Electronics manufacturing services provider Benchmark (NYSE:BHE) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 6.5% year on year to $631.8 million. Next quarter’s revenue guidance of $640 million underwhelmed, coming in 4.3% below analysts’ estimates. Its non-GAAP profit of $0.52 per share was 4% above analysts’ consensus estimates.
Revenue: $631.8 million vs analyst estimates of $640 million (6.5% year-on-year decline, 1.3% miss)
Adjusted EPS: $0.52 vs analyst estimates of $0.50 (4% beat)
Revenue Guidance for Q2 CY2025 is $640 million at the midpoint, below analyst estimates of $668.8 million
Adjusted EPS guidance for Q2 CY2025 is $0.55 at the midpoint, below analyst estimates of $0.56
Operating Margin: 3.7%, in line with the same quarter last year
Free Cash Flow Margin: 4.3%, down from 6.4% in the same quarter last year
Market Capitalization: $1.32 billion
StockStory’s Take
Benchmark’s first quarter results reflected the impact of ongoing tariff uncertainty and evolving customer demand patterns across its key sectors. CEO Jeff Benck attributed the company’s sales decline to delayed customer decisions stemming from the dynamic global trade environment, but pointed to double-digit growth in semiconductor capital equipment (semi-cap) and aerospace & defense (A&D) as evidence of sector-specific momentum. Benck noted, “These challenges create opportunities for us as we help customers optimize their global supply chain for the most efficient distribution of their products.”
Looking ahead, management provided cautious guidance, citing lingering macroeconomic uncertainty and the potential for further disruptions from tariffs. CFO Bryan Schumaker highlighted expectations for a slow first half recovery, with improved performance anticipated in the second half as medical and computing sectors potentially return to growth. The company stressed its focus on protecting margins and generating free cash flow, as well as the strategic importance of its U.S. and North American manufacturing footprint to help customers adapt to shifting trade policies.
Key Insights from Management’s Remarks
Benchmark’s leadership discussed how shifting global trade conditions, sector-specific demand trends, and operational execution influenced the quarter’s results. The company’s ability to protect gross margins despite softer sales was a recurring theme, supported by targeted investments and ongoing wins in prioritized markets.
Semi-cap growth continues: The semi-cap sector grew 18% year-over-year, driven by new program wins and share gains, although management cautioned about ongoing risks from restrictions on advanced equipment sales to China and unpredictable customer purchasing patterns due to tariffs.
A&D sector resilience: Aerospace & defense revenue increased 15% year-over-year, supported by strong defense demand and new program ramps, with ongoing bookings momentum in both engineering and manufacturing.
Medical softness persists: Medical sector performance was hampered by ongoing demand softness and delayed customer launches, with management expressing optimism for improvement in the second half as inventory normalization and new program wins materialize.
Industrial sector mixed signals: Industrial revenues were slightly down, but the company reported its strongest new bookings performance in this segment, citing new customer wins in digital displays, geospatial solutions, and automation.
Tariff-driven supply chain shifts: Management emphasized that tariffs and global trade actions are causing customers to reconsider where they manufacture products, leading to elongated sales cycles and increased interest in Benchmark’s North American facilities.
Drivers of Future Performance
Management expects the near-term outlook to remain shaped by macroeconomic uncertainty, customer hesitancy driven by tariffs, and varied end-market recoveries, with a gradual improvement anticipated in the second half of the year.
Tariff policy impacts: Ongoing tariff negotiations and executive orders are likely to continue influencing customer supply chain decisions and the timing of new program ramps, particularly in sectors reliant on cross-border trade.
Sector recovery timelines: Benchmark anticipates sequential growth in the second half of the year, contingent on improvements in the medical and computing markets, and continued strength in semi-cap and A&D, though recovery speed remains uncertain.
Margin and cash flow priorities: The company aims to maintain non-GAAP gross margins above 10% and generate positive free cash flow, balancing strategic investments with careful expense management to offset revenue volatility.
Top Analyst Questions
Jim Ricchiuti (Needham & Company): Asked whether customer shipment pauses and pull-ins would create a net headwind; management said these effects are largely offsetting, creating more uncertainty than directional bias in near-term results.
Steven Fox (Fox Advisors): Queried about drivers of expected second half recovery beyond semi-cap and A&D; management named medical and computing as areas showing early signs of improvement, while industrial remains uncertain.
Jaeson Schmidt (Lake Street): Sought clarity on whether medical sector rebound would stem from channel replenishment or new programs; management expects both inventory normalization and competitive wins to contribute.
Anja Soderstrom (Sidoti): Asked about North American capacity and flexibility to relocate projects; CEO Benck emphasized available headroom and customers’ growing interest in nearshoring due to tariffs.
Melissa Fairbanks (Raymond James): Questioned the impact of elongated sales cycles on revenue timing and execution; management acknowledged delays but noted competitive takeaways could allow for faster ramps when decisions are made.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the pace at which medical and computing sectors return to growth and whether new program launches translate into revenue, (2) evidence of improved bookings converting to sales in the industrial segment, and (3) the company’s ability to mitigate tariff-related risks through its North American production network. Execution on expanding capacity in Penang and the success of competitive takeaways will also be important indicators.
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