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Benchmark Electronics, Inc. today announced financial results for the first quarter ended March 31, 2016.
"This quarter highlighted the strategic importance and merits of our shift to higher-value sectors, as both computing and telecommunications end markets slowed markedly from last year," said Gayla Delly, Benchmark's President and Chief Executive Officer. "Our first quarter results were impacted by late-quarter demand reductions in certain end markets, including orders from our largest computing customer. While we are disappointed with the top line revenue and the resulting impact on operating margin this quarter, increasing our share of higher-value end markets to 64% positions us well to deliver future growth and margin enhancement."
"Importantly, 75% of our first quarter new program bookings were from our targeted higher-value markets, which are characterized by higher margins, longer lifecycle products and customers requiring higher value-added and engineered solutions. These bookings are expected to result in annualized revenue of $110 - $140 million when fully ramped in the next 18-24 months."
"While our strategic trajectory remains on track with an improving portfolio mix, near-term market challenges in the traditional sectors are reflected in our outlook for the second quarter. In light of these challenges, we have intensified our efforts to optimize our global cost structure, including an evaluation of our global manufacturing footprint, which should allow us to continue improving margins in an uncertain market."
Ms. Delly concluded, "Benchmark remains committed to creating shareholder value and will continue to allocate capital towards areas that will drive the greatest returns. We will continue our ongoing share repurchase program, while investing in the innovation and engineering skills necessary to support our customers and our future portfolio. We returned $14 million to shareholders through share repurchases in the first quarter, and $67 million over the last 12 months. This extends our track record of consistently returning a significant amount of free cash flow to shareholders through share repurchases to 35 consecutive quarters. We will continue to invest prudently in organic programs, acquisitions and share repurchases as we execute our strategy to drive increasing value for our shareholders and enhanced service for our customers."
First Quarter 2016 Financial Highlights
- Operating margin (non-GAAP) was 3.5%. The GAAP margin was 3.0%.
- Cash flows from operating activities were $77 million.
- Accounts receivable were $414 million at March 31, 2016, and calculated days sales outstanding were 68 days compared to 69 days at December 31, 2015.
- Inventories were $390 million at March 31, 2016; inventory turns were 5.1 times compared to 5.6 times at December 31, 2015.
- Cash was $519 million at March 31, of which $477 million was held outside the U.S.
The cash conversion cycle increased by 6 days from the previous quarter primarily due to higher levels of inventory resulting from lower than expected revenues during the quarter. Benchmark continues to execute initiatives to drive working capital improvements, and the Company continues to target a 15-20% reduction in cash cycle days exiting 2016.
First quarter revenue from Benchmark's higher-value markets was impacted by late-quarter softening in Industrials demand and program qualification delays in Medical. In traditional markets, demand was slightly better than expected in Telecommunications, but did not fully offset greater than anticipated declines from the Company's largest computing customer.