Benchmark Electronics, Inc. Q3 FY2025 earnings call

Succession Planning: David Moezidis promoted to President and will be next CEO effective March 31, 2026 upon Jeff Benck's retirement. ### Revenue Growth: Q3 revenue showed return to year-over-year growth, with non-GAAP EPS $0.62, both at high end of prior guidance. Eighth consecutive quarter of 10% or greater gross margin. ### Sector Performance: Broadening of sectors contributing to revenue growth; semi-cap had softening demand due to China restrictions and tariffs but continued to book new program wins. ### Financial Discipline: Focus on working capital management, achieving multiyear record cash cycle quarter. Generated $25 million in free cash flow in Q3, over $74 million last 12 months. Investing in business, including construction of new 4th PT building in Penang, Malaysia. Americas manufacturing footprint still ~50% of total capacity.

For the third quarter ending September 2025, revenue was $681 million. By sector: AC&C revenue was up 18% quarter-over-quarter but down year-over-year; medical revenue was up 15% quarter-over-quarter and 18% year-over-year; industrial revenue was up 8% quarter-over-quarter and flat year-over-year; A&D revenue was up 2% quarter-over-quarter and 26% year-over-year; semi-cap revenue decreased 3% quarter-over-quarter and was flat year-over-year. Each sector's revenue contribution isn't explicitly stated as a percentage in the transcript, but the performance details are as above.

Q4 Guidance: Expect revenue to be within $670 million to $720 million, up mid-single digits year-over-year at midpoint. Non-GAAP gross margin expected between 10.1% and 10.3%. Non-GAAP operating margin expected between 5% and 5.2%. Non-GAAP diluted EPS expected in range of $0.62 to $0.68.

Semi-cap demand faced challenges due to near-term industry challenges and cyclical recovery; demand signals mixed near term but potential strengthening in second half of 2026. ### Government shutdown had minimal impact on customers with long-range contracts, but knock-on effects could pose potential issues if shutdown persists.

Q: On the high-performance compute comments, can you characterize the programs and timeline for revenues?

A: Traditionally work on top supercomputers, large projects with fixed durations. Working on new solutions for government installations, expecting work in 2026 and some into 2027. Also participating in AI opportunities, ramping in Q4 2025 and into 2026.

Q: On semi-cap comments, probability and timeline for recovery, and machining wins?

A: Customer conversations showed more optimism, indicating potential pickup in second half of 2026. Significant investments in Penang, Malaysia, position to provide alternate solutions to customers, with continued wins in precision machining.

Q: On A&D space, is the space award the second award, and other niche areas?

A: Won additional business in space and communication arena, with defense spending strong and space/satellite business ramping. Defense spending increasing in Europe and Americas, new space outdriving growth over traditional commercial air.

Q: On AI, what percentage of AC&C revenue could enterprise AI be?

A: Timing not exactly defined, not focused on hyperscalers but commercial/enterprise opportunities, staged later than some buildouts, expect to provide more color in 2026.

Q: Any concerns from customers in verticals with government exposure due to shutdown?

A: Minimal impact as customers have long-range contracts; knock-on effects possible if shutdown continues but not felt yet.

Q: On medical demand outlook and inventory levels?

A: Inventories cleared in customers' channels, seeing growth in Q3 and projecting to continue, with lift and shift competitive takeaways moving faster to revenue.

Q: On cash cycle improvement and CapEx spend for 2026?

A: Made significant progress in cash cycle, with inventory days decreasing. CapEx expected to accelerate slightly from current year, finishing PT 4 and investing in factories for automation and growth support.