Benchmark Electronics Inc. (NYSE:BHE) Q3 2020 Earnings Conference Call - Final Transcript

Oct 28, 2020 • 05:00 pm ET

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Benchmark Electronics Inc. (NYSE:BHE) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Jeffrey W. Benck

said, Benchmark has a great cultural foundation that starts with a committed workforce who wants to deliver for our customers. Our investments in this initiative will include focus on better self-service tools, increased empowerment and critical skills development to ensure the talent the organization needs in future leaders can be found within our own diverse team.

This includes the ongoing commitment to advancing diversity and inclusion efforts at all levels in the company, which we are enhancing as part of our ongoing ESG focus. For technology companies like Benchmark, competitiveness requires innovation, fresh ideas and creative thinking, all areas fueled by diversity. If you now please turn to slide 16. The attentive work on these strategic priorities formed the foundation for setting our midterm target model through the year 2022. The company had a great start at pivoting the higher-value markets before my arrival, and we are now at our target mix between traditional and higher-value splits. The right markets and customer selection remains key to our strategy.

Setting COVID and the resulting macroeconomic uncertainty aside, we believe that we can grow revenue at a 5% compound annual growth rate over the next two years by growing our current accounts and ramping new programs with our targeted new customers. While we're overcoming some pretty significant revenue decline headwinds in our aerospace and oil and gas markets and other demand softness in our installed base due to the pandemic recession, our growth expectations speak to the strength in our recent bookings and outsourcing wins. As the economy picks up later in 2021 and through 2022, we expect our growth can accelerate further with this new win momentum and recovery in our customer installed base.

With our current mix of business, the success of ongoing operational excellence initiatives and our current global footprint, we are targeting gross margins in the range of 9.3% to 9.7%. On the SG&A expense line, I'm committed to effective overhead management and have taken the necessary actions to drive an efficient organization that is rightsized to support our customers and employees effectively. As the company expands and needs greater investments and capabilities, we will keep expenses aligned to our future revenue growth.

The resulting non-GAAP operating margin target range will be between 3.4% to 3.8%. With this model, we feel comfortable that we can grow earnings faster than revenue. As operating margins improve, we see resulting improvement in ROIC. I am confident and remain excited about our team's ability to capitalize on the growth opportunities in our diverse end markets, where our deal pipeline in win rate is increasing, and we remain focused on executing our ongoing initiatives to increase incremental value for our customers, employees and shareholders.

And with that, I will now turn the call over to the operator to conduct our Q&A. Operator?