Benchmark Electronics, Inc.

Hello and welcome to the Benchmark Electronics, Inc. first quarter 2023 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. To ask a question, you may press star, then one on your telephone keypad. To withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Paul Manske with the Benchmark Electronics Company. Please go ahead.

Thank you, MJ, and thanks, everyone, for joining us today for Benchmark's first quarter fiscal year 2023 earnings call. Joining me this afternoon are Jeff Bank, CEO and President, and Ruth Lockerager, CFO. After the market closed today, we issued an earnings release pertaining to our financial performance for the first quarter of 2023, and we have prepared a presentation that we will reference on this call. Both are available under the investor relations section of our website at bench.com. This call will be webcast live and a replay will be available online following the call. The company has provided reconciliation of our gap to non-gap measures in the earnings release as well as an 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 filings. Actual results may differ materially from these statements and most notably due to the global supply chain constraints, macroeconomic conditions, and semi-cap equipment spending. Benchmark undertakes no obligation to update any forward-looking statements. For today's call, Jeff will begin by providing a summary of our first quarter results. where we'll then discuss our detailed financial results and our second quarter guidance. Jeff will then return to provide more insight on sector demand trends, business wins, and closing commentary. If you will, please turn to slide three. I'll turn the call over to our CEO, Jeff Banks. Thank you, Paul.

Good afternoon, and thanks to everyone for joining our call today. Our first quarter was once again demonstrated our ability to continue to grow our business without compromising our margin objectives. even in a less certain macro environment. Total revenue in the quarter was up 9% year over year. Both GAAP and non-GAAP gross margins were 9.2%. GAAP operating margin was 3.3%. On a non-GAAP basis, we delivered operating margin of 3.7%. As a reminder, unlike most of our peers, our non-GAAP operating margin includes stock-based compensation, which in the March quarter equated to approximately 70 basis points. Our first quarter gap earnings were $0.35 per share, and our non-gap earnings were $0.42 in line with our prior guidance. Supply chain premiums, which we previously disclosed to be zero margin pass-through revenue, came in at $18 million in the quarter. This was down nearly 70% year over year. Excluding the effect of this no margin revenue, we delivered non-gap gross margin of 9.5% and non-gap operating margin of 3.8%. Before turning the call over to Ruth, I'd like to share a few high-level thoughts on demand and our outlook. In the first quarter, we continue to experience strength across the majority of our market sectors, led by healthy double-digit year-over-year growth in our advanced computing, industrials, medical, and next-generation communications sectors. As we guided the last quarter, Semicap was a challenge during the period. However, I should note, unlike last quarter, we did not see incremental weakening during the first quarter. We believe in the secular trends that will support our future growth in this sector and are investing accordingly, even in this downturn, an example of which is the grand opening in March of our new precision technology facility in Mesa, Arizona, which was supported by our governor, Katie Hopp. We have and expect to continue to outperform the broader wafer front-end market. Indicators are pointing to a better second half of 2023 and a potentially much stronger 2024. Looking at the broader market, although we see growth across the majority of the sectors we serve, we are aware of the uncertain macro trends outside of our control. Based on that, we began proactively implementing expense controls in the quarters. which will continue into Q2. These are designed to enable us to continue investing in future growth while protecting profitability amidst the current environment. Our commitment to operational discipline, combined with our continued success in gaining share in the market, positions us exceptionally well to deliver to our financial targets. Finally, I want to take a moment to highlight our continued commitment to ESG. In February, we published our second annual sustainability report. This report builds upon last year's inaugural edition in that for the first time, we established specific intensity targets for greenhouse gases. I encourage you to read the report, which can be found at bench.com slash sustainability. Now, let me pass it over to Ruth to share more details on the quarter and our guidance for 2Q.