Benchmark Electronics Reports Third Quarter 2018 Results

Benchmark Electronics Reports Third Quarter 2018 Results

- Quarterly revenue of $641 million

- Quarterly EPS of $0.17 ($0.33 non-GAAP)

PR Newswire

SCOTTSDALE, Ariz., Oct. 30, 2018 /PRNewswire/ -- Benchmark Electronics, Inc. BHE today announced financial results for the third quarter ended September 30, 2018.





Three Months Ended





Sep 30,





Jun 30,



Sep 30,

In millions, except EPS

2018





2018



2017(1)

Net sales

$641





$661



$611

Net income

$8





$11



$18

Net income – non-GAAP(2)

$15





$14



$20

Diluted EPS

$0.17





$0.23



$0.35

Diluted EPS – non-GAAP(2)

$0.33





$0.30



$0.40

















Operating margin

1.7%





2.2%



3.4%

Operating margin – non-GAAP(2)

2.9%





2.7%



4.0%



(1) 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.



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

Benchmark Electronics (PRNewsfoto/Benchmark Electronics, Inc.)

"Third quarter revenue and earnings were in line with our expectations", said Paul Tufano, Benchmark's President and CEO.  "Bookings remained strong at $175 million; revenue was up 5% year-over-year; and gross margins, on a non-GAAP basis, improved 30 bps quarter-over-quarter to 8.5%, but remain muted from continuing softness in semi-cap.  Cash cycle days were 74 and slightly above our target range due to the linearity of shipments; we expect our Q4 cash cycle days to be within our target range.  As a result, we expect full year operating cash flow to be positive in 2018."

"As of this earnings release, we have spent $152 million on share repurchases year-to-date and are expecting to exceed $200 million in share repurchases exiting this year, which well exceeds our $100 million target for 2018," said Tufano.  "Additionally, the board has authorized an additional $100 million for share repurchases above our existing program."

"Our fourth quarter guidance reflects strength in our core business and sustained operational improvement, but remains tempered by softness in the semi‐cap market, which we expect to persist through the first half of 2019.  Despite an expected 10% year-over-year reduction in the Test & Instrumentation sector, we expect annual revenue growth in 2019 of 3-5%.  For 2019, we also expect gross and operating margin expansion from not only operational execution and the progressive growth of our new RF and high-speed design center, but also the reduction of our cost and expense structure, including SG&A and the evaluation of marginal or dilutive contracts.  We are committed to the achievement of our business model and are encouraged by the opportunities to further expand customer engagements," said Tufano.

Cash Conversion Cycle





Sep 30,







Jun 30,







Sep 30,







2018







2018







2017



















(as adjusted)

Accounts receivable days



64







61







61



Contract asset days



22







20







24



Inventory days



49







47







46



Accounts payable days



(57)







(57)







(55)



Customer deposits



(4)







(2)







(4)







74







69







72



Third Quarter 2018 Industry Sector Update

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







Sep 30,







Jun 30,







Sep 30,





Higher-Value Markets



2018







2018





2017 (as adjusted)

Industrials

$

128



20

%



$

118



18

%



$

126



21

%

A&D



105



16







100



15







96



16



Medical



96



15







97



15







102



17



Test & Instrumentation



77



12







106



16







89



14







$

406



63

%



$

421



64

%



$

413



68

%



















































































Sep 30,







Jun 30,







Sep 30,





Traditional Markets



2018







2018





2017 (as adjusted)

Computing

$

146



23

%



$

161



24

%



$

126



20

%

Telecommunications



89



14







79



12







72



12







$

235



37

%



$

240



36

%



$

198



32

%



Total

$

641



100

%



$

661



100

%



$

611



100

%

Higher‐value markets were down 2% year‐over‐year from softer demand in Test & Instrumentation (primarily semi-capital equipment) and Medical program transitions.  Traditional market revenues were up 19% year-over-year primarily from strong storage demand in Computing and new program ramps in Telecommunications.

Third Quarter 2018 Bookings Update

  • New program bookings of $175 million at the midpoint of projected annualized revenue.
  • 27 engineering awards supporting early engagement opportunities.
  • 31 manufacturing wins across all market sectors.

The Company projects that new program bookings for the third quarter will result in annualized revenue of $162 to $182 million when fully launched in the next 12-24 months, medical up to 36 months.

Additional Share Repurchase Authorization and Capital Allocation Update

On March 7, 2018, the board expanded an existing share repurchase program by $250 million.  The Company has repurchased $122 million of common stock shares year-to-date through September 30, 2018 and $152 million through October 29, 2018.  On October 26, 2018, the Board authorized an additional $100 million and the total remaining authorization outstanding is $262 million.

Fourth Quarter 2018 Outlook

  • Revenue between $610 - $650 million.
  • Diluted GAAP earnings per share between $0.21 - $0.32.
  • Diluted non-GAAP earnings per share between $0.32 - $0.40 (excluding any additional impact related to U.S. Tax Reform, restructuring charges and other costs and amortization of intangibles).

Third 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 is a worldwide provider of innovative product design, engineering services, technology solutions and advanced manufacturing services.  From initial product concept to volume production, including direct order fulfillment and aftermarket services, Benchmark has been providing integrated services and solutions to original equipment manufacturers since 1979.  Today, Benchmark proudly serves the following industries: aerospace and defense, medical technologies, complex industrials, test and instrumentation, next-generation telecommunications and high-end computing.  Benchmark's global operations network includes facilities in eight 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 2018 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, 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.

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





Nine Months Ended









Sep 30,



Jun 30,



Sep 30,





Sep 30,









2018



2018



2017





2018



2017















(as adjusted)





(as adjusted)

Income from operations (GAAP)

$

10,957

$

14,349

$

20,903



$

43,273

$

54,916



Restructuring charges and other costs



1,845



1,758



2,511





5,838



5,566



Customer insolvency (recovery)



3,295



(330)



(1,514)





2,624



2,896



Amortization of intangible assets



2,368



2,367



2,736





7,101



7,698



Non-GAAP income from operations

$

18,465

$

18,144

$

24,636



$

58,836

$

71,076































Gross Profit (GAAP)

$

52,777

$

54,299

$

58,243



$

165,394

$

165,259



Customer insolvency (recovery)



1,581



(330)



(1,514)





910



1,199



Non-GAAP gross profit

$

54,358

$

53,969

$

56,729



$

166,304

$

166,458































Net income (loss) (GAAP)

$

7,799

$

10,943

$

17,831



$

(4,899)

$

44,460



Restructuring charges and other costs



1,845



1,758



2,511





5,838



5,566



Customer insolvency (recovery)



3,295



(330)



(1,514)





2,624



2,896



Amortization of intangible assets



2,368



2,367



2,736





7,101



7,698



Refinancing of credit facilities



1,982



-



-





1,982



-



Income tax adjustments(1)



(1,914)



(811)



(1,674)





(3,542)



(4,519)



Tax Cuts and Jobs Act(2)



-



423



-





40,537



-



Non-GAAP net income

$

15,375

$

14,350

$

19,890



$

49,641

$

56,101































Diluted Earnings (loss) per share:



























Diluted (GAAP)

$

0.17

$

0.23

$

0.35



$

(0.10)

$

0.88





Diluted (Non-GAAP)

$

0.33

$

0.30

$

0.40



$

1.04

$

1.12































Weighted-average number of shares used in























   calculating diluted earnings (loss) per share:

























Diluted (GAAP)(3)



46,455



47,631



50,330





47,415



50,292





Diluted (Non-GAAP)



46,455



47,631



50,330





47,754



50,292







(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. For the three months ended June 30, 2018, this includes the applicable state tax impact of foreign cash distributions into the U.S.

(3)

Potentially diluted securities totaling 0.3 million for the nine months ended September 30, 2018 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























Condensed Consolidated Statements of Income

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)









Three Months Ended





Nine Months Ended







September 30,





September 30,





2018



2017





2018



2017









(as adjusted)







(as adjusted)

Sales

$

640,688

$

610,929



$

1,909,415

$

1,788,443

Cost of sales



587,911



552,686





1,744,021



1,623,184



Gross profit



52,777



58,243





165,394



165,259

Selling, general and administrative expenses



37,607



32,093





109,182



97,079

Amortization of intangible assets



2,368



2,736





7,101



7,698

Restructuring charges and other costs



1,845



2,511





5,838



5,566



Income from operations



10,957



20,903





43,273



54,916

Interest expense



(3,822)



(2,324)





(8,543)



(6,861)

Interest income



1,619



1,334





5,197



3,621

Other income (expense), net



1,139



(394)





827



(1,305)



Income before income taxes



9,893



19,519





40,754



50,371

Income tax expense



2,094



1,688





45,653



5,911



Net income (loss)

$

7,799

$

17,831



$

(4,899)

$

44,460























Earnings (loss) per share:





















Basic

$

0.17

$

0.36



$

(0.10)

$

0.89



Diluted

$

0.17

$

0.35



$

(0.10)

$

0.88























Weighted-average number of shares used in calculating

















   earnings (loss) per share:



















Basic



46,301



49,865





47,415



49,716



Diluted



46,455



50,330





47,415



50,292

For the three months ended September 30, 2017, the adoption of ASC 606 increased revenue by $7.4 million, operating income by $0.1 million and net income by $0.3 million.  For the nine months ended September 30, 2017, the adoption of ASC 606 increased revenue by $1.5 million, decreased operating income by $0.5 million and increased net income by $0.1 million.





















Benchmark Electronics, Inc. and Subsidiaries





















Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)













September 30,





December 31,













2018





2017



















(as adjusted)

Assets













Current assets:















Cash and cash equivalents

$

475,713



$

742,546





Accounts receivable, net



455,971





436,560





Contract assets



155,898





146,496





Inventories



321,194





268,917





Other current assets



35,026





36,138









Total current assets



1,443,802





1,630,657



Property, plant and equipment, net



208,495





186,473



Goodwill and other, net



288,474





292,174









Total assets

$

1,940,771



$

2,109,304





















Liabilities and Shareholders' Equity













Current liabilities:















Current installments of long-term debt and capital lease obligations

$

4,880



$

18,274





Accounts payable



373,879





362,701





Accrued liabilities



99,414





97,342









Total current liabilities



478,173





478,317



Long-term debt and capital lease obligations, less current installments



149,341





193,406



Other long-term liabilities



111,575





98,443



Shareholders' equity



1,201,682





1,339,138









Total liabilities and shareholders' equity

$

1,940,771



$

2,109,304

 





















Benchmark Electronics, Inc. and Subsidiaries





















Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)

































Nine Months Ended













September 30,













2018





2017



















(as adjusted)

Cash flows from operating activities:   













Net income (loss)

$

(4,899)



$

44,460



Depreciation and amortization



39,643





36,591



Stock-based compensation expense



8,229





6,819



Accounts receivable, net



(20,019)





30,926



Contract assets



(9,402)





(5,373)



Inventories



(54,342)





(36,747)



Accounts payable



12,620





3,922



Other changes in working capital and other, net



10,877





9,292





Net cash provided by (used in) operations



(17,293)





89,890















Cash flows from investing activities:   













Additions to property, plant and equipment and software



(52,933)





(37,736)



Other investing activities, net



(2,102)





364





Net cash used in investing activities



(55,035)





(37,372)





















Cash flows from financing activities:   













Share repurchases



(122,053)





(5,887)



Net debt activity



(57,758)





(9,288)



Other financing activities, net



(13,897)





9,012





Net cash used in financing activities



(193,708)





(6,163)

Effect of exchange rate changes   



(797)





2,358

Net increase (decrease) in cash and cash equivalents



(266,833)





48,713



Cash and cash equivalents at beginning of year



742,546





681,433



Cash and cash equivalents at end of period

$

475,713



$

730,146





















 

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SOURCE Benchmark Electronics, Inc.

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