BHE
$29.40
Benchmark Electronics
($.10)
(.34%)
Earnings Details
1st Quarter March 2018
Wednesday, April 25, 2018 4:05:00 PM
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Summary

Benchmark Electronics Guides Below Estimates

Benchmark Electronics (BHE) reported 1st Quarter March 2018 earnings of $0.41 per share on revenue of $608.1 million. The consensus earnings estimate was $0.36 per share. Revenue grew 7.3% on a year-over-year basis.

The company said it expects second quarter earnings of $0.26 to $0.34 per share on revenue of $590.0 million to $630.0 million. The current consensus earnings estimate is $0.43 per share on revenue of $634.8 million for the quarter ending June 30, 2018.

Benchmark Electronics Inc is engaged in the business of manufacturing electronics and it provides its services to original equipment manufacturers of computers and related products.

Results
Reported Earnings
$0.41
Earnings Whisper
-
Consensus Estimate
$0.36
Reported Revenue
$608.1 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Benchmark Electronics Reports First Quarter 2018 Results

SCOTTSDALE, Ariz., April 25, 2018 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the first quarter ended March 31, 2018.

Benchmark Electronics (PRNewsfoto/Benchmark Electronics, Inc.)

 




Three Months Ended




Mar 31,



Dec 31,


Mar 31,

In millions, except EPS


2018



2017(1)


2017(1)

Net sales


$608



$666


$558

Net income (loss) (2)


$(24)



$(76)


$9

Net income – non-GAAP


$20



$25


$16

Diluted EPS (2)


($0.49)



($1.54)


$0.17

Diluted EPS – non-GAAP


$0.41



$0.49


$0.32










Operating margin


3.0%



3.3%


2.0%

Operating margin – non-GAAP


3.7%



4.1%


3.6%



(1) 

Prior period amounts have been adjusted to reflect the adoption of ASC 606 on a retrospective basis.

(2) 

Includes $40 million ($0.82 per share) for the three months ended March 31, 2018 of foreign withholding taxes and state tax expense of repatriation of foreign cash to US parent company and $98 million ($1.95 per share) for the three months ended December 31, 2017 of tax expense related to the effects of the U.S. Tax Cuts and Jobs Act (U.S. Tax Reform).

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.

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

"Overall, performance in the first quarter was solid. Revenues were up 9% year-over-year and gross margins improved 40 bps to 9.5%.  Non-GAAP EPS of $0.41 exceeded the high end of our guidance by $0.03; cash cycle days ended at 68 days, within our 73 to 68 day target range; and we achieved 11.2% ROIC, a 90 bps quarter-over-quarter improvement," said Paul Tufano, Benchmark's President and CEO.

"We continue to see good progress in bookings and are encouraged by the quality of our new customer engagements.  For the second quarter, the convergence of timing dynamics related to mix shifts primarily in medical, new customer ramp headwinds, and planned investments in engineering and solutions will impact our reported financials.  Consequently, our guidance reflects these factors with sequential revenue in the range of $590 million to $630 million and non-GAAP EPS between $0.26 and $0.34," continued Tufano.  "We are confident in our ability to address these challenges and remain positive about the second half and our long-term model."

Cash Conversion Cycle



Mar 31,



Dec 31,




Mar 31,




2018



2017




2017






(as adjusted)

Accounts receivable days


59



59




62


Contract asset days


22



20




24


Inventory days


50



40




48


Accounts payable days


(60)



(54)




(61)


Customer deposits


(3)



(3)




(4)




68



62




69


 

First Quarter 2018 Industry Sector Update
Revenue by industry sector (in millions) was as follows.




Mar 31,




Dec 31,




Mar 31,



Higher-Value Markets


2018


2017 (as adjusted)


2017 (as adjusted)

Industrials

$

125


20

%


$

129


19

%


$

117


21

%

A&D


98


16




95


15




100


18


Medical


97


16




100


15




85


15


Test & Instrumentation


102


17




93


14




76


14




$

422


69

%


$

417


63

%


$

378


68

%










































Mar 31,




Dec 31,




Mar 31,



Traditional Markets


2018


2017 (as adjusted)


2017 (as adjusted)

Computing

$

103


17

%


$

172


26

%


$

100


18

%

Telecommunications


83


14




77


11




80


14




$

186


31

%


$

249


37

%


$

180


32

%


Total

$

608


100

%


$

666


100

%


$

558


100

%

First quarter revenues from higher-value markets were in line with expectations, including strong demand in Test & Instrumentation from semi-capital equipment customers.  Higher-value markets were up 12% year-over-year from Test & Instrumentation and Medical markets.

Traditional market revenues in Computing and Telecommunications were down sequentially from seasonality in Computing demand and up 3% year-over-year.

First Quarter 2018 Bookings Update

  • New program bookings of $171 million at the midpoint.
  • 17 engineering awards supporting early engagement opportunities.
  • 32 manufacturing wins across all market sectors.

The Company projects that new program bookings for the first quarter will result in annualized revenue of $141 to $201 million when fully launched in the next 12-24 months.  The new program bookings align with Benchmark's strategic focus.

Second Quarter 2018 Outlook

  • Revenue between $590 - $630 million.
  • Diluted GAAP earnings per share between $0.21 - $0.29.
  • Diluted non-GAAP earnings per share between $0.26 - $0.34 (excluding any additional impact related to U.S. Tax Reform, restructuring charges and amortization of intangibles).

First 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 provides worldwide engineering services, integrated technology solutions and manufacturing services (both electronics manufacturing services (EMS) and precision machining services) to original equipment manufacturers in the following industries: industrial controls, aerospace and defense, telecommunications, computers and related products for business enterprises, medical devices, and test and instrumentation.  Benchmark's global operations include facilities in eight countries, and its 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; 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.

All forward-looking statements included in this release are based upon information available to Benchmark as of the date hereof, and the Company 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.  This document also references "ROIC", which the Company defines as operating income for the last twelve months excluding restructuring charges and other costs, amortization of intangible assets and stock-based compensation, adjusted for taxes, divided by the quarterly average of invested capital.  Average invested capital is defined as shareholders' equity plus long-term debt minus cash as of the last five quarterly balance sheets.  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





March 31,


December 31,


March 31,





2018


2017


2017







(as adjusted)


Income from operations (GAAP)

$

17,967

$

21,910

$

10,889


Restructuring charges and other costs


2,235


3,062


1,511


Customer insolvency (recovery)


(341)


(239)


5,120


Amortization of intangible assets


2,366


2,367


2,481


Non-GAAP income from operations

$

22,227

$

27,100

$

20,001











Net income (loss) (GAAP)

$

(23,641)

$

(76,361)

$

8,555


Restructuring charges and other costs


2,235


3,062


1,511


Customer insolvency (recovery)


(341)


(239)


5,120


Amortization of intangible assets


2,366


2,367


2,481


Income tax adjustments(1)


(818)


(1,793)


(1,580)


Tax Cuts and Jobs Act(2)


40,114


97,633


-


Non-GAAP net income

$

19,915

$

24,669

$

16,087











Diluted earnings (loss) per share:









Diluted (GAAP)

$

(0.49)

$

(1.54)

$

0.17



Diluted (Non-GAAP)

$

0.41

$

0.49

$

0.32











Weighted-average number of shares used








 in calculating earnings (loss) per share:









Diluted (GAAP)(3)


48,517


49,576


50,080



Diluted (Non-GAAP)


48,837


49,998


50,080


 

(1)  

This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.

(2)   

This amount represents the estimated impact of the U.S. Tax Reform and the impact of repatriating foreign earnings from our foreign jurisdictions to the U.S. For the three months ended March 31, 2018, this includes estimated foreign withholding taxes applicable to historical earnings prior to December 31, 2017 and for the applicable state tax impact of foreign cash distributions into the U.S. For the three months ended December 31, 2017, this includes the impact of a one-time mandatory tax on the deemed repatriation of undistributed foreign earnings and the re-measurement of U.S. deferred tax assets and liabilities for the decrease in the U.S. federal tax rate from 35% to 21%.

(3)

Potentially diluted securities totaling 0.3 million and 0.4 million for the three months ended March 31, 2018 and December 31, 2017, respectively, 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









Consolidated Statements of Income


(Amounts in Thousands, Except Per Share Data)


(UNAUDITED)







Three Months Ended





March 31,




2018


2017






(as adjusted)

Sales

$

608,136

$

557,903


Cost of sales


549,818


510,371



Gross profit


58,318


47,532


Selling, general and administrative expenses


35,750


32,651


Amortization of intangible assets


2,366


2,481


Restructuring charges and other costs


2,235


1,511



Income from operations


17,967


10,889


Interest expense


(2,428)


(2,225)


Interest income


1,933


1,074


Other income (expense), net


43


(81)



Income before income taxes


17,515


9,657


Income tax expense


41,156


1,102



Net income (loss)

$

(23,641)

$

8,555









Earnings (loss) per share:







Basic

$

(0.49)

$

0.17



Diluted

$

(0.49)

$

0.17









Weighted-average number of shares used in calculating






  earnings (loss) per share:







Basic


48,517


49,511



Diluted


48,517


50,080


 

For the three months ended March 31, 2017, the adoption of ASC 606 reduced revenue by $8.6 million, operating income by $1.5 million, net income by $1.1 million and diluted earnings per share by $0.02.

 










Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)







March 31,


December 31,







2018


2017









(as adjusted)

Assets






Current assets:







Cash and cash equivalents

$

676,327

$

742,546



Accounts receivable, net


403,767


436,560



Contract assets


147,623


146,496



Inventories


305,980


268,917



Other current assets


31,795


36,138





Total current assets


1,565,492


1,630,657


Property, plant and equipment, net


200,422


186,473


Goodwill and other, net


292,092


292,174





Total assets

$

2,058,006

$

2,109,304










Liabilities and Shareholders' Equity






Current liabilities:







Current installments of long-term debt and capital lease obligations

$

19,746

$

18,274



Accounts payable


368,625


362,701



Accrued liabilities


96,460


97,342





Total current liabilities


484,831


478,317


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


187,601


193,406


Other long-term liabilities


138,243


98,443


Shareholders' equity


1,247,331


1,339,138





Total liabilities and shareholders' equity

$

2,058,006

$

2,109,304

 

As of December 31, 2017, the adoption of ASC 606 increased current assets by $12.0 million, increased total liabilities by $1.7 million and increased shareholder's equity by $10.3 million.










Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)
















Three Months Ended







March 31,







2018


2017









(as adjusted)

Cash flows from operating activities:   






Net income (loss)

$

(23,641)

$

8,555


Depreciation and amortization


12,384


12,273


Stock-based compensation expense


2,870


2,160


Accounts receivable, net


33,419


59,685


Contract assets


(1,127)


6,561


Inventories


(38,210)


(29,582)


Accounts payable


2,337


16,225


Other changes in working capital and other, net


36,498


2,028



Net cash provided by operations


24,530


77,905







Cash flows from investing activities:   






Additions to property, plant and equipment and software


(20,877)


(7,578)


Other investing activities, net


(122)


109



Net cash used in investing activities


(20,999)


(7,469)










Cash flows from financing activities:   






Share repurchases  


(58,381)


(1,000)


Equity forward contract related to accelerate share repurchase


(10,000)


-


Net debt activity


(4,551)


(3,082)


Other financing activities, net


2,316


4,349



Net cash provide by (used in) financing activities


(70,616)


267

Effect of exchange rate changes   


866


341

Net increase (decrease) in cash and cash equivalents


(66,219)


71,044


Cash and cash equivalents at beginning of year


742,546


681,433


Cash and cash equivalents at end of period

$

676,327

$

752,477










 

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SOURCE Benchmark Electronics, Inc.