BENCHMARK ELECTRONICS INC Q4 FY2024 earnings call

• Fourth quarter revenue of $657 million was in line with guidance, with Semi-Cap, A&D, and complex industrials delivering strong results offset by weakness in Medical and AC&C. - Non-GAAP gross margin in Q4 was 10.4%, continuing year-over-year expansion. Non-GAAP operating margin was over 5% but down slightly sequentially due to variable compensation true ups. - Full year 2024 saw non-GAAP gross and operating margins grow by 60 and 20 basis points respectively, despite mid-single-digit revenue declines. - Inventory was reduced by over $130 million or 20% in 2024, enabling over $156 million in free cash flow. - Intends to break ground on a fourth building in Penang, Malaysia, in Q4 2024 to support semi capital equipment customers. - Expect revenue growth across majority of sectors in 2025, focusing on controlling expenses and improving operational excellence.

Semi-Cap revenue increased 18% year-over-year in Q4 2024 and 12% for the full year 2024. Industrial revenue grew 5% in Q4 2024 and decreased 4% for the full year. Medical revenue was down 7% in Q4 2024 and 19% for the full year. A&D revenue rose 15% in Q4 2024 and 20% for the full year. AC&C revenue declined 48% in Q4 2024 and 30% for the full year.

• Q1 2025 revenue expected to be between $620 million to $660 million. - Non-GAAP gross margin expected to be between 10% and 10.2%. - Non-GAAP SG&A expenses expected to be between $34 million to $36 million, resulting in non-GAAP operating margin between 4.5% and 4.7%. - Non-GAAP diluted EPS expected to be in the range of $0.48 to $0.54. - Planning to spend between $15 million and $20 million on CapEx in Q1 and $65 million to $75 million for the full year. - Anticipates free cash flow in Q1 to be between $50 million to $80 million inclusive of elevated CapEx for the Penang building.

• Sector pressures in AC&C expected to persist at least into the first half of 2025 due to delay in next gen HPC platforms and ramp time for a communication customer's new product line. - Macroeconomic challenges impacting some end markets. - Tariff activity and potential shifts in manufacturing locations affecting operations.

Q: How much of the semi market growth in 2025 is from share gains vs. improved demand?

A: It's a combination of share gains from last year and improved demand in 2025, with new bookings ramping.

Q: Can you elaborate on Q1 guide and working capital?

A: Q1 guide reflects variable comp costs and tax factors; working capital continues to be a focus with inventory still having room for improvement.

Q: Update on AI opportunities?

A: Continues to see opportunities in AI related to supercomputing and complex systems, with applicability to water cooled infrastructure and domestic manufacturing.

Q: Exposure to Europe and outsourcing trends?

A: Europe is ~10% of revenue, industrial in Europe softer; outsourcing trends are a tailwind with customers looking to outsource or leverage EMS providers like Benchmark.