Benchmark Electronics Inc 8-K, filed Feb 10, 2020
Benchmark Electronics Inc (BHE)
About this 8-K
Benchmark Electronics Inc filed this 8-K on February 10, 2020, reporting on events of February 6, 2020.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 6, 2020, Benchmark Electronics, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter and year ended December 31, 2019. A copy of the press release and accompanying investor presentation are attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated by reference herein. The information disclosed under this Item 2.02, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
Description |
99.1 | Press release, dated February 6, 2020
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99.2 | Investor presentation, dated February 6, 2020
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104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
-1-
| SIGNATURES |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BENCHMARK ELECTRONICS, INC. |
Date: February 7, 2020 | By: /s/ Stephen J. Beaver |
| Stephen J. Beaver, Esq. |
| Vice President General Counsel |
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-2-
Exhibit 99.1
FOR IMMEDIATE RELEASE
BENCHMARK ELECTRONICS REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS
Full year 2019 results:
· Full year revenue of $2.27 billion
· Higher-value markets revenue mix greater than 70%
· Medical sector revenue up 14% compared to 2018
· Cash flow generated from operations of $93 million and free cash flow of $58 million
· Annual GAAP diluted EPS of $0.60 and non-GAAP diluted EPS of $1.32
Fourth quarter 2019 results:
· Quarterly revenue of $508 million
· Semi-Cap revenue growth of 17% year-over-year
· Quarterly GAAP diluted loss per share of $(0.19) and non-GAAP diluted EPS of $0.27
TEMPE, AZ, February 6, 2020 – Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the fourth quarter and year ended December 31, 2019. As previously reported, 2019 results were impacted by the ransomware incident in the fourth quarter.
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Three Months Ended |
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Dec 31, |
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Sep 30, |
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Dec 31, |
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In millions, except EPS |
2019 |
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2019 |
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2018 |
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Sales |
$508 |
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$555 |
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$657 |
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Net income (loss) |
$(7) |
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$7 |
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$28 |
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Net income – non-GAAP(1) |
$10 |
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$14 |
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$18 |
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Diluted earnings (loss) per share |
$(0.19) |
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$0.19 |
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$0.64 |
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Diluted EPS – non-GAAP(1) |
$0.27 |
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$0.36 |
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$0.41 |
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Operating margin |
(1.8)% |
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1.8% |
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2.3% |
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Operating margin – non-GAAP(1) |
2.6% |
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3.2% |
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3.2% |
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Twelve Months Ended |
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Dec 31, |
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Dec 31, |
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In millions, except EPS |
2019 |
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2018 |
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Net sales |
$2,268 |
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$2,566 |
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Net income |
$23 |
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$23 |
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Net income – non-GAAP(1) |
$51 |
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$68 |
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Diluted EPS |
$0.60 |
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$0.49 |
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Diluted EPS – non-GAAP(1) |
$1.32 |
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$1.45 |
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Operating margin |
1.3% |
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2.3% |
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Operating margin – non-GAAP(1) |
3.0% |
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3.1% |
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(1) A reconciliation of GAAP and non-GAAP results is included below.
1
Jeff Benck, Benchmark's President and CEO stated, "As we enter 2020, we continue to see momentum in our higher-value markets: Aerospace & Defense (A&D), Medical and Semi-cap markets are each expected to grow 10% year-over-year. With these increases, we expect the higher value markets mix to approach 80% of our revenue for the year.”
Benck stated, “Additionally, we generated over $50 million of free cash flow and returned over $140 million to shareholders through share repurchases and dividends in 2019. We expect operating cash flows in 2020 to be between $70 million and $90 million and provide further opportunities to return capital to our shareholders.”
“Our key strategic focus will underpin how we are creating a better Benchmark and it all starts with our focus on the customer. We are changing the relationships with our customers by delivering incremental value through our expanded set of services and differentiated technology. We are also attracting new customers that are seeking us out based on our unique capabilities and broad solutions portfolio as they look to outsource more work to a strategic partner like Benchmark.”
Cash Conversion Cycle
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Dec 31, |
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Sep 30, |
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Dec 31, |
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2019 |
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2019 |
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2018 |
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Accounts receivable days |
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57 |
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56 |
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64 |
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Contract asset days |
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29 |
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26 |
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19 |
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Inventory days |
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61 |
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57 |
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46 |
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Accounts payable days |
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(59) |
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(53) |
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(63) |
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Customer deposits |
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(7) |
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(7) |
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(4) |
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Cash Conversion Cycle days |
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81 |
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79 |
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62 |
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With the completion of the legacy computing contract, the cash conversion cycle days increased as expected.
2
Fourth Quarter 2019 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.
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Dec 31, |
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Sep 30, |
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Dec 31, |
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Higher-Value Markets |
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2019 |
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2019 |
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2018 |
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Industrials |
$ |
107 |
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21 |
% |
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$ |
115 |
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21 |
% |
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$ |
121 |
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18 |
% |
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A&D |
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106 |
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21 |
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115 |
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21 |
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105 |
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16 |
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Medical |
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103 |
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20 |
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128 |
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23 |
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104 |
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16 |
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Semi-Cap |
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81 |
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16 |
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68 |
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12 |
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70 |
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11 |
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$ |
397 |
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78 |
% |
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$ |
426 |
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77 |
% |
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$ |
400 |
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61 |
% |
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Dec 31, |
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Sep 30, |
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Dec 31, |
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Traditional Markets |
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2019 |
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2019 |
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2018 |
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Computing |
$ |
45 |
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9 |
% |
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$ |
59 |
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11 |
% |
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$ |
171 |
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26 |
% |
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Telecommunications |
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66 |
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13 |
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70 |
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12 |
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86 |
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13 |
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$ |
111 |
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22 |
% |
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$ |
129 |
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23 |
% |
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$ |
257 |
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39 |
% |
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Total |
$ |
508 |
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100 |
% |
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$ |
555 |
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100 |
% |
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$ |
657 |
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100 |
% |
Overall, revenues during the fourth quarter were down due to the impact of the ransomware incident, although revenues from Semi-Cap were up quarter-over-quarter and year-over-year. Traditional market revenues were down 57% year-over-year primarily from our exit of the legacy computing contract.
First Quarter 2020 Outlook
· Revenue between $530 - $570 million
· Diluted GAAP earnings per share between $0.22 - $0.28
· Diluted non-GAAP earnings per share between $0.32 - $0.38 (excluding restructuring charges and other costs and amortization of intangibles)
Restructuring charges are expected to range between $1.5 million to $2.5 million in the first quarter and the amortization of intangibles is expected to be $2.4 million in the first quarter.
Fourth Quarter 2019 and CY2019 Earnings Conference Call
The Company will host a conference call to discuss the results today at 5:00 p.m. Eastern Time. The live webcast of the call and accompanying reference materials will be accessible by logging on to the Company's website at www.bench.com. A replay of the broadcast will also be available until Thursday, February 13, 2020 on the Company's website.
About Benchmark Electronics, Inc.
Benchmark provides comprehensive solutions across the entire product life cycle; leading through its innovative technology and engineering design services; leveraging its optimized global supply chain; and delivering world-class manufacturing services in the following industries: commercial aerospace, defense, advanced computing, next generation telecommunications, medical, and semiconductor capital equipment. Benchmark's global operations include facilities in seven countries and its common shares trade on the New York Stock Exchange under the symbol BHE.
3
For More Information, Please Contact:
Lisa K. Weeks, VP of Strategy & Investor Relations
623-300-7052 or lisa.weeks@bench.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “expect,” “estimate,” “anticipate,” “could” “predict” and similar expressions, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts. Forward-looking statements include, among other things, guidance for first quarter 2020 results; statements, express or implied, concerning future operating results or margins, the ability to generate sales and income or cash flow, and expected revenue mix; and Benchmark’s business and growth strategies. Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally. If one or more of these risks or uncertainties materializes, or underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Readers are advised to consult further disclosures on these risks and uncertainties, particularly in Part 1, Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and in Part II, Item 1A, “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and in its subsequent filings with the Securities and Exchange Commission. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and it assumes no obligation to update them.
Non-GAAP Financial Measures
Management discloses non‐GAAP information to provide investors with additional information to analyze the Company’s performance and underlying trends. Management uses non‐GAAP measures that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance. This document also references “free cash flow”, which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software. The Company’s non‐GAAP information is not necessarily comparable to the non‐GAAP information used by other companies. Non‐GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as a measure of the Company’s profitability or liquidity. Readers should consider the types of events and transactions for which adjustments have been made.
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Benchmark Electronics, Inc. and Subsidiaries |
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Reconciliation of GAAP to Non-GAAP Financial Results |
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(Amounts in Thousands, Except Per Share Data) |
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(UNAUDITED) |
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Three Months Ended |
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Year Ended |
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Dec 31, |
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Sep 30, |
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Dec 31, |
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Dec 31, |
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2019 |
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2019 |
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2018 |
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2019 |
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2018 |
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Income (loss) from operations (GAAP) |
$ |
(9,281) |
$ |
9,798 |
$ |
15,265 |
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$ |
28,545 |
$ |
58,538 |
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Restructuring charges and other costs |
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2,268 |
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5,843 |
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3,527 |
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13,101 |
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9,365 |
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Ransomware incident related costs, net |
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7,681 |
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- |
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- |
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7,681 |
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- |
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Settlement |
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(773) |
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- |
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- |
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- |
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- |
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Customer insolvency (recovery) |
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11,036 |
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- |
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(113) |
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8,278 |
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2,511 |
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Amortization of intangible assets |
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2,366 |
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2,367 |
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2,384 |
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9,461 |
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9,485 |
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Non-GAAP income from operations |
$ |
13,297 |
$ |
18,008 |
$ |
21,063 |
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$ |
67,066 |
$ |
79,899 |
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Gross Profit (GAAP) |
$ |
40,725 |
$ |
52,883 |
$ |
55,199 |
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$ |
200,406 |
$ |
220,593 |
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Settlement |
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(773) |
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- |
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- |
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- |
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- |
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Customer insolvency (recovery) |
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967 |
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- |
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(113) |
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(73) |
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797 |
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Non-GAAP gross profit |
$ |
40,919 |
$ |
52,883 |
$ |
55,086 |
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$ |
200,333 |
$ |
221,390 |
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Net income (loss) (GAAP) |
$ |
(6,931) |
$ |
7,136 |
$ |
27,716 |
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$ |
23,425 |
$ |
22,817 |
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Restructuring charges and other costs |
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2,268 |
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6,168 |
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3,527 |
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13,426 |
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9,365 |
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Ransomware incident related costs, net |
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7,681 |
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- |
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- |
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7,681 |
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- |
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Customer insolvency (recovery) |
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11,036 |
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- |
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(113) |
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8,278 |
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2,511 |
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Amortization of intangible assets |
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2,366 |
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2,367 |
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2,384 |
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9,461 |
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9,485 |
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Settlements |
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(773) |
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(83) |
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- |
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(3,021) |
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- |
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Refinancing of credit facilities |
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- |
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- |
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- |
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- |
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1,982 |
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Income tax adjustments(1) |
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(5,385) |
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(1,879) |
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(1,050) |
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(8,095) |
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(4,592) |
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Tax Cuts and Jobs Act(2) |
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- |
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- |
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(14,529) |
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- |
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26,008 |
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Non-GAAP net income |
$ |
10,262 |
$ |
13,709 |
$ |
17,935 |
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$ |
51,155 |
$ |
67,576 |
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Diluted earnings (loss) per share: |
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Diluted (GAAP) |
$ |
(0.19) |
$ |
0.19 |
$ |
0.64 |
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$ |
0.60 |
$ |
0.49 |
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Diluted (Non-GAAP) |
$ |
0.27 |
$ |
0.36 |
$ |
0.41 |
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$ |
1.32 |
$ |
1.45 |
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Weighted-average number of shares used in |
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calculating diluted earnings (loss) per share: |
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Diluted (GAAP) |
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36,928 |
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37,645 |
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43,229 |
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38,763 |
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46,655 |
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Diluted (Non-GAAP) |
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37,374 |
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37,645 |
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43,229 |
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38,763 |
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46,655 |
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(1) This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.
(2) This amount represents the impact of repatriating foreign earnings from our foreign jurisdictions to the U.S., offset by available U.S. foreign tax credits, and a non-recurring tax true-up benefit as a result of finalizing our federal and state income tax accounting for the U.S. transitions toll tax from the 2017 Tax Cuts and Jobs Act.
5
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Benchmark Electronics, Inc. and Subsidiaries |
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Condensed Consolidated Statements of Income |
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(Amounts in Thousands, Except Per Share Data) |
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(UNAUDITED) |
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
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2019 |
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2018 |
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2019 |
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2018 |
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Sales |
$ |
508,444 |
$ |
657,050 |
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$ |
2,268,095 |
$ |
2,566,465 |
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Cost of sales |
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467,719 |
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601,851 |
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2,067,689 |
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2,345,872 |
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Gross profit |
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40,725 |
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55,199 |
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200,406 |
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220,593 |
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Selling, general and administrative expenses |
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37,691 |
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34,023 |
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141,618 |
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143,205 |
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Amortization of intangible assets |
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2,366 |
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2,384 |
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9,461 |
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9,485 |
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Restructuring charges and other costs |
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2,268 |
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3,527 |
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13,101 |
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9,365 |
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Ransomware incident related costs, net |
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7,681 |
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- |
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7,681 |
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- |
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Income (loss) from operations |
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(9,281) |
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15,265 |
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28,545 |
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58,538 |
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Interest expense |
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(1,650) |
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(1,930) |
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(6,664) |
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(10,473) |
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Interest income |
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745 |
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1,651 |
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3,829 |
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6,848 |
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Other income (expense), net |
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(717) |
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(199) |
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1,559 |
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628 |
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Income (loss) before income taxes |
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(10,903) |
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14,787 |
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27,269 |
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55,541 |
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Income tax expense |
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(3,972) |
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(12,929) |
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3,844 |
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32,724 |
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Net income (loss) |
$ |
(6,931) |
$ |
27,716 |
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$ |
23,425 |
$ |
22,817 |
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|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.19) |
$ |
0.64 |
|
$ |
0.61 |
$ |
0.49 |
|
|
Diluted |
$ |
(0.19) |
$ |
0.64 |
|
$ |
0.60 |
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in calculating |
|
|
|
|
|
|
|
|
||
|
earnings (loss) per share: |
|
|
|
|
|
|
|
|
||
|
|
Basic |
|
36,928 |
|
43,120 |
|
|
38,338 |
|
46,332 |
|
|
Diluted |
|
36,928 |
|
43,229 |
|
|
38,763 |
|
46,655 |
6
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark Electronics, Inc. and Subsidiaries |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets |
|||||||||
|
(UNAUDITED) |
|||||||||
|
(in thousands) |
|||||||||
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
||||
|
|
Current assets: |
|
|
|
|
|
|||
|
|
|
Cash and cash equivalents |
$ |
363,956 |
|
$ |
458,102 |
||
|
|
|
Accounts receivable, net |
|
324,424 |
|
|
468,161 |
||
|
|
|
Contract assets |
|
161,061 |
|
|
140,082 |
||
|
|
|
Inventories |
|
314,956 |
|
|
309,975 |
||
|
|
|
Other current assets |
|
30,685 |
|
|
27,230 |
||
|
|
|
|
|
Total current assets |
|
1,195,082 |
|
|
1,403,550 |
|
|
Property, plant and equipment, net |
|
205,819 |
|
|
210,954 |
|||
|
|
Operating lease right-of-use assets |
|
76,859 |
|
|
- |
|||
|
|
Goodwill and other, net |
|
282,114 |
|
|
285,279 |
|||
|
|
|
|
|
Total assets |
$ |
1,759,874 |
|
$ |
1,899,783 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
||||
|
|
Current liabilities: |
|
|
|
|
|
|||
|
|
|
Current installments of long-term debt and finance lease obligations |
$ |
8,825 |
|
$ |
6,793 |
||
|
|
|
Accounts payable |
|
302,994 |
|
|
422,053 |
||
|
|
|
Accrued liabilities |
|
147,426 |
|
|
108,313 |
||
|
|
|
|
|
Total current liabilities |
|
459,245 |
|
|
537,159 |
|
|
Long-term debt and finance lease obligations, less current installments |
|
138,912 |
|
|
147,277 |
|||
|
|
Operating lease liabilities |
|
67,898 |
|
|
- |
|||
|
|
Other long-term liabilities |
|
78,987 |
|
|
83,122 |
|||
|
|
Shareholders’ equity |
|
1,014,832 |
|
|
1,132,225 |
|||
|
|
|
|
|
Total liabilities and shareholders’ equity |
$ |
1,759,874 |
|
$ |
1,899,783 |
7
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark Electronics, Inc. and Subsidiaries |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Cash Flows |
|||||||||
|
(in thousands) |
|||||||||
|
(UNAUDITED) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|||
|
|
|
|
|
|
|
December 31, |
|||
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
||||
|
|
Net income |
$ |
23,425 |
|
$ |
22,817 |
|||
|
|
Depreciation and amortization |
|
48,427 |
|
|
51,839 |
|||
|
|
Stock-based compensation expense |
|
10,194 |
|
|
10,089 |
|||
|
|
Accounts receivable, net |
|
134,926 |
|
|
(33,952) |
|||
|
|
Contract assets |
|
(20,979) |
|
|
6,414 |
|||
|
|
Inventories |
|
(5,238) |
|
|
(43,264) |
|||
|
|
Accounts payable |
|
(121,860) |
|
|
61,391 |
|||
|
|
Other changes in working capital and other, net |
|
24,241 |
|
|
1,353 |
|||
|
|
|
Net cash provided by operations |
|
93,136 |
|
|
76,687 |
||
|
|
|
|
|
|
|
|
|||
|
Cash flows from investing activities: |
|
|
|
|
|
||||
|
|
Additions to property, plant and equipment and software |
|
(35,118) |
|
|
(66,732) |
|||
|
|
Other investing activities, net |
|
255 |
|
|
(2,117) |
|||
|
|
|
Net cash used in investing activities |
|
(34,863) |
|
|
(68,849) |
||
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
||||
|
|
Share repurchases |
|
(122,110) |
|
|
(211,858) |
|||
|
|
Net debt activity |
|
(6,794) |
|
|
(58,024) |
|||
|
|
Other financing activities, net |
|
(23,933) |
|
|
(21,085) |
|||
|
|
|
Net cash used in financing activities |
|
(152,837) |
|
|
(290,967) |
||
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes |
|
418 |
|
|
(1,315) |
||||
|
Net decrease in cash and cash equivalents |
|
(94,146) |
|
|
(284,444) |
||||
|
|
Cash and cash equivalents at beginning of year |
|
458,102 |
|
|
742,546 |
|||
|
|
Cash and cash equivalents at end of period |
$ |
363,956 |
|
$ |
458,102 |
|||
|
|
|
|
|
|
|
|
|
|
|
8
Exhibit 99.2
| 1 Q4 - 19 and 2019 Earnings Call February 6, 2020
| 2 | 2 This press release contains forward - looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “expect,” “estimate,” “anticipate,” “could” “predict” and similar expressions, and the negatives thereof, often identify forward - looking statements, which are not limited to historical facts. Forward - looking statements include, among other things, guidance for first quarter 2020 results; statements, express or implied, concerning future operating results or margins, the ability to generate sales and income or cash flow, and expected revenue mix; and Benchmark’s business and growth strategies. Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally. If one or more of these risks or uncertainties materializes, or underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Readers are advised to consult further disclosures on these risks and uncertainties, particularly in Part 1, Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10 - K for the year ended December 31, 2018 and in Part II, Item 1A, “Risk Factors” in the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2019, and in its subsequent filings with the Securities and Exchange Commission. All forward - looking statements included in this document are based upon information available to the Company as of the date of this document, and it assumes no obligation to update them. . This document includes certain financial measures that exclude items and therefore are not in accordance with U.S. generally accepted accounting principles (“GAAP”). A detailed reconciliation between GAAP results and results excluding special items (“non - GAAP”) is included in the Appendix of this document. Management discloses non - GAAP information to provide investors with additional information to analyze the Company’s performance and underlying trends. Management uses non - GAAP measures that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance. This document also references “free cash flow”, which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software. The Company’s non - GAAP information is not necessarily comparable to the non - GAAP information used by other companies. Non - GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as a measure of the Company’s profitability or liquidity. Readers should consider the types of events and transactions for which adjustments have been made. Forward - Looking Statements Non - GAAP Financial Information
| 3 CEO Perspective Jeff Benck President & Chief Executive Officer
| 4 Fourth Quarter and 2019 Summary Better than expected quarterly results in Semi - cap Year - over - year growth in Semi - cap and A&D in Q4 Medical revenues up >14% annually Momentum in Targeted Higher - value Markets Go - to - Market organization making progress Sector strategies driving disciplined customer selection Key new wins selling the full breadth of capabilities Continued Go - to - Market Progress San Jose site closure on track for 1H - 20; customer transitions underway Guaymas, Mexico operations sold versus closed First micro - electronics production units from Benchmark’s Lark facility in Phoenix Progress on Operational Efficiencies Working capital normalized at ~80 days after exiting the legacy computing contract Operating cash flow of $93 million and free cash flow of $58 million for the year Repurchased $122 million shares in 2019; $79 million authorization remaining Paid quarterly dividend of $0.15 per share Cash Flow and Capital Allocation
| 5 Q4 - 19 Notable New Business Wins by Market Sector Continued Progress in Capturing the Right Mix Industrials Facial imaging instrument (mfg.) Security scanning system (design & mfg.) Medical Advanced DNA testing platform ( process design & mfg.) Defibrillator product (mfg .) Fetal monitoring device ( process design & mfg.) Semi - Cap Front - end semi - cap in - chamber tool (precision technologies) Semi - cap tool electronic sensor device (mfg .) Aerospace & Defense Satellite communication device (process design & mfg.) F - 16 cockpit electronics (design & mfg.) Munition system electronics (mfg.) Computing & Telco High - performance computing (process design & mfg.) 3 - D holographic display device (design)
| 6 CFO Updates & Q4 - 19 and 2019 Financial Highlights Roop Lakkaraju Chief Financial Officer
| 7 Fourth Quarter 2019 Financial Summary See APPENDIX 1 for a reconciliation of GAAP to non - GAAP Financial Results For the Three Months Ended (In millions, except EPS) Dec. 31 , 2019 Sept. 30 , 2019 Q/Q Dec. 31 , 2018 Y/Y Net Sales $508 $555 (8%) $657 (23%) GAAP Operating Margin (1.8%) 1.8% (360 bps) 2.3% (410 bps) GAAP Diluted EPS ($0.19) $0.19 >(100%) $0.64 >(100%) Non - GAAP Operating Margin 2.6% 3.2% (60 bps) 3.2% (60 bps) Non - GAAP Diluted EPS $0.27 $0.36 (25%) $0.41 (34%) GAAP ROIC 2.9% 5.2% (230 bps) 6.2% (330 bps) Non - GAAP ROIC 7.4% 8.2% (80 bps) 9.2% (180 bps) Revenue (in millions) $ 505 – $ 510 Diluted EPS – non - GAAP $ 0.24 – $ 0.28 Updated Guidance for the Fourth Quarter:
| 8 Revenue by Market Sector For the Three Months Ended Higher - Value Markets Dec. 31 , 2019 Sept. 30 , 2019 Q/Q Dec. 31 , 2018 Y/Y Industrials 21% $107 21% $115 (6%) 18% $121 (11%) Aerospace & Defense 21% $106 21% $115 (8%) 16% $105 1% Medical 20% $103 23% $128 (20%) 16% $104 (1%) Semi - Cap 16% $81 12% $68 19% 11% $70 17% Total Revenue $397 $426 (7%) $400 (1%) (1) In millions Traditional Markets Dec. 31 , 2019 Sept. 30 , 2019 Q/Q Dec. 30 , 2018 Y/Y Computing 9% $45 11% $59 (25%) 26% $171 (74%) Telecommunications 13% $66 12% $70 (4%) 13% $86 (23%) Total Revenue $111 $129 (14%) $257 (57%)
| 9 GAAP Key Business Trends 15.3 16.1 11.9 9.8 - 9.3 2.3% 2.7% 2.0% 1.8% - 1.8% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 34.0 33.8 35.3 34.9 37.7 5.2% 5.6% 5.9% 6.3% 7.4% 0.0% 2.0% 4.0% 6.0% 8.0% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 657 603 602 555 508 8.4% 8.9% 8.8% 9.5% 8.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 0 500 1,000 1,500 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 829 835 840 835 819 51 47 44 43 24 6.2% 5.7% 5.3% 5.2% 2.9% -25.0% -15.0% -5.0% 5.0% 15.0% 0 500 1000 1500 2000 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Revenue ($M) and Gross Margin Operating Profit ($M) and Margin Return on Invested Capital (LTM) SG&A ($M) NOPAT Inv. Capital GAAP ROIC = (GAAP TTM income from operations – GAAP Tax Impact) ÷ (Average Invested Capital for last 5 quarters) Q4 - 19 Reflects Ransomware Incident Q4 - 19 Reflects Ransomware Incident
| 10 21.1 17.3 18.5 18.0 13.3 3.2% 2.9% 3.1% 3.2% 2.6% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 657 603 602 555 508 8.4% 8.8% 8.9% 9.5% 8.0% -1.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 0 200 400 600 800 1,000 1,200 1,400 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q4 - 19 Reflects Ransomware Incident 829 835 840 835 819 76 70 69 68 61 9.2% 8.3% 8.2% 8.2% 7.4% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 0 200 400 600 800 1000 1200 1400 1600 1800 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Non - GAAP Key Business Trends Revenue ($M) and Gross Margin Return on Invested Capital (LTM) SG&A ($M) 34.0 35.5 35.3 34.9 27.6 5.2% 5.9% 5.9% 6.3% 5.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Operating Profit ($M) and Margin NOPAT Inv. Capital Non - GAAP ROIC = (Non - GAAP TTM income from operations – Non - GAAP Tax Impact) ÷ [Average Invested Capital for last 5 quarters] Q4 - 19 Reflects Ransomware Incident
| 11 (In millions, except EPS) Dec. 31 , 2019 Dec. 31 , 2018 Q’18 to ‘19 Y/Y Net Sales $2,268 $2,566 ($298) (12%) Non - GAAP Gross Profit $200 $221 ($21) (10%) Non - GAAP Gross Margin % 8.8% 8.6% (20 bps) Non - GAAP SG&A $133 $141 ($8) (6%) Non - GAAP SG&A % 5.9% 5.5% 40 bps Non - GAAP Operating Profit $67 $80 ($13 ) (16%) Non - GAAP Operating Margin % 3.0% 3.1% (10 bps) Non - GAAP Diluted EPS $1.32 $1.45 ($0.13) (9%) Non - GAAP ROIC 7.4% 9.2% (180 bps) 2019 Financial Summary See APPENDIX 1 for a reconciliation of GAAP to non - GAAP Financial Results For the Twelve Months Ended
| 12 Revenue by Market Sector For the Twelve Months Ended ($M) Higher - Value Markets Dec. 31 , 2019 Dec. 31 , 2018 Y/Y Industrials 20% $454 19% $493 (8%) Aerospace & Defense 19% $432 16% $406 6% Medical 20% $448 15% $394 14% Semi - Cap 12% $278 14% $355 (22%) Total Revenue $1,612 $1,648 (2%) Traditional Markets Dec. 31 , 2019 Dec. 30 , 2018 Y/Y Computing 16% $361 23% $581 (38%) Telecommunications 13% $295 13% $337 (12%) Total Revenue $656 $918 (29%)
| 13 Cash Flow / Working Capital Highlights For the Twelve Months Ended For the Three Months Ended (1) Free cash flow (FCF) defined as net cash provided by (used in) operations less capex (In millions, except EPS) Dec. 31 , 2019 Dec. 31, 2018 Dec. 31 , 2019 Sept. 30 , 2019 Dec. 31, 2018 Cash Flows from (used in) Operations $93 $77 $36 ($11) $94 FCF $58 $10 $27 ($22) $80 Cash $364 $458 $364 $348 $458 International $198 $154 $198 $180 $154 US $166 $304 $166 $168 $304 Inventory $315 $310 $315 $316 $310 Accounts Receivable $324 $468 $324 $348 $468 Contract Assets $161 $140 $161 $161 $140 Accounts Payable $303 $422 $303 $296 $422 (1)
| 14 Working Capital Update Q4 - 17 Q1 - 18 Q2 - 18 Q3 - 18 Q4 - 18 Q1 - 19 Q2 - 19 Q3 - 19 Q4 - 19 Accounts Receivable Days 59 59 61 64 64 61 54 56 57 Contract Asset Days 20 22 20 22 19 23 23 26 29 Inventory Days 40 50 47 49 46 52 52 57 61 Deposits 3 3 2 4 4 3 3 7 7 Accounts Payable Days 54 60 57 57 63 61 61 53 59 Cash Conversion Cycle 62 68 69 74 62 72 65 79 81 Excluding the legacy computing contract, the updated CCC target is 78 to 83 days 62 68 69 74 62 72 65 79 81 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19
| 15 Capital Allocation Update Dividends Recurring quarterly dividend of $0.15 per share declared Dividend of $5.6 million paid in October 2019 Share Repurchases Share repurchases of $122 million completed as of December 31, 2019 Remaining authorization to repurchase shares of $79 million at December 31, 2019
| 16 First Quarter 2020 Guidance * The above guidance excludes the impact of amortization of intangible assets and estimated restructuring charges and other costs Guidance Net Sales (in millions) $ 530 – $570 Diluted EPS – non - GAAP* $0.32 – $ 0.38
| 17 Sequential Modeling Information Higher - Value Markets Q1 - 20 Outlook (%) Industrials Up High Singles Aerospace & Defense Up > 15% Medical Up > 20% Semi - Cap Up Low Singles Traditional Markets Q1 - 20 Outlook (%) Computing Flat Telecommunication s Down > 10% Q1 - 20 Guidance Operating Margin - non - GAAP* 3.0 – 3.3% Other Expenses, Net (in millions) $ 1.3 Effective Tax Rate 20 - 22% Weighted Average Shares (m) 37.4 * The above guidance excludes the impact of amortization of intangible assets and estimated restructuring charges and other costs
| 18 2020 Goals and Initiatives Jeff Benck - CEO
| 19 2020 Expectations Overcoming revenue loss from exit of the legacy computing contract Higher - value market growth >10% to ~80% of total revenue Modest Year - over - Year Revenue Growth Targeting full year non - GAAP gross margins in the 9.2% to 9.6% range SG&A expenses in the range of $140 to $145 million Increasing M argins Expect full year cash flow from operations to be between $70 - $90 million Increased quarterly dividend by $0.01 to $0.16 per share Capital Allocation
| 20 Key Strategic Initiatives Change the relationship with our customers; differentiate with technology Revenue at the right target margin profile Focus on the Customer Be the best at what we do Effective asset utilization and margin expansion Drive Enterprise Efficiencies Invest in People, Process, and Solutions Revenue growth and margin expansion Growing our Business Drive empowerment, accountability, and ownership High functioning teams in a great workplace Engage Talent and Shift Culture
| 21 Appendix
| 22 (Amounts in Thousands, Except Per Share Data) – (UNAUDITED) APPENDIX 1 - Reconciliation of GAAP to non - GAAP Financial Results This amount represents the tax impact of the non - GAAP adjustments using the applicable effective tax rates. This amount represents the impact of repatriating foreign earnings from our foreign jurisdictions to the U.S. offset by available U.S. foreign tax credits, and a non - recurring tax true - up benefit as a result of finalizing our federal and state income tax accounting for the U.S. transitions toll tax from the 2017 Tax Cuts and Jobs Act. Three Months Ended Year Ended Dec 31, Sep 30, Dec 31, Dec 31, 2019 2019 2018 2019 2018 Income (loss) from operations (GAAP) $ (9,281) $ 9,798 $ 15,265 $ 28,545 $ 58,538 Restructuring charges and other costs 2,268 5,843 3,527 13,101 9,365 Ransomware incident related costs, net 7,681 - - 7,681 - Settlement (773) - - - - Customer insolvency (recovery) 11,036 - (113) 8,278 2,511 Amortization of intangible assets 2,366 2,367 2,384 9,461 9,485 Non - GAAP income from operations $ 13,297 $ 18,008 $ 21,063 $ 67,066 $ 79,899 Gross Profit (GAAP) $ 40,725 $ 52,883 $ 55,199 $ 200,406 $ 220,593 Settlement (773) - - - - Customer insolvency (recovery) 967 - (113) (73) 797 Non - GAAP gross profit $ 40,919 $ 52,883 $ 55,086 $ 200,333 $ 221,390 Net income (loss) (GAAP) $ (6,931) $ 7,136 $ 27,716 $ 23,425 $ 22,817 Restructuring charges and other costs 2,268 6,168 3,527 13,426 9,365 Ransomware incident related costs, net 7,681 - - 7,681 - Customer insolvency (recovery) 11,036 - (113) 8,278 2,511 Amortization of intangible assets 2,366 2,367 2,384 9,461 9,485 Settlements (773) (83) - (3,021) - Refinancing of credit facilities - - - - 1,982 Income tax adjustments (1) (5,385) (1,879) (1,050) (8,095) (4,592) Tax Cuts and Jobs Act (2) - - (14,529) - 26,008 Non - GAAP net income $ 10,262 $ 13,709 $ 17,935 $ 51,155 $ 67,576 Diluted earnings (loss) per share: Diluted (GAAP) $ (0.19) $ 0.19 $ 0.64 $ 0.60 $ 0.49 Diluted (Non - GAAP) $ 0.27 $ 0.36 $ 0.41 $ 1.32 $ 1.45 Weighted - average number of shares used in calculating diluted earnings (loss) per share: Diluted (GAAP) 36,928 37,645 43,229 38,763 46,655 Diluted (Non - GAAP) 37,374 37,645 43,229 38,763 46,655
| 23 (Amounts in Thousands) – (UNAUDITED) APPENDIX 2 - Reconciliation of GAAP to Non - GAAP Financial Measures Twelve Month Ended Three Months Ended Dec. 31 , 2019 Dec. 31 , 2018 Dec. 31 , 2019 Sept. 30 , 2019 Dec. 31, 2018 GAAP Gross Profit $200,406 $ 220,593 $40,725 $52,883 $55,199 Settlement - - (773) - - Customer insolvency (recovery) (73) 797 967 - (113) Non - GAAP Gross Profit $200,333 $ 221,390 $40,919 $ 52,883 $55,086 GAAP SG&A Expenses $141,618 $143,205 $37,691 $34,875 $34,023 Customer Insolvency 8,351 1,714 10,069 - - Non - GAAP SG&A Expenses $133,267 $141,491 $27,622 $34,875 $34,023
| 24 (Amounts in Thousands) – (UNAUDITED) APPENDIX 3 - Reconciliation of Free Cash Flow Twelve Months Ended Three Months Ended Dec. 31, 2019 Dec. 31, 2018 Dec. 31 , 2019 Sept. 30 , 2019 Dec. 31, 2018 Net Cash Provided by (Used in) Operations $93,136 $76,687 $35,822 ($11,458) $93,980 Additions to property, plant and equipment and software (35,118) (66,732) (9,176) (10,447) (13,799) Free Cash Flow (Free Cash Flow Used) $58,018 $9,955 $26,646 ($21,905) $80,181