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Benchmark Electronics Reports Third Quarter 2018 Results

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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. (NYSE: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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