Benchmark Electronics Q2 Earnings Call Highlights

Key Points

• Benchmark Electronics exceeded second-quarter guidance: Revenue rose 18% year over year to $756 million, while non-GAAP EPS increased 36% to $0.75. Broad-based growth and higher volumes lifted non-GAAP operating margin to 5.2%.
• The company raised its full-year outlook: Benchmark now expects 2026 revenue of approximately $3 billion, or about 13% growth and a record high. Advanced Computing & Communications revenue surged 71% year over year on AI-related production ramps, while Aerospace & Defense declined 12% amid program transitions.
• Management remains optimistic but flagged supply-chain risks: Third-quarter revenue is projected at $755 million to $795 million with non-GAAP EPS of $0.76 to $0.82. Component and memory lead times have extended to as much as seven to 12 months, although the company said it has continued meeting customer orders.

Benchmark Electronics NYSE: BHE reported second-quarter 2026 results above its prior guidance, supported by double-digit revenue growth in four of its five operating sectors and expanding profitability. The company also raised its full-year revenue outlook to $3 billion, which would represent approximately 13% growth and a historical revenue high, according to President and Chief Executive Officer David Moezidis.

Second-quarter revenue rose 18% year over year to $756 million, while non-GAAP diluted earnings per share increased 36% to $0.75. Both measures exceeded the high end of the company’s previous guidance range. Moezidis said operating income and earnings per share grew 30% and 36%, respectively, as the company pursued its goal of growing profits at 1.5 to two times the pace of revenue growth.

Margins Improve Alongside Revenue Growth

Chief Financial Officer Bryan Schumaker said non-GAAP gross margin was 10.5%, up 30 basis points from a year earlier and 20 basis points sequentially, primarily due to higher volume. Non-GAAP operating margin rose 50 basis points year over year and 40 basis points from the first quarter to 5.2%.

Higher revenue drove the operating-margin improvement, though it was partly offset by increased variable compensation expense, Schumaker said. The company’s non-GAAP effective tax rate for the quarter was 26.6%.

Revenue growth was broad-based across Benchmark’s markets:

• Semi-Cap: Revenue increased 17% both year over year and sequentially as momentum strengthened through the quarter.
• Industrial: Revenue grew 13% year over year and 20% sequentially, aided in part by revenue acceleration tied to the planned wind-down of Benchmark’s Phoenix facility.
• Medical: Revenue rose 22% year over year and 4% sequentially.
• Advanced Computing & Communications: Revenue surged 71% year over year and 21% sequentially, driven by AI-related program wins entering production.
• Aerospace & Defense: Revenue declined 12% year over year and 7% sequentially amid previously discussed program transitions.

Despite the Aerospace & Defense revenue decline, Moezidis said the sector was the largest contributor to total bookings during the second quarter. He said Benchmark continues to win business in defense and space markets and expects 2026 Aerospace & Defense revenue to be roughly consistent with the prior year before returning to growth in 2027 as new programs ramp.

Cash Flow, Capacity Investments and Working Capital

Benchmark ended the quarter with $315 million in cash and $134 million in cash net of debt, as well as more than $500 million of available borrowing capacity. The company generated $35 million in operating cash flow and $22 million in free cash flow during the quarter while investing in inventory, capacity and capabilities, Schumaker said.

The company returned $6 million to shareholders through dividends during the quarter. It did not repurchase shares in the period, although Schumaker said Benchmark remains focused on repurchases to offset dilution and may resume them during the full year.

Capital expenditures totaled approximately $13 million in the second quarter, primarily for growth initiatives. Benchmark continues to expect full-year capital spending of 2% to 2.5% of revenue, and Schumaker said that range could continue into 2027 as the company expands its footprint.

Its fourth precision technologies facility in Penang, Malaysia, began ramping operations early in the third quarter. Benchmark also expects to break ground during the third quarter on a third building at its Ayutthaya, Thailand campus. Construction is expected to be completed in the fourth quarter of 2027.

The cash conversion cycle improved to 59 days, down 26 days from the year-ago period and eight days sequentially. Inventory turns were within the company’s target range of five, while the relationship between payables and receivables improved by three days sequentially and 16 days year over year.

Third-Quarter Guidance and Market Outlook

For the third quarter, Benchmark forecast revenue of $755 million to $795 million, representing 14% year-over-year growth at the midpoint. It projected non-GAAP diluted earnings per share of $0.76 to $0.82, non-GAAP gross margin of 10.5% to 10.7%, and non-GAAP operating margin of 5.3% to 5.5%.

The company expects a third-quarter effective tax rate of 26% to 27%, interest and other expenses of about $3 million, and approximately 36.4 million weighted-average diluted shares outstanding. It also projected GAAP expenses to include about $8.4 million of stock-based compensation and $3.5 million to $4 million of non-operating expenses, including amortization, restructuring and other charges.

Moezidis said Semi-Cap demand improved throughout the second quarter and has continued into the third quarter, reflecting stronger end-market conditions and the benefits of programs won during the prior downturn. Benchmark expects second-half Semi-Cap revenue growth to accelerate compared with both the first half and the prior-year period.

In Industrial, excluding the Phoenix-related one-time effect, revenue was slightly ahead of expectations and posted modest year-over-year growth. Moezidis said bookings were strong and included a competitive business win, which he attributed to the company’s operational execution and customer collaboration.

Medical-market growth has been supported by improving demand, ongoing bookings activity and a meaningful competitive “lift-and-shift” program win that reached revenue more quickly, Moezidis said. The second quarter also included engineering wins across multiple medical customers.

For Advanced Computing & Communications, Benchmark said production ramp-up of an AI-related program drove the quarter’s results. Moezidis said the company expects high-performance computing activity to begin increasing late in the fourth quarter and into 2027, complementing its existing clustered AI and on-premise cloud programs.

Management also noted tightening conditions in portions of the supply chain, particularly for complex components and memory. Moezidis said lead times for some components have extended from roughly three to five months to seven to 12 months, though he said the company’s supply-chain team has so far been able to meet customer orders.

About Benchmark Electronics (NYSE:BHE)

Benchmark Electronics, Inc is a global provider of comprehensive electronics manufacturing services (EMS) and integrated engineering solutions. The company offers a full suite of services that span the entire product lifecycle, from early‐stage design and prototyping to high‐volume production and aftermarket support. Benchmark serves diverse end markets, including industrial automation, medical devices, communications, aerospace and defense, and semiconductor equipment.

At the core of Benchmark's offering are printed circuit board assemblies (PCBA), system integration, box build assemblies and turnkey manufacturing.

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