Benchmark Electronics, Inc.

Good day and welcome to the Benchmark Electronics AIM Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw a question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lisa Weeks, Chief Strategy Officer, Head of Investor Relations. Please go ahead.

Thank you, Operator, and thanks, everyone, for joining us today for Benchmark's second quarter 2021 earnings call. Joining me this afternoon are Jeff Banks, CEO and President, and Root Wakaraji, CFO. After the market closed today, we issued an earnings release highlighting our financial performance for the second quarter of 2021, 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 GAAP to non-GAAP 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. And as a reminder, any of today's remarks that are not statements of historical fact are forward-looking statements, which involve risk and uncertainties as described in our press releases and SEC filings. 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 statement. For today's call, Jeff will begin by covering a summary of our second quarter results, including new program wins. Ruth will then discuss our detailed second quarter results, including a cash and balance sheet summary and third quarter 2021 guidance. Jeff will wrap up with an outlook by market sector, a progress update on our strategic initiatives for the year, and second half outlook before we conclude the call with Q&A. If you will now, please turn to slide three. I will turn the call over to our CEO, Jeff Banks.

Thanks, Lisa. Good afternoon, everyone. And thank you for joining us today. Throughout the past 18 months, we've rallied through the uncertainty surrounding the pandemic and made decisions to increase our investments in new opportunities, which we believe are starting to bear fruit. We've had to make difficult trade offs during this unprecedented time, but we never lost focus on prioritizing the safety and well being of our employees and meeting the growing needs of our customers. This approach has served us well as we progressed our strategy in a volatile operating environment. As you may have seen from the press release this afternoon, revenues of 545 million were above the midpoint of our guidance for the second quarter, and we're up 11% year over year. Revenues benefited from the continued momentum in the semi-cap market, as well as stronger demand from customers deploying broadband infrastructure solutions in our telco sector. Additionally, we are seeing early signs of recovery in some subsectors of the industrial markets. Loop will provide more specific color on the constrained component situation, but our teams are facing a heavy workload and significant disruptions in manufacturing planning based on the continued volatility of extended lead times, tight supply, and allocations that are limiting the ability to meet customer demand. In the second quarter, We estimate that we left approximately 50 million of demand on the table, and most of this demand is rolled into future quarters. Given component constraints, we estimate we may leave 100 million of unfulfilled demand in this quarter, demonstrating the strength of end customer orders. We continue to work closely with our customers to optimize output based on component availability. During the quarter, we also faced disruptions in our Malaysian operations from the ongoing COVID pandemic, where government regulations reduced staffing levels to 60% and required our team to replant our workforce and shift patterns through most of the second quarter. Even with these challenges, I'm proud to report our teams in Penang delivered on their customer demand and achieved their targets for the quarter. Thankfully, we held an onsite vaccination event for our precision machining operations allowing nearly all of our employees and some suppliers to receive their first vaccine shot and are making plans to host a similar event for our EMS team. Government restrictions have recently eased, now allowing 80% of the workforce capacity, and our leadership team continues to do a phenomenal job managing through reduced staffing and intermittent work stoppages to keep our employees healthy and maximize production. Now turning to profits. With improving revenue, our non-GAAP gross margins improved 50 basis points to 8.8%, and non-GAAP operating margins improved 20 basis points to 2.5%. As a reminder, our non-GAAP operating margins include stock compensation expenses, which were approximately 70 basis points in the second quarter. Earnings per share of 27 cents was above the midpoint of our guidance, and we had another solid quarter of cash conversion cycle results at 64 days. Our team continues to pull together, execute with excellence, and deliver on our growth strategy through the first half of 2021. We believe this momentum will continue through the rest of the year and demonstrate the benefits of scale in our model. Please turn to slide four. In addition to strong sequential and year-over-year revenue growth, we had another strong quarter of bookings where the outsourcing and New Deal opportunity environment remained strong. Now I'd like to highlight a few key wins in the quarter. In the medical sector, we were awarded new manufacturing programs for cardiac monitoring, blood transfusion, and in vitro diagnostics. Our winning value proposition in this sector resonates with customers and is supported by our 30-year quality track record of building Class III life-sustaining devices by FDA standards. In SEMICAP, we continue to win new programs which are additive to our already strong demand in this sector. In Q2, we added a new SEMICAP customer to our portfolio where we will be building process controllers for coding equipment. With existing customers, we were awarded new design and manufacturing projects for work cell handlers and power rack electronics. This quarter, we had great wins in SEMICAP across precision machining, engineering services, and electronics manufacturing. In the A&V sector, we were awarded new manufacturing programs for electronic warfare and defense satellites, as well as a design program for ruggedized electronics for land-based combat vehicles. In industrials, We are very excited about a major new customer win to manufacture solar battery storage solutions, which could provide meaningful growth to our industrial sector. And finally, in computing and telco, we continue to win new high-performance computing programs where we have unparalleled manufacturing expertise for large form factor, high-density electronics manufacturing. High-performance computing will be a key contributor to our growth over the next 12 months. Our new business pipeline remains strong across all of our sectors, and we expect these bookings to fuel growth in support of our midterm model and longer-term growth plans. All in all, I'm very excited about the meaningful opportunities we are winning, the increased attach rate of engineering services, and the level of new prospective wins that our business development teams are engaging in. With that, I'll now turn the call over to Rup to discuss the second quarter financial results. Rup, over to you.

Thank you, Jeff, and good afternoon. Please turn to slide six for our revenue by market sector. Total benchmark revenue was $545 million in Q2, which is at the higher end of our guidance, driven by continued strong performance and SEMICAP and improving revenue in industrials and telco. Medical revenues for the second quarter were relatively flat sequentially as expected. We expect medical revenues to be higher for the second half of 2021 as compared to the first half of 2021 due to new program ramps and improving demand. Semi-cap revenues were up 23% in the second quarter and up 60% year-over-year from continued demand strength from our front-end wafer fab equipment customers where we saw increased demand from each of our top customers. Our revenue in this sector is primarily precision machining and large electromechanical assembly, which are less impacted from the global component shortages. A&D revenues for the second quarter increased 8% sequentially and 9% year-over-year from continued strong demand in our defense programs for surveillance vehicles, secure communications and computing, and military satellite programs. Our commercial aerospace revenue was flat sequentially. Industrial revenues for the second quarter were slightly better than expected from slight improvements from building infrastructure and commercial construction programs. Overall, the higher value markets represented 82% of our second quarter revenue. Revenues from computing and telco sectors, our traditional markets, were flat quarter over quarter. We saw strong demand in telco from new and existing programs in commercial broadband and commercial satellites, but a high performance computing program that was expected to ramp in Q2 was pushed to the second half of 2021. Our traditional markets represented 18% of second quarter revenues. Our top 10 customers represented 46% of sales in the second quarter. Please turn to slide seven. Our GAAP earnings per share for the quarter was 20 cents. Our GAAP results included restructuring and other one-time costs totaling 1.6 million related to restructuring activities In Q2, we completed the closure of our Angleton, Texas site as planned. For Q2, our non-GAAP gross margin was 8.8%. This is 20 basis points better than the midpoint of our second quarter guidance, driven by higher revenues and a better mix. On a sequential basis, we were up 50 basis points as a result of our higher revenue, improved productivity and utilization, somewhat offset by higher variable compensation expenses, and higher than expected U.S. medical costs. Our SG&A was $34 million, an increase of $3.5 million sequentially due to our higher variable compensation expenses and higher U.S. medical costs. Non-GAAP operating margin was 2.5%. In Q2 2021, our non-GAAP effective tax rate was 20.3% as a result of the mix of profits between the U.S. and foreign jurisdictions. Non-GAAP EPS was 27 cents for the quarter, which is one cent higher than the midpoint of our Q2 guidance and six cents sequential improvement. Non-GAAP ROIC was seven and a half percent, 110 basis point increase sequentially, and 160 basis point improvement year over year. Please turn to slide eight to review our cash conversion cycle. Our cash conversion cycle days were 64 in the second quarter, an improvement of one day from Q1. Turning to slide nine for an update on liquidity in capital resources. The cash balance was $370 million at June 30, with $135 million available in the U.S. Our cash balances decreased $30 million sequentially. The decrease in cash is primarily the result of procuring a higher level of inventory to support future revenue growth and to better manage the increasing lead times for components and current broad supply chain constraints in the marketplace. We generated $4 million in cash flow from operations in Q2, and our free cash flow was a use of $9 million cash after capital expenditures. As of June 30th, we had 133 million outstanding on our term loan with no borrowings outstanding on our available revolver. Turning to slide 10 to review our capital allocation activity. In Q2, we paid cash dividends of 5.8 million and used 17 million to repurchase 566,600 shares. As of June 30th, we had approximately 174 million remaining in our existing share repurchase authorization. In Q3, we expect to repurchase shares opportunistically while considering market conditions. Please turn to slide 11 for a review of our third quarter 2021 guidance. We expect revenue to range from $555 million to $595 million, which at the midpoint represents a 9% year-over-year improvement. We expect that our gross margins will be 9% to 9.4% for Q3, and SG&A will range between $34 and $35 million. The sequential increase in gross margins is expected due to higher revenues and improved absorption. We are still targeting gross margins for the full year to be 9%. Implied in our guidance is a 3.1% to 3.4% non-GAAP operating margin range for modeling purposes. The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring and other costs. We expect to incur restructuring other non-recurring costs in Q3 of approximately 800,000 to 1.2 million. Our non-GAAP diluted earnings per share is expected to be in the range of 33 cents to 41 cents, or a midpoint of 37 cents. We expect our CapEx plans for the year to be between 50 and 60 million. We estimate that we will generate approximately 80 million to 100 million of cash flow from operations for fiscal year 2021. This range contemplates the higher inventory levels to support growth for our customers through the year. Other expenses net is expected to be $2.1 million, which is primarily interest expense related to our outstanding debt. We expect that for Q3, our non-GAAP effective tax rate will be between 19% and 21% because of the distribution of income around our global network. The expected weighted average shares for Q3 are approximately 35.7 million. Before I turn the call back over to Jeff, I wanted to comment on our perspective on component supply. As you're aware, end market demand continues to be strong. However, we continue to see component supply chain constraints across all commodity categories. Overall, lead times continue to extend, and more components are being placed on allocation by suppliers. Several commodities are impacted, yet semiconductors, remain the most constrained. We are maintaining close alignment with our suppliers and distributors to minimize disruptions to existing orders and to secure supply in support of customer demand increases. We are actively working with customers to replan mix and redesign some products to enable alternate component sourcing. In general, our ability to fulfill upside demand is challenging due to component constraints, but we do believe these actions still give us confidence that we will grow revenue in 2021 in the high single digits. In summary, our guidance takes into consideration all known constraints for the quarter and assumes no further significant interruptions to our supply base, operations, or customers. Guidance also assumes no material changes to end market conditions and our operations due to COVID. And with that, I'll turn the call back over to you, Jeff.

Thanks for that update, Ruf. Following Ruf's comments on our third quarter guidance, I wanted to provide some additional details on our view of demand by sector. for the quarter and the remainder of 2021. This is shown on slide 13. For the second quarter, we expect revenue to be up sequentially by about 30 million. This strength is led by expected sequential growth in computing and A&D with continued strong demand in semi-cap. After 60% year-over-year growth in Q2, we expect our semi-cap sector will remain at Q2 revenue levels as demand still remains robust, but we are constrained in the near term by mechanical sub-tier suppliers. Based on signals from our customers in the front-end wafer fab processing space, demand will remain at high levels for the balance of 2021 and through next year, supported by increasing demand for semiconductor capital equipment. With this ongoing demand strength and signals from our customers, we are revising our outlook for this sector upward from 20% to greater than 30% revenue growth over 2020 levels. This sector is clearly outperforming our expectations for this year. In A&D, where we grew 8% in Q2, we expect continued growth in third quarter, led by increased demand for ruggedized electronics for ground-based military vehicles and secure communication devices. While commercial aero demand in the second half is stabilizing, we still expect the A&D sector to remain flat for 2021 as defense strength does not offset aero weakness for the full year. In the computing sector, we expect strong revenue growth in 2021 from high-performance computing projects with the largest revenue growth in the second half of 2021. If there are no further component decommits or design delays, Computing could be up over 50% sequentially in the third quarter. As we continue to win new projects in this targeted subsector, we expect continued strength in high performance computing revenues in 2022. In the medical sector, we're expecting revenue to grow sequentially in Q3 and Q4. For our portfolio, we see revenue growth across our base business in the second half. Additionally, we have new program ramps contributing to second half growth. We still expect medical to have a growth year, but as always, new medical program revenue is subject to the timing of product qualification. In the telco market, where we had good growth in the second quarter, we expect stable demand in the second half of 2021, which will lead to 2021 being a solid growth year from strong performance in broadband communication products. In industrials, we are pleased to see the order book increasing for our customers supporting the oil and gas market, transportation infrastructure, and building systems. With this demand improvement forecasted in the second half and a tremendous number of new program ramps in Q4, this sector has the potential to achieve greater than 10% growth for this year. If you'll turn to slide 14, I wanted to provide a few highlights on our strategic objectives. We remain focused on our longer-term strategic initiatives and progress against these even as we deal with short-term challenges created by the pandemic and this constrained supply environment. Growing revenue remains a top priority at Benchmark. Our go-to-market team is doing a great job executing our sector development strategies with wins in our targeted subsectors where we have an advantage position based on our technology and a track record of success with complex programs. Our booking levels for both manufacturing and engineering services remain strong. We'll continue to invest in a sustainable infrastructure and our talent for sustainable growth. We are in data collection mode to support our intended reporting against the global reporting initiative, which will increase our transparency and further support our standalone sustainability report, which we plan to publish next year. We are also expanding our diversity and inclusion efforts by developing a multi-year continuous improvement roadmap supported by robust plans and actions with accountability held by the entire senior leadership team. This roadmap includes increased training, some enhanced policies, and recruiting strategies for our internal organization as well as the ongoing commitment to board diversification. You may have seen our recent announcement where one of our board members, Marilee Raines, left our board. We have certainly appreciated her service and wish her well. We are proud to welcome Lynn Wentworth to our board, filling Marilee's open seat. Lynn is an outstanding director and sits on three public companies where she currently holds two board chairs and one audit chair position. Her vast experience and history of operational execution will provide additional capabilities and insight to our already talented slate of directors. Lastly, we are laser focused on growing earnings. From our second quarter results to the midpoint of our Q3 guide, we're expecting a greater than 30% sequential earnings improvement. These expected results are enabled by our continued revenue growth trajectory. our target to sustain gross margins at 9% for the full year, and our commitment to control our expenses. In summary, on slide 15, I'm very excited about our progress in the first half and remain optimistic about our second half outlook. Given the continuing strong demand outlook in SEMICAP, improving demand in industrials, and expected second half ramps in high performance computing, we are revising our full year growth outlook to high single digits for 2021. Of course, this assumes no worsening component supply constraints or broader pandemic impacts. With this revenue growth and mix, we're expecting sequential quarterly improvement in both gross and operating margins in both 3 and 4Q. On the gross margin line, we are still targeting to achieve 9% for the full year 2021. With these results, we are still expecting operating cash flows between 80 and 100 million. Through the first half of 2021, we repurchased 30 million of stock and may continue to purchase stock opportunistically, as well as continue our recurring quarterly dividend, which we raised last quarter as part of our capital allocation plan. In closing, I remain excited about the overwhelmingly positive indicators that we are seeing from our teams and our customers. I want to express my heartfelt thanks to our team, including our hardworking suppliers, for their ongoing support at a very high level. I'm excited about how 2021 is shaping up and look forward to providing you an update in our October earnings call. And with that, I will turn the call over to the operator to conduct our Q&A. Operator?

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from Jason Schmidt with Lake Street.

Please go ahead.

Hey, guys. Thanks for taking my questions. Jeff, just want to clarify your comments on the $100 million in demand this quarter potentially being left on the table. Is that simply due to not being able to ship or have these projects and designs been lost? I'm just trying to get a sense of this revenue will eventually flow to you guys in the out quarters.

Yeah, that's a great clarifying question, Jason. This is really given the component constraint environment. It's not demand that's going away. Frankly, some of it is upside demand that we've taken from the recovery starting in many of the sectors, and a lot of that is within lead time. And as you know, lead times are extending, so it's difficult to close on clear to builds to be able to get the revenue. And some of it, you know, I would say would come from the rollover, you know, from last quarter as well because we left some unfulfilled demand on the table. We're pleased that, you know, assessing it, the majority of that will roll into fourth quarter and probably some into the beginning of 22. Some, you know, there are some portion that could be perishable, but for the most part, we intend to capture that lost revenue in the third quarter.

Okay, that's really helpful. And just given the tightness out there and need for spot buys and just general inflationary pressures, just curious what you're seeing from that standpoint. And if you are seeing those higher costs, if you're passing them along.

Yeah, everyone's dealing with, you know, the cost of expediting. Some components have gone up in price given the tightness of supply. So we're definitely seeing it. You know, we're in hand-to-hand combat, you know, trying to, keep costs down at the same time trying to get precious supply. As you can imagine, we work really close with our customers to make those decisions. In many cases, we are asking customers to help us with that, just given the nature of the relationship and the way our contracts are structured. But it's a difficult time, no question. Everyone's a bit frustrated, wish there was more we could do. But at the same time, we're also talking to customers about, you know, making sure they have their forecasts out and, you know, it's certainly not too soon to work on 2022 and those are the discussions we're having.

Okay. And then just the last one from me and I'll jump back into queue. I'm curious if you guys would be willing to share how much of the computing segment is comprised of what you guys consider high-performance computing. I'm just trying to get a sense. It seems like that high-performance computing really could be under that kind of higher-value market rather than the traditional markets.

Yeah, we've had that debate. Some of our competitors take compute and telco, the higher-value segments, and they classify it all as high-value. Certainly, we see high-performance computes. as higher than traditional compute business from a margin. It's on the higher side, although that segment overall is below our corporate average for margins, I would say. The HPC, I don't know that we'll break it out, but just directionally, it's meaningful. It's not 10 million, right? So it's a pretty big number in there because we've got multiple customers we're supporting in that segment.

Rick, do you want to add anything? Yeah, Jason, just maybe I'll add to Jeff's comment there. On HPC, if you remember, it can be somewhat project-based as well, right? So it's a bit lumpy. And so the percentage of what it represents of computing can vary by quarter. We, as we'd indicated, we saw a push out of the demand into the second half. So we'll expect to see the mix of that be a bit stronger in Q3 and Q4 as well.

Okay, appreciate the caller. Thanks, guys.

Just no worries.

As a reminder, if you have a question, please press star then 1 to be joined in the queue. The next question comes from Anya Satterstrom with Siddhoti. Please go ahead.

Hi, and thank you for taking my question, and congratulations on a good quarter despite the environment. You are talking about the high single digit growth for 2021, so taking that up a bit. How should we think then about 2022, especially with some projects being pushed out and you're working more closely with your customers now on lead times and stuff, so I assume you have a little bit better visibility into 2022. Do you foresee 2022 to be stronger than 2021, or is it too early to talk about that?

Yeah, this is Jeff. I'll start. You know, we have good momentum right now in the business and we felt comfortable with the visibility through second half to call the ball higher in terms of revenue growth this year. It's a bit early for 22. I mean, it's great to see the momentum and we certainly think some of that will carry in the next year. But we feel good about the midterm model we put out, you know, that looked really out through 2022. I think you'll see us come back as we get a little further into the year and and give you more color on what that looks like. And some of the things that have to factor in there is, you know, SemiCap's going through tremendous strength right now. We think that continues into 22. We'd love to get a little further along and see what that profile looks like. And then also what, you know, what, if anything, are we not able to fulfill through the end of the year? You know, is there going to be demand that rolls in the next year that isn't perishable and that, you know, we still may be dealing with this constrained environment which looks like it could go on. You know, right now we're saying from our visibility, it looks at least through first half of 22, that could be tough. So direction, I would say, you know, we feel good about where we are against the model, but a little bit too early to really call the growth rate for 22 yet.

Okay, thank you. And I'm sorry I jumped on the call a little bit late, so you might have addressed this, but in medical, what do you see there in terms of ramping of elective procedures, related productions?

Yeah, so elective surgeries, we are seeing recovery there, but it did come a little bit later than some of the other segments that bounced back, I would say maybe a little bit quicker. And so we're probably seeing a little more supply constraint in there because that demand kind of came back Later, you know, later in, you know, really even the first quarter, we weren't totally calling you yet. So now we're in kind of a lead time crunch. So we've got a number of new ramping programs that we're excited about. Some of those are really going to be based on, you know, the timing of when those hit. But right now, you know, that's really weighing on medical in 21.

Okay, thank you. And then in terms of new contract wins, can you just give us some color on whether those are with new logos or expansion with existing customers?

You know, it's a great question. We have this kind of initiative that we want to go deeper with the customers we have, but at the same time, we want a set of new logos every quarter. I would say it was a healthy mix of both. You know, about half of the deals that we highlighted were from existing customers and half are new logos. And, you know, we talked about the power storage solution, solar storage. That's a great new customer we're super excited about. We've got some industrial customers that are brand new that are going to be meaningful down the road for us. But we also saw some Semicap and A&D customers at a repeat that were kind of going deeper with. So it's a healthy mix as you go kind of across the sectors that we highlighted this quarter.

Okay, thank you. And also, just given you sort of increasing the revenue guidance for this year, but you're maintaining the growth studies, is that due to the supply constraints that's putting a little bit of pressure on the margins?

Anya, we apologize. You kind of broke up just a little bit there. Would you mind asking your question one more time?

Yeah, so you're taking up your revenue guidance a bit for this year, but you're maintaining the gross margin target. Is that due to the supply chain constraints that are putting some pressure on the gross margin?

Yeah, so really it's a combination, right? As you know, we are mixed dependent, and one of the things that we have forecasted in our comments is that we expect to see some growth In the high performance computing sector or computing sector with the high performance computing programs that will be executing in the third and fourth quarter. So the mix of the traditional markets will be a little heavier. And those margins tend to be a little bit less than our corporate averages. So when you think about the mix that's affecting it. The other side of that is The constrained market is affecting some of the higher value markets, like in medical, to Jeff's point just now, in delaying some of the ramp and growth there. So it's kind of the mix of both that we're not able to fulfill some of the demand on the higher value markets because of the constrained market, and then the higher computing revenue that we expect to see in the third and fourth quarter.

Okay, thank you. And then one last question. How much of your revenue is derived from Malaysia approximately?

I didn't catch the end of that question.

How much of your revenue is originating from Malaysia? How much of your business is in Malaysia?

Oh, Malaysia. Yeah, it's not something we've disclosed publicly overall. And remember, we've got both EMS and precision machining. If you think about our footprint, maybe as a proxy, which isn't exact, but we've got about 10% of our footprint in Malaysia.

And, you know, Malaysia has been challenging due to the COVID restrictions and also disruptions where we've had temporary shutdowns and and the like. But our team's done a phenomenal job over there. I just got to do a call out. They, you know, we saw risk. I think our analysts all highlighted the risk in the quarter with some of the disruptions, some of our peer group pre-announced because of it. They've done a phenomenal job working feverishly and carefully to stagger the teams and work overtime and be able to deliver for customers. So while COVID is, you know, really, Sobering that the rest of the world is not as far along. I know we're seeing rates spike up a little bit in America's too, but both Malaysia and Thailand continue to be a key watch for us and working closely with our teams and encouraging vaccination events and trying to get through that. But team did a great job in Q2.

Thank you.

Thank you, Anya.

The next question comes from James McReady with Needham.

Please go ahead.

Hi, this is Tyler Bailey filling in for Jim. Hey, everyone. How's it going?

Hi, Tyler. How are you? Hey, Tyler.

I'm doing well. Congrats on the great quarter. It seems like, you know, I guess it's rare to see some companies come out unscathed. And, you know, obviously you guys, you know... you know, missed out on some demand, but, you know, really, really came out strong despite, you know, all the headwinds you guys are facing. So, yeah, really, really congrats. But, yeah, so one, maybe just one question. I'm just kind of looking at, given what you guys talked about, sort of the market verticals and what you're forecasting for the rest of this year, it looks pretty strong, especially, you know, what you're seeing at a semi-cap in medical. I'm wondering, just thinking about Q4, I mean, historically we've seen a bit of a slowdown in Q4 relative to Q3, but just based on your guys' guidance and kind of what you're seeing and some of the demand being pushed out, is there a chance that Q4 comes in a little bit stronger than what we've seen in the past?

Well, certainly, you know, I think we're kind of directionally with saying that we're going to see, you know, we're shifting high single-digit growth for the year. We would anticipate being able to grow sequentially from Q3 to Q4, which I think is not always something that we've seen, to your point. So I think we do have some strength in the back half. And as we've talked about, the compute sector with some of the high-performance computing projects, you know, did move from the first half to second half, and that helps us. But certainly, SEMICAP, we got some temporary constraints there that are limiting us, some of the sub-tier suppliers. disruptions in Malaysia that were not in our own house. So we look to clear some of that, and that should help in the fourth quarter as well. So we've got pretty good momentum going into the fourth quarter. So we'll see how it plays out. But directionally, I don't think your thinking is off. Okay. Appreciate that.

I guess one thing, too, and I know you talk a lot about this, but because there are some spikes, I know you guys seemingly or hopefully have navigated the worst of it, but You know, is there some hesitancy with customers, like, you know, pushing out ramps maybe, you know, into 2022 just because of a little bit of, I guess, apprehensiveness from these Delta spikes?

No, I wouldn't say that customers, I mean, the demand is strong and customers, if they can get it sooner, and obviously with what we left on the table in Q2 and what we were projecting we potentially could have on the table. customers would like to get the product as quickly as possible. So we're not seeing push outs as a result of some of the COVID spikes or anything like that at this point in time.

If anything, I think customers are excited to get going on new projects. And we got more people wanting to visit our facilities and engage with our engineering teams. And I think people are trying to get things done that maybe they put off a little bit. But it is challenged by component constraints. And even in development projects, you know, if you've got engineering prototypes and samples you're trying to build, you know, there's the component constraints are not in material. So that's making it tough, but there's certainly, I have not seen one project push because, you know, they're worried about COVID and they're going to wait, you know, at this point.

Okay. That's, that's helpful insight. Appreciate that. And the one, one last question, you mentioned that the solar and storage when I believe, and just wonder if you could talk a little bit about that potential there. It's obviously growing segment, you know, really across the world. You know, you see it a lot in the U S the end phases, the sun runs, but just wonder if you could kind of just talk and speak to that potential a little bit for you guys.

You know, like any new booking for us, right. It typically can take, you know, it could take a year and a half, two years just to get into revenue and then ramp from there. Um, we're, you know, we are excited about, um, participating with one of the market leaders here. Um, that's in the space. I think it's an exciting space. People have leveraged generators for a long time, and this is an alternative, right, to be able to, with all the storms and increase the storms across, you know, certainly in the U.S., power brownouts are more and more common. So, you know, be able to have that energy back up and be able to run and store energy during the day and be more fuel, you know, and fuel efficient, I think, is an exciting market. So, I think we're really optimistic, but it's a bit early to say what it could be. Because it's a new customer and a market leader, as I said, kind of see it being a meaningful contributor, but not really. We're going to get into it probably in 22, and we'll see where it goes from there.

Okay. That's helpful. Appreciate it. Well, that's it for me. Thanks again, and congrats on the great quarter.

Thanks, Tyler. Appreciate it. Thanks for joining.

This concludes our question and answer session.

I would like to turn the conference back over to Lisa for any closing remarks.

Thank you again for joining our call today. If you have any follow-up questions regarding our earnings release, please don't hesitate to reach out, and I'll be happy to follow up. I wanted to put in a reminder that Benchmark will be supporting the Needham Industrial Tech Conference on August 9th, the Oppenheimer Technology Internet and Communications Conference on August 10th, and the Lake Street Best Ideas Growth Conference on September 14th. And we look forward to engaging with all of you at these events. Please have a great afternoon, and we'll look forward to speaking with you on our third quarter results call in October. Thank you.

The conference is now concluded. Thank you for attending today's presentation.