• Fourth-Quarter Revenue: $657 million, flat sequentially, down 5% year over year.
• Non-GAAP Gross Margin: 10.4%, a 10 basis point increase year over year.
• Non-GAAP Operating Margin: 5.1%, down 20 basis points sequentially and 40 basis points year over year.
• GAAP Earnings Per Share (EPS): $0.50.
• Non-GAAP EPS: $0.61, above guidance range of $0.53 to $0.59.
• Free Cash Flow (Q4): $37 million.
• Free Cash Flow (FY 2024): $156 million.
• Cash and Restricted Cash: $328 million as of December 31.
• Debt Reduction: $22 million in Q4.
• Capital Expenditure (CapEx) 2024: $33 million, including $9 million in Q4.
• Dividends Paid (Q4): $6.1 million.
• Dividends Paid (FY 2024): $23.9 million.
• Share Repurchase (FY 2024): $5.1 million.
• Revenue Guidance (Q1 2025): $620 million to $660 million.
• Non-GAAP EPS Guidance (Q1 2025): $0.48 to $0.54.
• CapEx Guidance (Q1 2025): $15 million to $20 million.
• CapEx Guidance (FY 2025): $65 million to $75 million.
• Free Cash Flow Guidance (FY 2025): $50 million to $80 million.

• Warning! GuruFocus has detected 6 Warning Signs with BHE.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Benchmark Electronics Inc (NYSE:BHE) achieved a significant reduction in inventory by over $130 million, or 20%, which contributed to generating over $156 million in free cash flow for the year.
• The company reported strong performance in the Semi-Cap and A&D sectors, with Semi-Cap revenue increasing by 18% year over year and A&D revenue up by 15% year over year.
• Benchmark Electronics Inc (NYSE:BHE) maintained a non-GAAP operating margin of over 5% for the fourth quarter, despite slight sequential declines.
• The company is planning to expand its capacity by breaking ground on a fourth building in Penang, Malaysia, to support Semi-Cap customers, indicating confidence in future growth.
• Benchmark Electronics Inc (NYSE:BHE) reported a strong bookings quarter in the Complex Industrial sector, including competitive wins in commercial gaming and audio control systems.

Negative Points

• Overall revenue for the fourth quarter was flat sequentially and down 5% year over year, indicating challenges in maintaining growth.
• The Medical sector experienced a 7% decline in revenue year over year, attributed to inventory rebalancing and demand weakness in medical devices.
• AC&C revenue decreased by 48% year over year, driven by the completion of large HPC programs and continued weakness in the communications business.
• Non-GAAP SG&A expenses increased by 9% sequentially and 6% year over year, primarily due to higher variable compensation.
• The company anticipates continued sector pressures in AC&C, expecting declines to persist at least through the first half of 2025.

Q & A Highlights

Q: How much of the anticipated growth in the semiconductor market for 2025 is due to share gains versus improved demand from OEM customers? A: Jeffrey Benck, CEO, explained that it's a combination of both. Last year's growth was primarily driven by share gains, but for 2025, they are seeing improved demand in certain areas, alongside new bookings ramping up.

Q: Does the Q1 guidance reflect a normal seasonal increase in variable costs, and is there more to do on working capital, particularly inventory? A: Bryan Schumaker, CFO, confirmed that the Q1 guidance includes normal seasonal increases in variable costs, including higher taxes. Regarding working capital, they aim to improve inventory turns from the current four to historical levels of 5-5.5 turns.

Q: With the new capacity investments, how much operating leverage can be expected as markets recover? A: Jeffrey Benck, CEO, noted that they have capacity due to recent expansions and expect more leverage as utilization increases. The impact will depend on where growth occurs, but they anticipate better leverage with growth forecasted for the full year.

Q: What is the outlook for the Medical segment, and are you losing market share? A: Jeffrey Benck, CEO, stated that the Medical segment is experiencing an inventory digestion period rather than a loss of market share. They expect stabilization and growth in the second half of the year, with strong bookings in Life Sciences and medical devices.

Q: What opportunities exist for Benchmark in the broader AI market? A: Jeffrey Benck, CEO, mentioned that while they are cautious about commodity server infrastructure, they see opportunities in complex systems and domestic manufacturing. AI's demand for semiconductor equipment could benefit their precision technology and Semi-Cap sectors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.