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Investor UpdateMarch 17, 2020
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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, 2019 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
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Contents
• Coronavirus Updates
• Benchmark Profile and Portfolio Strategy
• Selling the Full Breadth of Benchmark Capabilities
• Key Strategic Initiatives
• Why Benchmark?
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Covid-19 Update
• Temporary shut down of plant in Suzhou China; plant returned to operations 5 weeks ago and is
now fully operational
• Global impacts from supply chain and logistics disruptions from Asian suppliers to a number of
Benchmark locations
• Manufacturing operations impacts from government regulations and the ability for employees to
travel to the work place
Announced on March 16, 2020, we will not achieve first quarter guidance set on
February 6, 2020 due to COVID-19 impacts from:
• Focus remains on the health and safety of our employees and ecosystem
• Benchmark is financially strong to weather this event
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COVID-19 Update
Executive engagement
Critical order prioritization
Alternative manufacturing
scenarios
Logistic channel
substitutions
Focus on Engagement
and Communications
Customers
Benchmark Ecosystem Focus Areas:
Facility cleaning guidelines
and protective gear
Quarantine protocols
Social distancing
Restricted visitor and travel
policies
Employee policy updates (sick
leave, flexible work, etc.)
Global Task Force Meets
Daily Focused on Employee
Safety
Employees
Expediting components
from Asian factory restarts
Lead time management
Site balancing global
materials
Monitoring logistics costs
and delivery times
Integrated Supply Chain Team
Focused on Improving Supply
Suppliers
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Who is Benchmark? Spinoff of a Medical OEM
Founded:
1979
Stock Symbol:
NYSE: BHE
Employees:
~12,000
Locations:
8 countries
Sales Mix:
53% United States
47% International
HQ – Tempe, AZ
Grand Opening
Jan. 2019
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Who is Benchmark? Leading Global Provider of Services & Solutions
SERVESSix Primary End Markets
BENEFITSFrom Four Secular Trends
EMPHASISOn Four Strategic Initiatives
FOCUSfor Value Creation
Medical
Aerospace & Defense
Semi-Cap
Industrial
High-End Computing
Telecommunications
Aging Population
Growing Defense Spending
Optimize Go-to-Market
Centralize G&A
Drive Operational Efficiencies
Accelerate Engineering & Solutions
Higher-Value Portfolio >75%
EPS Growth Faster than Revenue
Continued Focused Capital Allocation
Improving ROIC
High-Speed Bandwidth
Recovery in Semi-Cap Spending
Traditional MarketsHigher-Value Markets
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Rochester, MN
Suzhou, China
Brasov, Romania
Nashua, NH
Angleton, TXTijuana, MexicoMoorpark, CA
Concord, CA
Ayudhaya, ThailandKorat, Thailand
Huntsville, AL
Guadalajara, Mexico
Fremont, CA
Santa Ana, CA
Tempe, AZ
Penang, Malaysia
Product Design & Engineering
Technology Solutions
Electronics Manufacturing
Precision Technologies
Corporate Headquarters
Almelo, The Netherlands
>50% Capacity in the U.S.
Austin, TX
Arden Hills, MN
Winona, MN
Phoenix, AZ
Where is Benchmark? 26 Locations in 8 Countries (12,000 employees)
Engineering Services on 3 Continents
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How is the Industry Changing? Higher-value Markets and Services
EMS
Market Size
Computing Higher Value
Telco
Computing Higher Value
Telco Consumer
• Labor Arbitrage
1990
• Labor Arbitrage
• Supply Chain
• Global Scale
2000
• Labor Arbitrage
• Supply Chain
• Global Scale
• Design
2010
Value
Proposition
Computing Higher Value
Telco Consumer
~$500B (est.)
• Labor Arbitrage
• Supply Chain
• Global Scale
• Concept to Design
• Increase in Outsourcing in
Higher-value Markets
• Differentiated Technology
Solutions
2020
Source: New Venture Research, Benchmark Analysis
Computing Higher Value
Telco Consumer
Era of
Computing/Telco
Outsourcing
Emergence of
Consumer
Electronics
Growth in
Higher-Value
Outsourcing
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• Larger, more cyclical programs
• Manufacturing only – less engineering
Traditional Market Revenue ($M)
Higher-value Market Revenue ($M)
Portfolio Strategy: Continued Focus on Higher-value Markets
Divested Lower-margin Traditional$1,983
$1,384
$846$65668%
50%35% 29%
10.0%
30.0%
50.0%
70.0%
90.0%
110.0%
130.0%
150.0%
170.0%
190.0%
0
500
1,000
1,500
2,000
2007 2014 2017 2019 Target
$933
$1,413$1,608 $1,612
32% 50%65%
71%
10.0%
30.0%
50.0%
70.0%
90.0%
110.0%
130.0%
150.0%
170.0%
190.0%
0
500
1,000
1,500
2,000
2,500
3,000
2007 2014 2017 2019 Target
25%
75%
• High-mix/lower-volume skills
• Engineering-led engagements
• Higher value-added services and solutions
Acquired Higher-value Programs
• 2007 Gross Margins 6.8%
• 2019 Gross Margins 8.8%
Expanded Non-GAAP Gross Margins 200 bps
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What are Benchmark’s Capabilities? Leading Global Provider of Services & Solutions
Design &
Engineering Services
Manufacturing
Services
Technology
Solutions
Electronics
Manufacturing
Full Product Design Services
IP Building
Block Design
Precision
Technologies
Process/Test Development
RF
Components
Our Goal is to Sell the Full Breadth of Capabilities To Our Targeted Customers
Traditional
EMS
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Higher-value Sectors : Selling the Full Breadth of Capabilities
• Ruggedized Computing
• Ground Vehicles and Aircraft
• Munitions
• Secure Communications
• Jet Engine Components
2019
Revenue
Key
Subsectors
Customers
$432 million
SectorAerospace &
Defense (A&D)
• Imaging Products
• Monitoring Devices, Pumps
Infusion and Glucose
• In Vitro Diagnostics
• Medical Robotics
$448 million
Medical
• Front End Fab Processes:
‒ Lithography
‒ Deposition
‒ Etch & Annealing
• In-Chamber Wafer Processes
$278 million
Semi-cap
• Process Controls
• Ruggedized Transport
• Lidar Applications
• Robotics
• Oil & Gas
$454 million
Industrial
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Customer Case Study: Selling the Full Breadth of Capabilities
• Account Size $20M in annual revenue
• Gross Margin % Below corporate average
• Offerings Electronics Manufacturing & Test Dev. only
Original State:
Customer: One Large Multi-national A&D Customer
Utilized
• Account Size +$100M in potential annual revenue
• Gross Margin % Above corporate average
• Offerings Full breadth of capabilities
Current State:
Technology Solutions
Electronics
Manufacturing
Full Product Design Services
IP Building
Block Design
Precision
Technologies
Process/Test Development
RF
Components
Engineering Services Manufacturing Services
Technology Solutions
Electronics
Manufacturing
Full Product Design Services
IP Building
Block Design
Precision
Technologies
Process/Test Development
RF
Components
Engineering Services Manufacturing Services
IP Building
Block Design
RF
Components
Process/Test Development
Precision
Technologies
Electronics
Manufacturing
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• Account Size <$5M in annual revenue
• Offerings Full Product Design Services
Customer Case Study: Engineering to Manufacturing Engagement
Original State:
Customer:
Utilized
• Account Size +$50M in potential annual revenue
• Offerings Design to EMS including Process/Test Dev.
Current State:
Technology Solutions
Electronics
Manufacturing
Full Product Design Services
IP Building
Block Design
Precision
Technologies
Process/Test Development
RF
Components
Engineering Services Manufacturing Services
Technology Solutions
Electronics
Manufacturing
Full Product Design Services
IP Building
Block Design
Precision
Technologies
Process/Test Development
RF
Components
Engineering Services Manufacturing Services
Press Release (Jan. 2020):
Dr. Marc Sesterhenn, Executive Vice President Operations at Rohde & Schwarz, said: “As an existing Benchmark engineering services customer, we were very familiar with Benchmark’s capabilities, global footprint and technical expertise. That is why we chose Benchmark, which can manufacture and deliver our complex products quickly and with the customary high quality according to our own and our customers' requirements.”
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Traditional Sectors : Focus on Complexity
• High-Performance Computing
• Secure Computing
• Data Center Storage
2019
Revenue
Key
Subsectors
Customers
$361 million
Sector Computing
• Satellite Communications
• Microwave Systems
• High-speed Optics
• Next Generation Telco – 5G
$295 million
Telco
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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
© 2020 Benchmark Electronics, Inc.| 17
Capital Allocation Update
Dividends
► Recurring quarterly dividend of $0.15 per share declared
► First dividend paid in April 2018
► Dividend of $5.5 million paid in January 2020
► Increased dividend from $0.15 to $0.16 per share in February 2020
Share repurchases
► $212 million shares repurchased in 2018
► $122 million share repurchases completed in 2019
► Remaining authorization of $79 million at December 31, 2019
► Additional $150 million was authorized in February 2020
© 2020 Benchmark Electronics, Inc.| 18
Takeaways
Why Consider Benchmark?
► OEMs continue to drive outsourcing strategy – expanding market
► Strong market position in High Value Growth sectors
► Unique technology and solution capabilities (RF technology, Micro-e, Semi-cap)
► Value added capabilities increase gross margins
► New leadership focused on Operational Excellence
► Business model leverage with revenue growth
► Returning capital to shareholders through share buybacks and quarterly dividends
© 2020 Benchmark Electronics, Inc.| 19
Q & A
Benchmark, the partner you choose When it matters.
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Appendix 1: GAAP to Non-GAAP Reconciliations
1 Equals line item immediately above divided by revenue (GAAP)