Q1 2024 Benchmark Electronics Inc Earnings Call

May 1, 2024

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Operator: Hello, and welcome to the Benchmark Electronics First Quarter 2024 Results Conference. At this time, all parties are in a listen-only mode. Later, you will have an opportunity to ask questions. To ask a question, press the star and 1 on your phone keypad. It's star and 1 if you'd like to ask a question. You can remove yourself from the queue by pressing star 2. Please note that this call is being recorded, and I will be standing by should you need any assistance. I would now like to turn the conference over to Paul Mansky, Benchmark Investor Relations and Corporate Development. Please begin.

Unnamed: To all Fightful and everyone, we appreciate your patience. We ask that you please continue...

Speaker Change: Hello, and welcome to the benchmark electronics to report first quarter 2024 results conference at this time all parties are in a listen only mode. Later, you will have an opportunity to ask questions to ask a question press star and one on your phone keypad at Star and one if you'd like to ask a question you can remove yourself from the queue by pressing star.

Speaker Change: <unk>. Please note that this call is being recorded and I will be standing by should you need any assistance I would now like to turn the conference over to Paul Matzke Benchmark Investor Relations and corporate development. Please begin.

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Operator: Stand by, your program is about to begin. If you need operator assistance today, press star zero. Hello, and welcome to the Benchmark Electronics First Quarter 2024 results conference.

Paul Mansky: Thank you everyone for joining us today for Benchmark's first quarter fiscal year 2024 earnings call. Joining me this afternoon are Jeff Benck, CEO and President, and Arvind Kamal, Interim CFO. After the market closed today, we issued an earnings release pertaining to our financial performance for the first quarter of 2024, and we prepared a presentation that we will reference on this call. Both are available online under the investor relations section of our website at bench.com. This call is being webcast live, and a replay will be available online following the call.

Paul Mansky: And thanks, everyone for joining us today for Benchmark's first quarter fiscal year 2024 earnings call. Joining me. This afternoon are Jeff Bank, CEO, and President and urban Cabal interim CFO. After the market close today, we issued an earnings release pertaining to our financial performance for the first quarter of 2024.

Operator: At this time, all parties are in a listen-only mode. Later, you will have an opportunity to ask questions. To ask a question, press star and one on your phone keypad. It's star and one. If you'd like to ask a question, you can remove yourself from the queue by pressing star two. Please note that this call is being recorded, and I will be standing by should you need any assistance. I would now like to turn the conference over to Paul Mansky, Benchmark Investor Relations and Corporate Development. Please begin.

Paul Matzke: And we've prepared a presentation they weren't a reference on this call. Both are available online under the Investor Relations section of our website at bench Dot Com. This call is being webcast live and a replay will be available online. Following the call. The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the appendix.

Paul Mansky: The company has provided a reconciliation of our gap to non-gap measures in the earnings release as well as in the appendix to the presentation. Please take a moment to review the forward-looking statements disclosure on slide 2 in the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks, which are not statements of historical fact, are forward-looking statements, which include risks and uncertainties, as described in our press releases and SEC filings. Actual results may differ materially from these statements. Benchmark undertakes no obligation to update any forward-looking statement.

Paul Matzke: Two of the presentation.

Paul Matzke: Let's take a moment to review the forward looking statements disclosure on slide two in the presentation. During our call. We will discuss forward looking information as it as a reminder, any of today's remarks, which are not statements of historical fact are forward looking statements, which includes risks and uncertainties as described in our press releases and SEC filings.

Paul Matzke: Actual results may differ materially from these statements benchmark undertakes no obligation to update any forward looking statements for today's call, Jeff will begin by providing a summary of our first quarter performance.

Paul Mansky: For today's call, Jeff will begin by providing a summary of our first quarter performance. Arvind will then discuss our detailed financial results and provide our second quarter guidance. Jeff will then return to share more insight into demand trends by sector, new business wins, and close with some final remarks. If you will please turn to slide three, I'll turn the call over to our CEO, Jeff Benck.

Jeffrey W. Benck: <unk> will then discuss our detailed financial results and provide our second quarter guidance. Jeff will then return to share more insight into demand trends by sector, new business wins and close with some final remarks, if you'll please turn to slide three I'll turn the call over to our CEO Geoff back.

Jeffrey W. Benck: Thank you Paul. Good afternoon, and thank you everyone for joining our call today. The first quarter was another strong performance by the team, best described as controlling what we can control. These results were clear indicators of our continued progress toward our long-term objective. Despite persistent macro-driven revenue challenges across many of our end markets, we continue to meet or exceed our margin, non-GAAP EPS, and free cash flow objectives in the quarter. Let me step through a few highlights.

Geoff: Thank you Paul good afternoon, and thanks to everyone for joining our call today.

Geoff: The first quarter was another strong performance by the team. That's described by controlling what we can control. These results were clear indicators of our continued progress toward our long term objectives.

Geoff: Despite persistent macro driven revenue challenges across many of our end markets, we continue to meet or exceed our margin non-GAAP EPS and free cash flow objectives in the quarter.

Speaker Change: Let me step through a few highlights.

Jeffrey W. Benck: Total revenue of $676 million was down 3% year-over-year and 2% sequentially. However, we were pleased with the continued solid performance in A&D and double-digit growth in Semicap despite the lack of industry recovery. However, these positives were offset primarily by weakness in our medical and communications sectors. Our non-GAAP gross margins again exceeded 10%, which reflected a continuation of our multi-quarter trend of year-on-year gross margin expansion. Excluding stock-based compensation, we achieved 4.9% non-GAAP operating margin in Q1, which was up 50 basis points year over year. However, on a sequential basis, operating margins were down due to seasonally higher payroll taxes and variable expenses.

Jeffrey W. Benck: Total revenue of $676 million was down 3% year-over-year and 2% sequentially. We were pleased with the continued solid performance in A&E and double-digit growth in SEMICAP despite the lack of industry recovery. However, these positives were offset primarily by weakness in our medical and communications sectors.

Speaker Change: Total revenue of $676 million was down 3% year over year and 2% sequentially.

Speaker Change: We were pleased with the continued solid performance in A&D and double digit growth in semi cap. Despite the lack of industry recovery.

Speaker Change: However, these positives were offset primarily by weakness in our medical and communication sectors.

Jeffrey W. Benck: Our non-GAAP gross margins again exceeded 10%, which reflected a continuation of our multi-quarter trend of year-on-year gross margin expansion. Excluding stock-based compensation, we achieved 4.9% non-GAAP operating margin in Q1, which was up 50 basis points year over year. On a sequential basis, operating margins were down due to seasonally higher payroll taxes and variable expenses.

Speaker Change: Our non-GAAP gross margins again exceeded 10%, which reflected a continuation of our multi quarter trend.

Geoff: Year on year gross margin expansion.

Geoff: Excluding stock based compensation, we achieved four 9% non-GAAP operating margin in Q1, which was up 50 basis points year over year.

Geoff: On a sequential basis operating margins were down due to seasonally higher payroll taxes and variable expenses.

Jeffrey W. Benck: These operating results allowed us to deliver $0.55 in non-GAAP earnings per share in the quarter. We achieved $0.51 of non-GAAP earnings per share when including $0.04 of stock-based compensation expense, which on a like-for-like basis was $0.03 above the high end of our guidance range of $0.42 to $0.48. At the same time, our working capital initiatives put in place last year are delivering results.

Geoff: These operating results allowed us to deliver 55 cents and non-GAAP earnings per share in the quarter.

Geoff: We achieved 51 cents of non-GAAP earnings per share when including four cents of stock based compensation expense, which on a like for like basis was <unk> <unk> above the high end of our guidance range of 42 to 48.

Geoff: At the same time, our working capital initiatives put into place last year are delivering put in place last year are delivering results.

Jeffrey W. Benck: Notably, first quarter inventory was down over 140 million year over year, which was a key enabler to us being able to deliver positive free cash flow of 43 million. We have now been free cash flow positive for four consecutive quarters, totaling just north of $200 million over this period. Given this performance and our expectations looking forward, we are raising our free cash flow target for the year from $70 to $80 million to now between $80 and $90 million.

Geoff: Notably first quarter inventory was down over $140 million year over year, which was a key enabler to us being able to deliver positive free cash flow of $43 million.

Geoff: We have now been free cash flow positive for four consecutive quarters totaling just north of 200 million over this period.

Geoff: Given this performance and our expectations looking forward, we are raising our free cash flow target for the year from $70 million to $80 million to now $80 million to $90 million.

Jeffrey W. Benck: I'd like to once again say how pleased I am with the team's ability to come together, particularly in this volatile marketplace, and again consistently deliver results. Now, let me pass it over to Arvind to share more details on the March quarter and guidance for Q2 2024. Thank you, Jeff, and good afternoon.

Geoff: I'd like to once again say, how pleased I am with the team's ability to come together, particularly in this volatile marketplace and again consistently deliver results.

Geoff: Now, let me pass it over to Arvind to share more details on the March quarter and guidance for Q2 2024.

Arvind: Thank you, Jeff and good afternoon.

Arvind Kamal: Please turn to slide five for our revenue by market sector. As Jeff mentioned, our total revenue in Q1 was $676 million. Semi-cap revenue increased 12% year-over-year, slightly ahead of our expectations. Industrial revenue for the first quarter decreased 2%, driven by reduced demand from some existing customers, shall pace the benefit of new program rent. Medical revenue was down 16%.

Arvind Kamal: Please turn to slide 5 for our Revenue by Market section. As Jeff mentioned, our total revenue in Q1 was $676 million. Semicap revenue increased 12% year-over-year, slightly ahead of our expectations. Industrial revenue for the first quarter decreased 2% driven by reduced demand from some existing customers, despite the benefit of new program rent. Medical revenue was down 16%.

Arvind: Please turn to slide five for our revenue by market sector.

Arvind: As Jeff mentioned, our total revenue in Q1 was $676 million.

Arvind: Semi cap revenue increased 12% year over year slightly ahead of our expectations.

Arvind: Industrial revenue for the first quarter decreased 2% driven by reduced demand from some existing customers, which outpaced the benefit of new program ramps.

Arvind: Medical revenue was down 16%.

Arvind Kamal: This decline was due to general softness across the industry driven by inventory rebalancing and demand normalization. AMD revenue was up 33%, driven by continued strength in commercial computing. Within defense, we are benefiting from increased demand from existing programs and incremental support from new program ramps; advanced computing decreased 6%, consistent with expectations. This modest decrease was due to some minor delays in large HPC program bills we commenced in Q4 that will partially carry over into Q2.

Arvind: This decline was due to general softness across the industry driven by inventory rebalancing and demand normalization.

Arvind: AMD revenue was up 33% driven by continued strength in commercial aerospace.

Arvind: Within defense, we are benefiting from increased demand from existing programs and incremental support from new program ramps.

Arvind: Advanced computing decreased 6%.

Arvind: Consistent with expectations.

Arvind: This modest decrease was due to some minor delays in large HBC program Bill we commenced in Q4 that will partially carryover into Q2.

Arvind Kamal: In the next generation communications sector, revenue is down 36% year over year. Sector performance was impacted by both general softness and subsector-specific dynamics, coupled with our disengagement with a large customer. We do not expect sector revenues to improve during 2024. Please turn to slide six.

Arvind: And the next generation communications sector revenue was down 36% year over year.

Arvind: <unk> performance was impacted by both general softness and sub sector specific dynamics.

Arvind: With our disengagement with a large customer.

Arvind: We do not expect sector revenues to improve during 2024.

Arvind: Please turn to slide six.

Arvind Kamal: Our gap earnings per share for the quarter was $0.38. As we indicated last quarter during Q1, we undertook an assessment of our approach to non-gap reporting, specifically as it relates to stock-based compensation. Although we will continue to measure our business on a gap basis, we believe providing non-gap results excluding stock-based compensation enables a more direct comparability to our peers. As such, beginning in Q1, all references to NONGAP, both historical and prospective,

Arvind: Okay.

Arvind: Our GAAP earnings per share for the quarter was 38.

Arvind: As we indicated last quarter. During Q1, we undertook an assessment of our approach to non-GAAP reporting.

Arvind: Specifically as it relates to stock based compensation.

Arvind: Although we will continue to measure our business on a GAAP basis, we believe providing non-GAAP results, excluding stock based compensation and enables a more direct comparability to our peers.

Arvind: As such beginning in Q1, all references to non-GAAP, both historical and prospective exclude the effect of stock based compensation.

Arvind Kamal: Please refer to both the earnings presentation and press release for reconciliation information. For Q1, our non-GAAP gross margin was 10%, both with and without stock-based compensation. This represents a 30-basis point decrease sequentially and a 70-basis point increase year-over-year. Non-GAAP SG&A expense was $34.7 million, excluding $1.8 million of stock-based compensation.

Arvind: Please refer to both the earnings presentation and press release for a reconciliation information.

Arvind: For Q1, our non-GAAP gross margin was 10%.

Arvind: With and without stock based compensation.

Arvind: This represents a 30 basis point decrease sequentially.

Arvind: And a 70 basis point increase year over year.

Arvind: non-GAAP SG&A expense was $34 7 million.

Arvind: Excluding $1 8 million.

Arvind: Stock based compensation.

Arvind Kamal: SG&A was up 5% sequentially and 3% year-over-year. The sequential increase was driven by seasonal payroll taxes, coupled with higher variable compounding, excluding 30 basis points of stock-based compensation expense. Non-GAAP operating margin was 4.9%, down 60 basis points sequentially due to the seasonal increase in operating expenses, while up 50 basis points year-over-year, aided by gross margin expansion. Our first quarter non-GAAP effective tax rate was approximately 24 percent.

Arvind: SG&A was up 5% sequentially and 3% year over year.

Arvind: The sequential increase was driven by seasonal payroll taxes, coupled with higher variable compensation expense.

Arvind: Excluding 30 basis points of stock based compensation expense non-GAAP operating margin was four 9% down 60 basis points sequentially due to the seasonal increase in operating expenses, while up 50 basis points year over year aided by gross margin expansion.

Arvind: Our first quarter non-GAAP effective tax rate was approximately 24%.

Arvind Kamal: First quarter non-GAAP EPS was $0.55 on a life-for-life basis. If we include the $0.04 of stock-based compensation expense in the quarter, our non-GAAP EPS of $0.51 was above the higher end of our guidance range of $0.42 to $0.48. Non-GAAP RAC in the first quarter was 9.6%. Please turn to slide 7 for trended financials under our former and current definitions of non-GAAP over the course of last year. Please turn to slide 8 for a discussion of our cash conversion cycle performance. Our cash conversion cycle days in the quarter were 94 compared to 98 in Q4.

Arvind: First quarter non-GAAP EPS was <unk> 55.

Arvind: On a like for like basis.

Arvind: If we include the <unk> stock based compensation expense in the quarter.

Arvind: non-GAAP EPS of <unk> 51.

Arvind: It was above the high end of our guidance range of 40 to.

Arvind: 48.

Arvind: non-GAAP RAC in the first quarter was nine 6%.

Arvind: Please turn to slide seven for trended financials under our former and current definitions of non-GAAP over the course of last year.

Arvind: Please turn to slide eight for a discussion of our cash conversion cycle performance.

Arvind: Our cash conversion cycle days in the quarter or <unk> 94, compared to <unk> 98 in Q4.

Arvind Kamal: This four-day improvement was primarily driven by a $46 million reduction in inventory during the quarter. Please turn to slide 9 for an update on liquidity. Cash flow generation is a key performance metric for the company. To that end, in Q1, we continued our working capital efficiency efforts, which combined with our net income performance enabled us to generate $48 million in operating cash flow and $43 million of free cash flow in the period.

Arvind: This four day improvement was primarily driven by $46 million reduction in inventory during the quarter.

Arvind: Please turn to slide nine for an update on liquidity.

Arvind: Free cash flow generation is a key performance metric for the company.

Arvind: To that end in Q1, we continued our working capital efficiency efforts.

Arvind: Combined with our net income performance enabled us to generate 48 million in operating cash flow and 43 million of free cash flow in the period.

Arvind Kamal: Given this performance... coupled with our current forecast throughout the balance of the year, we are raising our full year 2024 target free cash flow to $80 to $90 million. Our cash balance on March 31st was $296 million, a consequential increase of $13 million. As of March 31st, we had $126 million outstanding on our term loans.

Arvind: Given this performance.

Arvind: Coupled with our current forecast throughout the balance of the year we.

Arvind: We are raising our full year 2024 target free cash flow to $80 million to $90 million.

Arvind: Our cash balance on March 31, plus $296 million, a sequential increase of $13 million.

Arvind: As of March 31, we had $126 million outstanding on our term loan.

Arvind Kamal: $190 million outstanding against our revolver and $356 million available to borrow under our revolver. Overall debt, net of cash, improved sequentially by $29 million as we continue to use free cash flow to pay down short-term debt. Please turn to slide 10 for a discussion of our capital allocation activity. We invested approximately $6 million in CapEx and Q1 in support of both continued growth in our Mexico and Penang facilities and Enhanced Capabilities in our Precision Technologies Unit.

Arvind: $90 million outstanding against our revolver and $356 million.

Arvind: Available to borrow under our revolver.

Arvind: Overall debt net of cash improved sequentially by $29 million as we continue to use free cash flow to pay down short term debt.

Arvind: Please turn to slide 10 for a discussion of our capital allocation activity.

Arvind: We invested approximately $6 million in Capex in Q1 in support of both continued growth in our Mexico and.

Arvind: <unk> facilities and enhanced capabilities in our precision technologies unit.

Arvind Kamal: We expect Q2 CapEx to be between $10 and $12 million. On a full year basis, we anticipate CapEx to be in the range of $55 and $65 million. In Q1, we paid cash dividends of $5.9 million. We did not repurchase any shares in Q1.

Arvind: We expect Q2 capex to be between 10 and $12 million.

Arvind: On a full year basis, we anticipate capex to be in the range of <unk> 55 and $65 million.

Arvind: In Q1, we.

Arvind: We paid cash dividends of $5 9 million.

Arvind: We did not repurchase any shares in Q1.

Arvind Kamal: As of March 31st, 2024, we had approximately $155 million remaining in our existing share repurchase authorization. We anticipate resuming share repurchases in 2024. Please advance to slide 11. Turning to Guidance.

Arvind: As of March 31, 2024, we had approximately 155 million remaining in our existing share repurchase authorization.

Arvind: We anticipate resuming share repurchases in 2024.

Arvind: Please advance to slide 11.

Arvind Kamal: We expect Q2 revenue to be within a range of $615 to $655 million, excluding stock-based compensation. We expect non-GAAP gross margin to be approximately 10%. SG&A expense is expected to be within a range of $32 and $35 million. Our non-GAAP operating margin is expected to be between 4.7 and 4.9 percent. Non-GAAP operating income excludes approximately $4.4 million of stock-based compensation. $1.2 million in amortization of intangible assets and $2 million of estimated restructuring and other expenses.

Arvind: Turning to guidance.

Arvind: We expect Q2 revenue to be within a range of $615 million to $655 million.

Arvind: Excluding stock based compensation, we expect non-GAAP gross margin to be approximately 10%.

Arvind: SG&A expense is expected to be within a range of $30 million to $35 million.

Arvind: Our non-GAAP operating margin is expected to be between four seven and four 9%.

Arvind: non-GAAP operating income excludes approximately $4 4 million of stock based compensation.

Arvind: $1 2 million in amortization of intangible assets and $2 million of estimated restructuring and other expenses.

Arvind Kamal: Our non-GAAP diluted earnings per share is expected to be in the range of 48 to 54 cents. Other expenses, net, are expected to be approximately $7 million. Although interest expense is expected to decline sequentially, this will be partially offset by increased foreign exchange headwinds.

Arvind: Our non-GAAP diluted earnings per share is expected to be in the range of 48 to 54.

Arvind: Other expenses net are expected to be approximately $7 million.

Arvind: Although interest expense is expected to decline sequentially.

Arvind: This will be partially offset by increased foreign exchange headwinds.

Arvind Kamal: We expect that our Q2 non-GAAP effective tax rate will be 22-24%, with a weighted average share count of approximately $36 million. Our effective tax rate will be higher in 2024 due to the expiration of tax incentives for our operations in China at the end of 2023 and the implementation of global minimum tax laws in some of our foreign jurisdictions beginning in 2024. On a fiscal year basis, we believe the average effective tax rate should be approximately 22 to 23 percent.

Arvind: We expect that our Q2 non-GAAP effective tax rate will be 22% to 24% with a weighted average share count of approximately $36 million.

Arvind: Our effective tax rate is higher in 2024 due to the expiration of tax incentives for our operations in China at the end of 2023.

Arvind: And the implementation of global minimum tax laws and some of our foreign jurisdictions beginning in 2024.

Arvind: On a fiscal year basis, we believe the average effective tax rate should be approximately 22% to 23%.

Jeffrey W. Benck: And with that, I will turn the call back over to you, Jeff. Thanks, Arvind. Please turn to slide 13.

Arvind: And with that I will turn the call back over to you Jeff.

Jeffrey W. Benck: Thanks, Arvind, please turn to slide 13, let.

Jeffrey W. Benck: Let me start with some further color on our performance by sector. Within SEMICAP, our first quarter performance was down slightly sequentially but up 12% year-over-year, which was modestly better than our expectations. This performance, which we believe exceeded the overall market, was driven by our continued share gain. This momentum continued in the first quarter, with several wins that expanded an existing program with a customer, which includes higher-level assembly integration. I'm also pleased that our new Penang Precision Technology Facility was awarded a win with a new WaferFab equipment OEM.

Jeffrey W. Benck: Let me start with some further color on our performance by sector.

Jeffrey W. Benck: Within semi cap, our first quarter performance was down slightly sequentially, but up 12% year over year, which was modestly better than our expectations.

Arvind: This performance, which we believe exceeded the overall market was driven by our continued share gain.

Arvind: This momentum continued in the first quarter with several wins that expanded an existing program with a customer which includes higher level Assembly integration.

Arvind: I'm also pleased that our new Penang precision technology facility was awarded a win with a new wafer fab equipment OEM.

Jeffrey W. Benck: Our wins in the quarter include both manufacturing and engineering services. We continue to be optimistic about the multiple catalysts driving future growth in the semi-capital sector and are pursuing this with continued capital investment. On a near-term basis, we expect continued volatility and demand as the broader CapEx environment remains under pressure and the U.S. ChIPSAC funding is only now beginning to be awarded. However, looking further out to 2025 and beyond, we expect a broad-based recovery in the sector and look forward to gaining more than our fair share of business.

Arvind: Our wins in the quarter include both manufacturing and engineering services.

Arvind: We continue to be optimistic about the multiple catalysts driving future growth in the semi cap sector and are pursuing this with continued capital investment.

Arvind: On a near term basis, we expect continued volatility in demand as the broader capex environment remains under pressure in the U S. Chipset funding is only now beginning to be awarded.

Arvind: However, looking further out to 2025 and beyond we expect a broad based recovery in the sector and look forward to gaining more than our fair share of business.

Jeffrey W. Benck: In medical, as we saw in the December quarter, and I've heard from many who are exposed to the space, Sector performance has been challenged, particularly in the health tech subsector. This is a function of both inventory and end-demand normalization. Our March quarter revenue is down 16% year-over-year, in line with our expectations.

Arvind: And medical.

Arvind: As we saw in the December quarter and have heard from many who are exposed to the space sector performance has been challenged particularly in the health Tech sub sector.

Arvind: This is a function of both inventory and then demand normalization.

Arvind: Our March quarter revenue was down 16% year over year in line with our expectations.

Jeffrey W. Benck: However, we continue to see positive momentum in the form of new wins. Most notably, I'm encouraged by the recent traction we've been seeing in the biotech subsector, where we closed several big wins encompassing both manufacturing and engineering. Looking forward, we expect these new programs will begin to materially contribute in late 2024 and into 2025. In the meantime, we expect weakness within medical to continue into the next few quarters, impacting overall sector growth in 2024.

Arvind: However, we continue to see positive momentum in the form of new wins.

Arvind: Most notably I am encouraged by the recent traction we've been seeing in the biotech sub sector, where we closed several big wins encompassing both manufacturing and engineering.

Arvind: Looking forward, we expect these new programs will begin to materially contribute in late 2024 into 2025.

Arvind: In the meantime, we expect weakness within medical to continue into the next few quarters impacting overall sector growth in 2024.

Jeffrey W. Benck: Turning to complex industrials, we continue to extend our share in key growth markets, including automation and energy management solutions. For example, this past quarter, we won a manufacturing program to provide key subsystems for a lab automation application. Another key win, which will be manufactured in our Guadalajara facility, is for automated thermal control systems, which supports our commitment to sustainability. Finally, I'd like to mention an engineering win that I'm particularly interested in, which relates to an opportunity in 3D printing that looks very innovative.

Arvind: Turning to complex industrials, we continue to extend our share in key growth markets, including automation and energy management solutions.

Arvind: For example, this past quarter, we want our manufacturing program to provide key sub systems for a lab automation application.

Arvind: Another key win which will be manufactured in our Guadalajara facility is for automated thermal control systems, which supports our commitment to sustainability.

Arvind: Finally, I'd like to mentioned in engineering win then I'm, particularly interested in which relates to an opportunity in three D printing.

Speaker Change: That looks very innovative.

Jeffrey W. Benck: While we continue to see solid momentum and new wins, both from existing and new customers, our existing programs for a select number of industrial customers are under pressure from broad macro environment software. Although we anticipate this will be relatively short-lived, we don't expect year-on-year revenue growth to resume in our complex industrial sector until late 2024 or into 2025. Now, turning to A&D, we had another strong quarter of revenue performance, up 33% year-over-year, and our new business win momentum continues.

Speaker Change: While we continue to see solid momentum in new wins, both from existing and new customers our existing programs at a select number of industrial customers are under pressure from broad macro environment softness.

Arvind: Although we anticipate this will be relatively short lived we don't expect year on year revenue growth to resume in our complex industrial sector until late 2024 or into 2025.

Arvind: Now turning to A&D, we had another strong quarter of revenue performance up 33% year over year, and our new business win momentum continues commercial.

Jeffrey W. Benck: Commercial aerospace has remained strong for us since early 2023, which we believe will continue based on our order load. Meanwhile, within defense, the U.S. government's commitment to increased spending along with improved availability of components has translated into accelerated demand trends. This past quarter, we also saw significant wins across both subsets, including an expanded opportunity within commercial aerospace to provide guidance control systems. Within defense, we displaced a competitor to provide both engineering and manufacturing services for an integrated defense system program.

Arvind: Aerospace has remained strong for us since early in 2023, which we believe will continue based on our order load.

Arvind: Meanwhile, within defense the U S government's commitment to increase spending along with improved availability of components has translated into accelerated demand trends.

Arvind: This past quarter, we also saw significant wins across both subsectors, including an expanded opportunity within commercial aerospace providing guidance control systems.

Arvind: Within defense, we displaced a competitor to provide both engineering and manufacturing services for an integrated defense system program.

Jeffrey W. Benck: We also saw an existing program expansion and new product introduction wins at another major defense customer, principally in support of guidance applications. While our Q2 expectation is for relatively flat performance, this is primarily a function of program timing. The end-demand strength we are seeing, coupled with design-win momentum, has us positioned for continued A&E growth in 2024. Before turning to the advanced computing and next-generation communications sector discussion, after careful analysis, beginning with our Q2 2024 quarter ending in June, we'll be combining our reporting on these two sectors into one. Not only does this more accurately reflect the increasing interrelated nature of these sectors, but it more closely aligns with how we approach these sectors internally.

Arvind: We also saw an existing program expansion and new production product introduction wins at another major defense customer principally in support of guidance applications.

Arvind: While our Q2 expectations for relatively flat performance. This is primarily a function of program timing.

Arvind: The end demand strength, we are seeing coupled with design win momentum has us positioned for continued A&D growth in 2024.

Arvind: Before turning to advanced computing and next generation communications sector discussions.

Arvind: After careful analysis, beginning with our Q2 2024 quarter ending in June we will be combining our reporting on these two sectors into one.

Arvind: Not only does this more accurately reflect the increasing interrelated nature of these sectors.

Arvind: But even more tightly aligns with how we approach these sectors internally.

Jeffrey W. Benck: Within advanced computing, revenue was slightly better than our forecast during the quarter, down mid-single digits sequentially and year-over-year. As previously shared in Q1, we delivered a significant percentage of a new HPC program for a large OEM who's deploying the supercomputer at a national lab. This program will wrap up for us early in Q2. We are working on several next-gen platforms, which should enable future growth. And we anticipate participating in the AI infrastructure build-outs via these large cluster environments, as our OEMs sell into these opportunities.

Arvind: Within advanced computing revenue was slightly better than our forecast during the quarter down mid single digits sequentially and year over year.

Arvind: As previously shared in Q1, we will we delivered a significant percentage of a new <unk> program for a large OEM, who is deploying the supercomputer at a national lab.

Arvind: This program will wrap up for us early in Q2.

Arvind: We are working on several next gen platforms, which should enable future growth and we anticipate participating in the AI infrastructure build outs via these large cluster environments as their OEM sell into these opportunities.

Jeffrey W. Benck: However, given the anticipated timing of these opportunities, coupled with the difficult year-over-year comparisons, we are not currently anticipating a return to annual growth in advanced computing during 2024. Finally, in Next Generation Communications, we've been highlighting anticipated challenges at the industry level for a few quarters now. The communication sector is seeing broad pressure on capital spending while at the same time having to manage through their own inventory position. We have also been experiencing several quarters of weakness with a specific large customer in this segment, which has led to disengagement. We continue to expect sector revenue to remain under significant pressure throughout the course of the year in 2024. In summary, please turn to slide 14.

Arvind: However, given the anticipated timing of these opportunities coupled with the difficult year over year comparisons. We are not currently anticipating a return to annual growth in advanced computing during 2024.

Arvind: Finally, our next generation communications, we've been highlighting anticipated challenges at the industry level for a few quarters now.

Arvind: Communications sector is seeing broad pressure on capital spending.

Arvind: At the same time, having to manage through their own inventory positions.

Arvind: We have also been experiencing several quarters of weakness with a specific large customer in this segment, which has led to a disengagement.

Arvind: We continue to expect sector revenue to remain under significant pressure throughout the course of the year in 2024.

Arvind: Okay.

Arvind: In summary, please turn to slide 14.

Jeffrey W. Benck: Once again, I want to congratulate the Extended Benchmark Team for their performance in the quarter. Despite the challenging market dynamics, we continue to invest in future growth, building on our business with both new logos and expanding our share with existing customers. As I look at our 2024 objectives that we laid out for you last quarter, I believe we achieved high grades. In review, we're committed to managing demand volatility while continuing to progress towards our target profitability objective.

Speaker Change: Once again I want to congratulate the extended benchmark team for their performance in the quarter.

Arvind: Despite the challenging market dynamics, we continue to invest in future growth building on our business with both new logos and expanding our share with existing customers.

Arvind: As I look at it.

Arvind: At our 2024 objectives that we laid out for you last quarter I believe we achieved high grades.

Arvind: In review, we are committed to managing demand volatility utility, while continuing to progress towards our target profitability objectives.

Jeffrey W. Benck: To this end, we have delivered year-on-year non-gap growth and operating margin expansion in each quarter since introducing our 2025 target model in Q4 of 2022. We are further committed to working down inventory and driving free cash flow. For example, our first quarter inventory was down $140 million year over year, equal to 17 days of inventory.

Arvind: To this end we have delivered year on year, non-GAAP gross and operating margin expansion in each quarter since introducing our 2025 target model in Q4 of 2022.

Arvind: We further committed to working down inventory and driving free cash flow or.

Arvind: Our first quarter inventory was down $140 million year over year equal to 17 days of inventory and we've generated positive free cash flow for four quarters in a row and are raising our free cash flow target for 2024.

Jeffrey W. Benck: And we've generated positive free cash flow for four quarters in a row and are raising our free cash flow target for 2024. Lastly, we are committed to returning capital to investors. We did so in the form of our continued dividend but didn't complete any buybacks this last quarter. We nonetheless intend to be back in the market in 2024 with an objective of at least buying enough stock to offset annual dilution. I remain confident that we will successfully navigate this dynamic economic environment and come out stronger on the other side.

Arvind: Lastly, we committed to returning capital to investors.

Arvind: We did so in the form of our continued dividend, but didn't complete any buybacks this last quarter.

Arvind: We nonetheless and tend to be back in the market in 2024 with an objective at the minimum.

Arvind: Buying enough stock to offsetting annual dilution.

Arvind: I remain confident that we will successfully navigate this dynamic economic environment and come out stronger on the other side.

Jeffrey W. Benck: We're making improvements in our operations and investing for the future. We have significantly stepped up our customers' engagement, and are pursuing a number of exciting new opportunities while we close several meaningful deals further along in our pipeline, while we are experiencing an unprecedented duration of downturn in semi-cash. We continue to outperform that market and believe in the future growth that is sure to arrive in the coming quarter. I will end my prepared remarks where we started them.

Arvind: We're making improvements in our operations and investing for the future we have significantly stepped up our customers engagement.

Arvind: And are pursuing a number of exciting new opportunities, while we closed several meaningful deals further along in our pipeline.

Arvind: While we are experiencing an unprecedented duration of downturn in semi cap.

Arvind: We continue to outperform that market and believe in the future growth that is sure to arrive in the coming quarters.

Arvind: I will end the prepared remarks, where we started them.

Jeffrey W. Benck: We're going to maintain focus on those elements of our business that we can control, while best positioning ourselves to maximize the opportunities in front of us as the demand environment improves. With that, I'll now turn the call over to the operator to conduct our Q&A session.

Arvind: We're going to maintain focus on those elements of our business that we can control.

Arvind: While best positioning ourselves to maximize the opportunities in front of us as the demand environment improves.

Operator: Thank you. If you would like to ask a question, please press star and one on your phone keypad to remove yourself from the queue. Press star two. Again, that is star and one if you would like to ask a question. We will take our first question today from Steven Fox.

Speaker Change: With that I'll now turn the call over to the operator.

Speaker Change: Conduct our Q&A session.

Speaker Change: Thank you if you would like to ask a question. Please press star and one on your phone keypad to remove yourself from the queue Press Star two again that is star and one if you would like to ask a question.

Operator: We will take our first question today from Steven Fox with Fox Advisors.

Steven Bryant Fox: Hi, good afternoon. I had a couple of questions. Jeff, first on some of the comments you made about HPC Compute, as you look at winning, or your customers look at winning, large cluster back-end environment compute business, do you see that as being something that can build into a consistent book of business? Or does it remain kind of episodic in your mind?

Steven Bryant Fox: Hi, Good afternoon, I had a couple of questions. Jeff first on some of the comments you made around HTC compute.

Steven Bryant Fox: As you look at winning or your customers look at winning large cluster.

Steven Bryant Fox: Back end environment compute business do you see that as being something that can build into a consistent book of business because or does it remain kind of episodic in your mind and like how do you think your services are fitting with with that environment. Thanks, and then I had a follow up yes, yes, that's a good question.

Jeffrey W. Benck: And how do you think your services are fitting in with that environment? Thanks. Yeah, yeah, that's a good question. One of the things that we're seeing is that as folks look to get after AI, we are seeing some of these high-performance compute systems play in that. They, in general, have been very program-centric for us, particularly when we're doing large builds like for national labs. But I think that while there'll probably be smaller opportunities, meaning maybe not the scale of a 10,000-node supercomputer, I think that we could see, you know, some broader exposure with smaller systems that might, you know, make that demand a little less lumpy because we have seen in that sector where those large programs, you know, complete, and then we're on to the next one.

Speaker Change: One of the.

Speaker Change: One thing that we're seeing is that.

Speaker Change: As folks look to get after AI, we are seeing some of these high performance compute systems play in that.

Speaker Change: They are in general had been very program centric for us, particularly when we're doing large builds like for national labs, but I think that one.

Speaker Change: They'll probably be smaller opportunities, meaning maybe not the scale of 10000 node supercomputer.

Speaker Change: I think that we could see.

Speaker Change: Some broader exposure with smaller systems that might make that make that demand a little less lumpy because we have seen in that sector, where those large programs complete and then we're on to the next one although while while we've seen an up and down we've had pretty strong business over the last year.

Jeffrey W. Benck: Although, you know, while we've seen it up and down, we've had pretty strong business over the last several years. But the AI element is kind of a new opportunity, and we'll have to see how that plays out in the coming quarter. Thanks for that.

Speaker Change: Over the years, but thats. The AI element is kind of a new opportunity and we'll have to see how that fills in in the coming quarters.

Jeffrey W. Benck: And then in terms of Semicap, it sounds like the messaging is about the same in terms of the end market, but you guys are growing year over year. And you also said you're investing more in certain engineering areas. So I was wondering if you could just talk about the mix of the business right now and what you're investing in. I know you've had success in terms of precision machining and invested a lot in that area before the downturn. So maybe just putting all that together, and yeah. Okay. All right. Thanks. Sorry, I didn't mean to step on you there.

Speaker Change: Thanks for that and then in terms of semi cap it sounds like the messaging is about the same.

Speaker Change: In terms of the end market, but you guys are growing year over year.

Speaker Change: And you also said you are investing more in certain engineering areas. So I was wondering if you could just talk about the mix of the business right now and what you're investing in I know you've had success in terms of precision machining and invested a lot in that area before the downturn. So maybe just putting all that together and yet.

Speaker Change: Yes.

Speaker Change: Okay alright. Thanks.

Speaker Change: I mean, it's tough on you there.

Jeffrey W. Benck: We did have a good quarter in Semicap, and it was up, but we're seeing all the reports right from the large OEMs that we support, particularly as we're more heavily weighted to the wafer fab equipment. It's still capital spend, and we believe from what we're hearing and from our forecast that we won't see significant growth in 24. I think what's enabling us to do better than the market is that we have won quite a bit of new business that is really starting to flow in and start to ramp up, which is kind of offsetting weakness there and allowing us to do a bit better.

Speaker Change: We did have a good quarter in semi cap and it was up.

Speaker Change: But we're seeing all the reports from large Oems that we support, particularly as we're more heavily weighted to the wafer fab equipment.

Speaker Change: Capital spend and.

Speaker Change: We believe that from what we're hearing and from our forecast that we.

Speaker Change: We won't see significant growth in 'twenty, four I think what's enabling us to do better than the market as we have won.

Speaker Change: Quite a bit of new business that is really starting to flow in and.

Speaker Change: And starting to ramp which is kind of offsetting weakness, there and allowing us to do a bit better.

Jeffrey W. Benck: We still don't see significant growth in 24, but we are investing in it, and that's a trend that's continued. We do some great engineering work there. When we talked about investment, I think in the script, we were really speaking more about pretty significant capital investment in expanding our precision machining footprint in Malaysia and Penang. We also had a brand new facility that we had the grand opening with the governor here a year ago in Mesa, Arizona.

Speaker Change: We still don't see significant growth in 2020 four, but we are investing and thats trend Thats continued in.

Speaker Change: While we do some great engineering work there when we reflected investment I think in the script, we were really speaking more to pretty significant capital investment and expanding our precision machining.

Speaker Change: Footprint in Malaysia in Penang.

Speaker Change: We also had a brand new facility that was we had the grand opening of the governor here.

Speaker Change: A year ago in Mesa, Arizona, and so we have continued to invest in capacity because during the last up cycle. We were really really heavily utilized so we've got capacity, we certainly see the market coming back.

Jeffrey W. Benck: We have continued to invest in capacity because during the last up cycle, we were really, really heavily utilized. We've got capacity. We certainly see the market coming back. We also referenced the CHIPS Act, that now we are seeing money in the first quarter of this year that has started to get doled out, but, as you can appreciate, those buildings have to come out of the ground, and then capital equipment for wafer fab creation is put into those.

Speaker Change: We also referenced that the chips act that now we are seeing money in first quarter of this year that started to get build out but as you can appreciate those buildings have to come out of the ground and then capital equipment for wafer fab creation is put into those and that's really what we feed rate as we build sub systems and systems and modules.

Jeffrey W. Benck: That's really what we feed as we build subsystems and systems and modules in support of that. That's how we're thinking about it right now. Certainly feel like 25 is going to be a growth year. We'll see if it flips quicker, but right now we're saying 24, it's going to be more of

Speaker Change: In support of that.

Speaker Change: So that's kind of how we're thinking about it right now.

Speaker Change: We feel like 25 is going to be a growth year.

Speaker Change: We'll see if it flips quicker, but right now, we're saying 24, it's going to be.

Speaker Change: More of the same.

Anja Marie Theresa Soderstrom: Thank you. The next question comes from Anja Soderstrom with Sidoti.

Speaker Change: So our next question comes from <unk> <unk> with Sidoti.

Anja Marie Theresa Soderstrom: Hi, thank you for taking my questions. The first one is you mentioned you had a disengagement with a customer. Do you have any already committed?

Sidoti: Hi, and thank you for taking my questions. The first one is you mentioned you had a disengagement with that.

Sidoti: Customer have you seen any energy committee.

Jeffrey W. Benck: No, I mean, this was specifically in the comp sector and, you know, the challenges that we've seen there with demand being up and down, particularly with the end customers. And so, as the business has come down and shrunk, it has led to this disengagement. And we reflected that because, along with the broad softness, it's weighing on our growth in comps. And that's kind of why, you know, we were explaining a little bit what the dynamic is going on there. But beyond that, this was really unique. We haven't seen, you know, an impact like that.

Speaker Change: No I mean this is.

Speaker Change: That was specifically in the comms sector.

Speaker Change: You know the challenges that we've seen there with demand being up and down, particularly with the <unk> and.

Speaker Change: And customers and so as the business says come down has shrunk led to this engagement and we reflected that because thats along with the broad softness it's weighing on our growth and comps.

Speaker Change: And Thats kind of why we were explaining a little bit what dynamic is going on there but beyond that this was really unique we haven't seen.

Speaker Change: We haven't seen an impact like that from any of the other sectors or even others in comps.

Jeffrey W. Benck: Thank you, and thank you for coming to the CACO sector.

Speaker Change: Thank you Andrew.

Andrew: Let me just say sector. What are you hearing and when do you expect that to sort of come back.

Jeffrey W. Benck: in the communication sector, specifically. What we're hearing is that some of the, you know, 5G and, and, you know, think about fiber solutions and some of the next generation networking solutions. Some of the large carriers and some of the large operators have just slowed down their deployment there.

Andrew: In the communications sector specifically.

Andrew: What we're hearing is that some of the five G and.

Andrew: You think about.

Andrew: Fiber solutions and some of the next generation.

Andrew: Networking solutions.

Andrew: Some of the large carriers and some of the large operators have just slowed down their deployment. There. So its put broad macro headwinds on that on that sector.

Andrew: There's also a lot of activity in the satellite area, we support number of those customers and some of them better than others. So.

Andrew: In general I think that people in this tougher macro environment had been careful about capital spend and further that some and I think that's also weighing on what we see from a macro we do have a few customers. One in particular I can think of where they're deploying broadband into low serve regions.

Jeffrey W. Benck: So, you know, it's put broad macro headwinds on that sector. We do have a few customers. One in particular I can think of where they're deploying broadband into low-served regions, and some of the infrastructure bill that supports build out for, you know, broadband everywhere is seeing some growth. And so, you know, it's not that every customer in the sector is necessarily down, but we certainly have seen a broader softness there.

Andrew: And some of the infrastructure Bill that supports build out for.

Andrew: Broadband everywhere is seeing some growth and so it's not that every customer in this sector is necessarily down, but we certainly have seen a broader softness there as well.

Jeffrey W. Benck: And, you know, as we look at some of our peers, you know, we're not alone in some of the messaging around comms, but we just don't see a line of sight to that picking up in 24. But we're continuing to pursue new opportunities, and we just, you know, we're just in the closing phases of some really good things happening there. So, we look, you know, we're more and more optimistic long term. It's just right now that we don't see that visibility to growth in 24.

Andrew: We look at some of our peers, we're not alone in and some of the messaging around comps, but we just we just don't see a line of sight to that picking up.

Andrew: In 'twenty four.

Andrew: But we're continuing to pursue new opportunities and we just.

Andrew: We're just in the closing phases of some really good things happening there. So we look we're more optimistic long term. It's just right now we don't we don't see that visibility to growth in 'twenty four.

Jeffrey W. Benck: Okay, thank you. That was helpful. And in terms of medical, what are you... When do you anticipate that to sort of have normalized, and you would see the demand come back up after the normalization in inventory? Yeah.

Speaker Change: Okay. Thank you that was helpful and medical.

Speaker Change: When do you anticipate that the second half normalized you would see added and then come back up after the normalization of inventory.

Jeffrey W. Benck: Yeah, and it's good you brought up inventory, because I think what we're seeing in medical, particularly in the, you know, med tech, health tech area, we're seeing that, you know, customers are looking at their inventory position, and they're adjusting that. I think that's probably having a more pronounced effect, and as that works through over the next few quarters, I think it started really at the end of the year, I think we'll see that pop back, and that's got the potential to get there quicker.

Andrew: Yen.

Speaker Change: Good you brought up the inventory because I think what we're seeing in medical particularly in the in the Med Tech Health Tech area.

Speaker Change: We are seeing that customers are looking at their inventory position and they're adjusting that I think I think that's probably having a more pronounced effect and as that works through over the over the next few quarters I think it started really at the end of the year I think we will see that pop back and Thats got a potential too.

Speaker Change: To get there quicker but.

Speaker Change: It's not just any one customer I think medical in general right now.

Jeffrey W. Benck: But again, it's not just any one customer. I think medical in general right now, in those spaces, we're seeing that, you know, post-COVID, there was quite a bit of exuberance about medical devices and what could be done and where they would go, and we've seen that modulate, and we've seen people be more sensitive to their inventory levels. You know, one of the factors for that is the supply chain is getting better, lead times are coming down, you know, people don't need to hold as much inventory, customers, and OEMs don't need to hold as much inventory, so we see that sort of adjusting there.

Speaker Change: In those spaces were seeing that.

Speaker Change: Post Covid, there was quite a bit of exuberance about medical devices, and what could be done and where they will go in and we've seen that modulate and we've seen people be more sensitive to their inventory levels.

Speaker Change: One of the factors on that is supply chain is getting better lead times are coming down people don't need to hold customers Oems don't need to hold as much inventory. So we see that sort of adjusting their.

Jeffrey W. Benck: But unfortunately, you know, we're certainly not seeing that in Q2, where we see that growth come back, but we're going to watch it closely and sort of anticipate that in a few quarters here, we'll start seeing more broad-based demand strength.

Speaker Change: But unfortunately, we're certainly not seeing that in Q2.

Speaker Change: Where we see that growth come back but.

Speaker Change: But we're going to watch it closely and sort of anticipate in a few quarters here, we will start seeing more broad based demand strength.

Arvind Kamal: Okay, thank you. You've been very good at keeping that elevated. And now when you think of the semi-cap not coming back until 2025, and that's at a higher margin, how should we think about that gross margin going into 2025?

Speaker Change: Okay. Thank you.

Speaker Change: Interestingly gross my game has been very good at keeping.

Speaker Change: Keeping that elevated and now when you think of the semi cap not coming back.

Speaker Change: Until 2025, and that's at the higher margin how should we think about that gross margin going into 2010.

Jeffrey W. Benck: Hey Anja, this is Arvind. So let me just start off by saying we we guided for a 10% gross margin, and you know the things that really underpin that type of margin are, you know, there's a three-pronged approach. One is operational efficiency as we build demand or drive demand into you know our sites to align the demand part of it. Then there's the cost actions that we've talked about for a couple quarters here.

Speaker Change: Yes.

Speaker Change: And the audience is arvin. So let me let me just start off by saying you can see from our guidance, we guided 10% gross margin.

Arvin: And the things that really underpin that that type of margin is theres a three pronged approach one is operational efficiency as we.

Jeffrey W. Benck: In addition to that, there's also right sizing where we don't have the demand. And then the third kind of element of this is, you know, the mix of revenue. So when you think about that, you know, that's where we get to our 10%. And that's where we think, you know, for as we look out for 2024, that's where we'll be. And naturally, you know, we're not ready to talk about anything beyond that horizon.

Arvin: Bill demand or drive demand into our <unk>.

Arvin: Lights.

Speaker Change: To align the demand part of it than theirs.

Speaker Change: The cost actions that we've talked about for a couple of quarters here.

Speaker Change: In addition to that there is also right sizing, where we don't have the demand.

Speaker Change: And then on the third kind of element of this is the mix of revenue. So when you think about that.

Speaker Change: That's how we get to our 10% and Thats, where we think for as we look out for 2024, that's where it will be a naturally.

Speaker Change: We're not ready to talk about beyond that horizon. So when we get further into the year, we will give you more texture.

Jeffrey W. Benck: So when we get further into the year, we'll give you more texture as to how we're thinking about margin into 2025. Let me just add a little bit to Arvind's comment. I thought he was spot on.

Speaker Change: How we're thinking about margin into 2025, let me just add a little bit to <unk> comment on the spot.

Arvind Kamal: But I also think if you think about the mix with comms being down and even compute being down, they're, you know, lower margin than maybe our corporate average. So that's helping maybe a little bit on the mix side. We are also aligning expense to revenue. You know, we've been pretty disciplined about making sure we have the flexibility that we're looking at our resources to really protect profitability, even when there's pressure on things.

Speaker Change: Spot on but I also think if you think about the mix with comps being down and even compute being down there.

Speaker Change: Lower margin than maybe our corporate average so that is helping maybe a little bit on the mix side.

Speaker Change: We're also aligning expense to revenue, we've been pretty disciplined about making sure. We have softness that we're looking at our resources to really protect profitability, even though even when there is pressure.

Arvind Kamal: And then, you know, we do expect SemiCap to help. But until SemiCap really comes back, you know, strongly, we won't get as much top-line margin help. But right now, we're just focused on, you know, how do we continue to maintain this top-of-industry margin that we're enjoying right now?

Speaker Change: On things.

Speaker Change: And then.

Speaker Change: We do expect semi cap to to help but until semi cap really comes back strongly.

Speaker Change: We won't get as much topline margin help but right now we're just focused on how do we continue to maintain this top of industry margin that we're enjoying right now.

Anja Marie Theresa Soderstrom: Okay, thank you. I'll get back in queue.

Speaker Change: Okay. Thank you I'll get back in queue.

Speaker Change: Sure.

Speaker Change: Okay.

Operator: As a reminder, if you would like to ask a question, press star 1 on your touchtone phone at this time. We'll take our next question from Jim Ricchiuti with Needham & Company.

Speaker Change: As a reminder, if you would like to ask a question press star one on your Touchtone phone at this time.

Speaker Change: We'll take our next question from Jim Ricchiuti with Needham <unk> Company.

James Andrew Ricchiuti: Hi, good afternoon. This is Chris Grenga on behalf of Jim.

Speaker Change: Hi, Good afternoon. This is Chris <unk> on for Jim. Thank you for taking the questions.

Christopher Grenga: Thank you for taking the questions. Could you just provide a bit more color on the share gains with SEMICAP? And is there any particular area that you would call attention to? Or uh, anything else you can add there, yeah?

Chris: Could you just provide a bit more color on.

Chris: On the share gains with the semi cap.

Chris: And is it.

Chris: Is it any particular areas that you would call attention to.

Chris: Or anything else you can add there.

Jeffrey W. Benck: Yeah and this was a little tricky because there's not you know an infinite number of customers here particularly and on the front end where we play heavily but you know we've been working to make sure we get even exposure across logic and you know as well as the as the memory side of things so that that is you know that is something that we put a lot of energy into. We've also been growing the number of wins with existing customers and continuing to help do more like move to higher level integration right so we might build a frame or machine a platen or you know a piece of the solution that the wafer rides on but you know we're also increasingly looking to do more higher level integration in the cleaning room environment and just really helping our OEMs produce solutions and be more of a one-stop shop and where we can integrate EMS you know manufacturing assembly with precision metal machining that gives us a really unique advantage because not everyone does both the machining as well as the complex assembly side of things.

Speaker Change: Yes, this was a little tricky because theres not.

Chris: Infinite number of customers here, particularly on the front end, where we play heavily.

Chris: But we've been working to make sure we get even exposure across logic and.

Chris: As well as the as the memory side of things so that that is.

Chris: That is something that we put a lot of energy into we've also been growing the number of wins with existing customers and continuing to help do more like move to higher level integration right. So we might build a frame more machine a platten or.

Chris: A piece of the solution that the wafer rides on but we're also increasingly looking to do more higher level integration in a clean room environment, and just really helping our Oems.

Chris: <unk> suite of solutions and be more of a one stop shop, and where we can integrate.

Chris: EMS manufacturing assembly with precision Michelle metal machining that gives us a really unique advantage because not everyone does both the machine as well as the complex assembly side of things.

Jeffrey W. Benck: And so, from that standpoint, we've just, you know, kind of continued to grow WalletShare with existing customers and, you know, constantly look at adding new logos. We had a new win this particular quarter that was with a new customer in a new region, and we're excited about that, and that should continue to support the share gain that we're working through. And one last thing I meant to mention, some of those wins; we had pretty strong bookings both in 22 and 23 in the semi-cap space kind of before, you know, even when the slowdown was just starting back in 22.

Chris: And so from that standpoint.

Chris: We've just kind of continue to grow wallet share with existing customers and.

Chris: We constantly look at adding new logos.

Chris: We had a new win this particular quarter that was.

Chris: With a new customer in a new region and we're excited about that and that should continue to support the share gain that we're that we.

Chris: We're working through.

Chris: And one last thing I, Matt mentioned some of those wins, we had pretty strong bookings both in 'twenty, two and 'twenty three in the semi cap space kind of before even when the slowdown was just starting back in 'twenty, two and oftentimes takes a year 18 months 24 months. So we're benefiting.

Jeffrey W. Benck: And it often takes, you know, a year, 18 months, 24 months, so we're benefiting a bit from those strong bookings there, and that's really why you see us probably at double the growth rate or half the decline that others are seeing in the space because we had those wins, and they're contributing to our business today.

Chris: A bit from those strong bookings there and that that's really why you see us probably.

Chris: Double the growth rate or half the decline that others are seeing in this space because we had those wins and they are contributing to our business today.

Jeffrey W. Benck: Got it. I appreciate the call. Thank you very much. Good. No worries. Thank you. We have no further questions.

Speaker Change: Got it appreciate the color. Thank you very much okay no worries.

Operator: Thank you. We have no further questions at this time, but as a final reminder, if you would like to ask a question, press star and one on your touchtone phone at this time. Star and one to ask a question. It seems we have no further questions at this time. I'd like to turn the call back over to Paul Mansky for any closing or additional remarks. Thank you.

Speaker Change: Thank you we have no further questions at this time, but as a final reminder, if you would like to ask a question press star and one on your Touchtone phone at this time star and wanted to ask a question.

Speaker Change: Okay.

Speaker Change: It seems we have no further questions at this time I would like to turn the call back over to Paul Matzke for any closing or additional remarks.

Paul Mansky: Thank you, Dean, and thank you, everyone, for participating in Benchmark's first quarter 2024 earnings call. Please remember to check the events section of the IR website at ir.bench.com for updates on coming investor conferences. With that, we thank you again for your support and look forward to speaking with you soon.

Paul Mansky: Thank you <unk> and thank you everyone for participating in Benchmark's first quarter 2024 earnings call. Please remember to check the events section of the.

Paul Mansky: The IR website at IR dot bench dot com for updates to coming investor conferences with that we thank you again for your support and look forward to speaking with you soon.

Operator: Thank you, everyone. This concludes today's presentation. We appreciate your participation. You may disconnect at any time.

Speaker Change: Thank you everyone. This concludes today's presentation. We appreciate your participation you may disconnect at anytime.

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Q1 2024 Benchmark Electronics Inc Earnings Call

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