Benchmark Electronics Inc. Q1 2023 Earnings Call
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Speaker 2: Please continue to hold.
Speaker 2: Hello and welcome to the benchmark electronics Inc. 1st quarter 2023 earning conference call. All participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star, then one, on your telephone keypad. To withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Paul Mansky with the Benchmark Electronics Company. Please go ahead.
Speaker 3: Thank you, MJ, and thank everyone for joining us today. So, benchmarked first quarter of fiscal year of 2023, Arnie's call. Joining me this afternoon are Jeff Banks, CEO and President and Blue Block Roger, CFO . After the market closed today, we issued an earnings release pertaining to our national performance for the first quarter of 2023.
Speaker 3: And we have prepared a presentation that we will reference on this call. Both are available under the Investor Relations section of our website at bids.com. This call will be webcast live and it will be available online following the call. The company has provided reconciliation of our GAC to non- GAAP measures in the earnings release, as well as any appendix of the presentation.
Speaker 3: Please take a moment to review the forward-looking statements advice on slide 2 in the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks that are not statements of historical fact are forward-looking statements which involve risks and uncertainties as described in our press releases and SEC filings.
Speaker 3: actually results in a different material for these statements and notably due to the global supply chain constraints, macroeconomic conditions and CINI cap equipment spending.
Speaker 3: If you will please turn to slide three. I'll turn the call over to our CEO , Jeff Banks. Thank you, Paul. Good afternoon and thanks to everyone for joining our call today. Our first quarter was once again demonstrated our ability to continue to grow our business without compromising our margin objectives, even in a less certain macro environment. Total revenue in the quarter was up 9% year over year. Both GAAP and non-GAAP gross margins were 9.2%. GAAP operating margin was 3.3%. On a non-GAAP basis, we delivered operating margin of 3.7%.
Speaker 3: As a reminder, unlike most of our peers, our non-gap operating margin includes stock-based compensation, which in the March quarter equates approximately 70 basis points.
Speaker 3: Our first quote of Gap earnings with $0.35 per share and a non-Gap earnings will $0.42 in line with a prior guidance.
Speaker 3: The Plyching Premium, which we previously disclosed to be zero margin pass through revenue, came at 18 million in the quarter.
Speaker 3: This moved down nearly 70% year over year.
Speaker 3: Excluding the effect of this no margin revenue, we delivered non-gap gross margin of 9.5% and non-gap operating margin of 3.8%.
Speaker 3: If you're turning the call over to Ruth, I'd like to share a few high level thoughts on demand and our outlook.
Speaker 3: In the first quarter, we continue to experience strength.
Speaker 3: across the majority of our market sectors. Let my healthy double digit year-year growth in our advanced computing, industrial, medical.
Speaker 3: and next generation communications sectors.
Speaker 3: As we guided the last quarter, Senecap was a challenge during the period.
Speaker 3: However, I should note, unlike last quarter, we did not see incremental weakening during the first quarter.
Speaker 3: We believe in the second elections that will support our future growth in the sector.
Speaker 3: and are investing accordingly, even in this downturn. An example of which is the grand opening in March of our new Precision Technology facility in Mesa, Arizona, which was supported by our Governor, Katie Hoppe.
Speaker 3: We have an expected continue to outperform the broader wafer front end market.
Speaker 3: Indicators are pointing to a better second half of 2023 and a potentially much stronger 2024. Looking at the broader market, although we see growth across the majority of the sectors we serve, we are aware of the uncertain macro trends outside of our control. Based on that, we began proactively implementing expense controls in the quarter of 2020.
Speaker 3: positions us exceptionally well to deliver to our financial targets.
Speaker 3: Finally, I want to take a moment to highlight our continued commitment to ESG. In February , we published our second annual sustainability report.
Speaker 3: This report builds upon last year's inaugural addition in that for the first time we established specific intensity targets for greenhouse gases.
Speaker 3: I encourage you to read the report, which can be found at bench.com slash sustainability. Now, let me pass it over to Ruth to share more details on the quarter and our guidance for 2Q.
Speaker 3: Thanks Jeff, and good afternoon. Please turn the slide five for our revenue by market sector.
Speaker 3: Total benchmark revenue was 6.95 million in Q1, which is 7% lower sequentially, and 9% higher year-over-year. Excluding the effects of fly chain premiums, revenue was up 17% year-over-year in the period. The reconciliation of this and our sector level performance, excluding fly chain premiums, can be found in the appendix section of the presentation material.
Speaker 3: Turning to slide 6. Excluding supply chain premiums, medical revenues in the first quarter was up 26% versus the prior year. Our growth was fueled by strength in existing programs, new programs ramping, and an improving supply chain environment.
Speaker 3: The recap revenue decreased 16% year-of-year in line with our expectations.
Speaker 3: A&D revenue was down 2% year over year. Defense for us continues to be challenged by supply availability, coupled with the timing of program ramps. We expect this to improve as we go through the year. Meanwhile, commercial aerospace continues to show strength. Commercial's revenue for the first quarter increased 24% year over year.
Speaker 3: as new customer programs, assessment, test and measurement, and energy efficiency. Advanced computing increased in impressive 81% year of year, as we benefited from the continued execution of our multiple high performance computing programs.
Speaker 3: In the next-gen communications sector, revenue was up at an equally impressive 53% year-over-year. Our year-over-year performance was driven by continued secular strength in 5G infrastructure and satellite communications.
Speaker 3: In the first quarter, our top 10 customers represented 51% of total revenue. Please turn to slide 7.
Speaker 3: Our gap earnings per share for the quarter was 35 cents, which represents 13% growth on a year over year basis.
Speaker 3: Our gap results included restructuring and other one-time costs, totaling 1.4 million.
Speaker 3: related to both the previously announced closure of our site in Morpark, California, and the more recent 2023 expense actions discussed earlier.
Speaker 3: For Q1, our non-gath dose margin of 9.2% decreased 40 basis points sequentially, primarily due to lower revenue, specifically within our semi-cap sector.
Speaker 3: Excluding supply chain premiums, our gross margin was 9.5% which is in line with guidance.
Speaker 3: Our SG&A was $38.2 million, down sequentially as a result of the expense actions begun in Q1, coupled with lower variable compensation.
Speaker 3: non-GAAP operating margin was 3.7%, excluding supply chain premiums. Operating margin was 3.8%, representing the high end of our guidance range.
Speaker 3: In Q1, 2023, our non-GAAP effective tax rate was 19.2%.
Speaker 3: We turn to slide 8 to discuss the effects of supply chain agreements on a transit basis. In Q1 supply chain premiums declined to 18 million versus 46 million in Q4 2022 and 57 million in Q1 2022.
Speaker 3: Excluding supply chain premiums, our revenue in the first quarter was $677 million, a sequential decrease of $28 million, or 4%, and a year-over-year increase of $98 million, or 17%.
Speaker 3: The ground's on a year-over-year basis, we're driven by advanced computing, next-generation communications, and medical.
Speaker 3: Please turn to slide 9 to review our cash conversion cycle performance.
Speaker 3: Our cash conversion cycle days were 109 in the first quarter of 2023, compared to 96 days in Q4 2022. The largest contributor to the increase was investment and inventory as we continue to manage through pockets of supply chain constraints.
Speaker 3: So the limitary increase to coincidentally, if you want, by 50 million, which was partially offset by reduction in counts receivable across new 30 million.
Speaker 3: Please turn to slide 10 for an update on liquidity and capital resources.
Speaker 3: In Q1, we used $25 million of cash in operations and invested $39 million in CapEx to support continued growth in our Mexico facilities and enhanced capabilities in our Precision Technologies business unit.
Speaker 3: While we will continue to invest throughout the year, given the timing of these specific initiatives, we anticipate annual cat-backs to be first half-weighted in 2023. We expect our cat-back spending in Q2 to be between 10 and 15 million.
Speaker 3: Our cash balance on March 31st was $212 million. As of March 31st, we had $130 million outstanding on our term loan, $275 million outstanding borrowings against our revolver, and $171 million available to borrow under our revolver.
Speaker 3: As announced today, to further support our strong liquidity positions and growth, we expanded our revolver capacity by 100 million by executing the accordion within our existing credit facilities.
Speaker 3: The expansion of the revolver was done at the same terms as the current credit facility.
Speaker 3: Turning to slide 11 to review our capital allocation activity. In Q1, we paid our regular quarterly cash dividend equated to $5.8 million. Turning to slide 12 for our review of our second quarter 2023 guidance.
Speaker 3: We expect revenue to range from 670 million to 710 million. Excluding the effect of supply chain premiums, we expect gross margin to be between 9.4% to 9.6% in the quarter.
Speaker 3: SG&A expense will range between $36 and $39 million.
Speaker 3: Also, excluding supply chain premiums are not in gap operating margin range. It's forecasted to be 3.9% to 4.1%.
Speaker 3: Our non-GAAP guidance does exclude the impact of amortization of intangible assets and estimated restructuring and other costs.
Speaker 3: Between the Previously Announced Site Closure and our more recent expense actions mentioned earlier, we expect to incur restructuring and other non-recurring costs in 2.2 of approximately 1.8 to 2.2 million.
Speaker 3: A non-GAAP diluted earnings per share is expected to be in the range of 43 to 49 cents or a midpoint of 46 cents.
Speaker 3: Other expenses NAS are expected to be $7 million due primarily to interest expense.
Speaker 3: We expect that for Q2, our non-gas-effective tax rate will be between 18% and 20%, so weighted average share count of 35.6 million.
Speaker 3: Now turning to free cash flow for 2023. We continue to expect improved working capital throughout the year. This will be driven primarily by reducing inventory. We have a number of working capital initiatives in place, including increasing advanced deposits.
Speaker 3: inventory claims, and aligning clear-to-build schedules. Over the year, we continue to anticipate 2023 pre-cash flow generation of $70-90 million.
Speaker 3: And with that, I'll turn the call back over to Jeff. Thanks, Ruth. Please turn to slide 14.
Speaker 3: First, let me provide some additional color on what we're expecting by way of sector-level demand for the upcoming quarter and full year. All metrics I reference are excluding the effective supply chain premiums, which we believe provides the best insight into the performance of our sectors.
Speaker 3: In medical, revenue grew 26% in the first quarter, better than our expectations coming into the period. We were helped by some improvement in supply chain during the quarter, but still remain constrained in our ability to fully meet demand. With the strength and macro-resiliency of our existing customer base and programs, we
Speaker 3: New winds continue to ramp throughout the year, and with expected easing of supply conditions, we anticipate medical to continue to deliver growth for us in the current quarter and for the full year.
Speaker 3: Following 30% growth in semi-cap in 2022, first quarter of 2023 saw a correction, declining 16% versus both the prior year and quarter. This was in line with our expectations provided with our Q4 earnings call.
Speaker 3: With our customers' latest forecasts, share gains, and the timing of new program ramps, we are somewhat more optimistic on the second half of the year than we were 90 days ago.
Speaker 3: In Q2, we expect semi-cap to be flat to up sequentially, albeit still down modestly year on year. Looking further out, everything we are hearing today points to the potential for a broadly improved environment in 2024.
Speaker 3: We remain confident that even during this down cycle we will significantly outperform the end market for wafer fab capital equipment. While the majority of industry forecasts are centering around a 25% decline for the market in 2023, we expect our revenue to be up to $2.5 million.
Speaker 3: to be down only in the high single digits this year. We remain as committed as ever to Semi-Cap and are actively investing to continue to capture more than our share of the long-term growth of this market, which is supported by increased silicon content in all things.
Speaker 3: the geographical diversification of semiconductor manufacturing, and state and federally sponsored investments via measures including the CHIPS Act. Moving to the AMD sector, revenue was flattish year on year in the quarter, slightly below our guidance. It has beenrea
Speaker 3: Commercial Arrow demand continues to improve for us, but our defense sub-sector remains the most heavily supplied constraint.
Speaker 3: Also, impact in growth is the timing of defense program reps. In Q2, we expect these conditions to improve, resulting in growth in the quarter and for the year.
Speaker 3: Turning to industrials, here too we saw solid growth, with revenue of 24% versus the prior year.
Speaker 3: We have positioned ourselves to participate in megatrends, specifically automation, environmental, and energy efficiency solutions.
Speaker 3: Similar to medical, supply conditions are showing some improvement, which we expect to continue throughout the year.
Speaker 3: This leads us to anticipate year-on-year growth in the quarter and for the full year.
Speaker 3: In advanced computing, we delivered an exceptionally strong quarter with revenue growth above 80%.
Speaker 3: As a reminder, our advance computing efforts are not in support of cloud or data center varit for circuitren.
Speaker 3: Rather, we help build some of the largest and most sophisticated high-performance computing machines in the world.
Speaker 3: These are often government agency sponsored and by definition relatively macro resilient.
Speaker 3: They are, however, programmatic, which can lead to some lumpiness quarter to quarter, driven by build schedules with existing programs and the timing of new wins.
Speaker 3: Our first quarter revenue benefited from revenue that pushed out of Q4, as we discussed on our last call.
Speaker 3: For Q2, we expect completion of one of our large HPC programs.
Speaker 3: As such, we anticipate sector revenue to be down sequentially.
Speaker 3: On a full-year basis, we are forecasting flatish performance.
Speaker 3: Lastly, next generation communications revenue grew greater than 50% year on year. Coming off a year which sector revenue was up 24%.
Speaker 3: We are well positioned to capture investment in broadband infrastructure, demand for satellite communications and new broadband connectivity programs focused on rural areas.
Speaker 3: While some of these initiatives are potentially exposed to infrastructure deployment delays, we believe each are supported by multi-year catalysts and strategic comparatives for our customers. As such, we may see demand modulate in the near-term, but we continue to anticipate sector growth for the full year.
Speaker 3: Turning the slide 15, let me finish our sector discussion by highlighting some key programs we secured in the March quarter.
Speaker 3: We again saw good balance of wins across our sectors, reflecting the diversity of complex projects that we take on in support of our customers throughout the life cycle, from design to manufacturing.
Speaker 3: In medical, we continue to be awarded programs based on our ability to deliver highly sophisticated products in the medical device and life science markets.
Speaker 3: This quarter we won new manufacturing business for products including an automatic external defibrillator, a minimally invasive surgical system, and a next-gen CT scanning platform. In Semi-Cat, despite the near-term capital spending constraints, we continue to secure new winds that positions us out in front of us that go beyond our normal
Speaker 3: for the future growth driven by the evolution to next generation processes and geometries.
Speaker 3: To that end, this past quarter we awarded a new engineering win for a test platform and a vacuum system serving these leading edge processes.
Speaker 3: In the AMD sector, we secured multiple manufacturing wins in the commercial electric aeronautics market.
Speaker 3: Within defense, we are pleased to win the manufacturing business for optical sensors to be used in a space application.
Speaker 3: Also in defense, we won RF design opportunities spanning multiple projects, which speaks to our experience and skill set in this space. In industrial, we continue to benefit from our track record, particularly within the energy efficiency and management, automation, and test the measurement market.
Speaker 3: Examples of which are winds is quarter that include the manufacturing of a wireless seismic detection and prediction device as well as flow control devices. Both going into the energy market to improve safety and efficiency.
Speaker 3: Within engineering, we will award it a next-gen inspection tool designed to ensure compliance with electrical wiring standards in buildings. In advanced computing and next-gen communication, as an example of synergy between engineering and manufacturing.
Speaker 3: This quarter we want to combine opportunity at a household name to provide IOT-enabled smart sensors for municipalities.
Speaker 3: which will be used to improve energy efficiency and management. This is a great example of our deep partnership with our customers from concept to manufacturing.
Speaker 3: In summary, please turn to slide 16. Our diversified second positioning and focus on execution enabled us to again deliver to our targets.
Speaker 3: Excluding supply chain premiums, we delivered 17% revenue growth and 21% non-GAAP operating income growth in the quarter.
Speaker 3: We grew four of our six sectors and are expecting growth in four and potentially five of the six for the year.
Speaker 3: So one notable exception we see is in Semicat, where our business will contract, but we expect to perform significantly better than the market in 2023.
Speaker 3: While we are optimistic about the resilient demand forecast we are seeing across the majority of our sectors, we are also being proactive to manage discretionary spending while protecting our investment and our future growth.
Speaker 3: Although our inventory growth has impacted our cash flow in recent periods, we expect this trend will change in the quarters to come. As the supply chain improves, we execute our working capital initiatives and we continue to enjoy demand strength.
Speaker 3: This provides me confidence in our ability to execute to our commitment both in 2023 and beyond. With that, I'll now turn the call over to the operator to conduct our Q&A session.
Speaker 2: Great, thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw from the question, please press star, then two.
Speaker 4: At this time we will pause momentarily to assemble our roster. Today's first question comes from Jason Schmidt with Lake Street. Please go ahead. Hey guys, thanks for your team my questions. Just the first one I wanted to start with just to confirm that you still feel comfortable.
Speaker 4: with that 2023 guidance you laid out last quarter of kind of 7 to 9% growth ex those supply chain premiums.
Speaker 3: Yeah, I'll start that and let Ruth add to it. We still feel that things are tracking essentially where we were a quarter ago. So you see Q1 kind of came in, in line with expectations and we're certainly guiding in line with our last update there.
Speaker 3: So obviously there's a lot of macro uncertainty, but as we look at our feedback from our customers and what we're seeing, we feel pretty good about what we laid out last quarter. Jason, this is Bruce. I'll just ask the Jeff that just in terms of the profile of it over.
Speaker 4: What did increased confidence in the semi-cap business? Just curious if that is more due to order patterns that you're seeing or the fact that it bottomed in Q1 when maybe you thought it wouldn't bottom until Q2.
Speaker 3: I mean, obviously it's a dynamic environment, right? But we obviously, particularly with supply chain environment, we have good forecast now through the end of the year. So certainly we look at the forecast. It doesn't mean that we can't see changes there, but you know, probably have less...
Speaker 3: A little less turmoil in the quarter and fourth quarter we saw quite a bit of demand moving in the quarter. First quarter was not that there weren't some ins and outs but it was a lot more consistent. And then obviously with the guy this quarter and then just talking to a lot of the customers about what they're seeing. We still know there's memory weakness.
Speaker 3: concerns about China and some of that, but the legacy notes seem to be doing pretty well, and from that standpoint, there's pretty good demand strength, and we know we have a number of new wins that we're working on that is driving some revenue, particularly as you get into the back half of the year.
Speaker 3: And then everyone is sort of looking at 24. If you look at over the last four down cycles, you know, these typically have lasted, frankly, less than a year. And I know this cycle may be different, but we sort of think of it similar way. So, you know, I guess that's what's led us to where we believe.
Speaker 3: that we're a little more constructive, we're not ready to say, hey, you know, we're off to the races, but we feel good about where we're headed for 2Q.
Speaker 4: Okay, that makes sense. And then just the last one, and I'll jump back into queue. Are you seeing attach rates for your engineering and design services remaining fairly consistent? And then I guess relatedly, is that attach rate pretty consistent across all segments or are there some segments that are lagging?
Speaker 3: Good question. We did have a good quarter of engineering bookings and the attach rate, you know, I shifted that goal to be over 70% and the team cleared that again in the first quarter. So feel pretty good about the engineering pipeline.
Speaker 3: You know, we obviously have a long history in medical engineering devices and quite a bit of work going on in aerospace and defense and industrial. You know, we've had a nice spread of engineering projects across the sectors, so I can't say it's more heavily, necessarily dominated. It's good to see.
Speaker 3: some work going on in the communication and the semi-cap space. We talked about a couple new wins actually in that realm. So I would say pretty pleased with the diversity of engineering projects right now that we're winning. And it's awesome to see some of those.
Speaker 3: lead to winning the manufacturing as well, which is, while it's great to be a really strong design house, we do it with the intent of building product tube down the road.
Speaker 4: Okay, no, really good to hear. Appreciate the call, guys. Thanks.
Speaker 2: Thank you. The next question comes from Steven Fox with Fox Advisors. Please go ahead.
Speaker 5: conclusions coming out of the supply chain right now in terms of what's going on. I know everyone's got a different mix, etc. and different rate of new programs, but getting back to what you're seeing, like how much can you dive deeper into like sort of the the one the semi-cap trends that are benefiting you to see more stable outlook.
Speaker 5: And then two, maybe just remind us where the new program momentum is coming from. And then I had a follow-up.
Speaker 2: Ladies and gentlemen, please stand by. It appears we have lost connection with our speakers.
Speaker 1: The.
Speaker 2: Ladies and gentlemen, we have reestablished our speaker connection. Let's start again with Mr. Stephen Fox from Fox Advisors. So Stephen, I heard your question. I presume you didn't get my answer. I guess the line dropped. Yeah, great. Yes, so.
Speaker 3: Go ahead. Yeah, just thought about that. So what I was trying to articulate was that we have traditionally been more exposed to logic than memory. We do have wins across both and tools that we work on across both, but we've been more traditionally more logic, you know, heavy. The other thing I mentioned was that, um,
Speaker 3: Depending on the position on tools with different OEMs, some are seeing different impacts there. As we talked in the past about the backlog on EUV and the consistent of our strong demand there, that benefit us a bit because of our involvement there.
Speaker 3: We could question or engage in that. When it comes to the, I think you also asked about some of the new tools. Some of the new tools are certainly on the...
Speaker 3: I'm sort of the leading edge, so it's technology that hasn't necessarily come to market yet, and when you talk of the new geometries and some of that, are going to benefit us down the road as customers move there. And I think we saw some of those schedules move a bit just because of them.
Speaker 3: you know, introduction of a branded platform if an OEM is looking at trying to manage their spending and when they think the introduction makes sense, you know, do we do it in a downturn or not, but I'll leave that to the OEMs to decide, you know, how that plays out. The other dynamic is just, you know, we also have a pretty good...
Speaker 3: exposure to some of the 200 millimeter, 300 millimeter solutions, which there's been a lot of talk about some of those legacy nodes, and is there still a demand there, particularly in areas that are like IoT and some of the technology solutions that may not require five nanometer and smaller geometries.
Speaker 3: So that's a little bit, oh and then lastly, we are more front end exposed, like you know, we have the privilege of being in the chamber and so I know some of our competitors do more back end testing measurement and those kind of solutions. We tend to be more front end dominant.
Speaker 5: Yeah, no, it really does, but I just want to make sure I was clear on that. And then secondly, Rup, when you're taking some costs out, you seem to be seeing like stable trends with new programs ramping, etc. So how do we think about operating leverage into the second half? I mean, it seems like
Speaker 5: It seems like you have sort of some pent-up profit that could flow through the income statement Even if you're just like on your sales targets. Can you just talk a little bit about that potential? Thanks
Speaker 3: Yeah, no, that's right. It's from a margin profile standpoint. We'll continue to see second half strength from a margin standpoint. That's top line growth that fills in towards the growth rate that Jeff mentioned earlier. So we'll get continued operating leverage as we go through the year. In our DEP
Speaker 5: Great, got it. And I'm sorry, just one more. On the supply chain premiums, so how would you think it plays out? What's the updated view on how it plays out from here, and any other comments around just supply chain? Thanks, that's it. No, absolutely. I appreciate you asking on supply chain premiums. As we predicted, we thought it would continue to come down. It's come down.
Speaker 5: as we see it throughout the year. I mean, supply chain as a whole is still, you know, has pockets of constraints. Some lead times are improving here and there. Supply chain premiums have been reduced. And we think it's going to continue to come down likely as we go through the year.
Speaker 3: and as the market continues to stabilize around it. Yeah, we don't see that trend reversing at this point. I think that, you know, as things start to free up, we'll probably see less propensity for that. And frankly, you know, nobody, you know, at this point wants to be paying those premiums.
Speaker 3: So from that standpoint, I think we would say directionally, it'll continue to come down, although not evaporate overnight. So we'll continue to report kind of what we're seeing as we come through it. A little hard to predict in front of it other than it's a downward trajectory.
Speaker 2: Thank you. Thank you so much. Thank you. Thank you. As a reminder to ask a question, you may press star than one. The next question comes from Anya Sotarstrom with Sidoori. Beats go ahead.
Speaker 6: Hi, thank you for taking my question. So I have a follow up to Jason's question on the 2023 guidance. What's the biggest risk there? Have you sort of
Speaker 6: secure all the components for that or could there be some hiccups there or are there any other risks you—what are the biggest risks you see to achieving that guidance range?
Speaker 3: As we think about possible headwinds, I mean it's probably more to do with, we've got a portfolio that is we think largely resistance to recessionary considerations, if you think about medical technologies or these sort of things. But there are pockets where it's next-gen communications and there are then infrastructure deployment where it could be a little bit slower and we're hearing some headwinds around that. So I think it's more so that. Now on the other hand, as we talked about folks are saying that semi-cap could get stronger as you go through the year and exiting 23 into 24, it should likely be much stronger. So...
Speaker 3: Well, there's a lot of effort right now on inventory, as you can imagine, really trying to match things up to be able to build what customers want. At the same time, we have a number of initiatives around this, right, working obviously not only to how do we bring our inventory down, but then also working through as customers have incremental demand, we're really saying how do we – if we can't get things aligned that we pursue advanced deposits for customers to say, look, in this environment we really want to make sure that we've got everyone's skin in the game to go drive inventory beyond what we might have line of sight to clearing in a quarter.
Speaker 3: I think you see everybody in the industry sort of dealing with this, and it's certainly an explicit focus for our team. But we kind of knew it was a multi-quarter challenge that wasn't gonna just resolve itself overnight, but we clearly believe, and really root reiterating the...
Speaker 3: the free cash flow guidance for the full year that you'll see as we get through the second half. Some of that inventory coming down is going to contribute to that along with some of the other initiatives.
Speaker 2: to getting that approval. Okay, thank you. That was all for me. Sure. Thanks, Anja. Thank you. This concludes our question and answer session. I would now like to turn the call back to Paul Manski for any closing remarks.
Speaker 3: Thank you, MJ, and thank you everybody for participating in Benchmark's first quarter of the 2023 earnings call. Before we go, I'd like to remind everyone that we'll be presenting at two conferences in the quarter. First will be the Soudodi Virtual Conference on the 14th of June . We will then be in New York on the 15th of June presenting at the 2023 Cancer Test Conference.
Speaker 2: With that, thank you again for your support, and we look forward to speaking with you soon.
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