Benchmark Electronics, Inc.

Good afternoon and welcome to the Benchmark electronics conference call. All participants will be in a listen-only mode. Should you need assistance, please find a 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 touch-tone phone. 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 Lenski, Ambassador Relations and Corporate Development. Please go ahead.

Thank you, Maria. And thanks, everyone, for joining us today for Benchmark's second 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 second quarter of 2022. 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 GAAP to non-GAAP measures in the earnings release as well as in the appendix of this presentation. Please take a moment to review the forward-looking statements advice on slide two of 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 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. Ruth will then discuss our detailed financial results, including a cash and balance sheet summary and our third quarter 2022 guidance. Jeff will then return to discuss more insight on our sector outlook and then close with directional commentary on how we're viewing the year relative to our midterm model before opening for questions. If you will please turn to slide three, I will 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 for the second quarter of 2022, which demonstrates another strong performance for the company. Revenue of $728 million was nearly $100 million above the midpoint of our guidance range. an increase greater than $180 million versus Q2 of last year. The year-over-year 34% growth was well balanced across our market sectors, but I'm particularly pleased with the greater than 50% growth this quarter from industrials, medical, and computing sectors. Benchmark is clearly benefiting from two key drivers. First, the success of our customers whose product address high growth markets benefiting from strong secular demand trends. And second, the momentum of design wins captured over the last several years, which are now beginning to ramp in the marketplace. Our non-GAAP gross margin in the quarter was 8.1% and was impacted by 110 basis points due to pass-through revenue from supply chain premiums paid by our customers. As you now have heard from many of our EMS peers, pass-through revenue is an industry-wide phenomena during this unprecedented supply chain environment. These part premiums are temporary in nature, and we expect them to moderate in future periods. Rick will go into further detail in a moment, but excluding the effects of supply chain premiums, our June quarter non-GAAP gross margin would have been 9.2%. Turning to expenses, with the higher revenue base and prudent manage of spending, we were able to offset the inflationary wage environment and deliver non-GAAP SG&A expenses below 5% of sales, even while assuming higher variable compensation on the year. However, this did not fully offset the supply chain premium impact at the gross margin line, resulting in non-GAAP operating margin of approximately 3.1%, slightly below our guidance. As a reminder, our non-GAAP operating margins include stock-based compensation expenses. Excluding these expenses, our non-GAAP operating margin in the June quarter would have been 3.7%. Finally, non-GAAP earnings per share was 50 cents as compared to 27 cents in the year-ago period, representing 85% year-over-year growth. Looking to the second half of the year, we continue to see robust demand indicators across the majority of our market sectors. And even with our higher revenue attainment, we still left over 200 million of demand unfulfilled as orders again outpaced available supply. Although there are some signs of improvement on a selective basis within areas of the supply chain, we do not anticipate any broad-based easing in the second half of 22. Like others, we are mindful of the possibility we are entering a recession, but have confidence in our positioning within more resilient industrial and enterprise markets. In summary, before I turn it over to Rube, given the very strong first half performance and our expectation that this carries through the balance of the year, I'm pleased to say for the full year, we expect to deliver revenue growth of 20% or greater, excluding the pass-through of supply chain premiums, and non-GAAP earnings per share of $2 or better for the year, which would represent an all-time record for earnings at the company. With that, Rup, over to you.