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Date
Wednesday, April 29, 2026 at 5 p.m. ET
Call participants
- President & Chief Executive Officer — David Moezidis
- Chief Financial Officer — Bryan R. Schumaker
- Vice President, Investor Relations — Paul Mansky
Takeaways
- Revenue -- $677 million, up 7% year over year, at the higher end of prior guidance.
- Non-GAAP EPS -- $0.58, which was also at the upper end of the $0.53 to $0.59 guidance range.
- GAAP gross margin -- 10.3%, up 20 basis points year over year but down 30 basis points sequentially, attributed to volume changes.
- Non-GAAP operating margin -- 4.8%, a 20 basis point increase year over year and 70 basis point decrease sequentially, due to lower revenue and increased variable compensation.
- Non-GAAP effective tax rate -- 27.4%, slightly above guidance due to jurisdictional mix.
- Semi cap revenue -- Down slightly year over year but increased 12% sequentially; management cited improvement as "broad-based."
- Industrial and A&D revenue -- Each declined 32% year over year, matching internal expectations.
- Medical revenue -- Grew 24% year over year, with momentum expected to continue in coming quarters.
- AC&C revenue -- Up 41% year over year, driven by initial ramp of AI-related wins leveraging liquid cooling capabilities.
- Operating cash flow -- $47 million generated; Free cash flow -- $29 million, despite increased inventory and capital investments.
- Net cash position -- $121 million positive at quarter end; Cash balance -- $325 million, up $3 million sequentially.
- Available liquidity -- $486 million borrowing capacity, with $145 million outstanding on term loan, and $60 million on revolver.
- Capital expenditures -- $18 million invested; full-year capital spend expected at the upper end of the 2.0%-2.5% range.
- Shareholder returns -- $6 million distributed in cash dividends, $6 million in share repurchases, and $117 million remaining under repurchase authorization.
- Cash conversion cycle -- 67 days, a 19-day year-over-year improvement, attributed to disciplined inventory management, with inventory turns rising from 4.0 to 4.8.
- Second quarter guidance -- Revenue of $700 million to $740 million (12% year-over-year growth at midpoint); non-GAAP gross margin 10.4%-10.6%; non-GAAP operating margin 5.1%-5.3%; non-GAAP EPS $0.65-$0.71; tax rate 26%-27%; average share count approximately 36.3 million.
- Full-year revenue outlook raised -- Now expected at 9%-10% growth, with earnings and operating income projected to outpace revenue growth.
- Penang 4 capacity expansion -- Facility remains on schedule to begin operations in Q3, supporting growth in higher-margin precision technology for semi cap clients.
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Risks
- CEO Moezidis stated, "we are starting to see select lead times increasing in pockets, and we are seeing the same challenges as pretty much everybody in the memory space," indicating emerging component supply constraints.
- Management noted that automation and HVAC end markets within Industrial experienced "softer conditions," affecting sector results.
- CFO Schumaker flagged that non-GAAP operating margin fell 70 basis points sequentially, primarily due to "lower revenue and higher variable compensation."
- Defense sector expected to "moderate in 2026, driven primarily by program timing within defense," which could impact near-term growth rates in Aerospace and Defense.
Summary
Benchmark Electronics (BHE +5.22%) reported results and guidance that market participants may interpret as signaling accelerating end-market demand and solid execution of strategic priorities, with pronounced revenue contributions from Medical, AC&C, and an improving semi cap segment. The company raised its full-year revenue growth outlook to 9%-10%, outpacing its previous guidance, and expects operating income and earnings to grow faster than top-line revenue throughout 2026. Cash flow generation remained robust, fueling both capacity expansion—most notably Penang 4 for semi cap—and ongoing shareholder returns via dividends and repurchases, while inventory management further shortened the cash conversion cycle. Sector-specific investments and bookings momentum position Benchmark Electronics to benefit from new program ramps and customer diversification, while management continues to monitor emerging supply chain headwinds and sectoral volatility.
- CFO Schumaker said, "We expect the bottom line to grow at roughly 1.5x to 2.0x of revenue, dropping through to EPS," pointing to anticipated operating leverage as growth accelerates.
- CEO Moezidis characterized recent semi cap wins as driven by both increased "share of wallet with our existing customers" and new client additions, underpinned by long-term investment in technology and capacity.
- Management expects defense and space bookings to support a return to growth in Aerospace and Defense as programs ramp "later in the year and into 2027."
- High-performance computing (HPC) and clustered AI solutions in AC&C are cited by Moezidis as new growth drivers, enabled by the company's liquid cooling technologies, with additional momentum expected entering 2027.
Industry glossary
- AC&C: Advanced Computing & Communications; Benchmark Electronics segment focused on AI, cloud infrastructure, and high-performance computing hardware.
- Semi cap: Semiconductor Capital Equipment; systems and components used in semiconductor manufacturing.
- PT: Precision Technology; refers to Benchmark Electronics' machining and high-precision manufacturing capabilities, especially within semi cap.
- Penang 4: The company's fourth manufacturing facility in Penang, Malaysia, positioned for high-margin semi cap production and capacity expansion.
Full Conference Call Transcript
Paul Mansky: Thank you, Operator, and thanks, everyone, for joining us today for the first quarter 2026 earnings call. With us today are David Moezidis, our President and CEO, and Bryan R. Schumaker, our CFO. After the market closed, we issued an earnings release pertaining to our financial performance for 2026, along with a presentation which we will reference on this call. Both are available under the Investor Relations section of our website. This call is being webcast live, a replay of which will be available approximately one hour after we conclude. The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the appendix to the presentation.
Please take a moment to review the forward-looking statements disclosure on Slide 2 of the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks that are not historical statements of fact are forward-looking statements, which involve risks and uncertainties as described in our press releases and SEC filings. Actual results may differ materially from these statements. Benchmark Electronics, Inc. undertakes no obligation to update any forward-looking statements. For today's call, David will start with an overview followed by Bryan's further detail of our Q1 results and guidance. We will then turn the call back to David to share his perspective on sector trends and closing remarks.
If you would please turn to Slide 4, I will turn the call over to our CEO, David Moezidis.
David Moezidis: Thank you, Paul. Good afternoon, and thank you for joining us today. In the first quarter, we delivered revenue of $677 million and EPS of $0.58, both coming in towards the higher end of our expectations. Our first quarter performance reflects solid execution across the business and meaningful progress in our strategic priorities. As we look ahead, the combination of improving end market conditions, and our momentum in semi cap and AC&C and the operational discipline we have been emphasizing gives us greater confidence in our outlook for the year. We now expect full year revenue growth to be in the 9% to 10% range, up from our prior expectations of mid-single-digit growth.
We also expect EPS growth to outpace revenue as we remain focused on execution and disciplined expense management. Turning to Slide 5. During the quarter, we saw evidence of improvement across a broad cross section of our end markets, reflecting the benefits of our well-balanced portfolio. Medical revenue continued to accelerate year over year, and semi cap returned to double-digit sequential growth. Within AC&C, the AI-related wins we have discussed on prior calls have begun to ramp, and our confidence continues to improve. Meanwhile, performance across the rest of the portfolio was in line with our expectations. These are early but clear signs that the customer-first initiatives we began implementing over the past two years are taking hold.
That shows up in more disciplined customer engagements, clearer program prioritization, and more consistent execution across the portfolio. We also delivered another quarter of solid bookings performance. This consistency reinforces our confidence in both the pacing of the year and the sustainability of our growth outlook. Operationally, we continue to drive leverage with both operating income and earnings growing faster than revenue year over year. At the same time, our sustained focus on working capital efficiency drove another quarter of strong free cash flow despite stepped-up investments to support future growth. While we remain mindful of the broader environment, demand signals are stronger today than they were 90 days ago.
Regardless, our priorities do not change: stay close to our customers, execute with consistency, and continue to build a more resilient operating model. In short, we are encouraged by how the year has started and by the momentum we are seeing as we move forward. With that, I will turn the call over to Bryan to walk through the financial details for the quarter.
Bryan R. Schumaker: Thank you, David, and good afternoon, everyone. Please turn to Slide 6. Revenue in the quarter was $677 million, up 7% year over year and above the midpoint of our prior guidance of $655 million to $695 million. Non-GAAP EPS was $0.58, which was at the higher end of our prior guidance range of $0.53 to $0.59. As a reminder, our non-GAAP results exclude stock-based compensation, amortization of intangible assets, restructuring, impairment and other items as detailed in Appendix 1 of this presentation. For the first quarter, GAAP gross margin was 10.3%, improving 20 basis points year over year and decreasing 30 basis points sequentially, primarily due to volume.
Non-GAAP operating margin of 4.8% was also up 20 basis points year over year, but down 70 basis points sequentially, driven by lower revenue and higher variable compensation. Our first quarter non-GAAP effective tax rate was 27.4%, slightly above our prior guidance range driven by jurisdictional mix. Please turn to Slide 7 for the first quarter 2026 revenue performance by sector. Semi cap revenue, while down slightly year over year, increased 12% sequentially, reflecting improved momentum as we progressed through the quarter. As expected, Industrial and A&D moderated year over year, down 32%, respectively. Meanwhile, Medical revenue grew 24% and AC&C grew 41% year over year. Please turn to Slide 8 for our trended non-GAAP financials.
Year over year, we saw a consistent improvement across revenue, profitability and earnings. This reflects continued discipline in execution and mix. Although these metrics were sequentially down this quarter due to seasonal volume and variable expenses, we expect both sequential and year-over-year improvement for revenue, profitability and earnings throughout the balance of 2026. Please refer to Slides 9 and 10 for a discussion of our balance sheet, cash flow and working capital trends. In the first quarter, we generated $47 million in operating cash flow, and $29 million in free cash flow, despite investing in both inventory and capital equipment to support our future growth. As of March 31, we were $121 million net cash positive.
Our cash balance was $325 million, representing a $3 million sequential increase. We had $145 million outstanding on our term loan and $60 million outstanding on our revolver, leaving $486 million in available borrowing capacity. We invested approximately $18 million in capital expenditures during the quarter. Our fourth PT building in Penang remains on track to begin operations in Q3. Based on the momentum we are seeing in the business, we expect full year 2026 capital spending to track to the higher end of the 2.0% to 2.5% range. Demonstrating our continued commitment to return value to shareholders, we distributed $6 million in cash dividends and repurchased $6 million in stock during the quarter.
At quarter end, we had approximately $117 million remaining under our share repurchase authorization. Our cash conversion cycle for the quarter was 67 days, which is a 19-day improvement year over year and consistent with our strong fourth quarter performance. A key contributor to that progress was disciplined inventory management. Inventory days declined 14 days year over year even as we grew the top line over the same period. This discipline translated into an improvement in turns to 4.8 as compared to 4.0 in the prior-year period. Please turn to Slide 11 for our second quarter guidance.
For Q2 2026, we expect revenue to be within a range of $700 million to $740 million, representing 12% year-over-year growth at the midpoint. We expect non-GAAP gross margin to be between 10.4% to 10.6% and non-GAAP operating margin to be between 5.1% to 5.3%. We anticipate GAAP expenses to include approximately $6.1 million of stock-based compensation and $800,000 to $1.2 million of non-operating expenses, including amortization, restructuring and other charges. Our non-GAAP diluted earnings per share is expected to be in the range of $0.65 to $0.71. Interest and other expenses are expected to be approximately $3.5 million. We continue to advance initiatives aimed at structurally improving our tax rate over the long term.
However, for the second quarter and full year, we expect our effective tax rate will be in the range of 26% to 27%. Finally, for the quarter, our weighted average share count is expected to be approximately 36.3 million. With that, I would like to turn the call back over to David for our outlook by market sector and closing remarks.
David Moezidis: Thanks, Bryan. Let us turn to Slide 12 for our outlook by sector. Within semi cap, since late last year, we have been sharing our view that a potential recovery in 2026 was showing more promise. This became more evident in the first quarter as revenues were stronger than expected, increasing double digits sequentially. Over the past several years, we supported existing programs, secured new wins, and invested in capacity, including investments such as our Penang 4 facility, in anticipation of an industry upturn. Looking ahead, we expect this to translate into both sequential and year-over-year growth throughout the year. Within Industrial, revenue was in line with our expectations, and we see modest growth in 2026.
Within the sector, we are seeing good performance from transportation and agriculture, while automation and HVAC saw softer conditions. Overall, we remain positive on the outlook for the sector longer term. Turning to Aerospace and Defense. Our commercial air business continues to perform well. After two years of double-digit growth, we expect A&D to moderate in 2026, driven primarily by program timing within defense. Importantly, bookings activity across defense and space remains strong, positioning the sector for a return to growth as these programs are expected to ramp later in the year and into 2027. Medical delivered another standout quarter in Q1, and we expect this performance to continue over the next several quarters, supporting our growth for the year.
I am particularly encouraged by the breadth of the growth drivers in Medical, which includes our competitive wins, strong end markets, and new program ramps. Lastly, in AC&C, we delivered exceptional year-over-year results in the quarter, driven by the initial ramp of AI-related wins we have discussed over the past several quarters. These wins were enabled in part by our liquid cooling capabilities, which supported our HPC programs and are now seeing traction in clustered AI solutions. While still early in the ramp, our visibility continues to improve, leading us to expect strong growth from this sector in 2026.
As a validation that our customer-first initiatives are working, I am pleased that we were recently named h Enterprises’ 2026 Manufacturing Partner of the Year, a meaningful acknowledgment from a strategic customer. In summary, turning to Slide 13, we are pleased with our first quarter performance and how 2026 is taking shape. The progress we are seeing did not start in Q1. It reflects the work we have put in over the past several years, which gives us the confidence to raise our full year revenue outlook to 9% to 10%, with operating income and earnings growing faster than revenue both sequentially and year over year throughout the remainder of the year.
At the same time, we remain committed to investing in the business, with customer satisfaction as our central focus. This includes continued capacity expansion around the world as well as ongoing investment in our leadership and capabilities. Whether capacity, talent, or manufacturing efficiency, these investments share a common objective: to deepen customer engagement, accelerate innovation, and support the opportunities ahead of us. We will now open the call for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press the star and then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. Your first question comes from the line of Maxwell Michaelis with Lake Street Capital Markets. Please go ahead.
Maxwell Michaelis: Hey, thanks for taking my questions, and congrats on the quarter as well. First one for me, I want to stick to semi here. With Penang 4 opening up in Q3, can you remind me how much excess capacity that will bring online?
David Moezidis: Max, we do not discuss the specific capacity coming online, but what we can tell you is the additional capacity that is coming online is setting us up to serve our customers inside of 2026 and positioning us for further growth in 2027.
Maxwell Michaelis: Perfect. And then sticking with semi, when we think about this strength going throughout 2026, are you seeing this broad-based strength across your entire customer base, or is it kind of a onesie-twosie deal?
David Moezidis: This is broad-based. We started hearing the signals at Semicon in October, and I shared that information in one of our earlier calls. Those signals started materializing into orders, and now we are up and running as you can see with our performance.
Maxwell Michaelis: Yeah. And then last one, just with AC&C. You talked about strong momentum with enterprise AI clusters, both on-prem and cloud infrastructure. Any other use cases you can touch on, or maybe potential visibility into future orders that you are in conversations with right now?
David Moezidis: Those are the two key drivers, but we are also anticipating, as we exit the year and enter 2027, HPC is going to start picking up on its own and contributing nicely as well.
Maxwell Michaelis: Alrighty. Thanks, guys.
David Moezidis: Thank you.
Operator: And the next question comes from the line of Steven Bryant Fox with Fox Advisors. Please go ahead.
Steven Bryant Fox: Hi. Good afternoon. I had a couple of questions as well. I was wondering if you could dial in on the operating leverage you are seeing as per the guidance for Q2. Is there any sort of unusual headwinds, like as you ramp capacity, that maybe is limiting that? And as your mix shifts, how do we think about operating leverage as you get into the second half of the year? And then I have a follow-up.
Bryan R. Schumaker: Thanks for the question, Steven. We expect the bottom line to grow at roughly 1.5x to 2.0x of revenue, dropping through to EPS. As you get throughout the year, operating margin will be impacted a little bit, given we expanded the overall growth outlook, by some variable compensation and a little bit of impact from other corporate expenses due to some ramp and other items. But overall, we feel good about the back half and being able to leverage up on operating margin as we continue throughout the year. You see some of that from Q1, our guide in Q2, and then throughout the remainder of the year.
Steven Bryant Fox: Great. That is helpful. And then as a follow-up, David, you mentioned new programs that you have been working on for years—capabilities, etc.—in the semi cap space. Can you give us a better sense of what is coming to fruition now that maybe changes the mix or supports the growth over the next six to twelve months? Thanks.
David Moezidis: I would frame it in two areas. One is we are increasing our share of wallet with our existing customers. And two, we are actually winning new share with some new customers—newer brands, newer logos, if you will. It is contributing from both fronts. From our perspective, this is an area that we made investments in over the course of the last several years, and we are starting to see the fruits of those labors.
Steven Bryant Fox: And if I could just follow up on that real quick. When you talk about some of these wins, are the products or the services you are providing in the future a similar mix to what you have done over the last two to three years, or are there any changes on that front?
David Moezidis: I would say it is very similar for the most part. You will see products change with regard to the level of complexity, but how we serve our customers in the semiconductor capital equipment space is a combination of our precision technology solutions as it relates to machining and such, as well as electronic, mechatronics, system integration, and PCBA assembly. It is really the total breadth of services that we are able to bring to bear for our customers.
Steven Bryant Fox: Great. That is super helpful. Thanks, and congratulations on the quarter.
David Moezidis: Thank you, Steven.
Operator: And the next question comes from the line of Anja Soderstrom with Sidoti. Please go ahead.
Anja Soderstrom: Hi. Thank you for taking my questions, and congrats on the quarter here. In semi cap, you say you expect sequential growth. But do you expect the second half to be much stronger still?
David Moezidis: We do. Hi, Anja, this is David. We do not typically provide specific sector growth rates, but we decided for this sector specifically, because there have been a lot of questions, to share that we will be somewhere around the mid-teens from an overall growth perspective in this space.
Anja Soderstrom: Okay. And for AC&C, that was very strong for the quarter. Do you expect that to step up, or is it going to be on the same sort of level as the first quarter?
David Moezidis: As we continue our ramp, we expect it to continue to improve. To what extent, we will report back on that next quarter.
Anja Soderstrom: Okay. And then just remind me again for Penang. Is that higher-margin business, or is it corporate average?
Bryan R. Schumaker: Yes, it is higher margin. It is primarily focused on precision technology semi cap, so that is why it brings higher margins. Considering our overall portfolio, you have growth in the semi cap space and also AC&C, which is on the lower end, so they kind of offset. But as far as PT goes and that expansion, it is on the semi cap, the higher end.
Anja Soderstrom: Okay. Thank you. That was all for me.
David Moezidis: Thanks, Anja.
Operator: Once again, if you would like to ask a question, please press star one.
Operator: Your next question comes from the line of Anja Soderstrom with Sidoti. Please go ahead.
Anja Soderstrom: Hi. Sorry, I just had one more I wanted to squeeze in. Do you see any sort of difficulty in the supply chain or component availability at all?
David Moezidis: Anja, we are starting to see select lead times increasing in pockets, and we are seeing the same challenges as pretty much everybody in the memory space. We are doing our very best to get in front of it and make sure that we manage the supply chain properly.
Anja Soderstrom: Okay. Good. Thank you. That was all for me.
Bryan R. Schumaker: Thanks, Anja.
Operator: We do have a follow-up question coming from the line of Steven Bryant Fox with Fox Advisors. Please go ahead.
Steven Bryant Fox: Hi. Thanks for taking the follow-up. I was just curious—maybe some of this takes a little time to matriculate—but how do you think the conflict in Iran is impacting defense program run rates, maybe not this quarter, but over the back half of the year? Is that something we should think about beyond just the secular trends that you are riding? Thanks.
David Moezidis: Our view is that even if you have immediate resolution, defense is going to perhaps remain strong for the next 12, 18 to 24 months as those investments will need to be there for replenishment purposes. That is my opinion on that. From an order perspective and bookings, we continue to see momentum. We are winning defense programs, and as I shared in my script, we are also winning in space. We remain very positive in this sector, and we see it picking back up in 2027.
Steven Bryant Fox: Great. Thanks again.
David Moezidis: Sure, Steven.
Operator: I am showing no further questions at this time. I would like to turn it back to Paul Mansky for closing remarks.
Paul Mansky: Thank you, Operator, and thank you, everyone, for participating in Benchmark Electronics, Inc.’s first quarter 2026 earnings call. For updates to upcoming investor conferences and events, including a replay of this call, please refer to the Events section of our IR website at bench.com. With that, thank you again for your support, and we look forward to speaking with you soon.
Operator: This concludes today's conference call. You may now disconnect.
