Benchmark Electronics, Inc. Q2 FY2025 earnings call

• Second quarter 2025 results showed consistent execution with revenue of $642 million and non-GAAP EPS of $0.55, both at the midpoint of prior guidance.
• Seventh consecutive quarter of greater than 10% gross margin.
• Double-digit annual revenue growth in 2 sectors and sequential growth in 3 of 5 in the quarter.
• Anticipated sequential momentum to continue in Q3 and return to annual growth in fourth quarter, bolstered by multiyear record bookings led by medical and AC&C.
• Year-over-year sector revenue performance led by semi-cap and A&D, with focus on delivering increasing value add to customers and leveraging globally diversified manufacturing footprint.
• Successfully refinanced debt in June, extending maturity to June 2030 and increasing term loan to $150 million; repatriated $152 million of cash from China and Thailand; returned $6 million in cash dividends and repurchased $8 million in stock during the quarter.

In the second quarter of 2025, revenue was $642 million. By sector: Semi-cap revenue decreased 2% quarter-over-quarter but grew 11% year-over-year. Industrial revenue was up 4% quarter-over-quarter and flat year-over-year. A&D revenue was up 4% quarter-over-quarter and 16% year-over-year. Medical revenue was up 6% versus the prior quarter and down low-single digits year-over-year. AC&C revenue was flat quarter-over-quarter, while still down considerably year-over-year.

• Q3 2025 revenue expected to be within a range of $635 million to $685 million, up low-single digits sequentially.
• Anticipate year-over-year growth of low- to mid-single digits in the second half.
• Non-GAAP gross margin expected to be between 10.2% and 10.4%; non-GAAP operating margin between 5% and 5.2%.
• Non-GAAP diluted earnings per share expected to be in the range of $0.56 to $0.62.
• Q3 effective tax rate expected to be between 23% and 25%.
• Expect to return to positive free cash flow through the remainder of the year; continue to prudently manage spending to protect profitability and free cash flow while supporting dividends and share repurchases.

• Forward-looking statements involve risks and uncertainties as described in press releases and SEC filings; actual results may differ materially.
• Macro environment, trade restrictions, and tariff uncertainties could impact sector recoveries.
• Inventory challenges in some sectors previously affected growth; one-time events related to customs and transition tax payments impacted Q2 free cash flow.

Q: Steven Fox asked about the recovery in AC&C, specifically liquid cooling advantages and timing/strength of rebound.

A: Jeff Benck responded that they have water-cooling capability and experience from large systems like Intel's Aurora, with wins starting to ramp in Q4 and expecting growth into 2026.

Q: Melissa Fairbanks asked about pull-through from enterprise AI data center builds.

A: The unidentified representative said participation is more in the realm of enterprise apps beyond just hyperscalers.

Q: Bryan Schumaker was asked about cash cycle days and longer-term targets.

A: Bryan said each day reduction in cash cycle equals about $7 million, targeting inventory turns to 5 to 5.5.

Q: Anja Soderstrom asked about inventory improvement and winning the medical competitive lift and shift program.

A: Bryan discussed focus on driving inventory days down and Jeff explained the revamped go-to-market strategy with a proactive proposal team winning new business.

Q: Jaeson Schmidt asked about Medical inventory digestion and A&D space sector size.

A: The unidentified representative said inventory digestion took longer than expected but has dissipated, and Jeff mentioned the space sector is a meaningful contributor with opportunity to grow into tens of millions.