Good day, and welcome to the Benchmark Electronics Incorporated First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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 to everyone for joining us today for Benchmark’s first quarter 2019 earnings call. With me this afternoon, I have Jeff Benck, CEO and President; and Roop Lakkaraju, CFO. Jeff will provide an overview of our first quarter results and introductory comments, and Roop will provide a detailed review of our first quarter results and second quarter outlook. We will conclude our call today with a Q&A session. After the market closed, we issued an earnings release, highlighting our financial performance for the first quarter 2019, and 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. If you will please turn to Slide 4 in the presentation, I will now turn the call over to our CEO, Jeff Benck.

Thanks, Lisa, and welcome to everyone joining us for this afternoon’s call. I’m excited to be here and it’s been a great first month working with the extended Benchmark team. I’ve had the privilege of leading a number of great technology companies before joining Benchmark. And with my product and engineering background, I bring a set of experiences that can help the company navigate through the business transformation underway, as we deliver richer offerings to increase the value that we provide to our customers. Before I share my initial observations and areas of focus, I will provide a brief overview of our first quarter 2019 results. Please turn to Slide 5. In the quarter ending March 31, 2019, we delivered revenue of $603 million and non-GAAP EPS of $0.33, both at or above the midpoint of our guidance range. Revenue is driven by year-over-year increases in the higher-value A&D and Medical markets, assisted by increased traditional demand in Telco and legacy computing. Even with semi-cap headwinds, revenue is comparable to the first quarter of 2018. Our non-GAAP gross margins improved 40 basis points sequentially to 8.8% on bigger contribution from the higher-value markets, despite continued softening in semi-cap, which is part of our Test & Instrumentation market sector and was down 36% from the first quarter of 2018. The cash conversion cycle was 72 days in the first quarter, which was within the target range of 73 to 68 days. Cash from operations was approximately $16 million in the quarter, and we continue to expect full-year operating cash flow in the range of $40 million to $50 million. We continue to execute on our capital allocation strategy, which Roop will cover in more detail. Now, let me share some initial observations about the company. Please turn to Slide 6. Since…

Thank you, Jeff, and good afternoon, everyone. Before I discuss the recap of our first quarter, on behalf of the entire management team and company who want to welcome Jeff to the Benchmark family. Please turn the Slide 9. Bookings for the quarter were $161 million. We believe that the bookings were solid considering that award decisions for two new programs were delayed into Q2 2019. The booking target for the full-year of 2019 is in the range of $800 million to $900 million. Industrials were 17% of bookings with new wins for sensor modules for autonomous vehicles and electronics for vibration control systems. Q1 wins were strong again in medical with 35% of total bookings. We were awarded a program from a new customer for advanced diagnostic systems for infectious diseases, where we will provide both design and engineering services. Another notable medical win is a new drug delivery system for an existing customer. We – T&I, we continue to win new programs in the semi-cap space for new designs related to the advanced technologies. We continue to expand A&D wins with new programs with existing customers. Wins for Q1 include aircraft display, electronics and ground vehicle modules. Computing and telco were up combined 26% for the quarter. We were awarded a program with a new customer for next-generation telco devices and a new program with an existing customer for high-end security computing. We had 54 total wins for the quarter, 34 manufacturing and 20 engineering. Moving to Slide 10 for a discussion of our first quarter 2019 financial summary. Revenues of $603 million were above the midpoint of our guidance of $570 million to $610 million. Our GAAP EPS for the quarter was $0.34. Our GAAP results also included $1.6 million of restructuring and other costs due in…

Thanks, Roop. I’d first like to take a moment to acknowledge and thank Paul Tufano for his contributions to our strategic framework. We will hone our vision, tune the strategy and focus our efforts going forward to build an even stronger Benchmark. After my first month here, I’m even more excited about the potential for this company. Our next stage of growth will be driven by integration of the company’s engineering, technology and manufacturing platforms. We have great people, amazing capabilities and increasing opportunities in front of us and our job now is to execute. We are focusing on increasing margins and earnings even with the near-term headwinds from semi-cap. Growth in higher-margin medical and A&D sectors, coupled with our immediate cost actions on spending, will enable us to make progress on this objective. Together with the team, I’m confident that we can continue to set the standards for excellence and drive innovation in the industry for our customers, partners, employees and to the benefit of our shareholders. We look forward to updating you on progress in the coming months. With that, I will turn the call back over to the operator to conduct a Q&A session.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Anja Soderstrom with Sidoti. Please go ahead.

Yes. Hi, can you hear me?

Hi, Anja, good afternoon.

Hi, good afternoon. Hi, Jeff, and welcome to the Benchmark family. I’m looking forward to talking with you.

Yes, me too.

First, I just wanted to get some more context to the semi-cap you pushed it back by half a year. What are you seeing that’s – that you didn’t see before, since you thought it was going to sort of turnaround mid-year?

Anja, this is Roop. Maybe I’ll start with that. Honestly, we obviously expected it to start recovering in the second quarter and then ramping previously throughout the second-half. I think at this time and obviously with our guidance that we provided for the second quarter, we continue to see some further softening on a sequential basis. And as such, I think, it’s why we are seeking greater visibility from our customers. And with that, we’ve got a series of meetings set up to better understand from our customers what that longer-term visibility is throughout 2019. With all that said, two additional aspects. One, we are winning additional awards from those customers for those advanced technology areas. The other part is because of the further softening or decline on a sequential basis, we’ve taken some actions and are taking action to ensure that our capacity is right-sized to the near-term demand we have.

Maybe I’ll just add to that.

Okay. Sure.

I’ve had a chance to engage with our team in this space. And I’m super excited about the differentiated capabilities we have. I remain pretty bullish on semi-cap in general and our ability to serve the customers in the market. As Roop said, and that was in my comments, we don’t have the visibility we’d like to be able to call this going forward, and that’s something we’re going to – and I’m certainly going to spend more time on with the team in the coming days here to hear more directly from customers. And I’ve had the opportunity to talk to a number of our customers, certainly not all in this space, and it’s an area where there’s a lot of people talking about it. But we’re looking for some kind of feedback and we’ll be happy to share that as we get better visibility.

Okay. So it looks like you’re pretty confident about – it’s going to come back sort of in 2020 than it’s just a matter of when, not if it’s coming back?

Well, I mean, I think the win – design win certainly bode well for the future…

Yes.

…and how customers are relying on us. And I even like some of the joint collaboration we’ve been doing on some really sophisticated technology in this space. So from my engineering background, it’s pretty impressive some of the joint efforts that we’re doing. And I think there’s some things that we do that others would have trouble replicating. So I feel generally very good about the potential here. But as you’ve seen from our second quarter guidance, we’re feeling a bit of the pain of that. As we’ve said, we’re getting in front of it, but we’re certainly keeping our capability in place, because we do expect this to come back.

Yes, Anja, maybe this is Roop. I’ll just add additionally. I think you said it well, it’s a matter of when they’ll come back. We do expect it to come back. And I think even our customers in the marketplace have indicated that it’s expected to come back. And I think we want to be able to answer that specificity in terms of timing. And I think, as we get some of the conversations that we have in front of us completed, we’ll be able to provide that.

Okay. Thank you. And then in terms of the sort of component shortage issues you have had before, how has that played out for you this quarter and how should we look at that going forward?

Yes. I mean, the supply chain we had – have had – it’s been a constrained market in various commodity areas, especially the patches that it continues to be a tight market. But I would say that in our Q2 or in our Q1 execution, we didn’t see any effects from those component shortages or constraints. We work through those, that’s part of what we need to do effectively. And I think we didn’t do that. And as we look into Q2, I think our guidance contemplates any such considerations. But honestly, we don’t see any effects from constraints, if you will, at this point in time.

Okay, thank you. That was helpful. I’m getting back in the line then.

Thanks, Anja.

[Operator Instructions] At this time, there are no further questions in the question queue. I would like to turn the conference back over to Lisa Weeks for any closing remarks.

Thank you, operator, and thank you to everyone 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 again in 90 days. Have a good rest of your day.

The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.