Benchmark Reports Third Quarter 2021 Results

Rhea-AI Summary

Benchmark Electronics (BHE) reported strong Q3 2021 financial results with $572 million in sales, up 5% sequentially and 9% year-over-year. Net income rose to $8 million with a diluted EPS of $0.23. Non-GAAP gross margins improved to 9.4%, and operating margins increased to 3.3% non-GAAP. The company anticipates double-digit year-over-year growth in Q4, with revenues projected between $560 million and $610 million.

Positive

• Sales increased to $572 million, up 5% sequentially and 9% year-over-year.
• Net income grew to $8 million, with diluted EPS at $0.23.
• Non-GAAP gross margins improved to 9.4%.
• Expected revenue growth for Q4 projected between $560 million and $610 million.

Negative

• COVID-19 related costs impacted earnings results, amounting to approximately $1.2 million.
• Restructuring charges anticipated between $4.0 million and $4.5 million in Q4.

TEMPE, Ariz., Oct. 27, 2021 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2021.

		Three Months Ended
		Sep 30,				Jun 30,				Sep 30,
In millions, except EPS		2021				2021				2020
Sales		$	572			$	545			$	526
Net income(2)		$	8			$	7			$	6
Net income – non-GAAP(1)(2)		$	14			$	10			$	12
Diluted earnings per share(2)		$	0.23			$	0.20			$	0.16
Diluted EPS – non-GAAP(1)(2)		$	0.39			$	0.27			$	0.32
Operating margin(2)			2.1	%			2.0	%			1.6	%
Operating margin – non-GAAP(1)(2)			3.3	%			2.5	%			3.0	%

(1)	A reconciliation of GAAP and non-GAAP results is included below.
(2)	Results for the third quarter ended September 30, 2021 and 2020 and second quarter ended June 30, 2021 include the impact of approximately $1.2 million, $1.3 million and $0.9 million of net COVID-19 related costs, respectively.

"We continued to execute well in the face of unprecedented supply chain constraints delivering strong revenue and profit growth in the third quarter," said Jeff Benck, Benchmark's President and CEO. "Our revenues were up 5% sequentially and 9% year-over-year fueled by strong demand in Semi-Cap and high-performance Computing, and improving demand in the Industrials vertical. Our third quarter non-GAAP gross margins improved to 9.4% and non-GAAP operating margins improved 80 basis points or 32% sequentially, which is a testament to the strong operational performance of our team."

"Entering the fourth quarter, we expect that our revenue will again increase sequentially supported by Semi-Cap, Defense, and Computing strength, which we are projecting will enable double digit year-over-year revenue growth in the quarter and non-GAAP gross margins at 9% for the full year. As we look towards 2022 with our current strong demand momentum, we are expecting another year of solid growth and financial results aligned with the mid-term financial model that we set over a year ago."

Cash Conversion Cycle

		Sep 30,				Jun 30,				Sep 30,
		2021				2021				2020
Accounts receivable days			49				48				52
Contract asset days			25				26				28
Inventory days			83				75				66
Accounts payable days			(70)				(69)				(54)
Advance payments from customers days			(16)				(16)				(11)
Cash Conversion Cycle days			71				64				81

Third Quarter 2021 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.

		Sep 30,								Jun 30,								Sep 30,
Higher-Value Markets		2021								2021								2020
Medical		$	118			21		%		$	109			20		%		$	134			26		%
Semi-Cap			133			23					139			26					99			19
A&D			101			18					97			18					105			20
Industrials			108			19					100			18					86			16
		$	460			81		%		$	445			82		%		$	424			81		%
		Sep 30,								Jun 30,								Sep 30,
Traditional Markets		2021								2021								2020
Computing		$	57			10		%		$	40			7		%		$	44			8		%
Telecommunications			55			9					60			11					58			11
		$	112			19		%		$	100			18		%		$	102			19		%
Total		$	572			100		%		$	545			100		%		$	526			100		%

Overall, higher-value market revenues were up 4% quarter-over-quarter from growth in Industrials, A&D and Medical and 9% year-over-year from growth in Semi-Cap and Industrials. Traditional market revenues were up 12% quarter-over-quarter and up 9% year-over-year from growth in the computing sector.

Fourth Quarter 2021 Outlook

• Revenue between $560 - $610 million
• Diluted GAAP earnings per share between $0.24 - $0.32
• Diluted non-GAAP earnings per share between $0.37 - $0.45 (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 and our operations due to COVID-19.

Restructuring charges are expected to range between $4.0 million and $4.5 million in the fourth quarter and the amortization of intangibles is expected to be $1.7 million in the fourth quarter.

Third Quarter 2021 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 3, 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, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). 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 or the negative or other variations thereof. In particular, statements, express or implied, concerning future operating results, our ability to generate sales, income or cash flow, the anticipated impact of the COVID-19 pandemic, the outlook and guidance for fourth quarter 2021 results, our anticipated plans and responses to the COVID-19 pandemic, our expected revenue mix, our business strategy and strategic initiatives, our repurchases of shares of our common stock and our intentions concerning the payment of dividends, among others, are forward-looking statements. Although we believe these statements are based upon reasonable assumptions, they involve risks, uncertainties and assumptions that are beyond our 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, 2020, Part II, Item 1A of the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021  and in any of our subsequent reports filed with the Securities and Exchange Commission (SEC). 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 it and the consequences for the global economy, our business and the businesses of our suppliers and customers, as well as our ability (or inability) to execute on our plans to respond to the COVID-19 pandemic. 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 us as of the date of this document, and we assume no obligation to update.

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 certain 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 also uses non–GAAP measures in order to better assess operating performance and help investors compare results with our previous guidance. 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. 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,
		2021				2020				2021				2020
Sales		$	571,882			$	525,951			$	1,622,265			$	1,531,881
Cost of sales			518,177				479,597				1,478,420				1,407,494
Gross profit			53,705				46,354				143,845				124,387
Selling, general and administrative expenses			34,387				29,724				98,969				89,815
Amortization of intangible assets			1,596				2,368				4,793				7,120
Restructuring charges and other costs			6,428				7,161				9,600				15,480
Ransomware incident related costs (recovery), net			(500)				(1,558)				(3,944)				(1,305)
Income from operations			11,794				8,659				34,427				13,277
Interest expense			(1,987)				(2,136)				(6,215)				(6,189)
Interest income			122				154				451				1,040
Other income (expense), net			500				439				664				(191)
Income before income taxes			10,429				7,116				29,327				7,937
Income tax expense			2,364				1,201				5,976				1,577
Net income		$	8,065			$	5,915			$	23,351			$	6,360
Earnings per share:
Basic		$	0.23			$	0.16			$	0.65			$	0.17
Diluted		$	0.23			$	0.16			$	0.64			$	0.17
Weighted-average number of shares used in calculating earnings per share:
Basic			35,423				36,467				35,806				36,565
Diluted			35,666				36,544				36,287				36,821

 

Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
		September 30,				December 31,
		2021				2020
Assets
Current assets:
Cash and cash equivalents		$	288,567			$	390,808
Restricted cash			2,630				5,182
Accounts receivable, net			311,384				309,331
Contract assets			160,194				142,779
Inventories			478,325				327,377
Other current assets			37,909				26,874
Total current assets			1,279,009				1,202,351
Property, plant and equipment, net			188,858				185,272
Operating lease right-of-use assets			102,440				79,966
Goodwill and other, net			270,059				276,646
Total assets		$	1,840,366			$	1,744,235
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and finance lease obligations		$	7,663			$	9,161
Accounts payable			401,106				282,208
Advance payments from customers			91,464				84,122
Accrued liabilities			99,936				105,645
Total current liabilities			600,169				481,136
Long-term debt and finance lease obligations, less current installments			123,510				131,051
Operating lease liabilities			94,219				72,120
Other long-term liabilities			60,132				70,340
Shareholders' equity			962,336				989,588
Total liabilities and shareholders' equity		$	1,840,366			$	1,744,235

 

Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
		Nine Months Ended
		September 30,
		2021				2020
Cash flows from operating activities:
Net income		$	23,351			$	6,360
Depreciation and amortization			32,963				36,939
Stock-based compensation expense			10,856				9,464
Accounts receivable, net			(2,342)				16,410
Contract assets			(17,415)				(335)
Inventories			(151,518)				(37,131)
Accounts payable			114,477				(18,260)
Advance payments from customers			7,341				21,075
Other changes in working capital and other, net			(19,021)				(8,907)
Net cash provided by (used in) operations			(1,308)				25,615
Cash flows from investing activities:
Additions to property, plant and equipment and software			(32,437)				(29,102)
Other investing activities, net			294				2,586
Net cash used in investing activities			(32,143)				(26,516)
Cash flows from financing activities:
Share repurchases			(40,216)				(19,329)
Net debt activity			(6,458)				8,395
Other financing activities, net			(20,254)				(18,747)
Net cash used in financing activities			(66,928)				(29,681)
Effect of exchange rate changes			(4,414)				1,436
Net decrease in cash and cash equivalents and restricted cash			(104,793)				(29,146)
Cash and cash equivalents and restricted cash at beginning of year			395,990				363,956
Cash and cash equivalents and restricted cash at end of period		$	291,197			$	334,810

 

Benchmark Electronics, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Results
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
		Three Months Ended												Nine Months Ended
		Sep 30,				Jun 30,				Sep 30,				Sep 30,
		2021				2021				2020				2021				2020
Income from operations (GAAP)		$	11,794			$	10,699			$	8,659			$	34,427			$	13,277
Amortization of intangible assets			1,596				1,599				2,368				4,793				7,120
Restructuring charges and other costs			2,070				1,581				1,425				5,242				8,737
Impairment			4,358				—				5,736				4,358				6,743
Ransomware incident related costs (recovery), net			(500)				—				(1,558)				(3,944)				(1,305)
Customer insolvency (recovery)			(168)				(153)				(796)				(353)				(1,149)
Non-GAAP income from operations		$	19,150			$	13,726			$	15,834			$	44,523			$	33,423
Gross Profit (GAAP)		$	53,705			$	47,913			$	46,354			$	143,845			$	124,387
Customer insolvency (recovery)			(168)				(153)				(796)				(353)				(1,149)
Non-GAAP gross profit		$	53,537			$	47,760			$	45,558			$	143,492			$	123,238
Selling, general and administrative expenses (GAAP)		$	34,387			$	34,034			$	29,724			$	98,969			$	89,815
Non-GAAP selling, general and administrative expenses		$	34,387			$	34,034			$	29,724			$	98,969			$	89,815
Net income (GAAP)		$	8,065			$	7,369			$	5,915			$	23,351			$	6,360
Amortization of intangible assets			1,596				1,599				2,368				4,793				7,120
Restructuring charges and other costs			2,070				1,581				1,425				5,242				8,737
Impairment			4,358				—				5,736				4,358				6,743
Ransomware incident related costs (recovery), net			(500)				—				(1,558)				(3,944)				(1,305)
Customer insolvency (recovery)			(168)				(153)				(796)				(353)				(1,149)
Income tax adjustments(1)			(1,491)				(633)				(1,458)				(1,955)				(4,123)
Non-GAAP net income		$	13,930			$	9,763			$	11,632			$	31,492			$	22,383
Diluted earnings per share:
Diluted (GAAP)		$	0.23			$	0.20			$	0.16			$	0.64			$	0.17
Diluted (Non-GAAP)		$	0.39			$	0.27			$	0.32			$	0.87			$	0.61
Weighted-average number of shares used in calculating diluted earnings per share:
Diluted (GAAP)			35,666				36,061				36,544				36,287				36,821
Diluted (Non-GAAP)			35,666				36,061				36,544				36,287				36,821
Net cash provided by (used in) operations		$	(41,581)			$	3,660			$	5,697			$	(1,308)			$	25,615
Additions to property, plant and equipment and software			(13,818)				(12,197)				(5,812)				(32,437)				(29,102)
Free cash flow (used)		$	(55,399)			$	(8,537)			$	(115)			$	(33,745)			$	(3,487)

(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.