐over‐year due to growth in Medical and A&D, despite softer demand in Semi-Cap. Traditional market revenues were down 45% year-over-year primarily from legacy Computing revenues.
Fourth Quarter 2019 Outlook
- Revenue between $520 - $570 million
- Diluted GAAP earnings per share between $0.21 - $0.29
- Diluted non-GAAP earnings per share between $0.34 - $0.42 (excluding restructuring charges and other costs and amortization of intangibles)
Restructuring charges are expected to range between $3.5 million to $4.5 million in the fourth quarter.
Third Quarter 2019 Results Conference Call DetailsA 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 StatementsThis 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 MeasuresThis 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 provide additional insight into operating results and underlying trends 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 | Nine Months Ended | ||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | ||||||||||
2019 | 2019 | 2018 | 2019 | 2018 | |||||||||
Income from operations (GAAP) | $ | 9,798 | $ | 11,941 | $ | 10,957 | $ | 37,826 | $ | 43,273 | |||
Restructuring charges and other costs | 5,843 | 3,414 | 1,845 | 10,833 | 5,838 | ||||||||
Settlement | - | 773 | - | 773 | - | ||||||||
Customer insolvency (recovery) | - | (16) | 3,295 | (2,758) | 2,624 | ||||||||
Amortization of intangible assets | 2,367 | 2,361 | 2,368 | 7,095 | 7,101 | ||||||||
Non-GAAP income from operations | $ | 18,008 | $ | 18,473 | $ | 18,465 | $ | 53,769 | $ | 58,836 | |||
Gross Profit (GAAP) | $ | 52,883 | $ | 52,998 | $ | 52,777 | $ | 159,681 | $ | 165,394 | |||
Settlement | - | 773 | - | 773 | - | ||||||||
Customer insolvency (recovery) | - | (16) | 1,581 | (1,040) | 910 | ||||||||
Non-GAAP gross profit | $ | 52,883 | $ | 53,755 | $ | 54,358 | $ | 159,414 | $ | 166,304 | |||
Net income (loss) (GAAP) | $ | 7,136 | $ | 9,447 | $ | 7,799 | $ | 30,356 | $ | (4,899) | |||
Restructuring charges and other costs | 6,168 | 3,414 | 1,845 | 11,158 | 5,838 | ||||||||
Customer insolvency (recovery) | - | (16) | 3,295 | (2,758) | 2,624 | ||||||||
Amortization of intangible assets | 2,367 | 2,361 | 2,368 | 7,095 | 7,101 | ||||||||
Settlements | (83) | (330) | - | (2,248) | - | ||||||||
Refinancing of credit facilities | - | - | 1,982 | - | 1,982 | ||||||||
Income tax adjustments(1) | (1,879) | (1,039) | (1,914) | (2,711) | (3,542) | ||||||||
Tax Cuts and Jobs Act(2) | - | - | - | - | 40,537 | ||||||||
Non-GAAP net income | $ | 13,709 | $ | 13,837 | $ | 15,375 | $ | 40,892 | $ | 49,641 | |||
Diluted earnings (loss) per share: | |||||||||||||
Diluted (GAAP) | $ | 0.19 | $ | 0.24 | $ | 0.17 | $ | 0.77 | $ | (0.10) | |||
Diluted (Non-GAAP) | $ | 0.36 | $ | 0.36 | $ | 0.33 | $ | 1.04 | $ | 1.04 | |||
Weighted-average number of shares used in calculating diluted earnings (loss) per share: | |||||||||||||
Diluted (GAAP) | 37,645 | 38,583 | 46,455 | 39,184 | 47,415 | ||||||||
Diluted (Non-GAAP) | 37,645 | 38,583 | 46,455 | 39,184 | 47,754 | ||||||||
(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 | Nine Months Ended | |||||||||
September 30, | September 30, | |||||||||
2019 | 2018 | 2019 | 2018 | |||||||
Sales | $ | 555,229 | $ | 640,688 | $ | 1,759,651 | $ | 1,909,415 | ||
Cost of sales | 502,346 | 587,911 | 1,599,970 | 1,744,021 | ||||||
Gross profit | 52,883 | 52,777 | 159,681 | 165,394 | ||||||
Selling, general and administrative expenses | 34,875 | 37,607 | 103,927 | 109,182 | ||||||
Amortization of intangible assets | 2,367 | 2,368 | 7,095 | 7,101 | ||||||
Restructuring charges and other costs | 5,843 | 1,845 | 10,833 | 5,838 | ||||||
Income from operations | 9,798 | 10,957 | 37,826 | 43,273 | ||||||
Interest expense | (1,687) | (3,822) | (5,014) | (8,543) | ||||||
Interest income | 734 | 1,619 | 3,084 | 5,197 | ||||||
Other income (expense), net | (136) | 1,139 | 2,276 | 827 | ||||||
Income before income taxes | 8,709 | 9,893 | 38,172 | 40,754 | ||||||
Income tax expense | 1,573 | 2,094 | 7,816 | 45,653 | ||||||
Net income (loss) | $ | 7,136 | $ | 7,799 | $ | 30,356 | $ | (4,899) | ||
Earnings (loss) per share: | ||||||||||
Basic | $ | 0.19 | $ | 0.17 | $ | 0.78 | $ | (0.10) | ||
Diluted | $ | 0.19 | $ | 0.17 | $ | 0.77 | $ | (0.10) | ||
Weighted-average number of shares used in calculating earnings (loss) per share: | ||||||||||
Basic | 37,419 | 46,301 | 38,813 | 47,415 | ||||||
Diluted | 37,645 | 46,455 | 39,184 | 47,415 | ||||||
Benchmark Electronics, Inc. and Subsidiaries | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(UNAUDITED) | |||||||||
(in thousands) | |||||||||
September 30, | December 31, | ||||||||
2019 | 2018 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 348,042 | $ | 458,102 | |||||
Accounts receivable, net | 348,099 | 468,161 | |||||||
Contract assets | 161,068 | 140,082 | |||||||
Inventories | 315,835 | 309,975 | |||||||
Other current assets | 25,071 | 27,230 | |||||||
Total current assets | 1,198,115 | 1,403,550 | |||||||
Property, plant and equipment, net | 199,256 | 210,954 | |||||||
Operating lease right-of-use assets | 79,854 | - | |||||||
Goodwill and other, net | 281,521 | 285,279 | |||||||
Total assets | $ | 1,758,746 | $ | 1,899,783 | |||||
Liabilities and Shareholders' Equity | |||||||||
Current liabilities: | |||||||||
Current installments of long-term debt and finance lease obligations | $ | 8,784 | $ | 6,793 | |||||
Accounts payable | 295,693 | 422,053 | |||||||
Accrued liabilities | 136,760 | 108,313 | |||||||
Total current liabilities | 441,237 | 537,159 | |||||||
Long-term debt and finance lease obligations, less current installments | 141,017 | 147,277 | |||||||
Operating lease liabilities | 70,167 | - | |||||||
Other long-term liabilities | 77,553 | 83,122 | |||||||
Shareholders' equity | 1,028,772 | 1,132,225 | |||||||
Total liabilities and shareholders' equity | $ | 1,758,746 | $ | 1,899,783 | |||||
Benchmark Electronics, Inc. and Subsidiaries | |||||||||
Condensed Consolidated Statement of Cash Flows | |||||||||
(in thousands) | |||||||||
(UNAUDITED) | |||||||||
Nine Months Ended | |||||||||
September 30, | |||||||||
2019 | 2018 | ||||||||
Cash flows from operating activities: | |||||||||
Net income (loss) | $ | 30,356 | $ | (4,899) | |||||
Depreciation and amortization | 36,389 | 39,643 | |||||||
Stock-based compensation expense | 8,461 | 8,229 | |||||||
Accounts receivable, net | 121,171 | (20,019) | |||||||
Contract assets | (20,986) | (9,402) | |||||||
Inventories | (6,557) | (54,342) | |||||||
Accounts payable | (122,156) | 12,620 | |||||||
Other changes in working capital and other, net | 10,636 | 10,877 | |||||||
Net cash provided by (used in) operations | 57,314 | (17,293) | |||||||
Cash flows from investing activities: | |||||||||
Additions to property, plant and equipment and software | (25,942) | (52,933) | |||||||
Other investing activities, net | 252 | (2,102) | |||||||
Net cash used in investing activities | (25,690) | (55,035) | |||||||
Cash flows from financing activities: | |||||||||
Share repurchases | (118,350) | (122,053) | |||||||
Net debt activity | (4,614) | (57,758) | |||||||
Other financing activities, net | (17,699) | (13,897) | |||||||
Net cash used in financing activities | (140,663) | (193,708) | |||||||
Effect of exchange rate changes | (1,021) | (797) | |||||||
Net decrease in cash and cash equivalents | (110,060) | (266,833) | |||||||
Cash and cash equivalents at beginning of year | 458,102 | 742,546 | |||||||
Cash and cash equivalents at end of period | $ | 348,042 | $ | 475,713 | |||||
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SOURCE Benchmark Electronics, Inc.