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.