Benchmark Electronics, Inc.

Good afternoon and welcome to the Benchmark Electronics Incorporated first quarter 2022 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paul Manske, Benchmark Investor Relations. Please go ahead.

Thank you, Anthony, and thanks, everyone, for joining us today for Benchmark's first quarter fiscal year 2022 earnings call. Joining me this afternoon are Jeff Bank, CEO and President, and Rup Lakharaju, CFO. After the market closed today, we issued an earnings release highlighting our financial performance for the first quarter of 2022, and we 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 be discussing 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 release and SEC filings. Actual results may differ materially from these statements, most notably due to the ongoing impact of global supply chain constraints and COVID. Benchmark undertakes no obligation to update any forward-looking statements. For today's call, Jeff will begin by covering a summary of our first quarter results and new program wins. Ruth will then discuss our detailed financial results, including a cash and balance sheet summary and our second quarter 2022 guidance. Jeff will then return to discuss our sector outlook, provide a progress report on our strategic objectives, and then close with directional commentary on how we're viewing the year relative to our midterm model before opening for questions. If you'll please turn to slide three, I will now turn the call over to our CEO, Jeff Bank.

Thank you, Paul. Good afternoon, and thanks to everyone for joining our call today. Hopefully by now you've seen our press release and the strong results we delivered for the first quarter. We've made tremendous progress toward the strategic objectives and the midterm model we set out to achieve back in October 2020. I'm pleased to report the March quarter was a continuation of this trend. As you've no doubt heard repeatedly from companies across various industries, significant global supply chain challenges persist and COVID disruptions continue, particularly in Asia. Despite this, Benchmark once again delivered revenue and non-GAAP EPS above the high end of our guidance range in the first quarter. Revenue of $636 million was $51 million above the midpoint of our guidance and up 26% year over year. This was the largest revenue quarter we've had since the fourth quarter of 2018, well before the pandemic. The revenue outperformance in the period was primarily driven by strength in our semi-cap and industrial sectors. Our non-GAAP gross margin in the quarter was 9.1%, in line with guidance. Amid the backdrop of supply constraints and tight labor, we've been absorbing some costs in partnership with our customers. We're working on recoveries as appropriate, which will be reflected in the second half. We've also been strategically acquiring inventory to help meet our growing demand. These are conscious investment decisions we're making today in order to drive greater opportunities tomorrow. In the near term, this will have a temporary dampening effect on our gross margin expansion. We expect that by the second half of 2022, our gross margin expansion will resume. Turning to operating margin, with the high revenue base, we were able to leverage our operating expenses, translating the non-GAAP operating margin of 3.4%. As a reminder, our non-GAAP operating margins include stock-based compensation expenses. Excluding these expenses, our non-GAAP operating margin in the March quarter would have been greater than 4%. Non-GAAP earnings per share was $0.44 as compared to 21 cents in the year-ago period, representing 110% year-over-year growth. As mentioned previously, the March quarter results were achieved with a backdrop of supply chain challenges, further COVID-related disruptions in some of our facilities in Asia. And if those challenges weren't enough, we even had a tornado damage our site, our Austin site, and disrupt production for a week. Yet we overcame. I want to thank our teams across the globe for their incredible perseverance, which enabled these results. But there's room for further improvement. In the first quarter, we estimate that we were unable to fulfill over 200 million of demand requested by our customers. Unfortunately, our backlog of unfulfilled demand continues to increase as component supply is still severely restricting our outputs. Thanks to the diligent efforts of our supply chain and operations teams, we were able to fulfill a meaningful amount of the demand in the period and even outperformed against our initial customer forecast for the quarter, which enabled our first quarter 2022 upside. However, demand is continuing to increase. Unfortunately, we don't see a broad improvement in supply constraints throughout 2022. Given the disconnect between current demand and our ability to fulfill it, coupled with the expected continued strength in new bookings, our operations teams have been strategically building inventory as it becomes available. This will enable us to maximize throughput in our operations when longer lead time components arise. Please turn to slide four. Our go-to-market organization working closely with our functional teams continues to secure new wins, both from our existing customers and our new accounts across our targeted sectors. Let me highlight a few of those exciting wins for Q1. In medical, we were awarded new design and manufacturing programs for an ophthalmology therapy device, as well as manufacturing of an image-guided radiation platform. We were also awarded a design program for a neurological monitoring system. In SemiCap, we continue to win design awards for wafer handling and processing in support of next-generation SemiCap tools. This past quarter, we secured new engineering wins for lithography submodules and metrology systems and a manufacturing program for planarization modules. Benchmark is proud to enable our customers to provide some of the most complex process technology on the planet. In the A&D sector, we were awarded the manufacturing of a ruggedized RF SATCOM device, as well as an encryption and secure communications platform. We were also awarded the design and engineering of an RF module used in a lower-orbit space application. During the quarter, we were pleased to announce a key new partnership with Dynetics, a division of Leidos. whereby Benchmark will be manufacturing the electronics for the enduring shield defense system. Dynetics selected Benchmark due our deep experience and reputation in the A&D market, where we are known for our full product lifecycle support from design to new product introduction to aftermarket services. In industrials, we were awarded the manufacturing program for smart climate control devices. which is nicely aligned with our commitment to sustainability. Elsewhere, we secured a new logo for manufacturing robotic sub-assemblies to be used in warehouse automation. We were also awarded a design and engineering program for the redesign of controllers going into construction and agricultural equipment from a well-known market leader in the space. In computing and telco, we won new manufacturing programs for a high-end computer power subsystem, which was a new logo for us, as well as a broadband network power assembly representing another and a growing portfolio of next-generation broadband wins for Benchmark. We were also awarded the design responsibility for a specialized high-end computing platform to be used in crypto applications. We continue to see a mixed shift within computing and telco from legacy applications to leading edge technologies and are pleased with the quality of new complex wins in this sector. Further bolstering this shift and creating new opportunities for Benchmark has been a renewed focus on reshoring manufacturing of these systems and platforms to the US. We look forward to incrementally participating in this emerging trend. Our new business pipeline continues to grow across our targeted sectors, and we remain very encouraged about the prospect for continued wins. Where more OEMs are looking for strategic outsourcing partners that can take on both manufacturing and engineering projects to help them get to market faster and scale efficiently. I will discuss our momentum in our various sectors later in the call and provide an update on our progress against our key initiatives. But first, I'd like to turn the call over to Rup to go into the details of our first quarter performance and our guidance for the second quarter. Rup, over to you.