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Investor UpdateNovember 2020
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This document 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, the estimated financial impact of the COVID-19 pandemic, the outlook and guidance for fourth quarter 2020 results, the company’s anticipated plans and responses to the COVID-19 pandemic, 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 the company believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the business environment generally. These statements also depend on the duration and severity of the COVID-19 pandemic and related risks, including government and other third-party responses to it and the consequences for the global economy, our business and the businesses of our suppliers and customers. Events relating to or resulting from the COVID-19 pandemic, including the possibility of customer demand fluctuations, supply chain constraints, or the ability to utilize our manufacturing facilities at sufficient levels to cover our fixed operating costs, may have resulting impacts on the company’s business, financial condition, results of operations, and the company’s ability (or inability) to execute on its plans to respond to the COVID-19 pandemic. 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 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. In situations where a non-GAAP reconciliation has not been provided, the company was unable to provide such a reconciliation without unreasonable effort due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. 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
• Benchmark Profile and Portfolio Strategy
• Selling the Full Breadth of Benchmark Capabilities
• Key Strategic Initiatives
• Why Benchmark?
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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
*Based on 2019 Results
HQ – Tempe, AZ
Facility 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
Tijuana, 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? 25 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 8.2%
Expanded Non-GAAP Gross Margins
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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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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.| 14
Capital Allocation Update
Dividends
► First dividend of $0.15 per share paid in April 2018
► Recurring quarterly dividend increased by 6.7% to $0.16 per share in January 2020
► Last dividend paid to shareholders as of September 30, 2020 on October 14, 2020
Share repurchases
► $212 million shares repurchased in 2018
► $122 million share repurchases completed in 2019
► Share repurchases of $19 million completed in Q1 2020
► Additional $150 million authorized in February 2020 leaving remaining authorization
at $210 million as of September 30, 2020
© 2020 Benchmark Electronics, Inc.| 15
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 quarterly dividends and share buybacks
© 2020 Benchmark Electronics, Inc.| 16
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)