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Benchmark Electronics, Inc. today announced financial results for the fourth quarter and year ended December 31, 2015.
"2015 marked a year of continued progress on Benchmark's key strategic initiatives. Through focused and consistent execution, we achieved 55% revenue contribution from customers in our Industrial, Medical and Test & Instrumentation sectors," said Gayla Delly, Benchmark's President and Chief Executive Officer. "Continued emphasis in these strategic markets, coupled with our focus on operational excellence, is a key driver of our ongoing margin expansion strategy. In the fourth quarter, we delivered a 50 basis point year-over-year and a 20 basis point quarter-over-quarter improvement in operating margin and achieved our target of exiting 2015 with a 4.5% non-GAAP operating margin."
"The acquisition of Secure Technology in the fourth quarter of 2015 was another key milestone, although it did not significantly impact our results for the quarter. As expected, the transaction is advancing our business transformation and penetration of targeted higher-value markets. Integration is well underway and progressing according to schedule. In the near term, we are focused on customer care and expanding current relationships. Looking forward, we expect to realize the strategic benefits of the acquisition beginning in 2016."
Ms. Delly concluded, "During the last 12 months, Benchmark returned $68 million to shareholders through share repurchases, and we plan to continue these repurchases against the $135 million that remains available under our Board authorizations. We will continue our balanced approach to capital allocation through investments in organic initiatives, external growth opportunities and share repurchases as we execute our long-term strategy to drive increasing value for our shareholders and enhanced service for our customers."
The Company projects new program bookings for the fourth quarter to result in annualized revenue of $115 - 135 million when fully launched within the next 12-18 months. The new program bookings are aligned with Benchmark's strategic focus in higher-value markets. For the full year, 85% of new bookings came from Benchmark's targeted growth markets.
Fourth Quarter 2015 Financial Highlights
- Operating margin (non-GAAP) of 4.5%. The GAAP margin was 3.5%.
- Cash flows from operating activities were $28 million.
- Accounts receivable were $479 million at December 31, 2015, and calculated days sales outstanding were 69 days compared to 67 days at September 30, 2015.
- Inventories were $412 million at December 31, 2015; inventory turns were 5.6 times compared to 5.5 times at September 30, 2015.
Don Adam, the Company's Chief Financial Officer, stated, "The cash conversion cycle increased by two days sequentially due to shipments occurring later than expected in the fourth quarter. Benchmark remains focused on working capital improvement initiatives and is targeting a 15-20% reduction in cash cycle days exiting 2016."
Revenue was consistent with the Company's fourth quarter expectations. Growth in the higher-value markets – which include our Secure Technology group – was as anticipated. In our traditional markets, seasonal demand was better than expected in Computing, which offset continued Telecommunications softness related to weak capital spending.
Fourth Quarter 2015 Bookings Update
- New program bookings in the fourth quarter were $115 to $135 million.
- 12 engineering awards supporting early engagement opportunities.
- 23 manufacturing wins across all market sectors.
Margin Improvement Initiatives
The Company's strategic decision to transform its portfolio toward higher-value markets is driving positive results. Further portfolio diversification into higher-margin sectors, increased emphasis on engineering-led solutions and intense focus on operational excellence initiatives are expected to increase operating margins in the future. Benchmark remains committed to achieving a 5.0% operating margin on a non-GAAP basis over the longer term.
- Fourth quarter 2015 common share repurchases totaled $16 million or 770,000 shares.
- $135 million remains available under the current share repurchase program.
- Over the past three years, more than 57% of free cash flow has been returned to shareholders through share repurchases.
- Capex totaled $5 million in the fourth quarter and $38 million for the full year.
First Quarter 2016 Outlook
- Revenue between $565-$590 million.
- Diluted earnings per share between $0.29-$0.33 (excluding restructuring charges and integration costs).
About Benchmark Electronics, Inc.
Benchmark provides integrated manufacturing, design and engineering services to original equipment manufacturers of industrial equipment (including equipment for the aerospace and defense industries), telecommunication equipment, computers and related products for business enterprises, medical devices, and test and instrumentation products. Benchmark's global operations include facilities in seven countries, and its common shares trade on the New York Stock Exchange under the symbol BHE.