false000086343600008634362023-10-252023-10-25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): October 25, 2023 |
BENCHMARK ELECTRONICS, INC.
(Exact name of Registrant as Specified in Its Charter)
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Texas |
001-10560 |
74-2211011 |
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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56 South Rockford Drive |
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Tempe, Arizona |
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85288 |
(Address of Principal Executive Offices) |
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(Zip Code) |
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Registrant’s Telephone Number, Including Area Code: (623) 300-7000 |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s) |
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Name of each exchange on which registered
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Common Stock, par value $0.10 per share |
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BHE |
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The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 25, 2023, Benchmark Electronics, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter ended September 30, 2023. A copy of the press release and accompanying investor presentation are attached hereto as Exhibits
99.1 and 99.2, respectively, and incorporated by reference herein. The information disclosed under this Item 2.02, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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BENCHMARK ELECTRONICS, INC. |
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Date: |
October 25, 2023 |
By: |
/s/ Stephen J. Beaver |
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Stephen J. Beaver, Esq. Senior Vice President, General Counsel and Chief Legal Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
BENCHMARK REPORTS THIRD QUARTER 2023 RESULTS
Third quarter 2023 results:
•GAAP operating income of $30 million, up 20% year-over-year
•Non-GAAP(1) operating income of $34 million, up 22% year-over-year
•GAAP and non-GAAP earnings per share of $0.57
TEMPE, AZ, October 25, 2023 – Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2023.
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Three Months Ended |
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September 30, |
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June 30, |
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September 30, |
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In millions, except EPS |
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2023 |
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2023 |
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2022 |
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Sales |
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$ |
720 |
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$ |
733 |
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$ |
772 |
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Net income |
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$ |
20 |
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$ |
14 |
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$ |
19 |
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Income from operations |
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$ |
30 |
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$ |
24 |
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$ |
25 |
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Net income – non-GAAP(1) |
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$ |
21 |
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$ |
17 |
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$ |
20 |
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Income from operations – non-GAAP(1) |
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$ |
34 |
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$ |
29 |
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$ |
28 |
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Diluted earnings per share |
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$ |
0.57 |
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$ |
0.39 |
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$ |
0.53 |
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Diluted EPS – non-GAAP(1) |
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$ |
0.57 |
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$ |
0.48 |
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$ |
0.57 |
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Operating margin |
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4.2 |
% |
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3.3 |
% |
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3.3 |
% |
Operating margin – non-GAAP(1) |
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4.7 |
% |
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4.0 |
% |
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3.6 |
% |
(1) A reconciliation of GAAP and non-GAAP results is included below.
“Benchmark’s strategy is to serve high-complexity growth opportunities within our targeted sectors. This focus, coupled with the team’s commitment to operational improvement, enabled us to deliver another set of strong results in the third quarter,” said Jeff Benck, Benchmark’s President and CEO.
Benck continued “I am proud of the team’s continued execution despite the dynamic market environment. Looking forward, we remain focused on delivering continued operating leverage and believe we are well positioned to capitalize on the opportunities in front of us.”
Cash Conversion Cycle
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September 30, |
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June 30, |
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September 30, |
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2023 |
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2023 |
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2022 |
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Accounts receivable days |
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60 |
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59 |
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56 |
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Contract asset days |
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24 |
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23 |
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22 |
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Inventory days |
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100 |
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102 |
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95 |
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Accounts payable days |
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(53 |
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(56 |
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(67 |
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Advance payments from customers days |
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(26 |
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(25 |
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(27 |
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Cash Conversion Cycle days |
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105 |
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103 |
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79 |
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1
Third Quarter 2023 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) were as follows.
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September 30, |
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June 30, |
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September 30, |
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2023 |
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2023 |
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2022 |
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Medical |
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$ |
149 |
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21 |
% |
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$ |
145 |
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20 |
% |
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$ |
166 |
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21 |
% |
Semi-Cap |
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165 |
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23 |
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164 |
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22 |
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186 |
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24 |
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A&D |
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100 |
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14 |
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80 |
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11 |
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86 |
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11 |
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Industrials |
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154 |
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21 |
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167 |
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23 |
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155 |
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20 |
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Advanced Computing |
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66 |
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9 |
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81 |
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11 |
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95 |
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13 |
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Next Gen Communications |
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86 |
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12 |
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96 |
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13 |
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84 |
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11 |
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Total |
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$ |
720 |
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100 |
% |
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$ |
733 |
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100 |
% |
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$ |
772 |
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100 |
% |
Revenue decreased quarter over quarter and year over year primarily due to a decrease in Advanced Computing of 19% and 30%, respectively, due to completion of a high performance compute program, partially offset by an increase in A&D of 24% and 16%, respectively.
Fourth Quarter 2023 Guidance
•Revenue between $675 - $725 million
•Diluted GAAP earnings per share between $0.49 - $0.55
•Diluted non-GAAP earnings per share between $0.54 - $0.60 (excluding restructuring charges and other costs and amortization of intangibles)
Restructuring charges are expected to range between $0.8 million and $1.2 million in the fourth quarter and the amortization of intangibles is expected to be $1.2 million in the fourth quarter.
Third Quarter 2023 Earnings Conference Call
The 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 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.
For More Information, Please Contact:
Paul Mansky, Investor Relations and Corporate Development
1-623-300-7052 or paul.mansky@bench.com
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Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “project,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” “could,” “predict,” and similar expressions of the negative or other variations thereof. In particular, statements, express or implied, concerning the Company’s outlook and guidance for fourth quarter and fiscal year 2023 results, future operating results or margins, the ability to generate sales and income or cash flow, expected revenue mix, the Company’s business strategy and strategic initiatives, the Company’s repurchases of shares of its common stock, the Company’s expectations regarding restructuring charges and amortization of intangibles, and the Company’s intentions concerning the payment of dividends, among others, are forward-looking statements. Although the Company believes these statements are based on and derived from reasonable assumptions, they involve risks, uncertainties and assumptions that are beyond the Company’s ability to control or predict, relating to operations, markets and the business environment generally, including those discussed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in any of the Company’s subsequent reports filed with the Securities and Exchange Commission. Events relating to the possibility of customer demand fluctuations, supply chain constraints, continuing inflationary pressures, the effects of foreign currency fluctuations and high interest rates, geopolitical uncertainties including trade restrictions and sanctions, or the ability to utilize the Company’s manufacturing facilities at sufficient levels to cover its 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. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of the Company's operations, may vary materially from those indicated. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and the Company assumes no obligation to update.
Non-GAAP Financial Measures
Management discloses non‐GAAP information to provide investors with additional information to analyze the Company’s performance and underlying trends. A detailed reconciliation between GAAP results and results excluding certain items (“non-GAAP”) is included in the following tables attached to this document. In situations where a non-GAAP reconciliation has not been provided, the Company was unable to provide such a reconciliation without unreasonable effort due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. 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.
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3
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Sales |
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$ |
719,695 |
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$ |
771,575 |
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$ |
2,147,622 |
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$ |
2,135,687 |
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Cost of sales |
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650,618 |
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704,825 |
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1,947,556 |
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1,952,579 |
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Gross profit |
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69,077 |
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66,750 |
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200,066 |
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183,108 |
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Selling, general and administrative expenses |
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35,509 |
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38,544 |
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111,379 |
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110,675 |
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Amortization of intangible assets |
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1,592 |
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1,591 |
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4,775 |
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4,792 |
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Restructuring charges and other costs |
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1,635 |
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1,331 |
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6,348 |
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4,518 |
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Income from operations |
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30,341 |
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25,284 |
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77,564 |
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63,123 |
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Interest expense |
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(8,475 |
) |
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(3,493 |
) |
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(23,183 |
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(7,428 |
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Interest income |
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1,343 |
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452 |
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4,223 |
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|
843 |
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Other income, net |
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2,384 |
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1,087 |
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280 |
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1,577 |
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Income before income taxes |
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25,593 |
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23,330 |
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58,884 |
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58,115 |
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Income tax expense |
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5,181 |
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4,501 |
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12,121 |
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11,105 |
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Net income |
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$ |
20,412 |
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$ |
18,829 |
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$ |
46,763 |
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$ |
47,010 |
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Earnings per share: |
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Basic |
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$ |
0.57 |
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$ |
0.54 |
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$ |
1.32 |
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$ |
1.34 |
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Diluted |
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$ |
0.57 |
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$ |
0.53 |
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$ |
1.30 |
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$ |
1.32 |
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Weighted-average number of shares used in calculating earnings per share: |
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Basic |
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35,647 |
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35,151 |
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35,535 |
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35,184 |
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Diluted |
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35,876 |
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35,348 |
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35,879 |
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35,604 |
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4
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
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September 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
259,542 |
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$ |
207,430 |
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Restricted cash |
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1,218 |
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— |
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Accounts receivable, net |
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477,685 |
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491,957 |
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Contract assets |
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190,085 |
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183,613 |
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Inventories |
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725,349 |
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727,749 |
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Other current assets |
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53,190 |
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41,400 |
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Total current assets |
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1,707,069 |
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1,652,149 |
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Property, plant and equipment, net |
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231,661 |
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211,478 |
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Operating lease right-of-use assets |
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122,104 |
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93,081 |
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Goodwill and other, net |
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272,311 |
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270,623 |
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Total assets |
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$ |
2,333,145 |
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$ |
2,227,331 |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Current installments of long-term debt |
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$ |
4,281 |
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$ |
4,275 |
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Accounts payable |
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382,170 |
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|
424,272 |
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Advance payments from customers |
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189,058 |
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|
197,937 |
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Accrued liabilities |
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123,595 |
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|
122,652 |
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Total current liabilities |
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699,104 |
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749,136 |
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Long-term debt, less current installments |
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428,231 |
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|
320,675 |
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Operating lease liabilities |
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114,279 |
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|
86,687 |
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Other long-term liabilities |
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28,482 |
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|
44,417 |
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Shareholders’ equity |
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|
1,063,049 |
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|
|
1,026,416 |
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Total liabilities and shareholders’ equity |
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$ |
2,333,145 |
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$ |
2,227,331 |
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5
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
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Nine Months Ended |
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September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
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$ |
46,763 |
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$ |
47,010 |
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Depreciation and amortization |
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34,103 |
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|
32,987 |
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Stock-based compensation expense |
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12,331 |
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|
13,282 |
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Accounts receivable |
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12,937 |
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(123,600 |
) |
Contract assets |
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(6,472 |
) |
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(32,487 |
) |
Inventories |
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1,789 |
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(228,501 |
) |
Accounts payable |
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(24,420 |
) |
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|
84,588 |
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Advance payments from customers |
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(8,879 |
) |
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|
93,476 |
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Other changes in working capital and other, net |
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(30,938 |
) |
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(11,472 |
) |
Net cash provided by (used in) operations |
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37,214 |
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(124,717 |
) |
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Cash flows from investing activities: |
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Additions to property, plant and equipment and software |
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(66,713 |
) |
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(33,594 |
) |
Other investing activities, net |
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|
588 |
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|
5,666 |
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Net cash used in investing activities |
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(66,125 |
) |
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(27,928 |
) |
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Cash flows from financing activities: |
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Share repurchases |
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— |
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(9,391 |
) |
Net debt activity |
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107,194 |
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|
169,303 |
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Other financing activities, net |
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(23,306 |
) |
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(20,127 |
) |
Net cash provided by financing activities |
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|
83,888 |
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|
|
139,785 |
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|
|
|
|
|
|
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Effect of exchange rate changes |
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(1,647 |
) |
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(9,552 |
) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
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53,330 |
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|
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(22,412 |
) |
Cash and cash equivalents and restricted cash at beginning of year |
|
|
207,430 |
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|
|
271,749 |
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Cash and cash equivalents and restricted cash at end of period |
|
$ |
260,760 |
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|
$ |
249,337 |
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6
Benchmark Electronics, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Results
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
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Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Sept. 30, |
|
|
June 30, |
|
|
Sept. 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Income from operations (GAAP) |
|
$ |
30,341 |
|
|
$ |
24,481 |
|
|
$ |
25,284 |
|
|
$ |
77,564 |
|
|
$ |
63,123 |
|
Amortization of intangible assets |
|
|
1,592 |
|
|
|
1,591 |
|
|
|
1,591 |
|
|
|
4,775 |
|
|
|
4,792 |
|
Restructuring charges and other costs |
|
|
1,437 |
|
|
|
2,364 |
|
|
|
1,331 |
|
|
|
5,227 |
|
|
|
4,911 |
|
Gain on assets held for sale |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(393 |
) |
Asset impairment |
|
|
198 |
|
|
|
923 |
|
|
|
— |
|
|
|
1,121 |
|
|
|
— |
|
Customer insolvency (recovery) |
|
|
— |
|
|
|
— |
|
|
|
(599 |
) |
|
|
— |
|
|
|
(599 |
) |
Non-GAAP income from operations |
|
$ |
33,568 |
|
|
$ |
29,359 |
|
|
$ |
27,607 |
|
|
$ |
88,687 |
|
|
$ |
71,834 |
|
GAAP operating margin |
|
|
4.2 |
% |
|
|
3.3 |
% |
|
|
3.3 |
% |
|
|
3.6 |
% |
|
|
3.0 |
% |
Non-GAAP operating margin |
|
|
4.7 |
% |
|
|
4.0 |
% |
|
|
3.6 |
% |
|
|
4.1 |
% |
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP) |
|
$ |
69,077 |
|
|
$ |
67,031 |
|
|
$ |
66,750 |
|
|
$ |
200,066 |
|
|
$ |
183,108 |
|
Customer insolvency (recovery) |
|
|
— |
|
|
|
— |
|
|
|
(425 |
) |
|
|
— |
|
|
|
(425 |
) |
Non-GAAP gross profit |
|
$ |
69,077 |
|
|
$ |
67,031 |
|
|
$ |
66,325 |
|
|
$ |
200,066 |
|
|
$ |
182,683 |
|
GAAP gross margin |
|
|
9.6 |
% |
|
|
9.1 |
% |
|
|
8.7 |
% |
|
|
9.3 |
% |
|
|
8.6 |
% |
Non-GAAP gross margin |
|
|
9.6 |
% |
|
|
9.1 |
% |
|
|
8.6 |
% |
|
|
9.3 |
% |
|
|
8.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
$ |
35,509 |
|
|
$ |
37,672 |
|
|
$ |
38,544 |
|
|
$ |
111,379 |
|
|
$ |
110,675 |
|
Customer insolvency (recovery) |
|
|
— |
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
174 |
|
Non-GAAP selling, general and administrative expenses |
|
$ |
35,509 |
|
|
$ |
37,672 |
|
|
$ |
38,718 |
|
|
$ |
111,379 |
|
|
$ |
110,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (GAAP) |
|
$ |
20,412 |
|
|
$ |
13,991 |
|
|
$ |
18,829 |
|
|
$ |
46,763 |
|
|
$ |
47,010 |
|
Amortization of intangible assets |
|
|
1,592 |
|
|
|
1,591 |
|
|
|
1,591 |
|
|
|
4,775 |
|
|
|
4,792 |
|
Restructuring charges and other costs |
|
|
1,437 |
|
|
|
2,364 |
|
|
|
1,331 |
|
|
|
5,227 |
|
|
|
4,911 |
|
Gain on assets held for sale |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(393 |
) |
Asset impairment |
|
|
198 |
|
|
|
923 |
|
|
|
— |
|
|
|
1,121 |
|
|
|
— |
|
Settlement |
|
|
(3,375 |
) |
|
|
(1,155 |
) |
|
|
(611 |
) |
|
|
(4,530 |
) |
|
|
(611 |
) |
Customer insolvency (recovery) |
|
|
— |
|
|
|
— |
|
|
|
(599 |
) |
|
|
— |
|
|
|
(599 |
) |
Income tax adjustments(1) |
|
|
245 |
|
|
|
(670 |
) |
|
|
(351 |
) |
|
|
(941 |
) |
|
|
(1,639 |
) |
Non-GAAP net income |
|
$ |
20,509 |
|
|
$ |
17,044 |
|
|
$ |
20,190 |
|
|
$ |
52,415 |
|
|
$ |
53,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (GAAP) |
|
$ |
0.57 |
|
|
$ |
0.39 |
|
|
$ |
0.53 |
|
|
$ |
1.30 |
|
|
$ |
1.32 |
|
Diluted (Non-GAAP) |
|
$ |
0.57 |
|
|
$ |
0.48 |
|
|
$ |
0.57 |
|
|
$ |
1.46 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in calculating diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (GAAP) |
|
|
35,876 |
|
|
|
35,676 |
|
|
|
35,348 |
|
|
|
35,879 |
|
|
|
35,604 |
|
Diluted (Non-GAAP) |
|
|
35,876 |
|
|
|
35,676 |
|
|
|
35,348 |
|
|
|
35,879 |
|
|
|
35,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operations |
|
$ |
37,583 |
|
|
$ |
24,538 |
|
|
$ |
(31,208 |
) |
|
$ |
37,214 |
|
|
$ |
(124,717 |
) |
Additions to property, plant and equipment and software |
|
|
(19,664 |
) |
|
|
(8,318 |
) |
|
|
(8,623 |
) |
|
|
(66,713 |
) |
|
|
(33,594 |
) |
Free cash flow (used) |
|
$ |
17,919 |
|
|
$ |
16,220 |
|
|
$ |
(39,831 |
) |
|
$ |
(29,499 |
) |
|
$ |
(158,311 |
) |
(1) This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.
7
Benchmark Electronics Third Quarter 2023 Earnings October 25, 2023
Forward-Looking 2023 Statements This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “project,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” “could,” “predict,” and similar expressions of the negative or other variations thereof. In particular, statements, express or implied, concerning the Company’s outlook and guidance for fourth quarter 2023 results, future operating results or margins, the ability to generate sales and income or cash flow, expected revenue mix, the Company’s business strategy and strategic initiatives, the Company’s repurchases of shares of its common stock, the Company’s expectations regarding restructuring charges and amortization of intangibles, and the Company’s intentions concerning the payment of dividends, among others, are forward-looking statements. Although the Company believes these statements are based on and derived from reasonable assumptions, they involve risks, uncertainties and assumptions that are beyond the Company’s ability to control or predict, relating to operations, markets and the business environment generally, including those discussed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in any of the Company’s subsequent reports filed with the Securities and Exchange Commission. Events relating to the possibility of customer demand fluctuations, supply chain constraints, continuing inflationary pressures, the effects of foreign currency fluctuations and high interest rates, geopolitical uncertainties including trade restrictions, or the ability to utilize the Company’s manufacturing facilities at sufficient levels to cover its 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. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of our operations, may vary materially from those indicated. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and the Company assumes no obligation to update. Non-GAAP Financial Information Management discloses non‐GAAP information to provide investors with additional information to analyze the Company’s performance and underlying trends. A detailed reconciliation between GAAP results and results excluding certain items (“non-GAAP”) is included in the following tables attached to this document. In situations where a non-GAAP reconciliation has not been provided, the Company was unable to provide such a reconciliation without unreasonable effort due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. 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.
Third Quarter 2023 Results Revenue of $720 million Total revenue impacted by $58 million reduction in supply chain premium (SCP)* Excluding SCP, year-over-year growth in 4 of 6 sectors GAAP and non-GAAP** gross margin of 9.6% - Expansion of 90 and 100 basis points year-over-year, respectively GAAP operating income year-over-year growth of 20% and non-GAAP of 22% GAAP and non-GAAP** EPS of $0.57, above mid-point of guidance range Generated sequential increase in positive free cash flow * Component pass-through revenue for supply chain premiums (SCP) with no impact on non-GAAP operating income or EPS ** See APPENDIX 1 for a reconciliation of GAAP to non-GAAP Financial Results
Roop Lakkaraju Chief Financial Officer
Third Quarter GAAP Revenue by Market Sector Q3-23 Sep 30, 2023 Revenue by Mix and Market Sector Jun 30, 2023 Sep 30, 2022 For the Three Months Ended Dollars in Millions Sector Mix % Revenue Mix % Revenue Q/Q Growth Mix % Revenue Y/Y Growth Medical 21% $149 20% $145 3% 21% $166 (10%) Semi-Cap 23% $165 22% $164 1% 24% $186 (11%) Aerospace & Defense 14% $100 11% $80 24% 11% $86 16% Industrials 21% $154 23% $167 (8%) 20% $155 (1%) Advanced Computing 9% $66 11% $81 (19%) 13% $95 (30%) Next Gen Comms 12% $86 13% $96 (10%) 11% $84 3% Total Revenue 100% $720 100% $733 (2%) 100% $772 (7%)
Sector Results Excluding Supply Chain Premium Q3-23 Results ($MM) Total Revenue Supply Chain Premiums (SCP) Revenue adjusted for SCP Year-over-Year growth adjusted for SCP Medical $149 $(2) $147 8% Semi-Cap $165 $(1) $164 (10%) A&D $100 $0 $100 20% Industrials $154 $(11) $143 9% Advanced Computing $66 $0 $66 (30%) Next Gen Comms $86 $(2) $84 20% See APPENDIX 3 for a reconciliation of GAAP Sales to non-GAAP Sales Adjusted for Supply Chain Premiums
Third Quarter 2023 Financial Summary (Dollars in millions, except EPS) Sep 30, 2023 Jun 30, 2023 Q/Q Sep 30, 2022 Y/Y Net Sales $720 $733 (2%) $772 (7%) GAAP Gross Margin 9.6% 9.1% 50 bps 8.7% 90 bps GAAP SG&A $35.5 $37.7 (6%) $38.5 (8%) GAAP Operating Margin 4.2% 3.3% 90 bps 3.3% 90 bps GAAP Diluted EPS $0.57 $0.39 46% $0.53 8% GAAP ROIC 7.1% 7.1% 0 bps 7.1% 0 bps Net Sales $720 $733 (2%) $772 (7%) Non-GAAP Gross Margin 9.6% 9.1% 50 bps 8.6% 100 bps Non-GAAP SG&A $35.5 $37.7 (6%) $38.7 (8%) Non-GAAP Operating Margin 4.7% 4.0% 70 bps 3.6% 110 bps Non-GAAP Diluted EPS $0.57 $0.48 19% $0.57 0% Non-GAAP ROIC 9.4% 9.5% (10) bps 9.8% (40) bps See APPENDIX 1 for a reconciliation of GAAP to non-GAAP Financial Results GAAP ROIC = (GAAP TTM income from operations – GAAP Tax Impact) / (Average Invested Capital for last 5 quarters) Non-GAAP ROIC = (non-GAAP TTM income from operations + Stock-based compensation – non-GAAP Tax Impact) ÷ [Average Invested Capital for last 5 quarters]
Non-GAAP Financial Summary Excluding Supply Chain Premiums (Dollars in millions, except EPS) See APPENDIX 1 and APPENDIX 2 for reconciliations of GAAP to non-GAAP Financial Results
Cash Conversion Cycle Update Q3-23 Q2-23 Q1-23 Q4-22 Q3-22 Accounts Receivable Days 60 59 60 59 56 Contract Asset Days 24 23 25 22 22 Inventory Days 100 102 111 97 95 Accounts Payable Days (53) (56) (60) (56) (67) Customer Days (26) (25) (27) (26) (27) Cash Conversion Cycle 105 103 109 96 79
Liquidity and Capital Allocation (1) Free cash flow (FCF) defined as net cash provided by (used in) operations less capex. See APPENDIX 1. Debt Structure (In millions) Senior Secured Term Loan $129 Revolving Credit Facility Drawn Amount $305 Recurring quarterly dividend of $0.165 per share totaling $5.9 million paid in July 2023 No share repurchases in the quarter Remaining share repurchase authorization of $155 million as of September 30, 2023 For the Three Months Ended For the Three Months Ended Cash (In millions) Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Cash Flows from (used in) Operations $38 $25 ($31) FCF (1) $18 $16 ($40) Cash $261 $245 $249 International $238 $236 $189 U.S. $23 $9 $60
Fourth Quarter 2023 Guidance Q4-2023 Net Sales* $675 - $725 million Diluted EPS – GAAP $0.49 - $0.55 Diluted EPS – non-GAAP $0.54 - $0.60 Operating Margin – non-GAAP 4.8% - 5.0% Other Expenses, Net ~ $9 million Effective Tax Rate 19% - 21% Weighted Average Shares ~ 35.9 million * Guidance does not include supply chain premium revenue This guidance takes into consideration all known constraints for the quarter and assumes no further significant interruptions to our supply base, operations or customers.
Business Trends Jeff Benck - CEO
Sector Outlook* * Excludes supply chain premiums (SCP) revenue in forecast and comparable period(s) Q4-23 Q/Q FY2023 Y/Y Sector Commentary Medical Improved supply enabled us to meet demand Demand adjusting amid dynamic macro environment Continuing to win new opportunities ramping in 2024-2025 Semi-Cap Current market outlook points to a flat 2024 New program wins helping to offset overall market softness A&D New wins and program ramps to drive 2024 growth Commercial Aero remains strong Defense demand strengthening Industrials Some softening in international markets Domestic test, automation and energy more resilient Adv. Computing New HPC program build to commence in Q4 Expecting HPC build to continue into early 2024 Next Gen Comms Comms infrastructure capex is under pressure Expecting sector to be challenged in 2024 See APPENDIX 3 for a reconciliation of GAAP to non-GAAP Financial Results
Summary Exceeded mid-point of guidance for Q3 2023 Delivered strong year-over-year growth in 4 of 6 sectors* Expanded non-GAAP operating margin by >80 basis points year-over-year* Grew non-GAAP operating income 22% year-over-year Increased free cash flow generation, annualized at >$70 million Focused on delivering positive operating leverage Protecting investment in Semi-Cap to capitalize on the next upcycle * Excluding supply chain premium revenue in forecast and comparable period(s).
Appendix
(Dollars in Thousands, Except Per Share Data) – (UNAUDITED) APPENDIX 1 - Reconciliation of GAAP to non-GAAP Financial Results
(Dollars in Millions) – (UNAUDITED) APPENDIX 2 - Reconciliation of Supply Chain Premiums
(Dollars in Millions) – (UNAUDITED) APPENDIX 3 - Reconciliation of Supply Chain Premiums by Sector
v3.23.3
Document And Entity Information
|
Oct. 25, 2023 |
Cover [Abstract] |
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Document Period End Date |
Oct. 25, 2023
|
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BENCHMARK ELECTRONICS, INC.
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Entity Address, Address Line One |
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