Looking at the highlights from the call, Benchmark Electronics reported strong performance in the second quarter of 2024, with total revenues exceeding expectations and non-GAAP gross margins surpassing 10%. The company’s focus on the Aerospace & Defense and Semiconductor Capital Equipment sectors drove positive results, although there were declines in other sectors like Medical and Advanced Computing & Communications.
Looking ahead, Benchmark Electronics is optimistic about revenue growth in 2025, with new program wins expected to contribute to their performance. The company is expanding capacity in low-cost regions and investing in Semi-Cap and precision technology to drive future growth. Despite challenges in certain sectors, Benchmark Electronics remains committed to improving cash flow and potentially returning capital to shareholders through share repurchases.
Analysts and investors are closely watching Benchmark Electronics, with positive revisions to earnings estimates and strong free cash flow generation in the last four quarters. The company’s resilience in profitability and strategic focus on high-growth sectors position them well for potential future growth. Investors can access additional insights and tips on Benchmark Electronics’ financials and prospects through InvestingPro, providing a comprehensive overview of the company’s performance and market position.
Overall, Benchmark Electronics appears to be navigating the market environment effectively, with a strategic focus on sectors with growth potential. The company’s performance in Q2 2024 and outlook for 2025 demonstrate their commitment to driving growth and delivering value to shareholders. Investors and analysts will continue to monitor Benchmark Electronics’ progress and performance in the coming quarters.
At this time, I will turn the call back over to Jeff for further insights on demand trends and new business wins. Thank you.” We are encouraged by the progress we are making in our Semi-Cap sector, with new program wins and a strong outlook for future growth. In Medical, while we are facing near-term challenges, we are securing new wins that will contribute to growth in the future. Our Complex Industrials sector is seeing softness in demand, but we are optimistic about a potential return to growth by the end of 2024. Our A&D sector continues to perform well, with strong demand and new program wins driving growth. AC&C sector revenue declined in the June quarter, but we are winning significant new business that we expect will contribute to a return to growth in 2025. Overall, we remain committed to delivering value to our customers and driving growth in each of our sectors. Thank you to the entire Benchmark team for their hard work and dedication. Can you give us a little more color on what you’re seeing in that market and why you’re optimistic about its growth potential moving forward?
And other investments in semiconductor manufacturing that could drive demand in the Semi-Cap space. So, we’re cautiously optimistic about the margin progression into 2025, and we’ll continue to monitor those moving parts closely. But overall, we see Semi-Cap as a key area for growth and margin improvement for us.
Melissa Fairbanks: Great. Thank you so much for the color. I appreciate it.
Jeff Benck: Of course. Happy to help. Thank you for the questions.
Operator: And we have time for one more question. We’ll go to Michael Chang with Morgan Stanley. Your line is open.
Michael Chang: Hi, good afternoon. Thanks for taking my question. Just wanted to follow up on the topic of margin improvement. You mentioned earlier that you’re incrementally more constructive on the outlook for growth this year. Can you provide some more details on where you see the biggest opportunities for margin improvement in the near term?
Jeff Benck: Absolutely. I think one area where we see a significant opportunity for margin improvement is in our industrial segment. We have been focusing on streamlining our operations, driving efficiencies, and reducing costs in that area. Additionally, as we mentioned earlier, our Semi-Cap business has been performing well and has the potential to drive margin improvement due to its higher margin profile. We are also constantly evaluating our pricing strategies and looking for opportunities to optimize our product mix to enhance margins. Overall, we believe that a combination of these factors will contribute to margin improvement in the near term.
Michael Chang: That’s great to hear. Thank you for the insights. And just a quick follow-up, do you anticipate any challenges or headwinds that could impact margin improvement in the coming quarters?
Jeff Benck: While we are optimistic about the potential for margin improvement, there are always potential challenges and headwinds that we need to be mindful of. Factors such as supply chain disruptions, inflationary pressures, and competitive pricing dynamics could impact our margins. Additionally, macroeconomic factors and geopolitical events could also pose challenges. However, we are actively monitoring these risks and have strategies in place to mitigate their impact as much as possible. We remain focused on executing our growth and margin improvement initiatives and are confident in our ability to navigate any challenges that may arise.
Michael Chang: Understood. Thank you for the comprehensive response. I appreciate it.
Jeff Benck: My pleasure. Thank you for the questions. Have a great day.
Operator: This concludes our Q&A session. I will now turn the call back over to Jeff Benck for closing remarks.
Jeff Benck: Thank you all for joining us today and for your insightful questions. We are encouraged by our performance in the recent quarter and remain committed to driving growth and margin improvement in the coming quarters. We appreciate your continued support and look forward to updating you on our progress in the future. Have a great day, everyone. Goodbye.
Operator: This concludes today’s conference call. You may now disconnect.
That’s an opportunity for us to provide solutions for those applications. We’re seeing a lot of focus on energy efficiency and sustainability in the industrial sector, which is driving growth for us in that segment. Additionally, we’re seeing a lot of interest in automation and control systems, as companies look to improve their efficiency and productivity. Overall, we’re seeing a lot of positive momentum in the specialty industrial sector, and we’re excited about the opportunities it presents for us. We have been focused on improving our cash flow by reducing inventory levels and improving our cash cycle days. We have set a target of at least $120 million or greater for our free cash flow, and we believe that there is more room for improvement in this area. Our efforts to reduce inventory and improve our cash flow have been successful, and we are continuing to work towards reaching our target. Actualmente estamos a cuatro rotaciones de inventario y, como hemos establecido en nuestro plan a largo plazo para 2025, pretendemos llegar a unas cinco rotaciones. Así que sí, definitivamente hay margen de mejora. Pero por ahora, creo que puedes asumir que el flujo de efectivo libre estará en promedio entre $70 millones y $90 millones para el año en términos de modelado.
Jeff Benck: Sí. Y creo que el inventario ha sido un enfoque explícito y es bueno ver que el equipo sigue trabajando en reducir los inventarios y colaborando con los clientes para disminuir los inventarios. Como dijo Arvind, todavía tenemos camino por recorrer. No creemos que hayamos terminado con ese viaje, como él mencionó con el número de rotaciones. Así que ciertamente hemos hecho un tremendo progreso y estamos contentos con eso. Pero, hay más oportunidades aquí. No hemos vuelto a lo que yo consideraría normal, donde esperaríamos estar.
Anja Soderstrom: Vale. Y luego una última pregunta si me permiten. ¿Cuál es su práctica con el efectivo en su balance? ¿Han recomprado acciones en este trimestre? ¿Hay alguna razón para eso o?
Arvind Kamal: Sí, Anja, creo que nuestro enfoque realmente ha sido en el corto plazo pagar nuestra deuda a corto plazo, nuestro revolver. Y creo que has visto en los últimos trimestres que hemos estado realmente enfocados en reducir ese saldo y seguiremos haciéndolo. Y como mencionamos en la llamada de hoy, hemos aumentado el dividendo. Así que, con eso, pero seguimos enfocados en buscar oportunidades para recomprar acciones según lo hemos delineado.
Anja Soderstrom: Vale, genial. Gracias. Eso fue todo por mi parte.
Jeff Benck: Gracias, Anja.
Operador: Y esto concluye la sesión de preguntas y respuestas. Ahora se lo devolveré a Paul para cualquier comentario adicional o de cierre.
Paul Mansky: Gracias, Chloe, y gracias a todos por participar en la llamada de ganancias del segundo trimestre de 2024 de Benchmark. Como recordatorio, estaremos asistiendo a la 13ª Conferencia Anual Virtual de Tecnología Industrial, Robótica y Tecnología Limpia de Needham el 19 de agosto. Por favor, consulte la sección de eventos de nuestro sitio web de relaciones con inversores en ir.bench.com para actualizaciones sobre próximas conferencias de inversores. Con eso, les agradecemos nuevamente por su apoyo y esperamos hablar con ustedes pronto.
Operador: Esto concluye el programa de hoy. Gracias por su participación. Puede desconectarse en cualquier momento y que tengan una maravillosa tarde.
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