Benchmark Electronics, Inc. (BHE) Q4 2019 Earnings Report, Transcript and Summary

Good day, and welcome to the Benchmark Electronics, Inc. Fourth Quarter 2019 Earnings Conference Call. [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 2019 Earnings Call. With me this afternoon, I have Jeff Benck, CEO and President; and Roop Lakkaraju, CFO. Jeff will provide introductory comments and thoughts on the coming year, and Roop will provide a detailed review of our fourth quarter and 2019 results and provide an outlook for the first quarter of 2020. We will conclude our call today with a Q&A session. After the market closed today, we issued an earnings release highlighting our financial performance for the fourth quarter of 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. With that, 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. During today's call, I will first provide a brief overview of our fourth quarter and 2019 full year results, review some key business wins, and Roop will then take you through the financial updates and our guidance for the first quarter. I will then close with a review of our 2020 expectations and key initiatives. Please turn to Slide 4. During 2019, we continue to see momentum in our targeted higher-value markets. Medical revenues were up over 14%, and Aerospace and Defense was up 6% annually. In the fourth quarter, semi-cap results were higher than expected as new order load has continued to grow in this sector across our customer base, signaling a start to the market recovery. Semi-cap results were up 19% sequentially and 17% year-over-year. These results reflect our continued go-to-market progress. Our sector strategies are driving disciplined customer and program selection, and our new key wins reflect customers engaging with Benchmark for the full breadth of our capabilities. We continue to make progress on operational efficiencies, which includes rationalizing our global site footprint. As a result, we announced last summer the planned closure of our San Jose, California and Guaymas, Mexico locations. The San Jose closure plan remains on track with customer transitions in process. For Guaymas, Mexico location, we are pleased to announce that we successfully sold the assets of this location to Libra Industries, which will continue operations and provide services to their customers. While this transaction was not financially significant, it does allow us to save jobs and avoid severance as well as mitigate other shutdown costs. I really appreciate the support and dedication of our employees at both locations during these transitions. In the fourth quarter, we successfully reached a pivotal milestone and delivered the first production microelectronic units from our Lark facility in Phoenix. As we have discussed, this is a greenfield location with critical expertise in liquid crystal polymer substrates, RF and Micro-E. These capabilities, combined with advanced SMT manufacturing and assembly, provide a differentiated value proposition to the market. We look forward to the continued scale of production in this location in the coming year. 2019 was a strong year in free cash flow generation, and we returned over $140 million in capital to shareholders through share repurchases and our quarterly dividends. Please turn to Slide 5. I'm extremely pleased with the progress of our go-to-market organization and the close collaboration with our operations and engineering teams to win a number of critical new programs during the quarter. In our Medical sector, we were awarded an advanced DNA testing platform and a defibrillator product with 2 new global customers to Benchmark. Also, we were awarded a new fetal monitoring program with an existing customer. Each of these deals includes engineering services, which played a crucial role in closing these wins in this vertical. In Aerospace and Defense, we received additional awards for satellite communication device, an F-16 aircraft cockpit electronics and electronics for a munitions program. In Industrial, we are making progress with our new sector leader and received awards for a new customer building a facial imaging instrument. Also in the Industrial sector, we were pleased to announce that we were selected by Rohde & Schwarz, an international electronics and test instrumentation provider, to be their first externally outsourced manufacturing partner. Rohde & Schwarz has been a long-time engineering and product design services customer, and we were able to leverage this relationship into this new manufacturing services agreement. The excellent work provided by our global engineering team along with our global manufacturing footprint and technical expertise in the industrial space were pivotal to Rohde & Schwarz trusting Benchmark to deliver their complex products with the same high quality their customers expect from their own internal organization, all around excellent work by the Benchmark team to secure this strategic win. In semi-cap, we were awarded a precision machining program for a next-generation in-chamber tool along with a manufacturing word for an electronic sensor device. Lastly, in computing and telco, we were awarded the second phase of a high-performance computing program, which features some of the most complicated electronics manufacturing in the industry and a design program for a new customer who is developing a 3D holographic display device. We had solid design and manufacturing win momentum in Q4, and I look forward to reporting on the continued progress on bringing in new programs that will support our future revenue growth. Before I turn the call over to Roop to discuss our financial results and the impacts from the ransomware incident in Q4, I just want to express thanks to our customers for their incredible partnership and our teams who work diligently to quickly restore operations. As you might expect, we have further increased our spending in IT security, including both hardware and software investments guided by third-party consultants. This additional spend is reflected in our full year SG&A guidance. With this incident behind us, we're looking forward to continuing to serve our existing customers, ramp a number of new customers and execute on our growth strategy and the corresponding initiatives to build a better Benchmark. With that, let me pass it over to Roop.

Thank you, Jeff, and good afternoon, everyone. I'll start by providing an overview of the fourth quarter results, then move to the full year. I'll then discuss the Q1 2020 guidance. We'll begin on Slide 7. As we reported in the fourth quarter and updated last week, we were adversely affected by ransomware incident. Even though we restored connectivity and resumed operations quickly, we were unable to fulfill all customer demand in the fourth quarter. We did work with our customers to prioritize critical orders and rescheduled other orders of approximately $25 million to $30 million into the first half of this year. The rescheduling of certain Q4 2019 orders into the first half of 2020 reduced our Q4 2019 revenue and associated profits and the company's diluted GAAP and non-GAAP EPS. Given the ransomware incident was a unique event, certain discrete expenses and related insurance recoveries have been excluded for purposes of reporting the company's diluted non-GAAP EPS. Nonrecurring expenses related to the incident are included in our GAAP results, but excluded from our non-GAAP results. These expenses include consulting fees from third-party experts and advisers, legal fees, IT professional service expenses, in addition to certain direct labor hourly employee-related expenses. We do have insurance coverage, including cyber insurance, and have been working diligently with our carriers through this process. To date, we believe that there is a high degree of certainty that we will receive at least $5 million from our insurance carriers. This amount has been included in our GAAP results and offset against the nonrecurring expenses, which are excluded from our non-GAAP results. We will continue to work with our carriers to recover additional monies for the expenses incurred due to the incident. We expect that the insurance recovery process will be ongoing for months to follow. Our non-GAAP gross profit and operating income included certain expenses, such as compensating our salaried employees for nonproductive time, incremental overtime, other employee-related expenses and operational inefficiencies. The incurrence of these inefficiencies or expenses reduced our gross profit and margins and operating profit and margins below our original guidance range. Finally, I'd like to reiterate that we found no evidence that customer or employee data was exfiltrated from our network. From an operational standpoint, the incident is behind us, and we are moving forward with business as usual, focused on our customers, and as such, the ransomware incident is not expected to have a significant impact on the company on a go-forward basis. Now turning to the financial results. Revenues of $508 million was within the range of our updated fourth quarter 2019 outlook of $505 million to $510 million. Our GAAP loss per share for the quarter was $0.19. Our GAAP results included $2.3 million of restructuring and other nonrecurring costs in Q4 due to expenses associated with certain costs related to our former CEO, which is now completed, and various restructuring activities around our network as previously announced. $7.7 million of certain ransomware incident-related costs, net of accrued insurance recoveries, as previously mentioned. A reversal of a settlement accrual for a situation that was favorably resolved with a customer, an $11 million charge related to a customer insolvency. Customer insolvency was not related to the ransomware incident. We continue to work to recover what we can of what was written off. Our Q4 non-GAAP operating margin was 2.6%, a decrease from 3.2% in Q3, primarily due to the lower-than-expected revenue and financial impacts related to the incident. Non-GAAP EPS of $0.27 was within the range of our updated fourth quarter 2019 outlook of $0.24 to $0.28. For the quarter, our ROIC was 7.4%, an 80 basis point decrease from Q3. Please turn to Slide 8 for our revenue by market sector for the 3 months ended December 31. To avoid repetitiveness in discussing the revenue by market sector, I'd like to point out that each of our market sectors were affected to some degree by the ransomware incident. Our A&D and Medical sectors were most significantly affected since these products typically have longer production cycles, which were not completed in the quarter. Industrial revenues for the fourth quarter decreased 6% sequentially and 11% year-over-year. A&D revenues for the fourth quarter increased 1% year-over-year and were down 8% sequentially. Medical revenues were relatively flat year-over-year and were down 20% sequentially. Semi-cap revenues were up 19% in the fourth quarter and up 17% year-over-year from increased orders from all semi-cap customers. As a result of the strength in increased orders in Q4, we do believe that the sector is beginning to show signs of recovery. Overall, the higher-value markets represented 78% of our fourth quarter revenue. Turning now to our traditional market. Computing was down 74% year-over-year and sequentially, 25% quarter-to-quarter, as expected from the completion of the legacy computing contract in the third quarter of 2019. Telco was down 4% sequentially and down 23% year-over-year. Our traditional markets represented 22% of fourth quarter revenues. Our top 10 customers represented 35% of sales for the fourth quarter. Please turn to Slide 10 for a discussion of non-GAAP key business trends. Gross margin in the fourth quarter was 8%, 150 basis point sequential decline and year-over-year decline of 40 basis points. As previously noted, our results were negatively impacted by the ransomware incident in Q4. Our non-GAAP SG&A was $27.6 million, which was lower than our original Q4 guidance and down from Q3 2019 due primarily to a reduction in variable compensation expenses. Non-GAAP operating margin was 2.6%, down 60 basis points sequentially and year-over-year. Please turn to Slide 11 for our 2019 financial summary as compared to '18. Revenues were $2.3 billion in 2019 as compared to $2.6 billion for 2018, a decrease of $298 million primarily from our exit of the legacy computing contract, reduced revenues from other computing customers and the decline in certain telco customers, including the insolvent customer. Non-GAAP gross margin increased 20 basis points year-over-year. SG&A increased 40 basis points, and operating income declined 10 basis points primarily due to the lower revenue. Non-GAAP EPS declined 9% year-over-year and non-GAAP ROIC decreased 180 basis points. Please turn to Slide 12 for our revenue by market sector for the full year ended December 31. For the full year, higher-value markets were down 2% primarily due to semi-cap, which was down 22% annually in the industrial sector. If you will recall, we made an Industrial sector leader change midyear and are seeing improvements in that sector. The A&D sector continued to benefit from increased defense spending for new and existing programs. The Medical sector grew on the strength of new programs and increased demand from legacy customers and programs. Revenues in the traditional markets were down 29% from 2018 primarily from our exit of the legacy computing contract and demand changes in our telco customer base. For fiscal year 2019, there were no customers that were greater than 10% of revenue. Please turn to Slide 13, where we will provide a few updates on cash flow and working capital highlights. We generated $36 million in cash from operations for the quarter and had free cash flow of $27 million for the fourth quarter after capital expenditures of approximately $9 million. For the year ended, we generated $93 million in cash flow from operations and free cash flow of $58 million. Our cash balance was $364 million at December 31 with $166 million available in the U.S. Our accounts receivable balance was $324 million, a decrease of $24 million from September 30. Contract assets were $161 million at December 31 and September 30. Payables were up $7 million quarter-over-quarter. Inventory at December 31 was $315 million, down $1 million quarter-over-quarter. Turning to Slide 14 to review our cash conversion cycle. For the fourth quarter, our cash conversion cycle days was 81. Inventory days increased sequentially from the delayed revenue in the quarter. As noted in our Q3 earnings release, due to the completion of the legacy computing contract, our future cash version cycle is expected to be between 78 and 83 days. Please turn to Slide 15 from our -- for our capital allocation update. We paid $5.6 million in dividends in Q4 2019. On February 3, 2020, we announced an increase in our quarterly dividend to $0.15 per share, a 6.7% increase. Total share repurchases during Q4 were $4 million or 129,000 shares. We repurchased approximately $122 million or 4.7 million shares in fiscal 2019. Cumulatively, since Q1 2018, we have repurchased $334 million or 13 million shares and paid out $44.3 million in quarterly cash dividends. We will continue to evaluate further share repurchases through our open-market repurchase program. As of the end of December 2019, we had approximately $79 million available under the current share repurchase program. Please turn to Slide 16 for a review of our first quarter 2020 guidance. Note that our guidance does not reflect possible supply chain impacts from the coronavirus. We continue to actively monitor the evolving situation closely. The following guidance reflects certain Q4 2019 orders that were rescheduled into the first half of 2020. We expect revenue to range from $530 million to $570 million. Our non-GAAP diluted earnings per share is expected to be in the range of $0.32 to $0.38 or a midpoint of $0.35. We estimate that we will use between $10 million to $15 million in cash flow from operations during the first quarter of 2020 to support the higher revenue on a sequential basis and additional new program ramps. CapEx for the year will be between $50 million to $55 million, with approximately $15 million to $18 million in Q1. For sequential modeling information for the first quarter, please turn to Slide 17. Overall, we expect industrial revenues to be up from demand improvement associated with legacy programs and new program ramps. A&D is expected to be up greater than 15% in Q1 from new program ramps with the U.S. Border Patrol and for [indiscernible] space applications. We expect Medical revenues to be up greater than 20% from volume demand increases with existing customers. In semi-cap, we expect revenues to be up low single digits. We are beginning to see an increased order flow and are actively working with customers to determine ramp schedules. Turning now to the traditional markets. We expect Computing revenues to be flat and telco to be down greater than 10% across a number of existing customer programs. Implying our guidance is a 3% to 3.3% operating margin range for modeling purposes. The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring and other costs. We expect to incur restructuring and other nonrecurring costs in Q1 of approximately $1.5 million to $2.5 million. Other expenses, net, is expected to be $1.3 million, and the effective tax rate is expected to be between 20% to 22%. The expected weighted average shares for Q1 2020 are 37.4 million. I will now turn the call back to Jeff for a detailed look at our strategic initiatives. Jeff?

Thanks, Roop. Let's go to Slide 19, where I will share some thoughts about the new year in front of us. As we enter 2020, we expect revenue growth over 2019 results. We are overcoming not renewing the legacy computing contract by growth in higher-value markets and, to a lesser degree, the demand rolled over from Q4. Our higher-value markets are expected to grow greater than 10% over 2019's results, led by new program ramps and increasing demand from our Aerospace and Defense, Medical and semi-cap markets. For 2020, we expect the higher-value markets to represent approximately 80% of our total revenue. We expect gross margins to range between 9.2% to 9.6% for the full year as we offset headwinds from a number of new program ramps with benefits from our operational excellence programs. We are also targeting SG&A expenses to range between $140 million and $145 million. We expect to generate between $70 million to $90 million in cash from operations. We remain committed to sharing a portion of our free cash flow with shareholders. And in fact, earlier this week, we increased our quarterly dividend by 6.7%, as Roop mentioned. Before I discuss our strategic themes for the year, I want to acknowledge the difficult situation in China due to the coronavirus outbreak. Our full support is with our team in Suzhou, China and their well-being and safety is our priority at this time. As Roop stated earlier, we continue daily monitoring of the situation for our team, our valued customers and our suppliers. If you will please turn to Slide 20, I'll conclude with a summary of our 4 strategic themes for the year. Our priorities underpin where we will spend our time this year and how we're building a better Benchmark. First and foremost, it all starts with our focus on the customer. We are changing our relationships with our customers from a more transactional mindset to that of a relationship where we become a stronger, trusted partner by delivering incremental value through our expanded set of services and differentiated technology. The industry trend towards outsourcing in the high-value markets is continuing at an accelerating pace. But these distinctive customers are not looking for just an average EMS partner. This provides us an exciting opportunity as we bring unique capabilities and a broad set of solutions to any potential partnership. Our opportunity funnel is growing as we attract new customers that are looking for a strategic outsourcing partner, like Benchmark. The result for us is revenue growth at the right target margin profile in alignment with customers, who recognize and reward us for the value we bring to their business. Second, we are driving enterprise efficiencies across the entire organization and have kicked off several project teams to drive a specific set of actions aimed at streamlining our business. Our mantra within the team and all functions is to be the very best at what we do and to be where our customers need us to be. We will continue to evaluate our global engineering and manufacturing site strategy and align plans and investments to our customers' road maps to optimize asset utilization. Our aim is to process standardization and consistency across our operations to offer one Benchmark experience to our customers and allow them to work seamlessly across our network. This efficiency focus goes beyond operational excellence in our factories and extends into our shared services teams. Every role within the organization is critical to customer delivery. And as we continue centralization of our finance, human resources, legal and IT teams, we will continue to invest in new tools and services aimed at better support of our internal and external customers. Ultimately, the objective of this initiative is to ensure best utilization of the assets of the company and to expand operating margins. Next, we remain focused on growing our business by investing in people, process and solutions. As we have discussed over the past quarters, we have continued to invest in rich technical capabilities across our network to solve our customers' most complex challenges. With our large facility ramping the production here in Phoenix, Arizona, we are bringing to market cutting-edge technology that can enable our customers to reduce the size, weight and power of their sophisticated designs in the most challenging applications, such as RF in the Aerospace and Defense markets or medical device designs. We are further investing in microelectronics assembly capability, both in the U.S. and in our Asia facilities. Further, we will continue to invest in technologies that will give us an advantage in the targeted sectors we choose to pursue by addressing our customers' most challenging problems. These technology investments are critical to increasing value to our customers and accelerating future revenue and margin expansion for Benchmark. Finally, we're working to better engage talent and shift the culture of Benchmark. We have great people and are putting in place the infrastructure and tools to drive empowerment, accountability and ownership across the organization to support a high-functioning team and make Benchmark a great place to work. We believe these are the right priorities for where we are as an organization, and our executive leadership team is aligned and engaged in driving these initiatives throughout the year. And with that, I'll turn the call over to the operator to manage our Q&A.

[Operator Instructions]. Our first question comes from Anja Soderstrom with Sidoti.

Can you hear me?

Yes, we can hear you.

So I just want to get some more information on this -- the ransomware and the impact of that and especially the insurance. Will that also cover any revenue loss? Or is it just expenses that was incurred?

Yes, it's really expenses. And the -- obviously, the incurrence of the expenses that we have and the $5 million that we've accrued for in terms of the recoveries to date include some of the costs that I mentioned around forensics and legal fees and these sort of things. There are additional recoveries that we're trying to obtain, which will take a little bit of time around additional lost productivity time and these sort of things, Anja.

Okay. And then some of the orders was pushed out to the first half. So is that going to then affect the gross margin for the first half? Or how do you think about that? Is that creating lack in efficiencies?

No. I mean, I think obviously, our -- that rollover is reflected -- of that $25 million to $30 million is reflected into our first quarter guidance and the gross margins that we've given you in terms of potential range, if you will, right? So the ranges that Jeff spoke about, the 9.2% to 9.6%, contemplate the rollover and the revenue and the productivity we gained from those.

Yes, just to add to that. We work closely with our customers and prioritize critical demand that we needed to fill. And the team did a great job in the fourth quarter overcoming the time that we were out and really doing what we could to recover the revenue. We did have some revenue that we could not recover as you saw and the reason that we came in below our original estimates for revenue. We're fortunate that the large amount of that rolls into the first half of this year. There was a little bit of perishable demand in fourth quarter, as you might expect, just folks had upside that we weren't able to fulfill or they were able to shift demand if there were a few cases where we might have been built a source. But the bulk of that we're able to contain and pick up and capture in the first half of this year.

Okay. And also, I don't know if you maybe mentioned this, but for Medical segment, the sequential weakness, what drove that?

It's not so much sequential weakness really, Anja. It's -- I mean, if you think about Q1's guide that we gave is that there's growing greater than 20%. So it really was related to the incident and the fact that Medical production runs tend to have longer cycles, and therefore, we couldn't complete as much of the production runs within the quarter because of the incident. It's really to just -- yes, it kind of skewed the 2019 results.

It's more a matter of a push up, okay.

Yes, it's a blip, and we still expect, as Jeff pointed out in our guidance, that Medical in Q1 will be a strong contributor to the overall growth in revenue on a sequential basis and throughout 2020.

Yes, Medical was a strong performer in '19, and we look for it to contribute to the growth in 2020, as I mentioned.

Yes. And then in terms of China, I know you have a small footprint there. But did you also close down for the New Year? And do you have to extend that closure due to the virus? Or what's happening there?

Yes. Well, we've been complying with the government regulations regarding operations or any outbreak. So we've been kind of following their guideline there. You could appreciate our focus has been on the well-being and safety of our folks. We are in the same province where the epicenter was here. But that being said, all of China is a bit disrupted, given the outage or given the virus and what's happening there. We -- that being said, we do make some medical products for the China market. We've received some exceptions for shipments during the outbreak to help with these -- actually the recovery efforts. So we're part of the solution here. But more than that, I mean, I think just overall supply chain, we're paying close attention to the fact that there are some components across our network that come through China or come from China. And we're staying close to that. There's a lot of unknowns here, which is kind of why we -- at this point, we didn't say anything specifically different about our guidance, given it because it's kind of developing real-time and every day there's new news. We're staying close to the activity here, and we'll provide updates as we know more about the way this is going to trend.

Okay. And in terms of components, if it should be a bit more prolonged and become an issue, do you have any inventory buildup? Or how badly affected may it be?

So, if you think about it, Anja, for the production runs that we would have and the demand that we have in Q1, we really procure materials coming into Q1. So largely, I would expect us to have the materials. There could be some materials we're still chasing. It really is when you start to look at more extended supply chain considerations into subsequent periods potentially. But to date, and we're working actively with our supply chain as well as our customers to ensure we have continuity of supply to support not just Q1 but Q2 and beyond.

Our next question comes from Jim Ricchiuti with Needham & Co.

This is Mike Cikos, on for Jim. So I wanted to ask you guys about the different end markets. It sounds like semi-cap, I know last time we had spoken, it seemed like you guys were forecasting based on customer conversations that a recovery would look to be happening more in the second half of 2020, and I'm trying to figure out, obviously, Q4 better than expected, and we're seeing some growth on that and sequential growth in Q1. But should we expect this strength to continue throughout 2020 now? Or should we still expect more of a ramp in the back half of the year?

Yes, maybe I'll start and have Jeff jump in as well. I think we saw strength in the fourth quarter and that's reflected in our numbers. We do have some sequential growth that we've noted. The other comment that, Mike, I'll point out is that we are seeing an increase in orders, and we're working actively with our customers currently in terms of understanding how those orders need to be fulfilled. And I think as we continue through Q1 by our April call for the Q1 results, I think we'll have a lot more visibility as to how much does it pull in from the second half into Q2 and how that linearity looks throughout the rest of 2020. So we expected it to come back. We're seeing those signals. So that's very positive from our standpoint.

Not much more to add other than to say, it's encouraging to see the new order load coming in and probably a little bit ahead of the second half anticipation that we saw. But as Roop said, our -- we're building on where we came from fourth quarter and Q1, but there's just some lead time associated with that and that ramp and how we work through that will reflect. But it does seem like we are at the beginning here of what could be a really nice ramp and recovery.

That's good to hear. And then just I guess, jumping over to the Aerospace and Defense segment. Again, nice strength there. And I just wanted to ask you, regarding customer conversations and the program builds that you guys are seeing out there, can you help us better frame the wins and the strengths? Whether it's tied more to the fact that you guys have these engineering services that you're offering and the design services, were the strengths of the market coming from the defense budget? I'm just interested if you could parse out what is driving the strength in that market, because I know that it's been a driver for you guys for a while now.

Yes. Yes. No, good question. We did signal the fact that defense spending was up and we knew there is appropriation and it takes a long time, even when you have a change in leadership and for Congress and everything to pass the bill and then see that in domestic spending. But we're there, certainly, and we see an uptick, and a lot of our customers are announcing very strong demand. So we enjoy a nice footprint across a number of -- a lot of strategic defense suppliers to our government and to others. And so we're certainly going to participate in that. I think why we're winning new business and where we see that is that we really do have very strong design skills. We've been spending a lot of energy and the investment in the Lark technology with RF capability. And that certainly peaked the interest of a number of customers that are engaging us for that. We also had a strong domestic footprint with the capability to meet the stringent certification requirements for the A&D customers and strong eye to our position and just being located where we are geographically with a strong footprint in the U.S. has, I think, worked to our advantage here quite well. But it's as much about having the right capability and been able to do not only microelectronic design and some of the substrate work, but then also be able to do the fully integrated SMT and assembly beyond it. We've really become like a one-stop-shop for a number of these sophisticated customers. So I think it's a great mix of not only our capabilities, but also just with the market being solid, and we see that continuing through 2020 and even through '21 and beyond, so...

Okay. And then just two more items, if I may. The first on your go-to-market strategy and the new Chief Revenue Officer. Just wanted to see if we could get an update on that item. And then the second being, I know you have the new leadership for your Industrial sector, and you guys are in the stages of building the pipeline. Some of the prepared remarks sounded like you guys are making headway, but if you could give us any more color on either of those items, that would be helpful.

Yes. Rob joined us now, I guess, he's not a newbie quite so much anymore, he's been here over 6 months. But he's brought a lot of discipline into that business development sales organization, sort of aligning our strategies by sector with the marketing that we're doing, making sure that our business development leaders are aligned to the target accounts. And then, frankly, just -- that's very much an operational role where you're looking at what's the pipeline and what's my win rate and am I bringing everything I need to bear. I also really specifically like the fact that Rob had both OEM experience as well as EMS experience and so knows how to sell an engineering solution to a Vice President of Engineering as well as handle the EMS side of it. So very pleased with the -- his engagement with his team so far. We've seen some strong design wins both for engineering as well as EMS. We highlighted a number of those in the script and on the charts that we included with it. So in general, I would just say, like, it's been a little bit of wind in the sales. I feel like the pipeline is stronger. It's certainly growing. And we've been winning our share of business. So he's been a really positive add. And then frankly, he's building his team, and he's reinforced the strong folks that were there, and it's all worked out quite well. In terms of the Industrial leader, which -- that runs that segment, she's hit the ground running. Certainly needed some focus here. I think we felt that was an area that we didn't do as good in 2019 as we would have liked. The Rohde & Schwarz win that happened in the fourth quarter that was real big strategic win and bringing those kind of things home, leveraging the long-term relationship we've had with them on the engineering side is super important. It's more of that kind of activity we want to see because while Industrial, the market is not growing as fast as A&D and Medical, I don't feel like we got our fair share in '19. And I feel like we are getting after it. In the second half, we started to get there and with better momentum in 2020. But this is a multi-quarter cycle. So the stuff that we win now will take time to get to market. So unfortunately, there's a little bit of lag there, which is why it can be -- we get kind of inpatient. But I like the team we're building there. I think it's bringing us closer to our customers. I think that I like that tension between the operating teams and the go-to-market or business development team to make sure we're addressing everything the customer wants, make sure we're selling this little Benchmark. And we're building out the skill set, and we've added some great talent in our organization. So I think it bodes well for us. And that's why the whole focus on the customer is one of the key initiatives that I started last year, but it makes the top 4 themes for this year, and you'll see us continue to put energy into that.

[Operator Instructions]. As I'm showing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Lisa Weeks for any closing remarks.

Yes. Thanks to everyone for joining our call today. If you have any follow-up questions, please don't hesitate to contact me, and this will now conclude the Benchmark's Q4 '19 Earnings Call, and I hope you all have a great afternoon.

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