Benchmark Reports Fourth Quarter And Full Year 2020 Results

Rhea-AI Summary

Benchmark Electronics (NYSE: BHE) reported fourth-quarter earnings for 2020, revealing net income of $8 million, up from a loss of $7 million in Q4 2019. The company's sales reached $521 million, slightly increased from $508 million in the prior year. Non-GAAP diluted earnings per share were $0.34, compared to $0.27 a year earlier. Despite a decline in total annual sales to $2.05 billion from $2.27 billion in 2019, Benchmark generated $95 million in operating cash flow for Q4 and $120 million for the year. Looking ahead, revenue is projected between $480-$520 million for Q1 2021.

Positive

• Net income for Q4 2020 was $8 million, a significant recovery from a loss of $7 million in Q4 2019.
• Sales for Q4 2020 were $521 million, showing improvement compared to $508 million in Q4 2019.
• Non-GAAP diluted EPS increased to $0.34 from $0.27 in Q4 2019.
• Generated $95 million in operating cash flow for Q4 2020, exceeding forecasts.

Negative

• Total annual sales declined to $2.05 billion in 2020 from $2.27 billion in 2019.
• Net income for the year decreased from $23 million in 2019 to $14 million in 2020.
• Operating margin for the year slightly decreased to 1.2% from 1.3% in 2019.

TEMPE, Ariz., Feb. 4, 2021 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the fourth quarter and year ended December 31, 2020.

		Three Months Ended
		Dec 31,				Sep 30,				Dec 31,
In millions, except EPS		2020				2020				2019
Sales		$	521			$	526			$	508
Net income (loss)(2)		$	8			$	6			$	(7)
Net income – non-GAAP(1)(2)		$	13			$	12			$	10
Diluted earnings (loss) per share(2)		$	0.21			$	0.16			$	(0.19)
Diluted EPS – non-GAAP(1)(2)		$	0.34			$	0.32			$	0.27
Operating margin(2)			2.3	%			1.6	%			(1.8)	%
Operating margin – non-GAAP(1)(2)			3.4	%			3.0	%			2.6	%
						Twelve Months Ended
						Dec 31,				Dec 31,
In millions, except EPS						2020				2019
Net sales						$	2,053			$	2,268
Net income(3)						$	14			$	23
Net income – non-GAAP(1)(3)						$	35			$	51
Diluted EPS(3)						$	0.38			$	0.60
Diluted EPS – non-GAAP(1)(3)						$	0.95			$	1.32
Operating margin(3)							1.2	%			1.3	%
Operating margin – non-GAAP(1)(3)							2.5	%			3.0	%

(1)	A reconciliation of GAAP and non-GAAP results is included below.
(2)	Results for the fourth quarter ended December 31, 2020 and third quarter ended September 30, 2020 include the impact of approximately $1.6 million and $1.3 million of net COVID-19 related costs, respectively.
(3)	Results for the year ended December 31, 2020 include the impact of approximately $7.1 million of net COVID-19 related costs.

Jeff Benck, Benchmark's President and CEO stated, "We closed out a very challenging year, delivering fourth quarter results that not only met our expectations, but demonstrated sequential improvement in both non-GAAP gross margins at 9.6% and higher non-GAAP earnings at $0.34 enabled by higher-value sector mix and improved utilization across the company.  I am very proud of our team, which has proven to be very resourceful and resilient in the face of this pandemic and continues to deliver for our customers."  

Benck continued, "Our focused efforts on improving working capital management are also bearing fruit as we generated $95 million of operating cash flow in the quarter and over $120 million for the year, which exceeded our forecast.  I look forward to 2021 with optimism knowing that our strategic investments in the business to drive differentiated value and sustainability have solidified a path to achieve revenue, margin, and earnings growth in 2021 aligned with our mid-term financial goals."

Cash Conversion Cycle

		Dec 31,				Sep 30,				Dec 31,
		2020				2020				2019
Accounts receivable days			53				52				57
Contract asset days			25				28				29
Inventory days			63				66				60
Accounts payable days			(54)				(54)				(58)
Advance payments from customers days			(16)				(11)				(7)
Cash Conversion Cycle days			71				81				81

Fourth Quarter 2020 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.

	Dec 31,						Sep 30,						Dec 31,
Higher-Value Markets	2020						2020						2019
Medical	$	111		21	%		$	134		26	%		$	103		20	%
Semi-Cap		101		20				99		19				81		16
A&D		111		21				105		20				106		21
Industrials		97		19				86		16				107		21
	$	420		81	%		$	424		81	%		$	397		78	%
	Dec 31,						Sep 30,						Dec 31,
Traditional Markets	2020						2020						2019
Computing	$	46		9	%		$	44		8	%		$	45		9	%
Telecommunications		55		10				58		11				66		13
	$	101		19	%		$	102		19	%		$	111		22	%
Total	$	521		100	%		$	526		100	%		$	508		100	%

Overall, higher-value market revenues were up 6% year-over-year from strength in the Semi-Cap, Medical, and A&D sectors. Traditional market revenues were down from program transitions.

First Quarter 2021 Outlook

• Revenue between $480 - $520 million
• Diluted GAAP earnings per share between $0.11 - $0.14
• Diluted non-GAAP earnings per share between $0.18 - $0.22 (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. Guidance also assumes no material changes to end market conditions due to COVID-19.

Restructuring charges are expected to range between $1.0 million and $2.0 million in the first quarter and the amortization of intangibles is expected to be $2.0 million in the first quarter.

Fourth Quarter 2020 and CY2020 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 Thursday, February 11, 2021 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 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "could", "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, the estimated financial impact of the COVID-19 pandemic, our outlook and guidance for first quarter 2021 results, the company's anticipated plans and responses to the COVID-19 pandemic, statements (express or implied) concerning future operating results or margins, the ability to generate sales and income or cash flow, and expected revenue mix, and Benchmark's business and growth strategies. Although the company believes these statements are based on and derived from reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally.  These statements also depend on the duration and severity of the COVID-19 pandemic and related risks, including government and other fourth-party responses to the crisis and the consequences for the global economy, our business and the businesses of our suppliers and customers.  Events relating to or resulting from the COVID-19 pandemic, including the possibility of customer demand fluctuations, supply chain constraints, or the ability to utilize our manufacturing facilities at sufficient levels to cover our 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 to respond to the COVID-19 pandemic.  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 Part 1, Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A, "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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
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 special 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								Year Ended
	December 31,								December 31,
	2020				2019				2020				2019
Sales	$	521,250			$	508,444			$	2,053,131			$	2,268,095
Cost of sales		470,589				471,131				1,878,083				2,082,567
Gross profit		50,661				37,313				175,048				185,528
Selling, general and administrative expenses		32,380				34,279				122,195				126,740
Amortization of intangible assets		1,979				2,366				9,099				9,461
Restructuring charges and other costs		4,490				2,268				19,970				13,101
Ransomware incident related costs (recovery), net		(45)				7,681				(1,350)				7,681
Income (loss) from operations		11,857				(9,281)				25,134				28,545
Interest expense		(2,175)				(1,650)				(8,364)				(6,664)
Interest income		156				745				1,196				3,829
Other income (expense), net		(482)				(717)				(673)				1,559
Income (loss) before income taxes		9,356				(10,903)				17,293				27,269
Income tax expense		1,661				(3,972)				3,238				3,844
Net income (loss)	$	7,695			$	(6,931)			$	14,055			$	23,425
Earnings (loss) per share:
Basic	$	0.21			$	(0.19)			$	0.38			$	0.61
Diluted	$	0.21			$	(0.19)			$	0.38			$	0.60
Weighted-average number of shares used in calculating earnings per share:
Basic		36,402				36,928				36,524				38,338
Diluted		36,596				36,928				36,817				38,763

For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation.

Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
	December 31,				December 31,
	2020				2019
Assets
Current assets:
Cash and cash equivalents	$	390,808			$	347,558
Restricted cash		5,182				16,398
Accounts receivable, net		309,331				324,424
Contract assets		142,779				161,061
Inventories		327,377				314,956
Other current assets		26,874				30,685
Total current assets		1,202,351				1,195,082
Property, plant and equipment, net		185,272				205,819
Operating lease right-of-use assets		79,966				76,859
Goodwill and other, net		276,646				282,114
Total assets	$	1,744,235			$	1,759,874
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and finance lease obligations	$	9,161			$	8,825
Accounts payable		282,208				302,994
Advance payments from customers		84,122				37,511
Accrued liabilities		105,645				109,915
Total current liabilities		481,136				459,245
Long-term debt and finance lease obligations, less current installments		131,051				138,912
Operating lease liabilities		72,120				67,898
Other long-term liabilities		70,340				78,987
Shareholders' equity		989,588				1,014,832
Total liabilities and shareholders' equity	$	1,744,235			$	1,759,874

 

Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
	Year Ended
	December 31,
	2020				2019
Cash flows from operating activities:
Net income	$	14,055			$	23,425
Depreciation and amortization		48,792				48,427
Stock-based compensation expense		10,398				10,194
Accounts receivable, net		13,586				134,926
Contract assets		18,282				(20,979)
Inventories		(10,799)				(5,238)
Accounts payable		(15,553)				(121,860)
Advance payments from customers		46,612				9,254
Other changes in working capital and other, net		(4,935)				14,987
Net cash provided by operations		120,438				93,136
Cash flows from investing activities:
Additions to property, plant and equipment and software		(39,519)				(35,118)
Other investing activities, net		5,136				255
Net cash used in investing activities		(34,383)				(34,863)
Cash flows from financing activities:
Share repurchases		(25,220)				(122,110)
Net debt activity		(7,987)				(6,794)
Other financing activities, net		(24,319)				(23,933)
Net cash used in financing activities		(57,526)				(152,837)
Effect of exchange rate changes		3,505				418
Net increase (decrease) in cash and cash equivalents and restricted cash		32,034				(94,146)
Cash and cash equivalents and restricted cash at beginning of year		363,956				458,102
Cash and cash equivalents and restricted cash at end of year	$	395,990			$	363,956

 

Benchmark Electronics, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Results
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
	Three Months Ended									Year Ended
	Dec 31,			Sep 30,			Dec 31,			Dec 31,
	2020			2020			2019			2020			2019
Income (loss) from operations (GAAP)	$	11,857		$	8,659		$	(9,281)		$	25,134		$	28,545
Restructuring charges and other costs		4,490			1,425			2,268			13,227			13,101
Ransomware incident related costs (recovery), net		(45)			(1,558)			7,681			(1,350)			7,681
Settlement		—			—			(773)			—			—
Impairment		—			5,736			—			6,743			—
Customer insolvency (recovery)		(553)			(796)			11,036			(1,702)			8,278
Amortization of intangible assets		1,979			2,368			2,366			9,099			9,461
Non-GAAP income from operations	$	17,728		$	15,834		$	13,297		$	51,151		$	67,066
Gross Profit (GAAP)	$	50,661		$	46,354		$	37,313		$	175,048		$	185,528
Settlement		—			—			(773)			—			—
Customer insolvency (recovery)		(553)			(796)			967			(1,702)			(73)
Non-GAAP gross profit	$	50,108		$	45,558		$	37,507		$	173,346		$	185,455
Net income (loss) (GAAP)	$	7,695		$	5,915		$	(6,931)		$	14,055		$	23,425
Restructuring charges and other costs		4,490			1,425			2,268			13,227			13,426
Ransomware incident related costs (recovery), net		(45)			(1,558)			7,681			(1,350)			7,681
Customer insolvency (recovery)		(553)			(796)			11,036			(1,702)			8,278
Amortization of intangible assets		1,979			2,368			2,366			9,099			9,461
Settlements		—			—			(773)			—			(3,021)
Impairment		—			5,736			—			6,743			—
Income tax adjustments(1)		(1,006)			(1,458)			(5,385)			(5,157)			(8,095)
Non-GAAP net income	$	12,560		$	11,632		$	10,262		$	34,915		$	51,155
Diluted earnings (loss) per share:
Diluted (GAAP)	$	0.21		$	0.16		$	(0.19)		$	0.38		$	0.60
Diluted (Non-GAAP)	$	0.34		$	0.32		$	0.27		$	0.95		$	1.32
Weighted-average number of shares used in calculating diluted earnings (loss) per share:
Diluted (GAAP)		36,596			36,544			36,928			36,817			38,763
Diluted (Non-GAAP)		36,596			36,544			37,374			36,817			38,763

(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.

FAQ

What were the Q4 2020 financial results for Benchmark Electronics (BHE)?

Benchmark Electronics reported Q4 2020 sales of $521 million and a net income of $8 million, with non-GAAP diluted EPS at $0.34.

How did Benchmark Electronics perform for the full year 2020?

For the full year 2020, Benchmark Electronics had net sales of $2.05 billion, down from $2.27 billion in 2019, with net income decreasing to $14 million.

What is the Q1 2021 revenue guidance for BHE?

Benchmark Electronics provided guidance of $480 to $520 million in revenue for Q1 2021.

What were the operating margins for Benchmark Electronics in 2020?

The operating margin for Benchmark Electronics in 2020 was 1.2%, slightly down from 1.3% in 2019.

How much operating cash flow did Benchmark generate in Q4 2020?

Benchmark generated $95 million of operating cash flow in Q4 2020.