Good day, and welcome to the Benchmark Electronics Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lisa Weeks, Vice President of Strategy and Investor Relations. Please go ahead.

Thank you, operator, and thanks, everyone, for joining us today for Benchmark's fourth quarter and full year 2018 earnings call. With me this afternoon, I have Paul Tufano, CEO and President; and Roop Lakkaraju, CFO. Paul will provide introductory comments, and Roop will provide the detailed review of our fourth quarter and full year 2018 results. We will conclude our call with a Q&A session. After the market closed today, we issued an earnings release, highlighting our financial performance for the fourth quarter and full year. We have 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 advice 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. I will now turn the call over to our CEO, Paul Tufano.

Thank you, Lisa, and thank you for joining our call. If you turn to Slide 5, we capped 2018 with strong results in the fourth quarter. Revenue and non-GAAP EPS were both above our guidance. Revenue in Q4 was $657 million and for the full year was approximately $2.6 billion, which reflects 5% year-over-year revenue growth. This was driven primarily by strength in A&D, Telco and Medical. Non-GAAP operating margins improved 30 basis points to 3.2% quarter-over-quarter. This is despite continued softening in our Test and Instrumentation sector, which was down 25% year-over-year. Our EPS on a non-GAAP basis was $0.41, above our guidance. Our cash conversion cycle days were 62 days and for the full year at 68 days, this was at the low end of our target range of 73 to 68 days. Cash from operations was approximately $94 million in the quarter and $7 million for the full year, which is above our expected $30 million to $50 million range that we outlined earlier in 2018. We have continued aggressively buyback our shares. For 2018, we have repurchased $212 million of our stock and reduced our outstanding share count by 17%. We continue to prudently repurchase shares and through yesterday, we repurchased $17 million of additional shares. If you turn to Slide 6, we continue to make excellent progress on bookings, which as you all know are critical to revenue growth. This quarter we posted solid bookings of $198 million and $721 million for the full year, which is up 23% year-over-year. If we reflect back to this time period in the fourth quarter of 2016 bookings were up 55%. We had our strongest number of wins in our medical sector with 34% of total bookings. Seven new customers, five linked to design services. With projects ranging…

Thank you, Paul and good afternoon, everyone. Before I discuss the recap of our fourth quarter, on behalf of the entire management team and company, we want to thank Paul for his efforts over the last few years. I've had the opportunity to work with Paul at several companies. If there's one word, I'd use to describe Paul is passionate. Paul is passionate about our people, our customers, our investors, technology and the success of Benchmark. Through his tireless efforts, Paul has strengthen the foundations of Benchmark and he leaves the company well positioned to grow and deliver value. So with that Paul, I'll just say thank you. We appreciate all that you've done. With that I'll turn to Slide 14, for a discussion of our fourth quarter 2018 financial summary. Revenues of $657 million exceeded the high end of our guidance of $610 million to $650 million, but it was down 1% year-over-year. The decline from prior year was due to the continued semi-cap market softness offset by increases in telecommunications and A&D. Our GAAP EPS for the quarter was $0.64, our GAAP results also included $3.5 million of restructuring on other costs due in part to the execution of sight restructuring actions announced on the Q3 2018 earnings call. $14.5 million of non-recurring tax benefits primarily related to the finalization of the tax accounting for the 2017 Tax Cuts and Jobs Act and foreign tax credits generated from our 2018 cash repatriation. Our non-GAAP operating margin was 3.2%, a 30 basis point quarter-over-quarter improvement. Non-GAAP EPS of $0.41 exceeded the high end of our guidance of $0.32 to $0.40. For the quarter, our ROIC was 9.2%, down 60 basis points sequentially on 110 basis points year-over-year. Please turn to Slide 15 for our revenue by market sector for…

[Operator Instructions]. Our first question today will come from Mitch Steves of RBC Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my question. I kind of want to first touch on the end market on the testing and instrumentation side. Are you guys seeing any sort of bottoming in semi-cap equipment? Because I know that’s a pretty lowered segment for you guys there. Or do you guys expect that to kind of hit a run rate of $70 million going forward?

Yes, Mitch. This is Roop. I’ll start out. We’re expecting to see, as we said, a 10% overall decline year-over-year and we expect that to – demand to increase as we go through 2019 with really a second half 2019 kind of accelerated growth.

Got it. And then secondly, on the high-end computer segment for the customer that you guys are moving on from. So how do we think about the profitability from an operating margin standpoint versus gross margin standpoint, Because I understand that the mix of the business was in that gross margins up, but is that – so that will flow through the op margin? Or should we just assume that the operating margins will be similar?

Yes. There is an effect on operating margins. So maybe the way I’d ask you to think about it is if you take the range of $280 million to $320 million, that is very low single digit type gross margin overall. And so when you do the math, you’re looking at operating profit dollars of somewhere around $3 million to maybe $6 million or so. And so you can see that effect. Overall, from an operating margin perspective, it’s depending upon exactly where that revenue stream is, maybe 10 basis points or 30 basis points increase in overall op margin.

Got it. Just to be clear here, so 80 to 90 basis point improvement in gross margin but only 10 to 20 on op margin?

10 to 30 basis point in op margin improvement, and that’s just the math of how it flows through.

Understood. Thank you very much.

Thanks, Mitch.

[Operator Instructions] Our next question will come from Anja Soderstrom of Sidoti & Company. Please go ahead.

Hi Lisa and Paul, thank you for taking my question. I had a question with this SG&A for the fourth quarter. It was a little bit lower than expected and the lower end of the guidance range going forward. I just wondered what sort of impact of that and how to think about that going forward.

Hi, this is Roop. So good to have you and thanks for the question. So, in terms of the fourth quarter SG&A, obviously, we have been focused on being prudent with our overall cost management structure and we have put in place action to normalize that SG&A that came in around at $34 million As we look towards 2019, as Paul pointed out in his comments, we expect it to be in that $34 million to $36 million. There are some investments we still expect to make as we continue moving forward but we'll be within that range.

Thank you. And then I also just had a question about the semi-cap turnaround in the second half. Are you still seeing the same things that you have been talking about before in terms of that turnaround? Or have you gotten any more color you can share with us on that?

I mean, we're lucky to have a diversified roster of customers in semi-cap, and each one is a slightly different story and set of considerations. With that said, what we would kind of aggregate in a composite would say we expect – still expect that second half recovery as we see it now and based on our discussions with those customers.

Okay. Thank you so much for taking my questions.

Thank you.

[Operator Instructions] Showing no further questions, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Roop Lakkaraju for any closing remarks.

Thank you, operator. Thank you for – everyone, for joining our call today. We'll be available after the call to answer any further questions, and we look forward to speaking with you all in 90 days. Have a good rest of your day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.