BENCHMARK ELECTRONICS INC (BHE)

OVERVIEW

Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides design engineering and advanced manufacturing services that include both electronic manufacturing services (EMS) and precision metal machining (PMM) services. We support customers throughout their product lifecycle starting from initial product concept through volume production, including the ability to manage direct order fulfillment and provide aftermarket services. We are a trusted partner to our European and U.S. based national and multinational original equipment manufacturers (OEMs). Served markets include: advanced computing and communications (AC&C), aerospace and defense (A&D), industrial, medical, and semiconductor capital equipment (semi-cap). The Company has manufacturing operations located in the United States and Mexico (the Americas), Asia and Europe.

Our customer engagement focuses on two principal areas:

•
Manufacturing Services include printed circuit board assemblies (PCBAs), subsystem and full system integration, precision metal machining, complex electromechanical assembly, and related test and fulfillment services. We support build-to-order or configured-to-order programs across regulated, high-reliability markets. Our manufacturing capabilities span electronics assembly, precision machining, clean room assembly, systems integration, and direct order fulfillment.

•
Design & Engineering Services include turnkey product design, designing for manufacturability, design optimization for our factory processes and supply chain, test development, concurrent and sustaining engineering, and regulatory services. Our engineering services may be for systems, subsystems, printed circuit boards and assemblies, and components. We have the flexibility and capability to engage anywhere in the design process flow. We provide these services across all the industries we serve. We often partner with our customers to provide turnkey product realization from requirements through the launch to volume production in our factories. We have also developed differentiated capabilities in radio frequency (RF) and optics.

22

The need to improve size, weight and power (SWaP) to accommodate high frequency electronics communications is important to customers in the A&D, medical, and AC&C markets.

Our core strength lies in our ability to partner with our customers to provide concept-to-production solutions through a tightly integrated and seamless set of design, test, manufacturing, supply chain, and support services. The integration of these product realization services, along with our global manufacturing presence, increases our ability to respond to our customers’ needs by providing accelerated time-to-market and time-to-volume production of high-quality products, with an emphasis on complex products serving regulated markets with high reliability requirements. These capabilities and attributes enable us to build strong strategic relationships with our customers as an integral part of their business.

Our ability to deliver these integrated solutions is enabled by our highly skilled personnel who provide leading-edge technical capabilities in engineering services (including full life cycle), high frequency RF systems, microelectronics, optics, miniaturization, and manufacturing services (including electronics, complex precision machining, and clean room assembly). To support customers across these sectors, we have strategically invested in geographically diverse manufacturing locations and global supply chain capabilities.

A strong focus on human capital—encompassing the talent we attract, develop, and retain—is essential to sustaining our competitiveness and long-term success. Our people-first culture is grounded in our five core values: acting with integrity, valuing inclusion, commitment to customers, promoting ingenuity, and demonstrating genuine caring for one another, our customers, and the communities we serve. We are committed to fostering an environment where our team members feel engaged, valued, and empowered to thrive, recognizing that inclusion and diverse perspectives drive innovation, strengthen decision-making, and enhance overall performance. Our approach is centered on delivering exceptional value to our customers while achieving operational and financial performance aligned with our strategic objectives. Through ongoing employee engagement and customer listening strategies, we are committed to continually improving our practices, understanding that we serve our customers best by supporting our people first. We invest in building a forward-thinking, high-performing workforce by developing leaders at all levels and supporting the personal growth and career aspirations of our employees. These efforts are demonstrated through our executive development program, CLIMB; our general manager readiness program, ASCEND; and our employee mentorship program, Thrive.

Our customers often face challenges in supply chain design, demand planning, material procurement, and inventory management due to demand variability, product design changes, short product life cycles, and component price fluctuations.

We employ enterprise resource planning (ERP) systems and lean/six sigma methodologies to efficiently and cost-effectively manage procurement and manufacturing processes. Because we are a significant purchaser of electronic components and other raw materials, we are generally able to capitalize on the economies of scale associated with our relationships with suppliers to negotiate price discounts, obtain components and other raw materials that are in short supply, and return excess components.

We recognize manufacturing services revenue as the customer takes control of the manufactured products built to customer specifications. We also generate revenue from our design, development and engineering services, in addition to the sale of other inventory.

Revenue is measured based on the consideration specified in a contract with a customer. Under the majority of our manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. For other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, we recognize revenue upon transfer of control of the product to the customer, which is generally when the goods are shipped. Revenue from design, development and engineering services is recognized over time as the services are performed. As a general matter, we assume no significant obligations after shipment as we typically warrant workmanship only. Therefore, warranty provisions are generally not significant.

Impact of Certain Factors on Results

Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to our major customers or their products, including conditions affecting the availability of electronic components or the failure of a major customer to pay for components or services, can impact our ability to fulfill customer demand. A substantial percentage of our sales are made to a small number of customers, and the loss of a major customer, if not replaced, would adversely affect us. Sales to our ten largest customers represented 50% and 53% of our total sales during the six months ended June 30, 2026 and 2025, respectively.

23

Industry supply conditions have reflected varying demand dynamics across end markets and component categories, including periods of imbalance across certain technologies, notably in the memory market. While supply conditions have improved in certain areas compared to prior periods, supply availability and pricing conditions continue to vary across the broader market.

We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on the type of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products. Moreover, new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower, resulting in inefficiencies and unabsorbed manufacturing overhead costs. During periods of low production volume, we generally have unabsorbed manufacturing overhead costs and reduced gross profit. Gross profit can also be impacted by higher costs associated with other situations, such as supply chain constraints. This includes supply chain premiums for excess component costs paid to secure available supply resulting in revenue with cost recovery only with no margin. In addition, a number of our new program ramps require incremental investment during the launch and ramp phase, which can exert downward pressure on our gross profit.

Inflation, interest rates, disruption in the global economy and financial markets, geopolitical events, tariffs and trade restrictions continue to create uncertainty. However, we are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date we filed this Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ from these estimates under different assumptions or conditions.

On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act, including, among others, tariffs on imports of certain Canadian, Chinese, and Mexican goods, a universal baseline tariff on imports from most countries, and reciprocal tariffs on select countries. In March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are entitled to refunds. During the second quarter of 2026, U.S. Customs and Border Protection launched a process to administer IEEPA tariff refund claims, and the Company submitted claims for qualifying IEEPA tariff refunds. We continue to monitor developments related to tariffs and trade policies and evaluate the potential impact on our results of operations and financial condition. For the three and six months ended June 30, 2026, the Company recorded in the consolidated statement of income tariff refunds of $11.8 million as a reduction to cost of sales, reflecting the recovery of previously incurred tariff costs, and recorded a corresponding reduction to sales for amounts reimbursable to customers. For additional information, refer to Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

24

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, certain statements of income data expressed as a percentage of net sales:

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Report. You should also bear in mind the Risk Factors set forth in Part I, Item 1A, of this Report, any of which could materially and adversely affect the Company’s business, operating results, financial condition and the actual results of the matters addressed by the forward-looking statements contained in the following discussion.

For discussion and analysis regarding our financial condition and results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 24, 2025, as amended on February 27, 2025. For a discussion of the correction of an immaterial error see Note 1 to the consolidated financial statements in Part II, Item 8 of this report.

2025 OVERVIEW

Sales for 2025 and 2024 were both $2.7 billion. During 2025, sales to customers in our various industry sectors fluctuated from 2024 as follows:

•
Semi-Cap increased by 2%

•
Industrial remained flat

•
Medical increased by 7%

•
A&D increased by 19%

•
AC&C decreased by 27%

Revenue was flat year-over-year primarily due to increases in A&D, Medical, and Semi-Cap, which were offset by a decrease in AC&C sales.

Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to our major customers or their products, the availability of electronic component supply, or the failure of a major customer to pay for components or services have adversely affected us by not allowing us to fulfill our total customer demand. A substantial percentage of our sales are made to a small number of customers, and the loss of a major customer, if not replaced, would adversely affect us. Sales to our ten largest customers represented 51% and 50% of our total sales in 2025 and in 2024, respectively. Sales to Applied Materials, Inc. and subsidiaries, our largest customer in 2025 and 2024 represented 14% of our total sales in both 2025 and 2024. After a period of unprecedented global labor and supply disruptions, we have seen a general easing of certain material constraints across commodity categories, with the exception of older technologies where semiconductor original equipment manufacturers are not adding incremental capacity. The lack of capacity regarding these older technologies could constrain our ability to produce the full demand forecasts we are receiving from customers needing those parts. Lead times are also improving from the previous highs that prompted many suppliers to categorize some of their constrained components with non-cancellable and non-returnable business terms. Until recently, these constraints led to last-minute allocations and created inefficiencies in our operations, as well as increased costs to us and our customers.

We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on the type of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products. Moreover, new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower, resulting in inefficiencies and unabsorbed manufacturing overhead costs. During periods of low production volume, we generally have unabsorbed manufacturing overhead costs and reduced gross profit. Gross profit can also be impacted by higher costs associated with other situations, such as supply chain constraints. This includes supply chain premiums for excess component costs paid to secure available supply resulting in revenue with cost recovery only with no margin. In addition, a number of our new program ramps require incremental investment during the launch and ramp phase, which can exert downward pressure on our gross profit.

Inflation, interest rates, disruption in the global economy and financial markets, geopolitical events, tariffs and trade restrictions continue to create uncertainty. However, we are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date we filed this Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ from these estimates under different assumptions or conditions.

30

RESULTS OF OPERATIONS

The financial information and the discussion below should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Report. The following table presents the percentage relationship that certain items in our consolidated statements of income bear to sales for the periods indicated:

2025 Compared With 2024

Sales

Sales remained flat in 2025. The percentages of our sales by market sector were as follows:

Semiconductor Capital Equipment. 2025 sales increased 2% to $741.2 million from $723.2 million in 2024. The increase was primarily due to higher demand with existing customers.

Industrial. 2025 sales increased slightly to $574.7 million from $573.3 in 2024. The slight increase was due to mixed demand.

Medical. 2025 sales increased 7% to $483.9 million from $450.7 million in 2024. The increase was primarily due to higher demand with existing customers.

Aerospace and Defense. 2025 sales increased 19% to $514.4 million from $434.0 million in 2024. The increase was primarily due to strong market growth in both commercial aerospace and defense.

Advanced Computing and Communications. 2025 sales decreased 27% to $344.9 million from $474.9 million in 2024. The decrease was due to lower demand from existing customers.

Our international operations are subject to the risks of doing business abroad. See Part I, Item 1A of this Report for risk factors pertaining to international sales, fluctuations in foreign currency exchange rates and a discussion of potential adverse effects in operating results associated with the risks of doing business abroad. During 2025 and 2024, 64% and 62%, respectively, of our sales were from international operations.

31

Sales by geographical segment were as follows:

Americas. 2025 sales decreased 8% to $1.2 billion from $1.3 billion in 2024 primarily due to decreases in sales in our Semi-Cap, Industrial, and AC&C sectors.

Asia. 2025 sales increased 7% to $1.2 billion from $1.1 billion in 2024 primarily due to increases in existing customer demand of our A&D, Semi-Cap, and Industrial sectors.

Europe. 2025 sales increased 4% to $352.5 million from $339.3 million in 2024 primarily due to increases in sales in our A&D, Medical, and Industrial sectors.

Gross Profit

Gross profit of $270.1 million in 2025 compared to $270.0 million in 2024 was relatively consistent. Gross profit margin was 10.2% in both 2025 and 2024.

Income from Operations

2025 income from operations declined to $76.0 million from $109.4 million in 2024.

Income from operations by reportable segment was as follows:

Americas. 2025 operating income decreased 38% to $24.8 million from $40.2 million in 2024. The decrease was primarily due to increased restructuring charges and other costs due to settlement of an indirect tax assessment as well as an impairment charge, partially offset by cost control. See Note 15 and Note 16 to the consolidated financial statements in Part II, Item 8 of this Report for additional information on the tax assessment and impairment charge, respectively. Restructuring expenses are discussed under “Restructuring Charges and Other Costs” below.

Asia. 2025 operating income increased slightly to $140.8 million from $140.3 million in 2024. The increase was primarily due to higher revenue.

Europe. 2025 operating income increased 36% to $35.8 million from $26.3 million in 2024. The increase was primarily due to higher revenue and expense control.

Selling, General and Administrative (SG&A) Expenses

SG&A expense increased to $159.7 million in 2025 from $149.5 million in 2024. The increase was primarily due to variable compensation.

32

Amortization of Intangible Assets

Amortization of intangible assets was $4.8 million in both 2025 and 2024.

Restructuring Charges and Other Costs

During 2025, we recognized $7.4 million of restructuring charges and other costs which primarily related to closures of our site in Fremont, California and our old facility in Guadalajara, Mexico in the Americas, the exit of a business in the Americas, and other smaller activities involving capacity reductions and reductions in workforce in certain facilities across various regions. Fremont, California operations ceased during the third quarter of 2025 and all restructuring activity was fully complete as of December 31, 2025 upon the disposition of the facility. Operations at our new facility in Guadalajara, Mexico commenced in 2024 with customer programs continuing to transition into 2025. Operations at our old facility in Guadalajara, Mexico operations ceased during the third quarter of 2025 and all restructuring activity is expected to be fully complete in 2026.

Additionally, the Company agreed to an $11.0 million settlement related to an indirect tax assessment in the Americas for the year ended December 31, 2025. See Note 15 to the consolidated financial statements in Part II, Item 8 of this Report.

During the year ended December 31, 2025, the Company identified an impairment triggering event related to the performance of a manufacturing site in the Americas. In connection with that analysis, the Company assessed the facility and equipment assets used in that manufacturing site using val

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]