What Benchmark Electronics (BHE) Said on Its Q3 Earnings Call

Key Points

• Record Q3 performance: Benchmark Electronics reported revenue of $811 million, up 19% year over year, while non-GAAP EPS increased 35% to $0.84. Operating margin improved to 5.5% as favorable mix, higher sales and cost efficiencies boosted profitability.
• Broad-based growth: Four of five end markets grew, led by Advanced Computing and Communications, which rose 50%, and Semiconductor Capital Equipment, which increased 30%. Benchmark is expanding capacity in Malaysia and Thailand to support AI infrastructure, semiconductor and other program ramps.
• Outlook raised: The company expects fourth-quarter revenue of $815 million to $855 million and now projects 16% full-year revenue growth, exceeding $3 billion. Management cited stronger demand visibility entering 2027, while warning that memory and ASIC supply constraints remain.

Benchmark Electronics NYSE: BHE reported record third-quarter revenue and raised its outlook for the fourth quarter and full year, citing improving demand across much of its portfolio, new program ramps and operating leverage.

Revenue for the third quarter of 2026 reached $811 million, up 19% from a year earlier and above the high end of the company’s prior guidance. Non-GAAP diluted earnings per share rose 35% year over year to $0.84, also exceeding guidance. President and CEO David Moezidis said earnings growth outpaced sales growth by nearly two times, while operating margin improved by 70 basis points from the prior-year quarter.

“Demand continued to improve across much of our portfolio, our teams executed well, and we delivered record revenue alongside earnings growth that significantly outpaced sales,” Moezidis said.

Margins, Cash Flow and Balance Sheet

Non-GAAP gross margin was 10.5%, up 40 basis points year over year and unchanged from the prior quarter. Non-GAAP operating margin was 5.5%, improving 70 basis points year over year and 30 basis points sequentially. CFO Bryan Schumaker attributed the improvement to favorable sales mix, higher revenue and expense efficiencies, partly offset by higher variable compensation.

The company generated $30 million in operating cash flow and $14 million in free cash flow during the quarter. Benchmark ended the quarter with $291 million in cash and $133 million net of debt. It also added a $45 million revolver in Malaysia as part of a global cash-management initiative, bringing total available borrowing capacity to $576 million.

Benchmark returned $14 million to investors through dividends and share repurchases during the quarter. Capital expenditures totaled about $15 million, largely supporting growth initiatives. The company continues to expect full-year capital spending of 2% to 2.5% of revenue.

Working-capital performance improved, with the cash conversion cycle declining to 54 days, or 23 days better than the prior-year quarter and five days better sequentially. Moezidis said the company maintained discipline while supporting growth and program ramps, while Schumaker said inventory increased in connection with those ramps and bookings activity.

Growth Across Business Sectors

Benchmark reported growth in four of its five reported end markets. Semiconductor capital equipment, or Semi-Cap, revenue rose 30% year over year and 8% sequentially, supported by in-market demand and new program wins. Industrial revenue increased 13% from a year earlier and 7% from the second quarter, primarily reflecting new program awards from existing customers.

Medical revenue grew 9% year over year and 3% sequentially due to program ramps. The Advanced Computing and Communications, or AC&C, segment posted 50% year-over-year growth and 4% sequential growth, driven by a major ramp that began earlier in the year. Aerospace and defense revenue declined 1% year over year, though it increased 15% sequentially.

• Semi-Cap: Benchmark expects year-over-year growth to accelerate further in the fourth quarter and continue into 2027.
• Industrial: The company expects its current growth pace to continue in the fourth quarter, positioning the sector for mid- to high-single-digit growth for the full year.
• Medical: Benchmark said it remains on pace for double-digit annual growth and cited a significant new medical-device customer program awarded during the third quarter.
• Aerospace and defense: Management expects the sector to return to growth in 2027 as recently awarded programs begin ramping.
• AC&C: The company expanded manufacturing capacity to support an AI infrastructure customer’s on-premises product ramp and expects a material sequential increase in fourth-quarter revenue.

Moezidis said the company’s latest outlook for AC&C does not include contributions from next-generation high-performance computing opportunities, which management now expects are more likely to begin contributing in the middle to latter part of 2027.

Capacity Investments and Supply Chain

Benchmark said it is investing in capacity and capabilities to support expected demand. Its PT4 facility in Penang, Malaysia, began operating in July and is ramping, particularly in support of semiconductor-related growth. The company also has a planned Thailand facility expected to be completed in late 2027.

During the question-and-answer session, Moezidis said the company believes its current global footprint provides sufficient capacity through 2027. He said Benchmark is continually reviewing capacity requirements across its network, beyond the Penang and Thailand investments.

Management also acknowledged continuing supply-chain constraints. Moezidis said shortages initially centered on memory products and have expanded into other categories, particularly application-specific integrated circuits, or ASICs. Benchmark is working with suppliers and customers and is making selective, jointly agreed inventory investments to position materials for customer requirements and program ramps.

Raised Fourth-Quarter and Full-Year Outlook

For the fourth quarter, Benchmark forecast revenue of $815 million to $855 million, representing 19% year-over-year growth at the midpoint. The company expects non-GAAP diluted EPS of $0.85 to $0.91, non-GAAP gross margin of 10.5% to 10.7%, and non-GAAP operating margin of 5.5% to 5.7%.

For the full year, Benchmark now expects revenue growth of 16%, with annual revenue exceeding $3 billion. The company said it remains positioned to meet its objective of growing earnings at roughly 1.5 to two times the rate of revenue growth in 2026.

Schumaker said the company expects continued gross-margin efficiency as major programs ramp and capacity utilization improves, though portfolio mix could affect results. Management said it would provide additional 2027 guidance on its next fourth-quarter earnings call.

Moezidis said customer forecasts, active program ramps and ongoing customer discussions have strengthened management’s confidence entering 2027. He added that Semi-Cap customers are providing longer-term order visibility than in the past, helping Benchmark plan capacity and supply-chain support.

About Benchmark Electronics (NYSE:BHE)

Benchmark Electronics, Inc is a provider of integrated electronics manufacturing and engineering services. The company helps original equipment manufacturers design, develop, test, manufacture and support complex electronic products and systems.

Its services include product design and engineering, prototyping, printed circuit board assembly, systems integration, precision machining, testing, supply chain management, and aftermarket support. Benchmark serves customers in industries such as aerospace and defense, medical technology, industrial equipment, semiconductor capital equipment, and advanced computing.

Headquartered in Tempe, Arizona, Benchmark operates manufacturing and engineering facilities across North America, Europe and Asia.

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