Good day ladies and gentlemen, and welcome to the Benchmark Electronics Fourth Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to introduce your host for today's conference, Ms. Lisa Weeks, Vice President of Strategy and Investor Relations. Please go ahead ma’am.

Thank you operator and thanks everyone for joining us today for Benchmark’s fourth quarter 2016 earnings call. With me this afternoon, I have Paul Tufano, CEO and President; and Don Adam, CFO. Paul will provide introductory comments and Don will provide a detailed review of our 2016 fourth quarter financial results and 2017 first quarter outlook. We will conclude our call today with a Q&A session. Before the market opened today, we issued an earnings release highlighting our financial performance for the fourth quarter and we prepared a presentation that we will reference on this call. The press release and presentation are available online under the Investor Relations section of our website at www.bench.com. This call is being webcast live and a replay will be available online following the call. Please take a moment to review the forward-looking statements advised on Slide 2 in the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today’s remarks that are not statements of historical fact are forward-looking statements, which involve risks and uncertainties described in our press releases and SEC filings. Actual results may differ materially from these statements and Benchmark undertakes no obligation to update any forward-looking statements. The Company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release, as well as in the Appendix of the presentation. With that I will now turn the call over to our CEO, Paul Tufano.

Thank you Lisa and good afternoon everyone and thank you for joining us for the earnings call today. I'm pleased with the company’s performance. As I stated in our last earnings call, we have credibility mostly earned and it is a function of delivering on our commitments. And I’m pleased that we did that this quarter meeting or exceeded our guidance across the board. Revenue was $608 million this quarter, at the high end of the guidance. Earnings per share was $0.45 which is $0.02 better than the guidance. Our gross margins were 9.5%, a 30 basis point improvement quarter over quarter and at historical high. [indiscernible] most happy about is that we beat our cash conversion cycle day target of 75 days, we achieved 74 days in the quarter, which is a 20 day improvement over the same period in the fourth quarter of ‘15. And as a result of that we generated operating cash flow for the full-year of $272 million. I would [indiscernible] if I didn't think the many Benchmark employees whose hard work allowed this to happen and I want to celebrate their achievement. You can now turn to Page 5. As it relates to bookings, as you all know bookings are fundamental to revenue growth. And for the past two years, we had been flat lined at about $125 million of new bookings every quarter. Clearly this was not acceptable but it is a key focus area for the company, so we are driving to $150 million of bookings by the second half of 2017. However, well our 2016 bookings were not at a level we would like them to be. The mix was appropriate. As you can see from the chart, we had 68% of our total bookings for 2016 in higher value markets…

Thank you, Paul and good afternoon, everyone. I want to start on slide 14. Revenues of 608 million were at the top end of our guidance and up 6% quarter over quarter and down 3% from the last quarter based on significantly lower computing revenue. Our fourth quarter GAAP operating margin improved sequentially by 50 basis points to 4.8% on higher revenues. Our non-GAAP EPS of $0.45 exceeded our guidance of $0.39 to $0.43 through the better absorption during the quarter and a slightly lower tax rate. Our GAAP EPS for the quarter was $0.37. Our GAAP results reflect 2.7 million or restructuring and other costs. For the quarter, our ROIC was 8.4%, which is below our 12% long-term target and driven by the reduction in absolute profit and lower year-over-year revenues as well as an increase in the invested capital from 924 million to 986 million. If you turn to slide 15, we’ll look at our quarterly results by market sector. Industrial revenues for the fourth quarter were in line with expectations and grew 6% quarter over quarter and modestly 3% year over year. Medical revenues for the fourth quarter were forecasted at 90 million, but were lower than expected primarily due to some regulatory delays. Test and instrumentation revenues were flat in Q3, but grew 26% year over year from share gains in our semicap customers where demand is strong. In summary, higher value markets represented 63% of our fourth quarter revenues. Overall, the higher value sectors grew 3% sequentially and 4% year over year, which is well below our overall 10% target. As we turn to our traditional markets, computing continues to be challenged by the maturity of our product portfolio. In Q4, telco revenues were up 2% year over year and 8% sequentially from the strength…

[Operator Instructions] Our first question is from the line of Steven Fox of Cross Research. Your line is open.

Thanks. Just a couple of questions for me to start off. I guess first off, you did mention how the gross margins have improved. I was curious if you could break that down for ‘16, how much was related to acquisitions or some internal improvements. And then going forward, sort of a similar question when you target gross margins improving by another 60 to 80 basis points, is that all predicated on volume or mix or do you see some operational improvement in the assets that you can also run through the gross margin? Then I had a couple of quick follow ups? Thanks.

So if you look at the gross margin expansion, I think that it will come from two different flavors. Obviously, operational execution improvements will be a driver. The second driver will be, as we get more revenue and more load in our plants, we get better absorption and those are the two things that we’ll focus on.

And then in terms of looking back on the year, how much was due to some of those things versus just the acquisition that you did?

I think the acquisitions helped in terms of the mix because it had a higher margin profile. But I think it really is that shift of 8 [ph] percentage point to higher value segment that drove the majority of it.

Okay. And then just going forward in terms of looking at the improvement in orders that you're targeting by the second half and then longer term, is there anything - any color you can add in terms of where maybe the target markets are, what you think you can correct immediately in order to maybe accelerate some order wins and what might be some longer term solutions that you can put in place, in other words how you plan on controlling your own destiny around those? Thanks.

Okay. So first of all, the target markets are pretty simple, they’re the higher value segments. So be it A&D, industrial, and medical, and those are the key ones. And obviously, we're not going to forego compute or telco, but we’ll look at, what I’ll call is next generation. So with telco, I am a big fan of next generation telco. Telco for 4G and 5G. So the key is, we have realigned our go to market organization in to a market segment organization. We have market segment leaders with each of those specific markets. We’re now staffing those market segment organizations. And so they know how the task. I said the task is they're currently now formulating it in a lot more granularity that will drive more funnel. Who are their target accounts? Why those market accounts? How are they going to attack those target accounts and how they leverage off our current book of business in terms of capability? Now, it takes a while to build a funnel. And you can’t get orders once you have an appropriate funnel. So we're now in the process of funnel development. I would hope that as we move into the second quarter of this year and to early third quarter, that funnel development allows us to generate that 25 million more of additional bookings per quarter. And so as we work on better qualified funnel, target account attack plans that are linked to this segment strategies, that’s how we’ll go do this. Now, the easy thing to do is to buy revenue by just lowering the price. We will not do that as we draw this order book.

Okay. That's really helpful. And then just one clarification, all of that Paul is the, when you talk about staffing sort of the segmented organizations, is that mainly internal or does that reference when you mention that SG&A may have to creep up a little bit in the first half that you’re going to do some external hires?

Well, there will be external hires in there as well. I think the predominant of our additions will be external hires.

[Operator Instructions] Our next question is from the line of Jim Suva. Your line is open.

Thank you very much. Paul, you mentioned about a desire to have higher profitability. Yet, we look at actually the company is among the higher operating profit margins in its peer group. So can you help us understand about watching vision is higher or look at the pipeline you saw going forward and they have faced some headwinds, so that you can help understand about what you kind of mean by higher and that you when you are already kind of outperforming peers from a profitability standpoint?

Okay. Jim, that’s a good question. And I’ll be happy to answer that. So clearly, we did 9.2 points of gross margin for the full year. And we were at 9.8 at the fourth quarter. So I think that is pretty good shooting for this industry, but we have one that’s entire. And so, our goal is 9.8 to 10 which puts us on top of that peer. I think when you look at the type of businesses we do, the type of work we do, that the ability to get there is not unreasonable because we’re really doing highly complex product sets that have a lot of engineering. And so our target model range of 9.8 to 10 I think is realistic. Now, I talk about optimizing that. Over the course of the last several months, we have bisected the company. We have cut every account by every site, looked at what its gross margin and OI enrollment is and when you do that, you always find opportunity. So we found opportunity, we’re going to go process it.

Great. That makes a lot of sense. And for your SG&A, am I correct you said higher in the first half and then level off for the second half or kind of go back down or stable at those levels or even higher in the second half, I’m trying to think about the linearity of your SG&A, I think you mentioned the word double down or double up or really focus more -

So clearly I was talking about [indiscernible]. I think as we staff our engineering organization, but as we bring on more market resources, you will see that perhaps higher in the first half than it will be in the second half. That’s what I’m referring to.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a great day.