Benchmark Electronics, Inc. (NYSE:BHE) Q3 2023 Earnings Call Transcript

Benchmark Electronics, Inc. (NYSE:BHE) Q3 2023 Earnings Call Transcript October 26, 2023

Operator: Good day, and welcome to Benchmark Electronics Inc. Third Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please, note this event is being recorded. I would now like to turn the conference over to Paul Mansky with Benchmark Electronics. Please go ahead.

Paul Mansky: Thank you, Betsy, and thanks, everyone, for joining us today for Benchmark’s third quarter fiscal year 2023 earnings call. Joining me this afternoon are Jeff Benck, CEO and President; and Roop Lakkaraju, CFO. After the market closed today, we issued an earnings release pertaining to our financial performance for the second quarter of 2023, and we have prepared a presentation that we will reference on this call. Both are available on the Investor Relations section on our website at bench.com. This call is being webcast live, and a replay will be available following the call. 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 advice on Slide two in the presentation.

During our call, we will discuss forward-looking information. As a reminder, any of today’s remarks, which are not statements of historical 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 most notably due to ongoing supply chain constraints, macroeconomic conditions and semi-cap equipment spending. Benchmark undertakes no obligation to update any forward-looking statements. For today’s call, Jeff will begin by providing a summary of our first quarter results. Roop will then discuss our detailed financial results and our third quarter guidance. Jeff will then return to provide more insight on demand trends by sector, business wins and then closing remarks.

If you’ll please turn to Slide three, I will turn the call over to our CEO, Jeff Benck.

Jeffrey Benck: Thank you, Paul. Good afternoon, and thanks, everyone, for joining our call today. The third quarter was another period of solid execution for the company. Despite the dynamic market environment, we met or exceeded expectations in the quarter. This is a direct reflection of our purposeful focus on complex and often highly regulated markets and team-wide emphasis on operational execution. Let me highlight a few key accomplishments in the quarter. Total revenue was $720 million. Although down year-over-year, recall that in Q3 2022, we had $74 million in zero margin supply chain premiums. In Q3 2023, supply chain premiums were less than $16 million, down $58 million versus a year ago. Excluding SCP, we grew revenue by high single digits or more in four of our six sectors, the exceptions being semi-cap and advanced computing, which were down as expected.

Whether including or excluding SCP, we expanded gross margin both sequentially and year-over-year, primarily through operational improvements we put in place over the last few quarters. This enabled us to grow non-GAAP operating income an impressive 22% year-over-year. I want to congratulate the entire team for delivering such a strong set of results, which was key to allowing us to report $0.57 in both GAAP and non-GAAP earnings. This was above the high end of our GAAP guidance range and 10% above the non-GAAP consensus. Finally, over the last few quarters, we’ve highlighted steps we’ve taken to return to positive free cash flow. I’m pleased to report that we delivered this for the second quarter in a row, aided largely by reductions in inventory.

We have generated over $34 million in free cash flow over the last two quarters. Considering that and our continuing focus, we feel confident we are on a trajectory to achieve greater than $70 million in annualized free cash flow, which is in line with the targets we provided. Now let me pass it over to Roop to share more detail on the September quarter and our guidance for Q4.

Roop Lakkaraju: Thank you, Jeff, and good afternoon. Please turn to Slide five for our revenue by market sector. Total Benchmark revenue was $720 million. Excluding the effect of SCP, revenue was up 1% year-over-year in the period. Reconciliation of this and our sector level performance can be found in the appendix section of the presentation materials. Turning to Slide six. Medical revenue for the third quarter was up 8% versus the prior year. Growth was fueled by strength in existing programs, coupled with improved supply availability, allowing us to more fully meet demand. Semi-cap revenue decreased 10% year-over-year, in line with our expectations. This compares favorably to industry estimates, which have the wafer fab equipment market declining 20% or more in 2023.

A&D revenue was up 20% year-over-year due to continued strength in commercial aerospace defense programs that continue ramping and improved supply availability, enabling us to address more of our previously unmet demand. Industrials revenue for the third quarter increased 9% year-over-year, driven by strength with existing customers and new customer programs ramping in energy efficiency. Advanced computing decreased 30% year-over-year due to the completion of multiple high-performance computing programs in the first half as expected. In the next-generation communications sector, revenue was up 20% year-over-year. Our year-over-year performance was driven by growth in broadband infrastructure programs. Please turn to Slide seven. Our GAAP earnings per share for the quarter was $0.57.

For Q3, our non-GAAP gross margin was 9.6%, a 50 basis point sequential increase and a 100 basis point improvement year-over-year due to our mix of revenue and improved operational utilization. Excluding SCP, in Q3, our gross margin was 9.8%, which was in line with guidance. Our SG&A was $35.5 million, down sequentially due to the cost actions taken in the first half of the year, coupled with lower variable compensation. Non-GAAP operating margin was 4.7%, up 70 basis points sequentially and 110 basis points year-over-year as a result of improved gross margin. Excluding SCP, operating margin was 4.8%. In Q3 2023, our non-GAAP effective tax rate was 19.4%, consistent with our expectations. For Q3, non-GAAP EPS of $0.57 was $0.02 higher than the midpoint of our guidance.

Non-GAAP ROIC in the third quarter was 9.4%. Please turn to Slide eight to discuss the effects of SCP on a trended basis. In Q3, SCP declined to $16 million versus $17 million in Q2 2023 and $74 million in Q3 2022 and continues to decline consistent with expectations. Excluding this, our revenue in the third quarter was $704 million, a sequential decrease of $12 million or 2% and a year-over-year increase of $6 million or 1%. Please turn to Slide nine to review our cash conversion cycle performance. Our cash conversion cycle days were 105 in the third quarter compared to 103 days in Q2. Our inventory decreased sequentially by $31 million. However, the linearity of customer shipments and inventory receipts adversely affected our accounts receivables and accounts payable days.

Please turn to Slide 10 for an update on liquidity and capital allocation. In Q3, we generated $38 million of cash from operations and $18 million of free cash flow. Our CapEx spend is supporting continued growth in our Mexico facilities and enhanced capabilities in our Precision Technologies business unit. We expect our CapEx spending in Q4 2023 to be between $10 million and $15 million. This would equate to full year 2023 CapEx in the range of $70 million to $75 million. Our cash balance on September 30 was $261 million, a sequential increase of $16 million. As of September 30, we had $129 million outstanding on our term loan, $305 million outstanding borrowing against our revolver and $241 million available to borrow under our revolver. In Q3, we paid our recurring quarterly cash dividend of $5.9 million.

Please turn to Slide 11 for a review of our fourth quarter 2023 guidance. We expect revenue, excluding SCP, to range from $675 million to $725 million. SG&A expense will range between $35 million and $38 million. Excluding SCP, our non-GAAP operating margin range is forecasted to be 4.8% to 5%. As a reminder, this includes approximately 55 basis points of stock-based compensation. Our non-GAAP guidance excludes the impact of $1.2 million in amortization of intangible assets and $800,000 to $1.2 million of estimated restructuring and other costs. Our non-GAAP diluted earnings per share is expected to be in the range of $0.54 to $0.60. Other expenses net are expected to be approximately $9 million due to primarily interest expense. We expect that for Q4, our non-GAAP effective tax rate will be between 19% and 21% for the weighted average share count of 35.9 million.

And with that, I’ll turn the call back over to Jeff.

Jeffrey Benck: Thanks, Roop. Please turn to Slide 13. Again, all commentary related to demand trends by sector are excluding supply chain premiums. In medical, this past quarter, we did a good job meeting demand as the supply chain continues to improve. Partially offsetting this, however, is demand softening from some customers as they rebalance going into year-end. Considering all of this, we’re expecting medical sector revenue to likely decline sequentially in Q4, while still growing nicely on a full year basis. We continue to build on our future success in medical during this past quarter, securing new wins that we expect to ramp in 2024 into 2025. For example, we expanded an existing relationship with a key customer in the heart valve market, with several new manufacturing wins at both the subassembly and system level.

Elsewhere, we had another existing customer award us the opportunity to provide subassemblies that will be integrated into their anesthesia and respiratory devices. Within semi-cap, we believe our semi-cap sector likely bottomed earlier in the year. However, based on public commentary from many of our customers, we expect semi-cap revenue to remain roughly consistent with current levels through at least the first half of 2024. Our expectation is to continue to outperform the broader WFE market growth rates, driven by our unique customer exposure and new program wins. For example, in Q3, we were awarded an opportunity to manufacture assemblies and fully integrated modules for an epitaxy tool used in the transistor device fabrication process.

We also won both the engineering and manufacturing business at another customer that is in support of high-end lithography platform. While the current downturn in the market appears poised to last longer than recent cycles, the long-term growth drivers are undeniable. As the market ultimately recovers, we fully expect to participate in more than our share of semi-capital equipment growth given our significant investment during this down cycle. Within A&D, commercial aerospace has been improving for us for the last few quarters. We are now more optimistic about future growth within defense, which is both a reflection of both strong demand and improving supply chain. At the same time, we continue to secure new wins in the past quarter. This includes engineering services for test development in the commercial aerospace market.

Yet another engineering services win was with the defense program where we’re helping on the development of an RF module. Meanwhile, in manufacturing, we won a nice piece of business where we’ll be providing a sensor module into a commercial aerospace application. Again, we’re pleased with the momentum we’re seeing in A&D. In fact, we expect year-over-year growth to accelerate in Q4. With the strong second half expected, we anticipate A&D sector revenue has the opportunity to grow double digits on a full year basis. Turning to complex industrials. We continue to extend our footprint in key growth markets, including automation, test and measurement and energy efficiency solutions. Examples of this include both manufacturing and engineering wins for several next-generation energy efficiency solutions for residential HVAC applications.

Another manufacturing win I’d like to highlight is in the transportation space where we’ll be providing next-generation radios used for locomotive control and communications. Our industrials sector domestically continues to show resilience. However, this demand is being offset some by softening international markets. As such, we’re expecting industrial revenue to be down sequentially in Q4, while still growing solidly in the double digits year-over-year, both for the quarter and full year. In advanced computing, revenues were consistent with our guidance provided last quarter. Recall, we completed a significant high-performance computing project in the first half that’s being deployed by our customer at a federal agency. As previously shared, after a pause in Q3, we’re delivering upon a new HPC program that will contribute to our growth in the fourth quarter.

Finally, the next-generation communications, last quarter, we highlighted some risk of infrastructure deployment delays amid macro sensitivity. We saw this begin to materialize in Q3, which we expect to continue in Q4. As such, sector revenue is expected to be down sequentially and year-over-year in Q4, albeit still up on a full year basis given the strong first half performance. Looking forward, we are seeing a few more customers across a number of sectors begin to moderate their forecast, while others, specifically in A&D, are seeing incremental strength. On balance, we expect this to translate to total revenue remaining flat at current levels through the first half of 2024. While soon we’ll provide color on full year growth rates, we’re going to maintain our focus on operational execution and productivity improvements as we progress to the profitability targets reflected in our long-term model.

In summary, please turn to Slide 14. I’m pleased that, once again, we were able to exceed the midpoint of guidance and deliver a 10% upside to non-GAAP earnings estimates. We again delivered solid growth in four of our six sectors. At the same time, we grew non-GAAP operating margin by better than one point year-over-year. Excluding SCP, non-GAAP operating margin was up 80 basis points to 4.8%, which includes approximately 55 basis points in stock-based compensation. Non-GAAP operating income growth in the third quarter was 22%, which was our 10th consecutive quarter of double-digit growth year-over-year. Turning to working capital and free cash flow, aided by our continued focus on reducing inventory, we delivered the second consecutive quarter of positive free cash flow and expect this trend to continue.

Finally, it’s true we’re heading to a more uncertain economic environment. Based on this, we’re being judicious about where we’re making investments and managing our expenses closely. I remain confident that our diversified portfolio will help us to weather this and come out stronger as the market turns. We will maintain a sharp focus on investment in future growth while protecting our ability to continue to deliver positive operating leverage and cash flow. With that, I’ll now turn the call over to the operator to conduct our Q&A session.

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Q&A Session

Operator: [Operator Instructions] The first question today comes from Max Michaelis from Lake Street Capital Markets. Please go ahead.

Maxwell Michaelis: Hey, guys. I want to make sure I didn’t hear you incorrectly, but did you note that revenue was expected to be flat through the first half of 2024? I know you didn’t give 2021 guidance, but I just want to make sure I heard that correctly?

Roop Lakkaraju: Yes, that’s right. Hey, Max, this is Roop. That’s right. We kind of indicated that based on kind of macro and different sector kind of trends. Right now, we expect it to be generally flat through the first half.

Maxwell Michaelis: And is that based off of Q4 numbers or Q3 revenue?

Roop Lakkaraju: No. I think it’s Q4 effectively.

Maxwell Michaelis: Okay. And then — so my second question is going to be just looking at medical, wasn’t that expected to be down quarter-over-quarter? I was wondering if you’re seeing any slowdown or maybe pushouts from electrosurgeries and then maybe that’s playing a part in the sequential decline?

Jeffrey Benck: There’s a couple of dynamics still on in medical. We’ve seen — obviously, through the pandemic, there was quite a bit of slowdown in that area. And then after that, we saw a lot of catch-up in places where we play, for example, in the defibrillator market as well, which really is an electro-surgery related. But stadiums, airports, places that people aren’t going really wasn’t seeing the demand, right, for those kind of devices. Well, that’s an example where there was quite a catch-up, and we saw really substantial growth over the last two years as we got more normalized. So I think what we see is just sort of a modulation here where it’s still — demand is still solid, but we do see pockets where folks who have been a little more careful given the macroeconomic and they’re saying, okay, we’re going to watch this closely and maybe rebalance a little bit.

But I won’t say we see electro-surgery devices that might play in there necessarily being uniquely slower than previously. I think there’s a little bit of — there was an element of catch-up and now we’re sort of catching our wind here and things are flattening a bit, and then we’ll see where we go from here. But we feel — we’re bullish long term on the sector just given the growth in outsourcing that it really is poised to continue.

Maxwell Michaelis: And then just looking at supply chain premiums, they were down, I think, about $1 million from Q2. Was just wondering if you’re seeing any material changes going into Q4, maybe if that’s more of a first half 2024 story. It just doesn’t seem like the macro is picking up — the supply chain, I should say, is picking up as quick as maybe we thought it was more or less in the first half of the year?

Roop Lakkaraju: Yes, Max. I mean supply chain premiums, we anticipated coming down. They have come down sequentially throughout 2023, and obviously, on a year-over-year basis, are considerably down. So we do expect that to continue into the future in terms of that supply chain premium value coming down.

Jeffrey Benck: I also would just add to Roop’s comments. This is Jeff. Really just customers — the supply chain is incrementally better. It’s better this quarter than it was last quarter. We see less need for customers to necessarily have to look at paying a premium to get a product that others would have got. So we still that modulate. There’s still some areas where there’s constraints. It’s hard to believe that two years later, we do still see supply chain constraints in some small pockets here and there, but it’s dramatically better, which is really a direct reflection, as Roop said, of why we see those supply chain premiums going down so substantially. As we think about next year, we think we could see things really get back to normal where it’s a few million a quarter, not anywhere near where we’ve been.

Maxwell Michaelis: Okay. And then just last one for me and then I’ll jump back in the queue. Quickly here, just wondering if you guys are seeing any decommits or cancellations within your pipeline backlog?

Jeffrey Benck: I mean, obviously, when we take an order, right, we end up securing material to go build that product and contractually, customers are obligated for the responsibility of that. There’s always some push-ins and pullouts just depending on what the needs are. So I don’t see anything unusually out of order than what we normally see. As you get out two, three quarters, there’s more flexibility in what customers can do related to demand balancing. But this environment, we haven’t seen something substantially different in terms of that demand profiling.

Roop Lakkaraju: Yes, Max, I would just add. I mean, I think as a general comment, that’s right. And obviously, in certain sectors, we’re not seeing any kind of demand reprofiling, right? So we talked about A&D strength, and that’s continuing in the fourth quarter, and we expect into 2024. So it really is kind of sector-by-sector low consideration.

Operator: The next question comes from Steven Fox with Fox Advisors. Please go ahead.

Steven Fox: Hi, good afternoon. A couple of questions from me. First of all, just following up on the last couple of questions there. With regard to the flat revenues for the first half of the year, how much — when you talk about the weakness, how much is just mature programs just producing less units for customers as opposed to like maybe slower ramps for kind of a wait-and-see on what the macro is? Any color on that, and then I have a couple of follow-ups.

Jeffrey Benck: I think what I would say on that is that the legacy programs typically — we aren’t typically on programs that are very short-lived, maybe a little bit different in advanced computing where we might have an HPC build that comes to a conclusion. I think — what I would say there is that we have had some elongation in some of the new product ramps where it’s taken a bit longer and maybe customers are being a little more careful about development engineering spend. So we see some prolongated development cycles. I won’t say it’s substantially pronounced in one area, maybe really across those sites where they’re multiyear kind of projects anyways. I think, if anything, I think you have customers that might have had their own unfulfilled demand and they’re kind of catching up with that and now looking at how much inventory do I want to have, where do I want to go with my own portfolio and you’re just being cautious about that given the environment.

Steven Fox: Okay. That’s helpful. And then — I’m sorry, if I interrupted.

Jeffrey Benck: No. That was good.

Steven Fox: Okay. Sorry. And then along those lines, I think you mentioned that even with flattish sales, I forget the exact words, but you talked about further margin progression. Are you trying to say that like your margins go up in the first half from where you exit? Or are you just — were you talking more broadly? What, in general, do you think about sort of how the environment is impacting margins?

Roop Lakkaraju: Yes. I mean I think what we’re saying is more generally, we’re continuing to focus on operating margin expansion, and that will continue as we get into 2024. I think it’s a little bit early to give you a lot of specifics at this point in time as we work through things. But with the operational efficiencies and utilization focus, productivity, we do anticipate operating margin continue to strengthen into future periods.

Jeffrey Benck: Our own model, we projected higher margins. Obviously, it goes out to 25%, Steve, as you know. But we just — we see opportunity that we could continue to go where we can continue to improve things even in a flatter environment. So I think it’s more just a reflection of that, that we’ve been on a nice trend of growing operating income faster than revenue. And as we look forward, we want to continue that and think that while we’ve closed the gap substantially to where we needed to be, we still have room that we can be better.

Steven Fox: Great. That’s helpful. And if I could just squeeze one more in on the semi-cap bottoming process. I’m just curious if that’s a — you’ve had a bunch of expansion plans in place to address all the wins you have. Has that been impacted as sort of the bottoming delays? Are you delaying your own equipment orders or anything like that?

Jeffrey Benck: That’s good. I didn’t touch on it earlier, but that was an area where we were maybe seeing some more pushouts a few quarters ago. I would say it’s stabilized a lot over the last two quarters as we sort of think about our own bottoming of the business or what we saw. You see from our results where we still think we’re outperforming the market even in a downturn because we’re down 10%, the market is down 20%. So we feel pretty good about our competitive position. We also saw some programs delayed and pushed to the right, not lost, still feel good about the new product introduction work, and there’s a lot of that going on. So that gives us a lot of confidence around our capital investments, but we have invested pretty significantly here.

We’ve got two new buildings, one that’s online and one that’s in process in a low-cost region. It’s supporting that industry. And we still feel like that makes 100% sense. And not everyone has weathered in the same area and able to kind of keep the pedal to the metal. We think that this is going to serve us extremely well as we come out through the other side of this down cycle.

Roop Lakkaraju: Yes. And Steve, I’ll just add. The timing of our investments are geared towards aligning with kind of production. So if you look at our Mesa facility, which we invested in coming into the year, it’s online, it’s producing for our customers. The others were also timing out such that they time to when revenue comes. So we’re able to manage through that effectively and align it to the demand that’s going on.

Operator: The next question comes from Chris Grenga with Needham & Co. Please go ahead.

Chris Grenga: Hi, this is Chris on for Jim. It sounds like the defence — the supply is loosening up a little bit and that was a bit of a tailwind for you. Is that supply resolution where you’d like to see it? Or is there still some more activity that you like — or some more improvement that you’d like to see there; if you could talk about that?

Jeffrey Benck: Yes. Certainly, it’s gotten a lot better, and it’s freed up our ability to increase the ramp of products that we’ve been building. That’s a market that I would say we saw maybe slower recovery, right, with commercial aero was really down. Obviously, people weren’t flying, particularly on the wide-body jets. And obviously, that market has kind of come back with a vengeance. And then the defence space, we’re seeing incremental demand as you might expect just given what’s going on around the world. We have seen improvement in some of that. What I would say is some of the demand came in late in the cycle when things were pretty constrained. And plugging an alternative parts, re-qualifying, that is a really challenging proposition in A&D.

So in some cases, we had to wait 40 weeks to be able to get material and do all that. And that started over a year ago. So we are seeing pretty good improvement in ability to close on supply gaps to support the growth. I would say in the last few quarters, we could have produced more if we could have gotten more. And at this point, we’re looking — the outlook is much better in terms of aligning to what the needs are.

Chris Grenga: Great. And then just you had mentioned the uncertain economic environment. And I’m curious, how does that impact the pace of discussions with either new or existing customers who are looking to outsource? Has that had any impact on their thought process or maybe catalyzing the decision to outsource manufacturing? Or anything — any trend that you’ve noticed?

Jeffrey Benck: I think in a challenging economic environment, you find OEMs really analyzing what they’re going to — what’s their strength and where do they want to put their investment. And in many cases, they look at why are we building product that we could be outsourced on and we’re spending our money here. And so in many ways, I think we’ve seen pretty good experience where customers are more willing to reevaluate what their approach is in terms of outsourcing. If there’s anything that might impact the delay on new platform profile is really probably the product development cycle. Hey, we want to be careful on spending and we’re going to push out the product design a quarter. We’ll see some movement there. But we feel, in general, that there’s a lot of opportunities. Our broader pipeline hasn’t materially changed in terms of what the market opportunity is. So we’re not overly concerned about there being enough to do.

Operator: The next question comes from Anja Soderstrom with Sidoti. Please go ahead.

Anja Soderstrom: Great. Thanks for taking my questions, some of them have been addressed already. But in terms of semi-cap, it seems like that’s going to be a little bit later return of — or acceleration in the growth there. But how does that — can you remind me how the margins on the semi-cap business compares to the overall business? And could it be a nice tailwind there once that come back in terms of margin expansion?

Roop Lakkaraju: Anja, so yes, as we’ve indicated, semi-cap margins are some of our strongest gross margins overall in operating margins. So when the revenue comes back, as we’ve indicated later into ’24, we expect that to be a strong tailwind to our overall operating performance and operating margins.

Jeffrey Benck: The semi-cap market is generally, right now, a lot of folks are out in public and talking about 2024 being flatter. The industry hasn’t been particularly good at calling the downturn, and we’re not typically very good at calling the upside either. So you see us investing, you see us preparing, and we really protect a lot of resource, contemplating a pretty significant upswing as it comes back. But exactly calling the timing is something that we’ve been spending a lot of energy on. We just — we know right now, it really — it doesn’t look to be a first half thing, and that’s weighing pretty heavily on to how we think about our growth profile. And we’ll all be watching it quarter-to-quarter to see how that shifts. But no doubt, it will be back and people continue to talk about just how significant it could be, but the best is yet to come there.

Anja Soderstrom: So could the approach to being maintaining readiness for that to come back been pressuring margins in the coming quarters until we see that come back? Or…

Roop Lakkaraju: Yes. I mean I think it’s — you can see right now, we’re in a market where semi-cap has been softer throughout ’23, but we’ve expanded margins as you saw, Anja. So I think there’s an opportunity for us to continue to improve on our operating margin performance. It’s a little early to give you a lot of details there as we kind of finish up the year. But with the growth that we’ve seen in the other sectors over the year-over-year from ’22 to ’23, the load we’re seeing across our factories, the improved absorption, our focused operational productivity, we’re positioned well to continue to drive improving operating performance.

Anja Soderstrom: Okay. And just remind me, too, whether you have a significant footprint in Mexico and other regions that could have a currency headwind for you.

Jeffrey Benck: Could you repeat that? You said do we have a footprint in Mexico? The answer is yes. But if you asked…

Anja Soderstrom: Yes. I noticed that they’ve been suffering from the increased pesos. I don’t know if you have a large Mexican footprint that could be impacting your margins as well.

Roop Lakkaraju: Yes. So from an FX standpoint — if the focus is on FX there, Anja, we’ve got a — we’ve globally hedged different currencies and have different programs in place. And Mexico is one place where we do that. And we do quite — our hedge program tends to be quite effective. So we’re obviously monitoring and manage that very closely. And there’s been a lot of volatility more recently with kind of Mexico’s economic improvement and growth. So — but we do have a hedge program.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul Mansky for any closing remarks.

Paul Mansky: Thank you, Betsy, and thank you, everybody, for participating in Benchmark’s Third Quarter 2023 Earnings Call. Before we go, I’d like to remind listeners, we will be attending two conferences between now and our Q4 results. On December 4, we will be at the Raymond James TMT and Consumer Conference in New York. And then on the 16th of January, we’ll be presenting at the 26 Annual Needham Growth Conference. Please remember to check the Events section of the IR website at ir.bench.com/investors for updates to the schedule. With that, thank you again for your support, and we look forward to speaking with you soon.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.