Benchmark Electronics, Inc.

Good afternoon. Welcome to Benchmark Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lisa Weeks, Vice President of Strategy and and investor relations. Please go ahead.

Thank you, operator, and thanks, everyone, for joining us today for Benchmark's second quarter 2020 earnings call. Joining me this afternoon are Jeff Banks, CEO and President, and Root Lakharaju, CFO. After the market closed today, we issued an earnings release highlighting our financial performance for the second quarter, and we have prepared a presentation that we will reference on this call. The press release and presentation are available online under the investor relations section of our website at www.bench.com. This call is being webcast live and a replay will be available online following the call. The company has provided a reconciliation of our gap to non-gap measures in the earnings release as well as in the appendix of the presentation. Please take a moment to review the forward-looking statements advice on slide two in the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks that are not statements of historical fact are forward-looking statements which involve risks and uncertainties as described in our press releases and SEC filing. Actual results may differ materially from these statements, most notably from the ongoing impact of the COVID-19 pandemic, and Benchmark undertakes no obligation to update any forward-looking statements. For today's call, Jeff will begin by covering a summary of our second quarter results and by providing a current status of our global operation. Ruth will then discuss the second quarter results in more detail, including a cash and balance sheet summary and our third quarter guidance. Jeff will wrap up with an outlook by market sector and an update on our strategic initiatives before we conclude the call with Q&A. If you will please turn to slide three in the presentation, I will turn the call over to our CEO, Jeff Banks. Jeff?

Thank you, Lisa. Good afternoon, everyone, and thank you for joining our call today. Our second quarter results were achieved against the backdrop of mandatory facility shutdowns, component constraints, and extra processes required to keep everyone safe. I want to thank the entire benchmark organization for doing a remarkable job in taking care of one another and making sure we are operating as effectively as possible in the new world. During Q2, we achieved revenue of $491 million, which was down sequentially from Q1, but supported by strong demand in our medical and SEMICAP sectors. Non-GRAP gross margin for the quarter was 7%, and non-GAAP earnings per share were $0.07. Our non-GAAP earnings include $4 million or $0.10 per share of COVID-related costs that we could not fully anticipate as we entered the quarter. In addition to these COVID costs, we experienced other production inefficiencies as a result of the current pandemic environment. Our overall performance was helped by the aggressive cost reduction actions taken earlier in the quarter. Our cash conversion cycle for the quarter was 84 days. Despite operating challenges, we generated $23 million in cash flow from operations and returned $6 million of cash to shareholders as part of our recurring quarterly dividend payment. As we look forward, I wanted to step back and offer a few perspectives. I'll do that on slide four. Since I joined Benchmark last year, We've made a lot of positive changes, and all of these have been supported by an amazing team. From the hard work required to execute on our strategic initiatives and goals that we outlined last year, to overcoming unique challenges presented by the unprecedented global pandemic of today, let me simply say our team has risen to the occasion. Before I arrived, the company had embarked on a strategy to diversify the markets we serve and drive a portfolio mix with a greater concentration in higher value markets. In the past year, we have worked further to align the customers where we can add the most value, and these efforts have paid off. Today, we enjoy a diverse portfolio of products across many high-growth and high-value sectors. That being said, we are not immune to the current recession that this disease has caused. and we have an unprecedented amount of demand changes in our portfolio that's required a lot of the team's attention to ensure we capitalize on new opportunities while mitigating any risks. We believe this diverse portfolio and exposure to high-value segments will allow us to expand our quarterly revenue through the balance of the year. Supply chain in our complex time-mixed environment is a constant focus, and our recent results have been supported by the strong performance of our supply chain team. During the second quarter, and due to the team's efforts, we were not significantly impacted by component shortages, but they did, in some places, contribute to operational inefficiencies. Further, our revamped go-to-market organization has grown the manufacturing and engineering services opportunity pipeline by over 30% in the past 12 months. and have delivered three-quarters of sequential growth in bookings, which bodes well for our long-term growth potential. As we look out to the end of the year, we are still on track to exit 2020 with at least 9% gross margin, and we expect to build on this momentum into 2021. Please turn to slide five. As the global pandemic continues to evolve, we have expanded protocols focused on keeping a safe work environment for our employees. Our actions are informed by the best practices published by the CDC, the WHO, and local authorities, and we've completed a company employee survey to solicit direct feedback on our actions to date and ensure our employees agree that we are maintaining a safe work environment. Where possible, we are continuing to permit about 20% of our employees to work from home. We have shifted our customer engagements to a virtual environment with real-time video-supported factory tours as we limit travel to protect our teams. We even hosted a virtual grand opening of our new Phoenix operation with Governor Ducey and Mayor Gallego. Our teams have adapted well to the new reality, and we are finding creative ways to stay close to our customers and continuing to collaborate with them on solving new challenges. If you please turn to slide six, I could provide an update on the status of benchmark global operations. In Asia, China and Thailand were fully operational through the second quarter. As we entered Q2, our Penang, Malaysia operations, which includes our largest precision machining facility, operated at 50% capacity based on local restrictions, which were subsequently lifted at the end of April. From the 1st of May, Malaysia has been fully operational. Our European sites in the Netherlands and Romania were fully operational in the second quarter and remain so today. Across the U.S., our five operations in California were impacted by shelter-in-place orders through April. Since early May and to the present, All California locations, as well as our other U.S. sites, are fully operational. In Mexico, we have two operations in Tijuana and one in Guadalajara. The 100% shutdown that impacted our Tijuana operations was lifted in mid-May after we passed an inspection and were given authorization to operate by the Baja State. There has been a phased return to work since this time, and the Tijuana sites are now operating at approximately 75%. Our Guadalajara facility has been essentially operating at 75% productivity due to at-risk employees being required to stay home for the Jalisco state government restrictions. We are staggering shifts in other protocols in our Mexican operations to keep our employees safe and optimize output. This has been and remains a highly dynamic environment. As shelter-in-place orders were lifted in the U.S., we had hoped the country could maintain the declining infection curve. Unfortunately, this has not happened. As the incident rate domestically increases, there could be temporary shutdowns in one of our facilities at any given time, and we stand ready to execute decontamination protocols beyond our normal safe work and cleaning procedures. Our operation teams will continue to maintain our safety-first approach while managing schedules to ensure we meet delivery obligations to our customers. Now I will turn the call over to Rube to discuss the second quarter results, and following his commentary, I will share further insights regarding our business. Over to you, Rube.