Benchmark Electronics Inc (BHE) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Benchmark Electronics, Inc. first-quarter 2015 earnings call. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Ms. Lisa Weeks, Vice President of Strategy and Investor Relations. Ma'am, you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us today for Benchmark?s first-quarter earnings conference call. My name is Lisa Weeks and with me here this morning are Gayla Delly, President and CEO, and Don Adam, CFO. Gayla will provide quarterly highlights and a strategic overview, and Don will provide a detailed review of our financial results followed by a question-and-answer period.

Before we begin, I would like to announce that we have set our remaining 2015 earnings call for Thursday, July 23 and Thursday, October 22. Our fourth-quarter and full year results for 2015 will be announced on Tuesday, February 2, 2016.

Earlier today, we issued our earnings release highlighting our financial performance for the first quarter 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 earnings release and SEC filings. Actual results may differ materially from these statements and Benchmark undertakes no obligation to update any forward-looking statement.

The Company has provided a reconciliation of our GAAP to non-GAAP measures in the press release as well as in the appendix of the presentation. I will now turn the call over to our President and Chief Executive Officer, Gayla Delly.

Thank you, Lisa and good morning to everyone. Thank you for joining us this morning. Please turn to Slide 3 in our presentation for a review of our first quarter highlights.

Benchmark delivered consistent performance in a challenging quarter, our revenue of $621 million and earnings of $0.34 were within our guidance. Despite some demand softness within the industrial sector, the business performed overall as we expected. Our operating margin was 3.8% for the first quarter, a 20 basis point year-over-year improvement.

The first quarter operation margin highlights our team's efforts in three key focus areas: first, our ongoing operational excellence initiative; second, our successful completion of the acquisition integration activity; and third and importantly, building on our diversified revenue base in targeted growth markets. In addition, we returned $16 million to shareholders through the repurchase of common stock during the quarter.

Now please turn to slide 4 for a current view of our portfolio. As noted in our last earnings call, we expected continued variability in our traditional markets of computing and telco associated with seasonality and cyclical demand generated by new product refresh cycles. Our first quarter guidance incorporated these impacts and our revenues from computing and telco were in line with our expectations.

We also anticipated seasonality to impact revenues from customers in other industry segments. In Industrial Control, we experienced broad based softness in the first quarter. We believe this was related to foreign currency headwinds experienced by our customers in their own sales cycles.

In our fourth quarter, sales to customers in our higher growth markets exceeded 50% of our revenues for the first time in the company history with the activity levels associated with design and production in support of higher complexity programs and products beginning to support our growth in these areas. This trend continued during the first quarter of 2015. Revenues generated in these markets represented 54% of our total revenue supported by the strength of bookings and ramping of programs in the higher growth markets which served to offset some of the seasonality and cyclicality in our traditional markets of computing and telco.

We are pleased that we have built a foundation of operational excellence and cost discipline to continue increasing our operating margins while we continue to actively manage our portfolio.

Please turn to [beta] slide 5. Our bookings for the quarter once again aligned well with our strategic growth plan. We won 33 new programs including six engineering projects. These have an estimated annual revenue run rate between $105 million and $125 million.

A key part of our strategy is to engage early with our customers to provide them solutions for their success and this is what we are doing. While on the surface these bookings may appear light for the quarter, they represent the early engagement with our customers which is producing that healthy funnel of opportunities. I am pleased with the strong booking results especially highlighting the opportunity in medical and industrial segments.

Our solutions in these segments require a high degree of early engineering design and technical engagement and we are continuing to enhance and grow our talent base and invest in resources to support these opportunities. We're excited to be supporting our customers and their new product innovation. We see their products across our served segment supporting the backbone for datacenter solutions, for a base of communication products and platforms supporting the Internet of Things, as well as supporting infrastructure and solution sets for medical and industrial products.

I will now ask Don to provide additional insight into our first quarter financial performance.

Thank you, Gayla and good morning to everyone. Please turn to slide 6 for a summary of our results. First quarter revenues were $621 million which was within our guidance of $615 million to $645 million and was impacted by softness related to our industrial control customers.

The foreign currency impact on our revenues due to the strengthening US dollar was not significant at approximately $2 million for the quarter.

Net income on a GAAP basis was $14 million for the quarter including $5 million of restricting costs compared to $19 million last year. Non-GAAP net income for the quarter was $18 million compared to $19 million last year. Our GAAP EPS was $0.27 compared to $0.35 in 2014. Non-GAAP earnings per share were $0.34 for the first quarter compared to $0.35 last year.

Our Non-GAAP operating margin was 3.8% compared to 3.6% during the first quarter of 2014. This continuous improvement is a result of our ongoing operation excellence initiatives in our business mix.

Other expense of $1.1 million or $0.02 a share during the first quarter was primarily related to foreign currency losses caused by the strength in the US dollar.

As expected during the quarter, we had $4.9 million of restructuring charges and integration cost primarily due to the consolidation of previously acquired facilities.

The first quarter non-GAAP effective income tax rate was 20.9% compared to 16.4% in the same period last year. And we expect the tax rate for the second quarter to be approximately 21%. The diluted weighted average shares outstanding for the first quarter were 53 million shares.

Please turn to slide 7 for a trending view of our operating income. Our first quarter non-operating GAAP income of 3.8% was better than our expectations especially in light of the Industrial Controls performance. This is a 20% increase from the year before and a 110 basis point increase when compared to the first quarter of 2013.

Now please turn to slide 8 to review our revenue by industry sector. Industrial control revenues were $199 million and represented 32% of first quarter revenues. These results were up 7% year-over-year based on new customer programs. On a sequential basis, revenues were down 13% which was slightly greater than we expected due to the lower sales volume to customer across multiple industrial segments.

As expected, telecom revenues of $166 million decreased sequentially from the fourth quarter due to seasonality and were somewhat flat year-over-year. Computing revenues of $120 million decreased sequentially due to seasonality and were $11 million less than the same period a year ago.

Medical revenues were $81 million, which was consistent with prior quarter. This represents an 11% year-over-year increase. We have several new programs that started ramping later in the quarter and will continue to ramp into Q2. Testing and instrumentation of $55 million were up slightly quarter-over-quarter, a significant difference in the year-over-year comparison increased $23 million for a customer who declared bankruptcy in 2014. As expected, we had no customers that were greater than 10% of total revenue this quarter.

Now please turn to slide 9 where I'll highlight a few balance sheet and cash flow items. Our cash balance at March 31 was $384 million. Cash available in the US was $48 million.

In the fourth quarter of 2014, we announced that our Board authorized the repurchase of an additional $100 million of our common shares. During the first quarter, we repurchased 662,000 shares at a cost of $16 million. We have $87 million remaining for future repurchases.

Our near-term capital allocation remains focused on executing share buybacks and investing CapEx in the business for operational excellence.

During the quarter we used $11 million in cash from operations, we do expect strong cash flow generation in the second quarter. Capital expenditures were $17 million and depreciation and amortization expense was $12.1 million for the quarter. We believe CapEx will range between $40 million to $50 million for the full year.

Our accounts receivable balance was $491 million, a decrease of $30 million from last quarter and our accounts receivable day were 71. The increase in accounts receivable days from prior quarter is primarily a function of the timing of sales and customer mix within the quarter.

Inventory returns at March 31 were $427 million, an increase of $26 million from last quarter. Inventory turns were 5.3 which is consistent with the same period last year.

Now I will turn the call back over to Gayla.

Thank you, Don. Please turn to slide 10 to review our guidance. We expect our second-quarter revenue to range between $635 million and $665 million. And diluted earnings per share, excluding restructuring and integration costs, are expected to range from $0.37 to $0.41. At the midpoint this reflects a 3.9% operating margin. In addition, our guidance includes an expected tax rate of 21%, as Don noted. Restructuring and integration costs are expected to be less than $1 million next quarter.

Now please turn with me to slide 11 as we look at the industries we serve. In Industrial Controls, we had forecasted a sequential decline primarily based on seasonality. However, during the first quarter, we witnessed a softness forecast by a number of customers in this segment. For the second quarter, we expect churn to increase with stronger growth in Q3 and Q4 and this is based on new programs during the second half of the year.

For the full year 2015, we expect solid year-over-year growth in industrial, which is an important segment with long life cycle products for Benchmark. Over the past few years, we have built a robust base of business in the sub-segments of transportation, energy, building infrastructure and power.

While there is some softening in existing demand, we expect compelling growth throughout rest of this year moving into next year based on the transition of new products into full production.

In medical, we continue to support the launch of new programs and expect a mid-teen percentage increase for Q2 based on the anticipated program ramps. We are pleased with our strides in the medical segment. We expect the second quarter to be especially strong with a return to normal growth patterns for the remainder of the year.

Now moving to Test and Instrumentation, we expect demand in Q2 to be comparable to that of Q1 levels. And for the full year, we expect Test and Instrumentation to be stable. In our traditional markets, we expect telecom to remain flat next quarter and decline for the full year when compared to the significant strength and double digit growth that we experienced in 2014. Based on the R&D activities with our customers and an anticipated return to spending by telco carriers expected, we see a ramp moving into 2016.

For computing, after our seasonally low first quarter, we expect mid single digit growth in the second quarter with modest increases to follow throughout the year. And for the full year 2015, we expect computing revenues to modestly decline.

Now turning to slide 12. In summary, we continue to execute well against our long-term strategy. And the first quarter was a positive start in a challenging environment. As we manage through the near-term volatility in the industrial and telecom markets, challenges will continue to arise. We are managing these challenges and building an even stronger more diversified customer base and solution offerings in these markets.

Our consistent results are made possible by the hard work of our entire Benchmark team on a global basis. For 2015 and beyond, we remain focused on the opportunities that will have the greatest impact on our future success.

Our portfolio managing -- as we continue to add new customers and expand share with our existing customers. As our current results show, our operational excellence is another key area of focus and our efforts are paying off. We have successfully integrated our previous acquisitions and will continue to balance our foot print and align our capacity to meet the needs of our customers. And finally, we remain strongly committed to solving our customers' problems and providing solutions to assist them in bringing their products to market.

We believe that 2015 remains an important year as our higher growth markets continue to outpace that of the traditional markets. We also expect sequential revenue and quarter-over-quarter margin growth this year with plans to exit the December quarter at 4.2% operating margin.

In 2016, we anticipate a return to growth in our traditional markets and even further progress towards our 4.5% operating margin target.

In closing, I want to again thank our customers, our shareholders and our employees for their support. I'll now turn it over to the operator to open for Q&A. Operator?

(Operator Instructions) Sean Hannan, Needham & Company.

Good morning, Sean.

Good morning. Thanks for taking my question here. So first in terms of looking at the growth and growth profile, so I understand that we certainly had some dynamics within the traditional segments last year and gave you boost and make comparisons right now a little bit more difficult. But it looks like you are going to be down year-over-year again in June. I think there were expectations already for that a little bit, but perhaps maybe a little bit more than anticipated.

So just trying to understand if, when we look at 2015 -- and thanks for all the general qualitative color for the outlook for the year for the segments. Is there a way to get some type of a view around how we think we can exit December? Are we back into growth territory here across your business? Are we able to even get 2015 in aggregate to a flat type of year? Or is that opportunity just off table, we need to think about 2016? Thanks.

So Sean, we again provided color but we are not giving guidance for the full year. But generally as you see in the marketplace, what we've incorporated into the industry outlook that we have provided is strength coming from our new program ramps, but we still see in the marketplace the currency headwinds impacting our customers? sell through activity. And we see a strong level of engagement on the R&D side and the excitement surrounding new products.

So those are the puts and takes that have been incorporated into our guidance. And in a nutshell I would say that we are not expecting that the currency headwinds or the dynamics in any of the industries that we participate in that currently exist, that those will subside by year-end.

So some of those activities would be some of the telecom activities where we have seen significant growth last year. As we indicated, we expect that to be a return in 2016 not 2015. Currency headwinds, expect those to remain intact. The energy sector having some impact on current spending. Don't expect that to subside.

So those are the assumption sets, if you will, that we have baked into our guidance. And in order to arrive at the overall industry and segment by segment outlook that we provided, the tailwinds, if you will, that we have are the new programs wins and the ramps.

So again we don't have clarity to be able to truly provide what I would consider full year guidance at this time. So what we are doing is giving color around what we're seeing in the marketplace.

Okay, that's helpful. And then question around the wins. I think, Gayla, you had commented, look there is an acknowledgement that it's not necessarily a high level but the nature of the wins are encouraging. Is there a way -- is there some way we can get a little bit more of a conclusion here around how we should think about your win capture at this point? You can also remind us of how you consider targeted levels.

This is probably the lowest level I think since the fourth quarter of 2012. So just trying to get a perspective there and to what degree we can get confidence that there is some resumption of win growth? Thanks.

A couple of things that I think are important to consider. First of all, as I noted, we are engaging earlier on, so it's not just a share shift, it is truly an opportunity to engage with customers on their outsourcing solutions. And then secondly sizing the opportunity in conducting with our customers as we launch those programs becomes challenging.

So what we really done I think in response to some of the comments and thoughts that you the analysts have provided us is trying to really tighten up our view of what program wins are, so that we see a higher conversion rate into revenue. And again as a reminder to everyone, our wins are for new opportunities, not those that are just expected refresh of existing products.

And so we do not have a specific percentage that we put out that we expect that rate to be. And we do expect it to have variability from quarter to quarter. And that we are very excited about what we see in the funnel and some of the wins that we've had since quarter end.

So what we've really done is focused on [exceeding] a ramp in a shorter cycle as being a pinpoint that we have including in our number. So the numbers we represent we want to see ramp into revenue in a 12 to 18 month period, not at some point in the future that gets incorporated into an outlook currently.

Great, thanks for the perspective, Gayla.

Mitch Steves, RBC Capital Markets.

Hey guys, thanks for taking the question. So I am just kind of looking at the networking segment, the day what happened with some of your competitors, we are mix results. So I am just wondering if you guys can clarify, I mean what happened in the quarter, what you guys expect going into June as well?

I believe in telco what we really see is some timing events. We had an exceptionally strong 2014, while others didn't. And I believe there is just and offset as to timing of different pieces being put in. And as we indicated, some of the activities that we're working on would position us well for strength at the end of this year and into 2016.

So when we speak to cyclicality and seasonality, I truly believe that that's the impact. But it doesn't appear that all of the production occurs simultaneously for telco for instance. So I think as the different pieces of the network are populated that we play in different parts of it where we saw just substantial strength, as you recall, last year.

Great and then one quick follow-up. So since we?re not getting additional color on the revenue growth targets, since the new wins are coming from your call it non-tax segment, should we expect the operating margin to kind of ramp up over the next call it three quarters?

As we?ve said in our comments, we have incorporated into our guidance 3.9% operating margin for next quarter which is another increase from this quarter and this quarter was an increase from the fourth quarter. So 20 basis points increase from fourth quarter to first quarter, a 10 basis point further increase expected from first quarter to second quarter. And then we expect to continue to drive improvement such that we exit the year at 4.2%. So yes.

Great, thank you.

Steven Fox, Cross Research.

Thanks, good morning. Just first off on the industrial weakness that you are seeing, seems like you are also pretty optimistic for the rest of the year. I am just trying to understand why you think it's fairly short lived, if I understand your comments right?

And then secondly along similar lines, looking at your new wins for the quarter and looking back over the last few quarters, are you seeing any changes in the timing of ramps that?s related to the economy or currencies in terms of what your customers are doing. And if so, can you just sort of go over why that would be?

So the industrial strength that we are seeing is associated with new program wins and ramps. And the softness that we saw we believe is primarily associated with, as I mentioned, the currency headwinds our customers are experiencing in their selling cycle. So we expect the ramps to continue and to outpace the headwinds associated with the currency impact felt by customers. I believe they got that dialed in now into their forecast. And so we believe that's incorporated.

The second piece is as to ramp. So to the extent that we are engaging in products and the design in ramp phase, yes, the cycle to achieve total revenue target has been longer. And again, that's why we've incorporated an outlook that seems to have a smaller opportunity for revenue growth because we're not looking out three years to see when it ramps or 2.5 years. And in medical we are really looking at a tighter timeframe for when we can ramp it into the revenue stream.

Great, that's very helpful. And then just one real quick question. Based on the stock repurchases in the quarter and given your fundamental outlook, is that Q1 rate of buyback sort of what we should assume for the rest of the year?

Again we continue to balance our cash and utilize our cash in the US to both fund our operating needs and to perform our buyback. So we'll continue to manage that and we'll operate within a normal range there.

Okay, thanks.

Sherri Scribner, Deutsche Bank.

Hi thanks. I just wanted to dig a little bit into the compute segment, it looks like it was a bit softer in the quarter and wanted to get a sense of what drove that?

And then looking for the full year, your guidance for a modest decline, I am just trying to understand is there some big ramps in the second half to get you to a modest decline because you?re sort of down 8% and then down again in the June quarter on a year-over-year basis? Thanks.

Sherri, I think computing actually came in pretty close to what we expected. And you are correct, we did expect some cyclicality and seasonality in Q1 and beyond that the outlook that we have is associated with program ramps and new wins.

So I do believe that we see some choppiness in both telco and computing and variability that we?ll continue to see. And so we?ve modeled and layered it in based on our outlooks associated with the customer programs that we are supporting. But no unusual dynamics there as compared to what we had forecasted.

Okay, that's helpful. And then on the telecom side, you talked about it a little bit, but can you just remind us what type of customers you are servicing there? Because we've had sort of different commentary from given supply chain companies on weakness in certain areas and strength in other areas. If you could give us a little more detail on the type of telecom business you are guys are doing? Thanks.

Yes, really as we covered kind of (inaudible) section, communication, backhaul, equipment and really infrastructure pieces there. So optical, it really runs through pretty much the gamut. So again ours really has to do with probably when our customers are launching new programs, they really seem to be very successful in launches and getting those in the field. And then there is a refresh cycle.

So I don't know that it?s necessarily different based on the actual place in the telecom that you?re playing as much as it is the timing of the new product launches and the success of those programs in the field.

Thank you.

Jim Suva, Citi.

Great, thanks very much. And a quick clarification question, Gayla, if I heard correctly your business wins outlook that you gave today and you mentioned was a little bit softer, that incorporates what you view as kind of customers having a little more cautious or adjustment to the FX environment if they find corrected. Can you confirm that you believe they?re kind of building in some conservative around the new economy that we're focusing in today? Is that your view?

Yes, again I believe it?s just normal for us and our customers to adjust our outlook based on the current environment and absolutely that has been incorporated not only into our forecast but also into our bookings.

Okay and then on the past quarter's bookings, I know we don't go back on those new wins and restate those, but I guess there is kind of two ways to look at it. One is, do you think that then those need to be tempered a little bit? Or because they are new wins and truly something kind of new that they hold valid? Or do you think they need to be adjusted slightly modestly to the FX environment that we sit in and look at today?

I wouldn't say that we would restate those. What you may see occurring in the current environment would be a slightly elongated ramp. But we haven't seen the product is going to fall off or the demand outlook from customers make them rethink their process or their R&D efforts or their ramp. But sometimes it will make it take a little bit longer to get through the process generally because they are focused on their existing programs and products and focused on their sell through on their current products.

Great and my last question on capital deployment, you bought back some stock, you are also ramping new programs. And then also when we think about -- you've had a lot of success in growing your industrial controls business. Is it fair to say that success gives you more confidence in going down the industrial controls even more and maybe augmented with acquisitions?

Or do you think that organically you have the building blocks in place to keep going? Or do you think you need to add to some of that as far as accretion? Because you guys ? or acquisition, because you guys have a very fortunate cash situation and was kind of thinking about how you view your capital plans. Thank you.

So yes, we're always looking at opportunities to continue to invest in our business and to grow our portfolio of both skills, depth and breadth of skills and our ability to continue to grow with our customers and targeted customers. So absolutely, we are in the market looking at ways to engage and invest.

And then clearly as Don indicated, we will continue with our buyback as well as investing through CapEx to support growth of our existing operation. So all of the above is incorporated in our thought process because we have demonstrated through our results that we are able to drive improvement.

Thank you so much to you and your team.

Brian Alexander, Raymond James.

Okay, thanks. And maybe just a question on the gross margin. The performance was really impressive especially given the revenue softness in the quarter. I think that might be the strongest gross margin at least that I can recall.

So can you just talk a little bit more about some of the key drivers there, how much of it was mix? Are you delaying any investments that you had planed because of the softer revenue environment? I am just trying to get a sense for what drove the 8.3% and how sustainable is 8% plus as you think about your operating margin objectives of 4.2% by the end of this year and ultimately getting to 4.5%.

And so Brian, in terms of the margin improvement, it's really, it's several factors. It's utilization rates that we have -- over the past year and a half or so since the acquisition we have reduced our footprint so that's been a contributor. Efficiency, operational excellence initiatives that we?ve embarked on and we've been moving toward those for the last three or four years.

Lastly is mix. In terms of your comment on reducing investments, as you can see, we are not reducing our investments, we were pretty heavy in Q1 in terms of CapEx of $17 million. So really -- now there is not one thing, it's a combination of all three factors that are contributing to the mix.

In terms of sustainability -- as we've said, we anticipate margins -- our operating margins improving throughout the year. So we believe at this point, gross margins are going to move with that.

Okay and then maybe just Don, sticking with you, the balance sheet, you made some comments earlier about DSOs. Maybe if you could just kind of go through those again. They were up quite a bit in the quarter, I don't think the quarter was particularly back-end loaded based on the revenue performance and the revenue outlook.

So DSOs is kind of a question, inventory days were flat year-over-year, but payables were down quite a bit. So I know that led to a negative cash flow outlook in Q1, but it sounds like you are really confident that that will snap back in Q2. Do you think you are still on track for the $100 million in free cash for the year? Or do you think that's off the table given the performance in Q1?

No, I think we are certainly -- as we indicated, we think we're going to have a pretty strong Q2 probably in the $40 million range. In terms of the balance sheet metrics, inventory, we typically see seasonally low inventory turns, we've seen that now for a couple of years now. Part of that is -- most of that's going to be -- we've going to have increased sales for Q2, so we've got to have inventory to support that business.

In terms of the receivables, again it's really is a function of timing, when the sales occur. If you go back and look at the performance for the last five years, we've actually had a couple of other -- typically the first quarter is going to be the worst performing quarter in terms of ? let me step back. Not the worst performing, but in terms of how the metrics sort of line out. So we do anticipate receivables and inventory improving as we go into Q2 and the balance of the year.

Sorry, just to clarify, the $40 million, was that operating or free cash flow. And then I think you had talked about $100 million of free cash for the year?

Operating cash flow.

And the $100 million for the year, is that still on track?

It's going to dependent on what the second half of the year looks like. So it depends on the working capital requirements to support the needs of the business, so.

Okay, thank you.

(Operator Instructions) Rick D'Auteuil, Columbia Management.

Hi guys how are you?

Good morning, Rick.

Good morning, Rick.

So just to follow-up on that Q2, the working capital looked a little concerning, but I think you've explained that away a little bit. What is CapEx expected to be in Q2, so we can get to a free cash number?

I think Rick, for the year, we're expecting CapEx to range between $40 million and $50 million, we are a little bit heavy in Q1, just really timing. So again overall CapEx to be in the $40 million to $50 million range, consistent with last year.

Okay, so is it - other than Q1, is it heavy, heavy first half weighted or --?

I would expect Q2 to decline.

It typically will average around $10 million a quarter put --- give or take $1 million or $2 million, but no significant events which are causing it to spike in any one single quarter.

Okay, thank you. And then Gayla, on your commentary around the new business wins, it sounded like the criteria has changed and yet I think the presentation on page 5, it looks like you are just using what you had previously reported as your new business wins and not necessarily changing -- going back and retroactively changing the criteria.

I don't know if you've done this exercise, but under your old criteria -- not necessarily the 12 to 18 months, what would that $105 million to $125 million look like in this that you are estimating for Q1 wins?

You're correct, Rick. We've done that as a prospective change and not a retropective change. So I didn't either challenge our team to restate what the old [carriers] would be under kind of a tighter criteria nor did we try to forecast the current under the old criteria.

I think again the key that we are focused on is to gain some knowledge and credibility around being able to ramp these bookings that we publically share into our revenue stream in a reasonable and meaningful way in a period that we feel comfortable with and not something that points out to a period to three years out for all the programs.

So it is trying to hone in on a period, again not trying to specifically say it's like a current asset that converts in one year. But trying to add some more focus to that around 12 to 18 month period is really what we're looking at, because we believe that's a reasonable outlook that investors could expect.

Because ones you stack three, four quarter of these program bookings on that may go out for years and then it really become less meaningful. So we wanted to be more meaningful as to what we can expect to add into the revenue stream. And you see that demonstrated in even recent periods with the growth that we've seen in industrial for instance in medical.

When you were promoted to the CEO spot, one of the things that we talked about, you and I anyway, was that you were going to take a more conservative view on the new wins. And in the past there were some new wins that ended up being duds.

And if you look back since you?ve become CEO and retroactively sort of evaluated that the numbers that you guys have put out and gone back and tested them at the 12 to 18 month marker. Are they generally coming in at the levels that you said? I know historically they hadn't and I am just wondering if your -- under your watch they've come closer to the estimates you guys have provided.

Well I think a couple of things. First of all, I wouldn't say it?s a change from myself versus carriers (inaudible) of how we are doing [thing]. It's really very much around the markets, right. So the markets and the time to ramp and the programs that we are winning being longer life cycle products and getting engaged earlier in the engineering and design phase really warrants us looking at the program wins a little bit differently.

And so that has been the focus, really trying to get that into a shorter timeframe for conversion. And so have we seen this? Yes, and that's what I pointed to in my prior answer and that was we saw that we had reported in 2013 some strong bookings in telco and we saw very strong performance in 2014.

And so we are beginning to get more I guess velocity in the conversion and expect to continue to see that. And where we will kind of next look to focus is how we then are able to convert the new programs into further ramps and growth with some of our expanded and diversified customer base. So yes, it's working and we're very pleased with the results.

Okay, I appreciate it. I mean the bottom line is we shouldn't be looking at Q4 2013 versus what you just -- where your new programs maxed out versus where you are now. It's almost like we need to draw a line and this is what we are going to benchmark off going forward?

Yes, I think that makes sense just again based on our focus for some of the new programs and where we are seeing opportunities to engage with customers.

Okay and you mentioned funnel strong but do you quantify that and how has it trended?

No, we don't quantify the funnel as it changes from time to time, but it is more a quality of funnel if you will. And we are very pleased with the quality of funnel and the opportunities we see out there. There are some real opportunities to support customers that either have not outsourced or outsourced as completely in today?s environment.

And what we see is that a number of those fit fairly within the capability sets that Benchmark has and are well served by our geographic footprint. So between skills and footprint, we feel very good about where we are participating on the new opportunities and see the funnel aligning.

Thank you very much.

Thank you. (Operator Instructions)

Operator, if we don't any more questions, we will end the call for today and thank everyone once again for participating. And we'll be following up with any calls here in the office today. And have a great day everyone.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of your day.