Benchmark Reports Third Quarter 2022 Results
Third quarter 2022 results:
- Revenue of $772 million; 35% year-over-year growth
- Computing and Telco combined revenue growth of 60% year-over-year
- Industrials revenue growth of 44% year-over-year
- Medical revenue growth of 41% year-over-year
- Semi-Cap revenue growth of 39% year-over-year
- GAAP operating income up 114% year-over-year
- Non-GAAP operating income up 44% year-over-year
- GAAP diluted EPS of $0.53, up 130% year-over-year
- Non-GAAP diluted EPS of $0.57, up 46% year-over-year
TEMPE, Ariz, Oct. 26, 2022 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2022.
Three Months Ended | ||||||||||||
Sept 30, | June 30, | Sept 30, | ||||||||||
In millions, except EPS | 2022 | 2022 | 2021 | |||||||||
Sales | $ | 772 | $ | 728 | $ | 572 | ||||||
Net income | $ | 19 | $ | 17 | $ | 8 | ||||||
Net income – non-GAAP(1) | $ | 20 | $ | 18 | $ | 14 | ||||||
Diluted earnings per share | $ | 0.53 | $ | 0.49 | $ | 0.23 | ||||||
Diluted EPS – non-GAAP(1) | $ | 0.57 | $ | 0.50 | $ | 0.39 | ||||||
Operating margin | 3.3 | % | 3.1 | % | 2.1 | % | ||||||
Operating margin – non-GAAP(1) | 3.6 | % | 3.1 | % | 3.3 | % | ||||||
(1) | A reconciliation of GAAP and non-GAAP results is included below. |
"Despite the well-known challenges with which we and the industry have had to navigate, Benchmark continues to execute on its strategy. Our third quarter results achieved the important financial targets within our mid-term model," said Jeff Benck, Benchmark's President and CEO.
Benck continued "Our third quarter results demonstrated another solid quarter of revenue growth, with five of our six targeted sectors growing more than 35% year-over-year. This has enabled us to drive non-GAAP earnings growth of more than 46% over the same period. We look forward to updating you on our long term strategy and growth potential for the company at our upcoming analyst day on November 8th."
Cash Conversion Cycle
Sept 30, | June 30, | Sept 30, | ||||||||||
2022 | 2022 | 2021 | ||||||||||
Accounts receivable days | 56 | 55 | 49 | |||||||||
Contract asset days | 22 | 22 | 25 | |||||||||
Inventory days | 95 | 90 | 83 | |||||||||
Accounts payable days | (67) | (67) | (70) | |||||||||
Advance payments from customers days | (27) | (23) | (16) | |||||||||
Cash conversion cycle days | 79 | 77 | 71 | |||||||||
Third Quarter 2022 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.
Sept 30, | June 30, | Sept 30, | ||||||||||||||||||||||
Higher-Value Markets | 2022 | 2022 | 2021 | |||||||||||||||||||||
Medical | $ | 166 | 21 | % | $ | 166 | 23 | % | $ | 118 | 21 | % | ||||||||||||
Semi-Cap | 186 | 24 | 175 | 24 | 133 | 23 | ||||||||||||||||||
A&D | 86 | 11 | 90 | 12 | 101 | 18 | ||||||||||||||||||
Industrials | 155 | 20 | 159 | 22 | 108 | 19 | ||||||||||||||||||
$ | 593 | 76 | % | $ | 590 | 81 | % | $ | 460 | 81 | % | |||||||||||||
Sept 30, | June 30, | Sept 30, | ||||||||||||||||||||||
Traditional Markets | 2022 | 2022 | 2021 | |||||||||||||||||||||
Computing | $ | 95 | 13 | % | $ | 69 | 10 | % | $ | 57 | 10 | % | ||||||||||||
Telecommunications | 84 | 11 | 69 | 9 | 55 | 9 | ||||||||||||||||||
$ | 179 | 24 | % | $ | 138 | 19 | % | $ | 112 | 19 | % | |||||||||||||
Total | $ | 772 | 100 | % | $ | 728 | 100 | % | $ | 572 | 100 | % | ||||||||||||
Overall, higher-value market revenues were up 29% year-over-year from strength in the Industrials, Medical and Semi-Cap sectors. Traditional market revenues were up 60% year-over-year from strength in both Computing and Telecommunications sectors.
Fourth Quarter 2022 Guidance
- Revenue between $760 - $800 million
- Diluted GAAP earnings per share between $0.52 - $0.56
- Diluted non-GAAP earnings per share between $0.58 - $0.62 (excluding restructuring charges and other costs and amortization of intangibles)
- This guidance takes into consideration all known constraints for the quarter and assumes no further significant interruptions to our supply base, operations or customers.
Restructuring charges are expected to range between $0.8 million and $1.0 million in the fourth quarter and the amortization of intangibles is expected to be $1.6 million in the fourth quarter.
Third Quarter 2022 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 until Wednesday, November 2, 2022 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.
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 estimated financial impact of the COVID-19 pandemic, the company's outlook and guidance for fourth quarter 2022 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, 2021, and in any of the company's subsequent reports filed with the Securities and Exchange Commission. In particular, these statements also depend on the duration, severity and evolution of the COVID-19 pandemic and related risks, including the emergence and severity of its variants, the availability of vaccines and potential hesitancy to utilize them, government and other third-party responses to the crisis and the consequences for the global economy, the company's business and the businesses of its suppliers and customers. Events relating to the possibility of customer demand fluctuations, supply chain constraints, inflationary pressures, the effects of foreign currency fluctuations, 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 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.
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, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | 771,575 | $ | 571,882 | $ | 2,135,687 | $ | 1,622,265 | ||||||||
Cost of sales | 704,825 | 518,177 | 1,952,579 | 1,478,420 | ||||||||||||
Gross profit | 66,750 | 53,705 | 183,108 | 143,845 | ||||||||||||
Selling, general and administrative expenses | 38,544 | 34,387 | 110,675 | 98,969 | ||||||||||||
Amortization of intangible assets | 1,591 | 1,596 | 4,792 | 4,793 | ||||||||||||
Restructuring charges and other costs | 1,331 | 6,428 | 4,518 | 9,600 | ||||||||||||
Ransomware incident related costs (recovery), net | — | (500) | — | (3,944) | ||||||||||||
Income from operations | 25,284 | 11,794 | 63,123 | 34,427 | ||||||||||||
Interest expense | (3,493) | (1,987) | (7,428) | (6,215) | ||||||||||||
Interest income | 452 | 122 | 843 | 451 | ||||||||||||
Other income, net | 1,087 | 500 | 1,577 | 664 | ||||||||||||
Income before income taxes | 23,330 | 10,429 | 58,115 | 29,327 | ||||||||||||
Income tax expense | 4,501 | 2,364 | 11,105 | 5,976 | ||||||||||||
Net income | $ | 18,829 | $ | 8,065 | $ | 47,010 | $ | 23,351 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.54 | $ | 0.23 | $ | 1.34 | $ | 0.65 | ||||||||
Diluted | $ | 0.53 | $ | 0.23 | $ | 1.32 | $ | 0.64 | ||||||||
Weighted-average number of shares used in | ||||||||||||||||
Basic | 35,151 | 35,423 | 35,184 | 35,806 | ||||||||||||
Diluted | 35,348 | 35,666 | 35,604 | 36,287 | ||||||||||||
Benchmark Electronics, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(UNAUDITED) | ||||||||
(in thousands) | ||||||||
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 247,298 | $ | 271,749 | ||||
Restricted cash | 2,039 | — | ||||||
Accounts receivable, net | 478,835 | 355,883 | ||||||
Contract assets | 187,730 | 155,243 | ||||||
Inventories | 746,920 | 523,240 | ||||||
Other current assets | 45,381 | 42,029 | ||||||
Total current assets | 1,708,203 | 1,348,144 | ||||||
Property, plant and equipment, net | 204,154 | 186,666 | ||||||
Operating lease right-of-use assets | 95,533 | 99,158 | ||||||
Goodwill and other, net | 268,617 | 269,912 | ||||||
Total assets | $ | 2,276,507 | $ | 1,903,880 | ||||
Liabilities and shareholders' equity | ||||||||
Current liabilities: | ||||||||
Current installments of long-term debt and finance lease obligations | $ | 3,452 | $ | 985 | ||||
Accounts payable | 522,499 | 426,555 | ||||||
Advance payments from customers | 211,601 | 118,124 | ||||||
Accrued liabilities | 111,348 | 108,718 | ||||||
Total current liabilities | 848,900 | 654,382 | ||||||
Long-term debt and finance lease obligations, less current installments | 296,425 | 129,289 | ||||||
Operating lease liabilities | 87,983 | 90,878 | ||||||
Other long-term liabilities | 42,582 | 55,529 | ||||||
Shareholders' equity | 1,000,617 | 973,802 | ||||||
Total liabilities and shareholders' equity | $ | 2,276,507 | $ | 1,903,880 | ||||
Benchmark Electronics, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Statement of Cash Flows | ||||||||
(in thousands) | ||||||||
(UNAUDITED) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 47,010 | $ | 23,351 | ||||
Depreciation and amortization | 32,987 | 32,963 | ||||||
Stock-based compensation expense | 13,282 | 10,856 | ||||||
Accounts receivable, net | (123,600) | (2,342) | ||||||
Contract assets | (32,487) | (17,415) | ||||||
Inventories | (228,501) | (151,518) | ||||||
Accounts payable | 84,588 | 114,477 | ||||||
Advance payments from customers | 93,476 | 7,341 | ||||||
Other changes in working capital and other, net | (11,473) | (19,021) | ||||||
Net cash used in operations | (124,718) | (1,308) | ||||||
Cash flows from investing activities: | ||||||||
Additions to property, plant and equipment and software | (33,594) | (32,437) | ||||||
Other investing activities, net | 5,666 | 294 | ||||||
Net cash used in investing activities | (27,928) | (32,143) | ||||||
Cash flows from financing activities: | ||||||||
Share repurchases | (9,391) | (40,216) | ||||||
Net debt activity | 169,303 | (6,458) | ||||||
Other financing activities, net | (20,127) | (20,254) | ||||||
Net cash provided by (used in) financing activities | 139,785 | (66,928) | ||||||
Effect of exchange rate changes | (9,552) | (4,414) | ||||||
Net decrease in cash and cash equivalents and restricted cash | (22,412) | (104,793) | ||||||
Cash and cash equivalents and restricted cash at beginning of year | 271,749 | 395,990 | ||||||
Cash and cash equivalents and restricted cash at end of period | $ | 249,337 | $ | 291,197 | ||||
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 | |||||||||||||||||||
Sept 30, | June 30, | Sept 30, | Sept 30, | |||||||||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
Income from operations (GAAP) | $ | 25,284 | $ | 22,432 | $ | 11,794 | $ | 63,123 | $ | 34,427 | ||||||||||
Amortization of intangible assets | 1,591 | 1,592 | 1,596 | 4,792 | 4,793 | |||||||||||||||
Restructuring charges and other costs | 1,331 | 1,266 | 2,070 | 4,911 | 5,242 | |||||||||||||||
(Gain) loss on assets held for sale | — | (2,376) | — | (393) | — | |||||||||||||||
Impairment | — | — | 4,358 | — | 4,358 | |||||||||||||||
Ransomware incident related costs (recovery), net | — | — | (500) | — | (3,944) | |||||||||||||||
Customer insolvency (recovery) | (599) | — | (168) | (599) | (353) | |||||||||||||||
Non-GAAP income from operations | $ | 27,607 | $ | 22,914 | $ | 19,150 | $ | 71,834 | $ | 44,523 | ||||||||||
GAAP operating margin | 3.3 | % | 3.1 | % | 2.1 | % | 3.0 | % | 2.1 | % | ||||||||||
Non-GAAP operating margin | 3.6 | % | 3.1 | % | 3.3 | % | 3.4 | % | 2.7 | % | ||||||||||
Gross Profit (GAAP) | $ | 66,750 | $ | 58,756 | $ | 53,705 | $ | 183,108 | $ | 143,845 | ||||||||||
Customer insolvency (recovery) | (425) | — | (168) | (425) | (353) | |||||||||||||||
Non-GAAP gross profit | $ | 66,325 | $ | 58,756 | $ | 53,537 | $ | 182,683 | $ | 143,492 | ||||||||||
GAAP gross margin | 8.7 | % | 8.1 | % | 9.4 | % | 8.6 | % | 8.9 | % | ||||||||||
Non-GAAP gross margin | 8.6 | % | 8.1 | % | 9.4 | % | 8.6 | % | 8.8 | % | ||||||||||
Selling, general and administrative expenses | $ | 38,544 | $ | 35,842 | $ | 34,387 | $ | 110,675 | $ | 98,969 | ||||||||||
Customer recovery | 174 | — | — | 174 | — | |||||||||||||||
Non-GAAP selling, general and administrative expenses | $ | 38,718 | $ | 35,842 | $ | 34,387 | $ | 110,849 | $ | 98,969 | ||||||||||
Net income (GAAP) | $ | 18,829 | $ | 17,221 | $ | 8,065 | $ | 47,010 | $ | 23,351 | ||||||||||
Amortization of intangible assets | 1,591 | 1,592 | 1,596 | 4,792 | 4,793 | |||||||||||||||
Restructuring charges and other costs | 1,331 | 1,266 | 2,070 | 4,911 | 5,242 | |||||||||||||||
(Gain) loss on assets held for sale | — | (2,376) | — | (393) | — | |||||||||||||||
Impairment | — | — | 4,358 | — | 4,358 | |||||||||||||||
Ransomware incident related costs (recovery), net | — | — | (500) | — | (3,944) | |||||||||||||||
Customer insolvency (recovery) | (599) | — | (168) | (599) | (353) | |||||||||||||||
Settlement | (611) | — | — | (611) | — | |||||||||||||||
Income tax adjustments(1) | (351) | (82) | (1,491) | (1,639) | (1,955) | |||||||||||||||
Non-GAAP net income | $ | 20,190 | $ | 17,621 | $ | 13,930 | $ | 53,471 | $ | 31,492 | ||||||||||
Diluted earnings per share: | ||||||||||||||||||||
Diluted (GAAP) | $ | 0.53 | $ | 0.49 | $ | 0.23 | $ | 1.32 | $ | 0.64 | ||||||||||
Diluted (Non-GAAP) | $ | 0.57 | $ | 0.50 | $ | 0.39 | $ | 1.50 | $ | 0.87 | ||||||||||
Weighted-average number of shares used in calculating diluted earnings per share: | ||||||||||||||||||||
Diluted (GAAP) | 35,348 | 35,336 | 35,666 | 35,604 | 36,287 | |||||||||||||||
Diluted (Non-GAAP) | 35,348 | 35,336 | 35,666 | 35,604 | 36,287 | |||||||||||||||
Net cash used in operations | $ | (31,208) | $ | (25,485) | $ | (41,581) | $ | (124,718) | $ | (1,308) | ||||||||||
Additions to property, plant and equipment and software | (8,623) | (6,996) | (13,818) | (33,594) | (32,437) | |||||||||||||||
Free cash flow (used) | $ | (39,831) | $ | (32,481) | $ | (55,399) | $ | (158,312) | $ | (33,745) | ||||||||||
(1) | This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates. |
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SOURCE Benchmark Electronics, Inc.
