Benchmark Electronics Inc (BHE) Q2 2019 Earnings Call Transcript

BHE earnings call for the period ending June 30, 2019.

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Benchmark Electronics Inc (NYSE:BHE)
Q2 2019 Earnings Call
Jul 24, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Benchmark Electronics Incorporated Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Lisa Weeks, Vice President of Strategy and IR. Please go ahead.

Lisa K. Weeks -- Vice President of Strategy and Investor Relations

Thank you, operator, and thanks, everyone, for joining us today for Benchmark second quarter 2019 earnings call.

With me this afternoon, I have Jeff Benck, CEO and President; and Roop Lakkaraju, CFO. Jeff will provide introductory comments, and Roop will provide a detailed review of our second quarter financial results and third quarter outlook. 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 second 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.

I will now turn the call over to our CEO, Jeff Benck.

Jeffrey W. Benck -- President and Chief Executive Officer

Thanks, Lisa, and welcome to everyone joining us for this afternoon's call. I've been on the job for four months now, and I've learned a lot about our strengths, our unique capabilities and where we have room to improve. And importantly, I've had the opportunity to hear from many of our customers, what their needs are going forward, and how we can help them accelerate their business, and in turn, grow ours. I'm energized by the opportunities in front of us and we are in the process of transforming our organization to ensure we capitalize on this opportunity.

During the call today, I will first provide a brief overview of our second quarter 2019 results, and introduce the new executives I've added to our team. Roop will then take over and talk through the financial update, and I will close with a review of the key strategic initiatives, we'll be driving in the coming year.

Please turn to Slide 4. In the quarter ended June 30, 2019, we delivered revenue of $602 million, which was beyond the high end of our guidance, and we achieved $0.36 of non-GAAP EPS, which was at the high end of our guidance range. Revenue was higher than our expectations, driven by year-over-year increases in the higher-value A&D and Medical markets, along with higher than expected revenues from the legacy computing contract.

Our non-GAAP gross margins improved 10 basis points sequentially to 8.9% on a higher-value market mix, despite continued softness in the Semi-Cap market sector, which was down 41% from the second quarter of 2018. More importantly, non-GAAP gross margins were over 10% when you exclude the legacy computing contract revenue, which reflects the potential leverage in our model with an improving portfolio.

Please turn to Slide 5. I've been very focused on building our leadership team, and I'm excited about the recent additions that we've announced, who will be instrumental in helping us execute our strategy.

First, we've added Rob Crawford as the company's first Chief Revenue Officer. In this role, Rob will direct our global go-to-market strategy with explicit attention on sector strategies, portfolio optimization, marketing execution and revenue realization to ensure we achieve our growth objectives.

Rob brings over 25 years of combined EMS and OEM experience from his prior leadership roles in other technology companies, making him a perfect fit for this new role at Benchmark. Furthermore, his engineering background enables him to not only understand our unique capabilities, but be able to articulate to customers the differentiation we bring. I am confident that Rob will do a great job spearheading our in-flight go to market transformation.

Second, we have added Rhonda Turner as the Chief Human Resources Officer to replace the vacancy left by the previous HR leader, who departed before I joined. Rhonda will oversee all functions of our HR team, including talent acquisition, employee engagement, organizational design, comp and benefits, and lead the deployment of our new HR shared services model. She comes to us from the University Technical Institute, where she was SVP of HR with the past leadership position at ConocoPhillips and Circle K.

In our Service business, people are critical to the company's success. And Rhonda has demonstrated her ability to globally align people and business strategies, and I'm energized by Rhonda's ideas on how to support our talented and diverse workforce. Rhonda will be a change agent in our organization and a key contributor to our centralization, standardization and scalability initiative.

Now, if you please turn to Slide 6, I will turn the call over to Roop to discuss our financial results for the quarter.

Roop K. Lakkaraju -- Chief Financial Officer

Thank you, Jeff, and good afternoon, everyone. We'll start out Slide 7 for a discussion of our second quarter 2019 financial summary.

Revenues of $602 million was above the high end of our guidance of $555 million to $585 million. The higher revenue performance against guidance was primarily driven by the substantial completion of a long standing legacy computing contract, versus our previous expectations, wherein the contract will be completed in Q3 2019.

The final activity in Q3 on the contract will be to complete the remaining inventory transfer. Our GAAP EPS for the quarter was $0.24. Our GAAP results also included $3.4 million of restructuring and other costs, due in part expenses associated with various site restructuring activities and our go-to-market changes. $800,000 for a legal settlement with a customer and $1.1 million of funds received from a favorable legal settlement.

Our Q2 non-GAAP operating margin was 3.1%, a 20 basis points quarter-over-quarter and 40 basis points year-over-year improvement, due to our improved operational efficiency and slightly lower SG&A. Non GAAP EPS of $0.36 was at the high end of our guidance range of $0.28 to $0.36. For the quarter, our ROIC was 8.2%, down 10 basis points sequentially, and 230 basis points year-over-year.

Please turn to Slide 8 for our revenue by market sector for the three months ended June 30. For your awareness and clarification, we have renamed the test and instrumentation sector as Semi-Cap to more accurately reflect the revenue mix in this sector. This change does not affect historical comparative revenue.

Industrial revenues were up slightly from our expectations and flat from Q1. Revenues were down 3% year-over-year from softer demand from customers in the industrial transportation market, and ramp delays from previously booked new programs. A&D revenues were up 3% quarter-over-quarter and 7% year-over-year from overall demand strength for existing products, the ground-based and airborne vehicles.

Medical revenues were 10% higher quarter-over-quarter and 18% year-over-year. We saw increased demand for existing renal, fluidics and cardiovascular programs, and program ramps from imaging and patient monitoring. Semi-Cap revenues declined 5% sequentially and were down 41% year-over-year from continued Semi-Cap softness.

Overall, the higher value markets represented 66% of our second quarter revenue and we're up 3% sequentially and down 5% year-over-year. Excluding the legacy computing contract, our higher value markets represented 76% of revenue in Q2.

Turning now to our Traditional Market, computing was up 7% sequentially and higher than expected to support the final build for our legacy computing contract. Telecommunications was down 20% sequentially, primarily from a design delay for a satellite program and a customer program end-of-life, and 10% year-over-year from softer demand from legacy broadband products in advance, although telco programs ramp delayed.

Our traditional markets, which represented 34% of second quarter revenues, were down 15% from last year and down 5% sequentially. Excluding the legacy computing contract, our traditional markets represented 24% of revenue in Q2. Our top 10 customers represented 41% of sales for the second quarter.

Please turn to Slide 9. Bookings for the quarter were $130 million. We continue to have strong Medical and A&D bookings and when market share in Semi-Cap. However, we are disappointed our overall bookings achievement in the quarter, which was driven by the lower-than-expected performance in our industrial sector.

Industrials were only 6% of bookings with a new manufacturing win for transportation infrastructure program and an NPI project for connected assets IoT sensor. Q2 wins were strong again in Medical with 27% of total bookings. We were awarded the design in manufacturing of a new biometric monitoring system, and manufacturing for a fluidics management product.

Semi-Cap, we continue to win new precision technology programs in the Semi-Cap space for critical wafer processing components used in multiple steps throughout the fab. We continue to expand A&D wins with new programs with existing customers, including PCBA manufacturing and precision technology wins for radar systems and electronics for ground and airborne vehicles.

Computing and Telco were a combined 33% for the quarter. In computing, we were awarded two new supercomputing programs, and in legacy telco, a new satellite electronics manufacturing program. We have 53 total wins for the quarter, 28 manufacturing and 25 engineering.

Please turn to Slide 11 for a discussion of non-GAAP key business trends. Gross margin for the second quarter was 8.9%, a 10 basis point sequential improvement and a year-over-year improvement of 70 basis points. Year-over-year gross margin improvement is attributable to operational improvements throughout our global network and better mix from higher value market revenue.

Without the legacy computing contract, our gross margin would have been 10.1% versus the reported 8.9%. Our non-GAAP SG&A was $35.3 million, which is in line with our Q2 guidance and Q1 2019. Non-GAAP operating margin was 3.1%, up 20 basis points sequentially. We had $3.4 million in restructuring and other costs for Q2, including expenses associated with various site restructuring activities and our go-to-market changes.

We expect to incur additional restructuring and transition charges in Q3 of approximately $2 million to $3 million that are related to various employee related activity. Additionally, as we have stated in our press release, we have elected to close two sites with customer transitions expected into other locations in the Benchmark network by mid-2020. Restructuring charges associated with these closures are expected to be between $6 million and $8 million, of which $1 million to $2 million will occur in Q3. Once the site closures are completed, we expect annualized savings of approximately $5 million.

Jeff will cover the strategic rationale for these activities shortly. Please turn to Slide 12, where I will provide a few updates on cash flow and working capital highlights. We generated $52 million in cash from operations for the quarter. Free cash flow was $47 million for the second quarter, after capital expenditures of approximately $5 million. We now estimate that we will generate between $75 million to $85 million in cash flow from operations compared to our previous estimate of between $40 million and $50 million. We now expect CapEx to range for the year between $45 million to $50 million, which is trending toward the higher end of our prior range due to additional investments required for new business wins.

Our cash balance was $397 million at June 30, with $217 million available in US. Our accounts receivable balance was $363 million, a decrease of $42 million from March 31. Payables were flat quarter-over-quarter. Contract assets were $156 million at June 30, a decrease of $1 million from March 31. Inventory at June 30 was $316 million, which is flat quarter-over-quarter.

Please turn to Slide 13 to review our cash conversion cycle performance. Our cash conversion cycle was 65 days for Q2, slightly below our range of 68 days to 73 days driven by the lower AR balance.

Turning to Slide 14 for our capital allocation update. In March 2018, we announced a recurring $0.15 per share quarterly cash dividend. $5.9 million in dividends were paid in Q2 2019. Total share repurchases during Q2 were $39 million or 1.5 million shares. Year-to-date, we have repurchased approximately $100 million or 3.9 million shares at an average price of $25.58. We will continue to evaluate further share repurchases in Q3 2019. If we repurchased shares, we will do so through our open market repurchase program. As of the end of June, we had approximately $102 million available under the current share repurchase program.

Please turn to Slide 15 for a review of our third quarter 2019 guidance. We expect revenue to range from $525 million to $555 million. This guidance reflects the essential completion of the legacy computing contract and the muted demand from the Semi-Cap sector. Our non-GAAP diluted earnings per share is expected to be in the range of $0.33 to $0.39, which results in a midpoint to the guidance range of $0.36. If achieved, this would result in flat sequential EPS even on the lower revenue.

For sequential modeling information for the third quarter, please turn to Slide 16. Overall, we expect industrial revenues to be flat with persistence, demand softness in the transportation facility infrastructure market and lack of growth from new programs. A&D is expected to be up high single digits in Q3 based on continued strength across multiple new and existing program supported by the strong -- by a strong US defense budget. We expect medical revenues to be up low single digit, driven from sustained demand with existing customers and the continued ramp of new imaging program. Semi-Cap is expected to be flat.

Turning now to the traditional market. We expect computing revenues to be down greater than 50% due to our exiting from our legacy computing contract. We expect telco to be flat. Strength in existing programs is offset by end-of-life program. Implied in our guidance is a 3.1% to 3.7% non-GAAP operating margin range for modeling purposes. The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring and other costs. Interest expense is expected to be $1.8 million and the effective tax rate is expected to be 21%. The estimated weighted average shares for Q3 2019 are approximately $37.8 million.

Exiting 2019 and the legacy computing contract, we believe that our higher value market revenue mix will be between 72% to 78%. Our gross margin will be between 9.5% to 9.8%, and our SG&A will remain in the range of $34 million to $36 million. Based on our bookings year-to-date, we do not expect to reach our range of $800 million to $900 million for the year. As Jeff indicated, we are making changes in our go-to-market organization that we believe will improve future bookings level and revenue realization.

I will now turn the call back to Jeff for a detailed look at our strategic initiative. Jeff?

Jeffrey W. Benck -- President and Chief Executive Officer

Thanks, Roop. Let's go to Slide 18. During the past quarter, working with my leadership team, we have refined our strategic priorities for the coming year. In fact, we have already made progress on these new initiatives in the quarter. The one thing I want to reinforce is that our strategic initiatives are prioritized with a customer-centric mindset.

The first initiative is optimizing our go-to-market organization and customer coverage strategy. Our strategy is built around addressing the future needs of our targeted customers with a partnership strategy that will help them win in the marketplace. If our customers win with us, we will accelerate our revenue growth.

Go-to-market has been an important area of investment over the past several years to drive booking, which would in turn drive revenue growth. Certainly, progress has been made, but the organization needs to mature at a faster pace. This quarter, we have realigned our go-to-market organization under a new CRO role, which we have filled with Rob Crawford.

The new organization merges our sector leadership, business development teams, marketing and sales operations under one leader. The purpose of this new organization is to facilitate more effective customer and sector coverage, reduce complexity in the selling process and improve revenue conversion. Rob will play a key role in optimizing our sector and customer portfolios in enhancing the sales process to expedite time to market for our customers and time to revenue for Benchmark. Part of the process focus will be on the bookings methodology.

As Roop communicated earlier, we were down quite a bit this quarter from where we expected to land. While we anticipate a recovery in bookings in 3Q, given our pipeline, it's a challenge to time customer communication of awards to a specific date in the quarter.

Beyond that, as I look at our competition, I am finding that our EMS competitors have a slightly different approach to how they communicate their booking, if at all. Having said that, our new bookings are an indicator of future revenue growth as illustrated by our growth in A&D and Medical. So we will continue to incentivize our business development teams to pursue that. I am also charging our new CRO to develop a revenue roadmap process across the sectors with accountability for converting bookings to revenue.

Given these changes, we don't intend to report our quarterly bookings performance going forward. We will come up with a revised reporting methodology, in line with our new process, wanted them to play.

In addition to bringing on a new CRO, we have also hired an industry veteran as our new industrial sector leader in the quarter. The second initiative is driving operational efficiencies and process consistency across our site. This strategy considers our customers' geographic requirements for our capabilities, and the ability for them to move seamlessly across our network. It also comprehends the need for us to rationalize our strategic footprint and address utilization challenge.

We are refreshing our global manufacturing services network strategy considering many factors such as utilization, scale, geographic placement, cost, and most importantly, our customers long range needs per volume manufacturing. As part of this process, we have decided to close our San Jose, California, and Guaymas, Mexico operation. It was a target closure date of Q1 2020.

As a result of these actions, we are reducing approximately 3% of our global workforce and 4% of our global footprint. We will consolidate many of these programs at these sites into other manufacturing locations in our network, which will in turn improve their asset utilization and efficiency.

I want to thank our loyal employees at these locations for their past service and dedication to Benchmark, and our customers for their ongoing support, while these transitions are completed.

Across our network, we are also focusing on consistent process deployment and cycle time reduction programs for productivity improvement to increase margins and asset utilization. We have early proof points that these accelerated productivity initiatives can drive benefit, and I expect further progress in the coming quarter.

The third initiative is creating a centralized G&A organization to accelerate our ability to efficiently deliver and scale our support organization service. This updated structure will enable us to deliver cost effective shared services to the benefit of our internal teams as well as our customer.

We have kicked off a process to functionally realign our finance, human resources, legal and IT teams by end of the year. We expect this realignment to accelerate business execution by deploying scalable processes and tools across Benchmark. The ultimate objective of this activity is to increase efficiency and scalability as we drive our next period of growth.

And finally, the fourth initiative is focused on accelerating engineering and services solutions to help solve our customers' most complex challenges. Over the past several years, we've continued to make investments in rich technical capability. In our engineering organization, we have invested in a number of advanced technology, including fluidics, connected device expertise, as well as optical packaging and microelectronic.

We've invested in our large RF and high speed design center. Process capabilities for circuits and filter components which fit nicely with our microelectronics and mixed S&P manufacturing capability. We are building these capabilities with customer inputs to align our road map and investments where we can demonstrate an advantage for our customers to partner with us. We are investing and we are winning new business with these investment.

With the optimization of our go--market team, we will improve on the integrated sales of all Benchmark services, and better communicate the value of our differentiated capability. 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 organization.

Now, if you please turn to Slide 19, I'll provide a brief summary. Roop provided an update on the near-term view of our sectors, but I want to provide a broader sector outlook.

Looking at Semi-Cap. Since April, I have met with our Semi-Cap customer. The general view is that 2020 will be improved from 2019, but the magnitude is still in question. We believe that the improvement will be more back-end loaded in 2020. Having said that, we are continuing to invest in this segment and we believe we are gaining share in the down market as we have won new design programs, as well as picked up existing production from supplier consolidation.

Now, looking at Medical and A&D. I remain pleased with the performance of these two target growth sector. We expect continued growth in the second half of '19. Our teams are doing a great job growing our business in these two highly regulated market with very complex product.

Industrial. Our industrial sector growth has not achieved the expectations we had hoped for, and the near term outlook is relatively flat. We believe this is an important sector that fits well with our capabilities and we believe our new sector leader will bring a fresh perspective and a renewed focus to this state.

Turn into Computing and Telco, with our legacy computing contract completing, we will continue to focus on our remaining portfolio of higher complexity computing programs in selected sub-sectors and next generation telco.

I also wanted to provide an update on our target business model. While I would love to adopt the former CEO's target model, it's clear with the Semi-Cap weakness, our performance in the industrial vertical and the transition out of our large legacy compute customer, we are now on a path to achieve the $2.8 billion revenue objective within the target business model by 2020.

However, we are in the process of analyzing our three-year business outlook, which is being updated through our floor planning cycle. We'll provide updates on this effort in the 2019 year-end call.

Our near-term focus is on the strategic objectives and initiatives I highlighted. And these will provide meaningful benefit as we execute our high priority action. Over time, these actions will enable us to focus our efforts and resources on our optimized portfolio while creating meaningful value for shareholders. We will continue to make steady progress on these initiatives to fully unlock the potential of our business.

We look forward to providing updates on our progress in the coming quarter.

And with that, I will turn the call over the operator to conduct the Q&A session.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jim Ricchiuti with Needham and Company. Please go ahead.

James Ricchiuti -- Needham and Company -- Analyst

All right. Thank you. Good afternoon. First question I had was just with respect to the performance in the industrial vertical, I wonder if you could maybe shed a little bit more light, because I assume that that vertical encompasses a number of different customers and maybe some subsets. So where are you seeing some of the weakness, and/or where has it fallen short of your expectation?

Jeffrey W. Benck -- President and Chief Executive Officer

Yes. So, this is Jeff. I'll take the lead, and I'm going to let Roop add some color. We -- the number of factors as you've said that's contributing to it. If you look at our current quarter revenue and the outlook, where it's flatter, we believe this growth opportunity here. So when we say we didn't perform as expected, we really intended to see growth here and expect to be able to grow it in the future.

But we have had a number of customer wins that we've had here that have taken longer to ramp for a number of issues. Sometimes it's a design issue with a particular customer's product that they're trying to develop. In some cases, the company dynamics and their plans to go--market. So we have seen some elongated programs that have not ramped as quickly. So that's certainly one factor.

When you look at our bookings performance, because they were industrial, certainly a contributor to a weaker bookings quarter. I think some of that execution on our pipeline and our ability to have the right interactions to close that. And we've made a number of changes there. We have a new industrial sector VP coming on board that I think it is -- I'm excited about and I think that's going to help quite a bit there.

In general, we don't see it really an industry economic slowdown per se in the industrial. But just when you look at our participation and where we play there, we were trying to expand into other areas, right. We were strong in the oil and gas measurement area and some of the segments that we're in may not have the highest growth profile of the complete sector. And as we've expanded it, we have gotten these wins, but they're certainly taking longer. You want to add to that, Roop?

Roop K. Lakkaraju -- Chief Financial Officer

No, I think you covered it well, Jeff.

Jeffrey W. Benck -- President and Chief Executive Officer

Okay.

James Ricchiuti -- Needham and Company -- Analyst

And Jeff, just with respect to Semi-Cap, have you basically now met with all of your major customers and it sounds like the way you're thinking about the recovery is the way we're hearing a lot of folks talk about it, more second half 2020. But by the same token, it sounds like -- do you get any indication as to particular leading indicators that you're looking at that might signal when this is actually really starting to happen?

Jeffrey W. Benck -- President and Chief Executive Officer

Yes. So, let me comment on that and go a little deeper. I have had a lot of customer interactions here, so that's been good, and I said I was going to go after that. I haven't met with a rude customer we have here, so I got more work to do there. But from the discussions I have had and some of the really important ones, there is definitely a belief that 2020 will be better than 2019.

And we feel pretty strongly, and I think it's been pretty consistent that that we'll see improvement in 2020. But we also would kind of look for where does the bookings in the overload start to happen, and we're also sort of saying which we think is consistent with what we've seen and heard -- when I heard from the customer that it's probably more back end loaded in 2020, second half 2020.

That being said, I'd really like this space. I like our strategic position. We have -- had strong bookings in this segment. We believe that we're gaining share. We've seen some consolidation of suppliers that have come to us. And we've also been asked by customers that, hey, we want you there as a strategic supplier when this recovery happens, and it could be pretty significant, as we've seen in the past.

So from that standpoint, we're still bullish on this segment and our position, but it is definitely taken longer. It's been a more pronounced downturn here. And we always -- last quarter, I think we said second half of '19 probably wasn't going to be there. And we're just reconfirming that, that is very flat for us in '19. And frankly it might have been down further had we not gained some ground.

Roop K. Lakkaraju -- Chief Financial Officer

Yes. Jim, this is Roop. I'll just add two additional things. I think to your question of leading indicators, obviously, the comments that that our customers who are some of the leading companies there -- what they might say will give us a better indication in those customer conversations. The other thing is Jeff mentioned, I'll just echo is kind of the order load and how that propels and will obviously give us confidence as to when we start to see that recovery, and we'll obviously communicate that at the appropriate time.

James Ricchiuti -- Needham and Company -- Analyst

Thanks. I'll jump back in the queue. Thank you.

Jeffrey W. Benck -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] The next question is a follow up from Jim Ricchiuti with Needham and Company. Please go ahead.

James Ricchiuti -- Needham and Company -- Analyst

Just with respect to the facility consolidation, I wonder if you could talk a little bit about either the types of customers you're servicing in those two facilities, and I just want to again go over the time line for closing those facilities, and when we might anticipate some of the benefits from a cost saving starting to flow in?

Jeffrey W. Benck -- President and Chief Executive Officer

Yes. So let me talk about the strategic context, and then I'll have Roop comment on the financial impact. This is tough decisions and we don't want to impact our team. But we've been going through this strategic assessment and looking at a lot of things, our utilization, the scale of our site, geographic placement, cost and customer needs. I think I mentioned that in the script. These sites do support really all sectors. So it's not specific to a sector. They even have some Semi-Cap business there as well, but it's small.

But when we just looked at our strategy and looked at the network, considering all those elements, we made the decision that we would close these sites. It's not a tremendously large number of customers, we're talking less than 20 customers across both sites. But we really are looking to move a majority of the programs with those customers to other sites where those customers already -- many already exist, and we can kind of consolidate with program teams then and be more efficient and yet though service those customers in a great way. When you look at the actual time line, our communication is very much about having the customers transitioned in the first quarter of 2020.

Then Roop, maybe you can comment a little bit on.

Roop K. Lakkaraju -- Chief Financial Officer

Yes. Just to finish off the thought there, as Jeff said, the timing is for customers to be transitioned by the end of Q1 2020. We expect final closure details to be in Q2 2020 in terms of lease termination, these sort of things. Jim, I think you asked also about savings and timing. As we indicated -- as I indicated, my prepared comments, we expect the annualized $5 million savings. We think those savings will start to kick in, in the Q3 time frame of 2020.

James Ricchiuti -- Needham and Company -- Analyst

Great. Okay. Thanks a lot.

Jeffrey W. Benck -- President and Chief Executive Officer

Yes. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Lisa Weeks for any closing remarks.

Lisa K. Weeks -- Vice President of Strategy and Investor Relations

Yes, I just wanted to put a reminder that Benchmark will be supporting the Needham Advanced Industrial Tech Day on August 14 in this year and also the Sidoti Fall Conference in September 25. So both of those will be in Midtown, New York, and we look forward to seeing you there. With that, we thank you all for joining our call today. And if you have any questions, please feel free to reach out to me and I will be happy to follow up with anything that you need. Thank you.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Lisa K. Weeks -- Vice President of Strategy and Investor Relations

Jeffrey W. Benck -- President and Chief Executive Officer

Roop K. Lakkaraju -- Chief Financial Officer

James Ricchiuti -- Needham and Company -- Analyst

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