Lisa Weeks – Vice President-Strategy and Investor Relations Paul Tufano – President and Chief Executive Officer Roop Lakkaraju – Chief Financial Officer.

Jim Suva – Citi Mitch Steves – RBC Capital Markets.

Good day, ladies and gentlemen, and welcome to the Benchmark Electronics Fourth Quarter 2017 Earnings Conference Call. At this time all participants are in a listen only mode. [Operator Instructions] Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today’s conference is being recorded.

I’d now like to introduce your host for today’s conference, Ms. Lisa Weeks, VP of Strategy and Investor Relations. Ma’am, please go ahead..

Thank you, operator, and thanks, everyone, for joining us today for Benchmark’s fourth quarter and full year 2017 earnings call. With me this afternoon, I have Paul Tufano, CEO and President; and Roop Lakkaraju, CFO.

Paul will provide introductory comments, and Roop will provide a detailed review of our fourth quarter financial results and first quarter outlook. We will conclude our call with a question-and-answer session.

After the market close today, we issued an earnings release highlighting our financial performance for the fourth quarter and 2017, 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 turn to Slide 2 in the presentation where we will discuss forward-looking statements. During our call, we will discuss forward-looking information.

As a reminder, any of today’s remarks that are not statements of historical facts 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, Paul Tufano..

about 33% of capital expenditures; 34% for M&A; and 33% for share repurchase, which is approximately 40% – 48% of our free cash flow. In the fourth quarter, we repurchased $23 million of our stock and we have continued to purchase through a 10b5 plan, throughout and during the first quarter.

As of yesterday, our year-to-date 2018 purchases totaled approximately $15 million. I now would like to turn the call over to Roop Lakkaraju, our new CFO. Roop has been with us since early January, and previously was the CFO of Maana, which was an enterprise software company.

I have known Roop for over 10 years, and he was previously my head of finance and Interim CFO when we were both at Solectron. It is a great pleasure to have them as part of the Benchmark here. I would now turn the call over to Roop, who will provide you with some color on our financials.

Roop?.

IBM at 11.5%; and Applied Materials at 10%. Turning to Slide 21, where I will provide a few updates on cash flow and working capital highlights. We generated $56 million in cash from operations for the quarter and $146 million for 2017. Free cash flows were $39 million for the fourth quarter and $91 million for full year 2017.

Our cash balance was $743 million at December 31, with $69 million available in the U.S. Inventory at December 31 was $397 million, a decrease of $25 million from September 30. Our accounts receivable balance was $437 million, an increase of $25 million from September 30. Payables were up $28 million quarter-over-quarter.

Please turn to Slide 22 to review our cash conversions cycle performance. Our cash conversion cycle is 60 days for Q4 which is a 14-day improvement compared to the fourth quarter of 2016, and exceeded our target of 70 days exiting 2017.

Our ongoing cash conversion cycle days will continue to range between 73 days and 68 days to support our long-term revenue growth. Turning to Slide 23 for a summary of expected U.S. tax reform impact to Benchmark.

As highlighted by Paul, during the fourth quarter, we recorded an estimated tax charge of $98 million or $0.95 per share related to the 2017 Tax Reform Act.

The expense consist of an estimated $102 million mandatory repatriation tax charge on undistributed foreign earnings or transition toll tax; an estimated $4 million tax credit for adjustments to our U.S. deferred tax assets and liabilities.

Our preliminary estimate of the transition toll tax and remeasurement of our deferred tax assets and liabilities is subject to finalization of our analysis related to certain matters such as developing interpretations of the provisions of the 2017 Tax Reform Act, changes to certain estimates and amounts related to the earnings and profits of certain subsidiaries and the filing of our tax returns.

U.S. Treasury regulations administrative interpretations or court decisions interpreting the 2017 Tax Reform Act may require further adjustments and some changes in our estimate.

The final determination of the transition toll tax and the remeasurement of our deferred assets and liabilities will be completed as additional information becomes available, but no later than one-year from the enactment of the 2017 Tax Reform Act.

We’re currently evaluating various scenarios for our foreign cash and our need for that cash as a result of the U.S. tax reform. In the event we do repatriate cash, applicable foreign withholding taxes and additional U.S. federal and state taxes may apply. The non-GAAP effective tax rate for 2018 is expected to range from 16% to 18%.

This effective tax rate range incorporates the effect from the global intangible low-taxed income, or GILTI, tax, which we estimate will increase our effective tax rate by approximately 3% to 4%. Please turn to Slide 24 for a review of our first quarter 2018 guidance. We expect revenue to range from $585 million to $605 million.

Our non-GAAP diluted earnings per share are expected to range $0.34 to $0.38. Implied in this guidance is a 3.6% to 3.9% operating margin range. The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring changes. For sequential modeling information for the first quarter, please turn to Slide 25.

We expect Industrial revenues to be down 10% in Q1, which is reflective of ongoing lack of end market growth with our large Industrial customers. Aerospace and Defense is expected to be up mid-single digits in Q1 based on increased demand across multiple platforms and programs, primarily in ruggedized communication devices and RF components.

We expect Medical revenues to be down mid-single digits on moderated demand outlook from our customers and a product transition with one of our customers. In Test & Instrumentation, the strong demand we saw in the past three quarters will continue in Q1, and we expect Test & Instrumentation to be up mid-single digits.

Turning now to the traditional markets. We expect Computing revenues to decline sequentially by greater than 40% based on current customer forecast after stronger-than-expected demand for legacy storage product in the fourth quarter. Telco revenue should be down low single digits.

Interest expense is expected to be $2.5 million and the effective tax rate is expected to be 18%. The expected weighted average shares for Q1 2018 are 49.3 million. I’ll turn the call back to Paul for some closing comments..

Thank you, Roop. In closing, I am extremely pleased by our progress in 2017, and more so, I’m excited by our opportunities in 2018. We’d like to thank all the Benchmark employees for their contributions and hard work this past year. Operator, we’ll now open the line for questions..

[Operator Instructions] Our first question comes from the line of Jim Suva with Citi. Your line is now open..

Thank you very much, Paul. And it’s great to see you and your team there executing. If I understand it correctly, the upside was due to legacy storage, which in turn created pressure on gross margins, and without that, gross margins, would’ve been more healthy.

Is that correct? And then my follow-up, when you said legacy storage, I guess I’ve been in this business a really, really long time, are you talking legacy as in enterprise spinning disks legacy or like pay-to-take storage legacy?.

Okay, Jim, you’re right in your assumption. We saw the upside in legacy storage. We – as Roop indicated, because those margins are below the corporate average, it did put pressure on our overall reported margins. Now this is enterprise storage. It is not spinning disk, it is more storage substitute and control units..

Great. Okay.

And then going forward, with the changes in tax law, whether it be depreciation or spending and such, have you seen any changes in behavior compared to seasonality?.

Jim, it’s too early to tell. I think that most people are assessing the impact of the tax law and what that might mean for their businesses, both from an investment and a growth standpoint. So I really can’t answer that question with any color right now..

Got it. Thanks so much for the color and additional details. I appreciate it..

Our next question comes from the line of Mitch Steves with RBC Capital Markets. Your line is now open..

Hey, guys. Thanks for taking my question.

So first, I just want to clarify to make sure, the Test & Instrumentation for semi-cap falls into safe to assume that was the recent why it was up 46%?.

Yes, that’s predominantly semi-cap equipment..

Right.

I mean, and it’s almost entirely aimed at 10% versus the 14% for the total segment?.

We are really fortunate to have a wide assortment of the customers in the semi-cap space. Quite honestly, we count most every one of the major players as a customer..

Okay, okay, got it. Kind of following to Jim’s comment about the Computing segment and the storage piece.

So is it down sequentially materially because of the timing of the legacy storage shipments? Or is the net of it higher than you guys expected?.

So if you look at the fourth quarter we’re computing in total, you could see it’s a massive quarter. I mean, it was a 47% growth, which, quite honestly, is contrary to what that fourth quarter looks like going back two to four years.

So given that strength, it is unclear – obviously, on a year-over-year – on a quarter-to-quarter basis, you’d see a natural decline because fourth quarter and first quarter is always down. How much of that fourth quarter strength might possibly have been pull-ahead, we don’t know..

Okay. Got it. Thank you very much..

I’m not showing any further questions in queue at this time. I’d like to turn the call back to Ms. Weeks for any closing remarks..

Yes. Thank you, everyone, for joining our call today. We will be available after this call to answer questions, and have a wonderful day. Thank you..

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program, and you may now disconnect. Everyone, have a great day..