Benchmark Electronics, Inc. · NYSE:BHE
Benchmark Electronics — Investor Presentation (April 2017)
34 slides from Benchmark Electronics's investor presentation, April 2017
Slide 1: Investor Presentation
Investor Presentation April 2017 design develop deliver advanced technology
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document contains forward-looking statements within the scope of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “expect,” “estimate,” “anticipate,” “predict” and similar expressions, and the negatives thereof, often identify forward-look
Slide 3: Benchmark Overview
Benchmark Overview design develop deliver advanced technology 3
Slide 4: Benchmark: Leading Global Integrated EMS Player
Benchmark: Leading Global Integrated EMS Player Who We Are Founded: ► Global provider of engineering, design, manufacturing and 1986 testing solutions for complex products Stock Symbol: ► Well-positioned to capitalize on increasing outsourcing in industrial, medical, aerospace and defense markets NY
Slide 5: Global Design and Manufacturing Locations
Global Design and Manufacturing Locations New Hampshire Minnesota Division Division Almelo The Netherlands Bay Area CA Brasov Romania Southern CA Huntsville AL Angleton TX Suzhou China Tijuana Mexico Tempe AZ Korat Thailand Guadalajara Guaymas Ayutthaya Mexico Mexico Thailand Penang Singapore Malays
Slide 6: Services We Offer to Our Customers
Services We Offer to Our Customers Providing Value Throughout the Entire Product Lifecycle Concept / New Product Supply Chain PCB Precision System Post-Delivery Logistics Design Introduction Management Assembly Mechanical Integration Support Support We design innovative We manufacture, We support de
Slide 7: Expanding Our Higher-value Market Leadership
Expanding Our Higher-value Market Leadership Strong Technical Acumen and Excellent Blue Chip Customer Base CHARACTERISTICS REQUIREMENTS • Engagement with engineering-led solutions Ruggedized Benchmark • Excellence in complex manufacturing and testing High/Low Temperatures Leadership in • High qualit
Slide 8: Market Sectors We Serve
Market Sectors We Serve Focus on More Complex Products Critical to Higher-Value Systems Building Automation Industrials Oil & Gas Drilling Tools Kiosks and Vending Higher-Value Markets Robotics for Harsh Environments Aerospace & Defense Cockpit Displays Microelectronics Solutions 66% D
Slide 9: Business Strategy and Financial Update
Business Strategy and Financial Update design develop deliver advanced technology 9
Slide 10: Evolving Our Portfolio to Higher-value Markets
Evolving Our Portfolio to Higher-value Markets ► Commoditization of Internet of legacy traditional Everything (IoE) markets necessitates continuous evolution in EMS ► IoE, Cloud and Networking / Computing Analytics will drive future of industry ► Significant opportunity for EMS leaders given core te
Slide 11: Higher-value Markets Have a Long Growth Runway
Higher-value Markets Have a Long Growth Runway Current penetration of outsourcing ($bn) ► Higher-value markets provide stable Penetration Market size $107 growth well in excess of traditional markets ► Superior profitability profiles driven by greater value-add versus $62 $65 traditional markets ► U
Slide 12: We Are Successfully Transitioning to Higher-value Markets
We Are Successfully Transitioning to Higher-value Markets 2000 Traditional Market Revenue ($M) 200% Traditional Market Characteristics 180% 1600 $1,409 $1,318 $1,384 160% 140% Fully outsourced 1200 $1,146 120% Software replacing hardware $846 100% Manufacturing solutions 800 57% 53% 49% 80%
Slide 13: Transition Improves Customer Diversification and Margins
Transition Improves Customer Diversification and Margins Revenue & Gross Margin ($M) SG&A ($M) 200 6.0% 5,000 11.0% 4,500 9.2% 9.2% 10.0% 180 4.9% 5.0% 8.6% 4.2% 5.0% 4,000 8.0% 9.0% 160 3.9% 4.0% 3,500 7.5% 8.0% 140 4.0% 120 3,000 7.0% 2,500 2,797 6.0% 100 112 107 113 116 3.0% 2,000 2,506 2,541 2,3
Slide 14: 2017: Our Priorities in a Transition Year
2017: Our Priorities in a Transition Year Optimization of our network for elevated execution Consolidate corporate staff in one location (Arizona) for speed and efficiency Accelerate operational excellence programs Continue focus on asset velocity Implementation of market-sector sales organiza
Slide 15: Our Financial Goals
Our Financial Goals Target Business Model Revenue $2.8 – $3.2B Gross Margin 9.8 – 10% SG&A 4.8 – 4.5% Non-GAAP Operating Income >5.5% ROIC >12% Cash Conversion Cycle <70 Days design develop deliver advanced technology 15
Slide 16: Current Progress Milestones
Current Progress Milestones design develop deliver advanced technology 16
Slide 17: Working Capital Update
Working Capital Update 120 100 99 83 80 80 74 67 60 40 20 0 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Accounts Receivable Days Accounts Payable Days Inventory Days Deposits Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Accounts Receivable Days 68 66 65 65 61 Accounts Payable Days 39 47 53 53 60 Inventory Days 70 64 68 62 70 De
Slide 18: Our Business Generates Strong Cash Flows
Our Business Generates Strong Cash Flows $350 Operating Cash Flow ($M) $300 $273 $274 ► Consistent FCF generation is one $250 of the key characteristics of our $200 $147 business $150 $135 $100 $99 ► Near-term cash flow enhanced by $50 working capital improvements $0 ► Modest capital expenditures of
Slide 19: Strong Balance Sheet Provides Flexibility
Strong Balance Sheet Provides Flexibility $250 Debt to EBITDA Ratio $200 $157 $150 $133 $129 ► Sufficient flexibility for investment $100 1.5x 1.7x 1.7x ► $752 million cash and equivalents* ► $220 million total debt* $50 $0 2015 2016 LTM ► Terms of existing credit agreements 3/31/17 $450 300% 3.70
Slide 20: ROIC: Key Determinant of Capital Allocation Strategy
ROIC: Key Determinant of Capital Allocation Strategy Cumulative capital allocation FY11– FY17 ► Organic growth through targeted investments Capex Repurchases Capex to extend business model to attractive market opportunities $300 $273 30% ► Fund investments in close-to-core, bolt-on M&A 33% M&A with
Slide 21: Creating Shareholder Value
Creating Shareholder Value $0 Return on Invested Capital $0 $0 12.0% $0 $0 10.5% 10.2% 9.9% $0 9.0% ► Strategic investment in higher- $0 8.4% value markets to drive profitable growth $0 $0 2013 2014 2015 2016 LTM 3/31/2017 Target ► Initiatives to increase working ROIC = [(Non-GAAP income from operat
Slide 22: Why Invest in Benchmark?
Why Invest in Benchmark? design develop deliver advanced technology 22
Slide 23: Our Long-Term Strategy and Value Proposition
Our Long-Term Strategy and Value Proposition Overall Goal of 6-8% Revenue CAGR with >10% Annual Growth in Higher-value Markets Portfolio ► Transitioning our Portfolio to Markets with Higher Growth Rates and Margins Management • Industrials • Aerospace and Defense • Medical Technologies • Test & Inst
Slide 24: Most Recent Financial Results and Outlook
Most Recent Financial Results and Outlook design develop deliver advanced technology 24
Slide 25: First Quarter 2017 Summary
First Quarter 2017 Summary Revenue and non-GAAP operating margins exceeded the high end of guidance Revenues up 3%, the first year-over-year growth in 11 quarters Gross margins at 9.3%, a 10 bps year-over-year improvement Non-GAAP operating margins at 3.8% and EPS at $0.34 Exceeded working cap
Slide 26: First Quarter 2017 Financial Summary
First Quarter 2017 Financial Summary For the Three Months Ended Mar 31, Dec 31, Mar 31, (In millions, except EPS) Q/Q Y/Y 2017 2016 2016 Net Sales $567 $608 (7%) $549 3% Non-GAAP Operating Margin 3.8% 4.8% (100 bps) 4.0% (20 bps) Non-GAAP Diluted EPS $0.34 $0.45 (24%) $0.30 13% GAAP Operating Margin
Slide 27: Key Business Trends
Key Business Trends 1,400 Revenue & Gross Margin ($M) 15.0% 70.0 SG&A ($M) 8.0% 7.0% 13.0% 60.0 5.5% 1,200 9.5% 5.2% 4.9% 4.9% 6.0% 9.3% 11.0% 50.0 1,000 9.2% 9.1% 9.2% 4.7% 5.0% 9.0% 40.0 800 4.0% 7.0% 30.0 600 608 28.5 28.5 28.1 28.4 31.0 3.0% 400 549 579 574 567 5.0% 20.0 2.0% 3.0% 10.0 200 1.0%
Slide 28: Cash Flow / Working Capital Highlights
Cash Flow / Working Capital Highlights For the Three Months Ended Mar 31, Dec 31, Mar 31, (In millions) 2017 2016 2016 Cash Flow from Operations $78 $44 $77 1 FCF $70 $38 $69 Cash $752 $681 $519 International $659 $626 $477 US $93 $55 $42 Inventory $404 $381 $390 Accounts Receivable $381 $441 $414 A
Slide 29: Second Quarter 2017 Guidance
Second Quarter 2017 Guidance Guidance Net Sales (in millions) $565 – $ 585 Operating Margin – non-GAAP* 3.6% – 3.9% Diluted EPS – non-GAAP* $0.31 – $0.35 * The above guidance excludes the impact of amortization of intangible assets and estimated restructuring charges design develop deliver advanced
Slide 30: Appendix
Appendix design develop deliver advanced technology 30
Slide 31: Appendix 1: Reconciliation of GAAP to non-GAAP
Appendix 1: Reconciliation of GAAP to non-GAAP (Amounts in Thousands, Except Per Share Data) – (UNAUDITED) Three Months Ended March 31, December 31, March 31, 2017 2016 2016 Income from operations (GAAP) $ 12,417 $ 23,548 $ 16,268 Restructuring charges and other costs 1,511 2,663 2,789 Customer inso
Slide 32: Appendix 2: GAAP to Non-GAAP Reconciliations
Appendix 2: GAAP to Non-GAAP Reconciliations (in millions) 2012 2013 2014 2015 2016 Revenue (GAAP) $2,468.2 $2,506.5 $2,797.1 $2,540.9 $2,310.4 Income from operations (GAAP) $75.6 $116.5 $100.1 $93.0 $75.6 Operating margin (GAAP) 1 3.1% 4.6% 3.6% 3.7% 3.3% Restructuring charges and integration and a
Slide 33: Appendix 3: Free Cash Flow (FCF) Yield
Appendix 3: Free Cash Flow (FCF) Yield Free cash flow LTM 3/31/2017 $ 241.8 Weighted averages shares outstanding (1) 49.7 Free cash flow price per share $ 4.87 Current market price per share $ 31.15 Free cash flow yield 16% (1) LTM 3/31/17 (2) Closing Price at April 19, 2017 33 design develop delive
Slide 34: Appendix 4: Debt to CFO and EBITDA Reconciliations
Appendix 4: Debt to CFO and EBITDA Reconciliations LTM 3/31/17 2016 2015 2014 2013 CFO $273.9 $272.5 $146.8 $135.4 $98.9 Debt $220.3 $223.6 $235.2 $9.5 $10.1 Debt to CFO ratio 80.4% 82.1% 160.2% 7.0% 10.2% Net Income - GAAP $62.7 $64.0 $95.4 $81.2 $110.9 Restructuring charges, net $11.3 $12.5 $13.9
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