Benchmark Electronics’ Earnings Call: Mixed Signals Amid Growth

Benchmark Electronics ((BHE)) has held its Q1 earnings call. Read on for the main highlights of the call.

Benchmark Electronics’ recent earnings call painted a mixed picture, reflecting both strong sector performances and notable challenges. The company reported robust growth in the semi-cap and A&D sectors, alongside consistent free cash flow and strategic investments. However, these positives were tempered by declines in overall revenue and operating margins, as well as sector-specific weaknesses in medical and AC&C due to market uncertainties, including global tariff issues.

Strong Performance in Semi-Cap and A&D Sectors

The earnings call highlighted impressive growth in the semi-cap and A&D sectors, with revenues increasing by 18% and 15% year-over-year, respectively. This growth was fueled by defense programs and the strength of traditional products, underscoring Benchmark’s resilience in these areas.

Consistent Free Cash Flow Generation

Benchmark Electronics demonstrated its financial stability by generating $27 million in free cash flow during the first quarter, contributing to a total of over $140 million on a trailing 12-month basis. This marks the eighth consecutive quarter of positive free cash flow, showcasing the company’s ability to maintain liquidity and fund strategic initiatives.

North American Manufacturing Footprint

The company’s North American manufacturing footprint now represents over 55% of its total global capacity. This strategic positioning is particularly advantageous amid global tariff uncertainties, allowing Benchmark to better navigate potential disruptions and maintain competitive advantage.

New Facility in Penang, Malaysia

Benchmark has initiated the development of a new facility in Penang, Malaysia, aimed at supporting future growth plans in the semi-cap sector. This expansion reflects the company’s commitment to enhancing its global manufacturing capabilities and meeting increasing demand.

Decline in Revenue and Operating Margin

Despite sector-specific successes, Benchmark reported a decline in overall revenue, with Q1 2025 figures at $632 million, down 4% sequentially and 6% year-over-year. The non-GAAP operating margin also fell to 4.6%, highlighting challenges in maintaining profitability amid fluctuating market conditions.

Medical and AC&C Revenue Decline

The medical and AC&C sectors faced significant challenges, with revenues decreasing by 12% quarter-over-quarter. This decline was attributed to demand softness and timing-related weaknesses, reflecting broader market uncertainties impacting these sectors.

Tariff-Related Market Uncertainty

Global tariff uncertainties and executive orders have introduced a level of unpredictability, causing some customers to pause shipments and elongating the decision cycle for new bookings. This has added a layer of complexity to Benchmark’s operational landscape, requiring strategic navigation.

Forward-Looking Guidance

Looking ahead, Benchmark Electronics anticipates revenue between $615 million and $665 million for the second quarter, with a non-GAAP gross margin expected between 10.2% and 10.4%. The company projects a non-GAAP operating margin between 4.8% and 4.9%, with non-GAAP diluted earnings per share ranging from $0.52 to $0.58. These forecasts indicate a cautious optimism as the company navigates ongoing market challenges.

In summary, Benchmark Electronics’ earnings call reflected a balance of strong sector performances and notable challenges. While the semi-cap and A&D sectors showed robust growth, overall revenue and operating margins faced declines. Strategic investments and a strong North American manufacturing presence position the company well for future growth, despite market uncertainties. Investors will be keenly watching how Benchmark navigates these dynamics in the coming quarters.