AEIS - Earnings call transcript Q4 2019 | Advanced Energy Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Advance Energy Industries’ Q4 2019 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for this conference call, Mr. Edwin Mok, Vice President of Strategic Marketing and Investor Relations.

You may begin.

Edwin Mok

Thank you, operator. everyone. morning, Good Energy’s Advanced XXXX conference earnings Welcome fourth call. to quarter Smith, are With President President Brian Investor Yuval and today and Director Relations. CEO; and Vice our Executive Wasserman, me of our Paul CFO; our Oldham,

you follow you find release, today. along ir.advanced-energy.com. you our it earnings a find at can will website discussion have also not our slide If our There press seen on presentation to

mention the that multiple Before months. Advanced will I like begin, at in I be investor to conferences coming would participating Energy

As other will we make additional announcements. events occur,

Let which forward-looking our me no and release Information performance. targets results not today and Long-term filings our slide the non-GAAP are them. could as obligation remind between forward-looking you are February statements that today’s today, SEC. on management’s found based future actual are uncertainties and concerning financial with also XX, call the contains update estimates, company these cause includes to be not are measures. statements, guidance. should aspirational in XXXX and presentation. and respect contained Today’s interpreted for in call projections GAAP explanation risks as these differ assumes risks materially subject and assumptions of well All and measures, to guarantees is that press as measures as to reconciliations of any integration non-GAAP goals An our including targets, presented and uncertainties

historical results, of our financial basis to in we provide prior full today’s During pro addition in periods. the on revenues reported forma revenue will presentation, which includes acquisition comparisons a

our results. of revenues will investors’ the contribution of performance an on believe better on In excludes understanding by website. be of which these revenue the addition, We we comparison provide can found historical Details basis, will Artesyn Artesyn markets help revenue. data organic our

me let call Yuval the CEO, that, Wasserman. and our pass to President Yuval? With

Yuval Wasserman

thank everyone morning, Good Edwin. us and this call. you joining you, for Thank on

of the let Before coronavirus. on I me touch outbreak start,

and assigned have we priority team the coordination a compliance threat and prudent most taking Chinese seriously in our impact mitigate with taking risks any are in an Since employees, and manage health of to base full global facilities important executive We production and restarting our are this operations. employee our led local safety our government. and approach is on

have our all We opened factories.

However, will is uncertainty a be with and slow to transportation, due of affected density be extended in supply the our QX that imposed that in restarting customer our output production below chains the of limitation our guidance set would reason, buildings growing our and disruption revenue assumption after rate break, people commercial government for demand.

situation the collaborating impact evolve, suppliers our continues the on As to mitigate and are shipments. actively customers to we with

a me marked Now, business. turn for finish Advanced to year to let transformational The a Energy. strong our quarter fourth

over by XX% of in end the verticals design revenue and total of product full sales prior semiconductor a forma recovery top earnings quarter including On in a QX Our quarterly grew guidance and ranges revenue incremental sequentially. wins. our data pro growth multiple basis, and Artesyn the market surpassed driven our period, center revenue computing from

the continuing support to Our and meet growth. team win on time while to future to demand, executed well products technologies with pipeline at increased the new focus our design expanding same

current new we in and factory following qualification shipping plans. with future strategy This from line also products quarter, customer and consistent our our started customer’s with in initial manufacturing Malaysia our

our well. incremental we going QX integration the market our was acquisition year of nearly despite and most XXXX, $XXX million solidly of the Artesyn revenues record results Power. revenue sluggish accretive as to for generated a full condition extremely Embedded is our from level of increased Artesyn the XX% For year, to

demand into growing. Going and QX remained strong products for our

outbreak. more coronavirus comments you evolving around the near-term earlier, provide markets with be expect related our will mentioned trends situation on Paul across we outlook to by to operating on impacted the will while details forward-looking as in outlook. My of see we impact focus demand our our coronavirus However, China the

performance the XX% markets for sequentially quarter, semiconductor at increase customers. Market our quarter demand our the to grew key in and end growth double foundry/logic drawdown by the into with conditions to market sales improve and equipment fourth more inventory anticipated memory strengthening the coupled continued with in during now an the Turning rate. than an

growth importantly, design at More to secured customers. our position and further we our revenue started contribute strengthen wins previously to

strong America. flat semiconductor demand from business in improved market we and with Our offset mid-teens semiconductor the softness on overall the pull sequentially. demand our bookings rate service about quarter-to-date, QX equipment Asia to Based North sequentially was expect continued in grow in by in

December At event, from including strategies pleased our across details to I semiconductor company, progress outlined Day our for the growth solid our these initiatives. Analyst market. am we growth report

won technical density, and quarter, a architecture AE chamber unique solutions. to iron Also, and low of we into due tool superior on customers high product’s our design based the with the of penetrated advantages cost cost remote During deposition stores integrated life RF additional with our multi-wafer plasma our chamber AE’s ownership.

ion application. shipped In allows to to engineers tailor profile energy of power technology EBAs, units beyond our three RF strategic the recognizing that Customers benefits customers specific essentially our each pioneering evaluation. solution of ion multiple addition, the energy are process to tunable for we

semiconductor we solutions, R&D our broad accelerate portfolio Lastly, the Overall, strategic beginning decision will products. quarters dollar last our power with within drive traction customers’ of investment over is good dividends. a to continue to increased pay saw several content which to

platforms. adopted our products aggressively Our being into solutions customers are developing process next generation new and are

are continue As will we the outgrow that our applications to semiconductor to into market. strengthen, our design sales pipeline confident win continues

medical surgical were auto we as were particularly in on the from from industrial display OLED applications project about This industrial diagnostic significant continued pro strength basis, near-term experienced production tools, in flat the conditions Macro market applications as a any demand remain systems, and in Demand sales and the in Turning sequentially. see multiple across and market driven investment, medical in to especially weak flat mobile Europe by offset markets, forma solar lasers. our not lasers China cosmetic industries. was especially did medical equipment and such by light we quarter challenging and customers, China. panel as improvement

products industrial as addition, across control, In robotics, embedded multiple and strength applications our horticulture, such saw power printing motion processing. food XD

important won In time, in At including wins numerous for revenue. converting were the same multiple wins, we analytical into DNA instrument equipment successful sequencing design market, more product application. an and a design one medical we

X leading space device XX% from over customers momentum reached medical We key are medical panel space, industrial design power with industrial advanced last of we the in and And gaining generation years. customer in flat our its products, our sales wins level next grew QX, the in in coating revenue another displays. one manufacturing, the highest for glass to for new XXXX in secured

be several forward, overall Looking from large in completed programs sequentially weakness. to from market continued as we vertical were QX expect medical down industrial and demand and

However, improved time. long-term, in design market conditions wins center Demand the this over our and than computing we expect solid market growth was data market from anticipated. we stronger given substantially

the weak ramp faster after basis this at a in customers, by wins into XXXX. pro market half first forma driven sales QX market XX% improvement sequentially a multiple hyperscale overall of design in expected an grew than on computing datacenter Our

Tier for shelf customized customer solution. several This expectations hyperscale X with hyperscale our power gained at as quarter, revenue a exceeded our share, we significant

In key high-quality computing requirements. to meet due storage addition, and market to at enterprise a ability share and we their customer gained our

our opportunities of given Looking wins new efficiency strong capabilities although industry-leading the market. hyperscale and forward, of vertical maybe pipeline density, With design and lumpy of existing in the power we our grow are share size this to deep application projects, position knowledge, revenues large in successful gaining XXXX. and ramp in this engineering us

and in and slowdown from our earnings last networking, their multiple sluggish Many saw for we QX. advanced is during to projected That as out Currently, their XG telecom in the XG weak we telecom infrastructure quarter’s and deployment due leveraging call are both telecom investment networking XG telecom base infrastructure IT equipment actively demand to is which LTE pushing lastly general we OEM networking equipment generation said, designs. markets initial infrastructure next on providers engaged for in station their are investments. spending. Turning

trough in networking demand next drive a to in two and the one recent we sales believe within approach next Overall, would XG offsetting the weakness we near-term pressure Long-term, design support generation and for such to drivers and networking enterprise projecting the and as market. datacenter In partially have applications continued are vertical this in enterprise vertical. quarters. telecom to started wins addition, expect that refresh the growth

on for global across significant company, organization Artesyn with Let progress and team months the and functional progress. close, key combined we Recently, now In our into single you strength the combined give will first which an acquisition. are sales our we me integrated the building few innovation. reach have already with made update since our an company Leveraging force and account speed accelerated drive synergies, channel efficiency, a efficiency. we our

integrated manufacturing chain efficiency supply factory enable drive company leverage. consolidation have and the new to We us our team which under a operation also single leadership and will across

While quarters, activity. from combined chain are several the seeing supply full we impact will take already benefits tangible

opportunity. our win for this use we confidence report applications over to in in gain time axillary that gives have efforts in fab the share equipment. cross-selling am power I million us first for Further, market new This our yielded our wafer pleased products embedded $XXX power that bookings will

through all create we increasingly to go to synergies I on value deliver stakeholders. to XXXX, am ability our As target our in confident and our

the solid In making progress of that ahead Artesyn design Embedded I win Power. successes integrating and of execution we summary, team, performance QX excited operating expectations our our are the am in very our strong

need chain by enable from our for that coronavirus the industrial strengthening operations impacting the growing demand revolution. is fourth supply our near-term, market is in solutions the in driven While

wins to focus revenue products continued our on our contributing technologies enabling our growth. through and innovation design of is in growth customer’s Our pipeline driving our

electrical to pure-play leader customers. the be is strategy in our with resonating precision power Our

by us opportunities. to We targeting to deliver and customers, partners verticals shareholders, employees are XXXX. plans and in growth I you many earnings your across valued All the exciting revenue support. position I quarter. in meaningful growth of like seeing and look and these our would forward new for our to executing our into growth our markets, gaining expending profitable share in upcoming thank

With that, to let Paul. Paul? the turn me over call

Paul Oldham

was in Total $XXX Thank $XXX up a you, quarter XXXX million, which from of fourth million for Artesyn. morning QX, only good of partial everyone. month Yuval included and the revenue

a computing. X% data to pro $XXX semiconductor Excluding strong grew and sequentially equipment including XX% revenue and year-over-year periods, Artesyn forma basis, a revenue sequentially million. revenue X.X% Artesyn, in XX% On organic growth center year-over-year QX grew full prior quarter of and driven by in

year over growth full X.X% we million, reflecting the $XXX revenues XXXX. of XXXX, For recognized record

equipment semiconductor market revenues Artesyn, the quarters Excluding XXXX industrial primarily XX% macro XXXX ongoing affecting our first were million, three to in and down year the weakness from downturn the the $XXX due of our products. in

revenue. million, by evolving forward-looking in Before I Semiconductor XX% up end that in want up about the were prior comments a by foundry XX% from quarter driven in I On operations given contribution demand impact of incremental QX $XXX growth some will demand revenues sequential forma and last at equipment cover year-over-year. not memory our wins. the talk potential of and OEM our revenue our growth for design for recovery by from my markets, revenue pro the comments We in the semi investment outlook, reflect saw I outlook our XX% QX sequentially my product our sales XX% continued sales. driven on logic, in China. basis, semi note to situation was

revenues For the $XXX down million, last were million year, semi from $XXX year.

pro and mid-teens outlook would applications. growth represent to the Revenue $XX in the significantly semi were greater and addition demand memory we both than revenues down than due grow in to medical a logic Artesyn. Looking forma million, from foundry year-over-year On year-over-year This industrial X% was of markets sequentially. sequentially and growth less with up sequentially expect of QX, basis, from to XX%.

from prior but industrial During both these largely the were able quarter, products. we sectors, programs offset specific with several to design shipments power our embedded trends wins of of macro for weakness we and new resulting existing saw in continued macro

basis. million $XX contributed products forma into pro medical and the from QX, on which was Artesyn up markets of sales industrial X.X% in QX a

the revenues medical $XXX For up year, from industrial in million were million, full XXXX. and $XXX

China. electronics a weaker in consumer mainly optical coatings, $XXX Excluding in revenues and pound and million, demand were due and glass display, with decline XXXX flat to related decorative manufacturing Europe Artesyn,

on to projects this to Looking demand seasonality market sequentially of QX, we from the normal and in down expect the absence QX. one-time be

up On demand expect the record Data center on $XX with revenues hyperscale share demand continued in computing significant sequential about earlier. year-over-year In from quarter discussed hyperscale forma based the enterprise the lower with strength we were QX. offset basis, recorded was gains, growth that computing QX, sequentially growth significant show XX% revenue to in a particularly XX% million versus to pro partial by from Yuval modest in QX seasonally customers. and

forma Telecom which QX and a On last networking expectations and basis, with in our was was revenues line declined pro XX% $XX.X from million. about quarter. commentary

this pressure new two one market from QX. in revenue market to Looking market on revenues with bottoming was With forward, service verticals. QX the down we basis, continued next our million, our out But in disclosures, our are counted slightly within $XX.X core expect quarters. a standalone service demand

revenue grew year, the $XXX service to For our X% million.

customers. the our year business we service lower sold if of exclude revenue utilization for grew XXXX, factory May in central However, by X% despite the that we inverter

a lower gross XX.X%. warranty from included and is cost. facility was revenue primarily cost for on relocation lower $X.X On strategic XX.X% million the acquisition-related factory. charges was our $X.X fixed Malaysia which and sales margins approximately of higher absorption the expansion Gross related of costs investment of basis, guided margin in high million the at and benefited quarter range. margin our non-GAAP of end Gross to Cost

margins to Looking adjusted to in QX, range. gross expect XX% the to XX% we be

QX GAAP million of of in of including and $X.X million $XX intangible transition charges, in of $X.X compensation amortization, restructuring and million million came $X.X expenses acquisition stock operating expenses. million, related $X.X at

exclude one-time exposure reserve China accounts for of This business savings. impacted $X.X is control further to conditions program range synergy our that non-GAAP expense our good expenses one-time Non-GAAP QX, we GAAP we initial and in guidance million the expenses operating end doubtful our certain In non-GAAP our operating $XX both addition, low by If to expenses. and in related have operating in been in delays the a recorded reserve, coronavirus. of below were came million. and on reflected the

in expenses we to expect between forward, be adjusted Looking $XX $XX quarter million and operating the first million.

Non-operating of operating expense was $X.X XX.X%. Non-GAAP X.X%. of net million, other GAAP million. GAAP made items. for expenses the On margin at basis, non-GAAP $X.X on was a in loss plus in interest non-operating million came a and was million up quarter margin $X.X $X.X foreign exchange operating basis expense

million to forward, the $X Looking expect non-operating we expense million range. in to run $X.X

due GAAP normal XX% certain recorded tax $X.X In of million of costs. QX, we or than expense transaction higher to non-deductibility

or non-GAAP XX%. expense tax Our $X.X million was

This and $X.XX guidance quarter and a our management. due $X.XX Non-GAAP ago. for we $X.XX expect diluted non-GAAP the forward, a to per of our the Artesyn. range a earnings to $X.XX higher with GAAP $X.XX XX% tax continuing last rate quarter the to good expense Looking in addition and high share earnings above year were favorable basis, be the On year. of quarter prior was last end the of XX% compared gross margin from $X.XX compares revenue, in operations to to EPS and GAAP of

the our this QX first has of job the the great realize efforts acquisition. full Artesyn, and done to accelerating integrating now synergies a Artesyn team quarter of Turning to was

expense million of equivalent earnings, over $X.XX As we in of annualized to end center strong adding accretive Combined QX of interest including data financing. an have the synergies on QX, computing, share the with than non-GAAP to more Artesyn realized in our solidly our was per basis. performance $XX

that XX While we accretion way target achieve will from over accretion remain XX quarter-to-quarter, are the earnings our of our fluctuate to we level of month on confident well $X.XX. to

approximately flow from sheet, acquisition. balance to to operations the the one-time which related Artesyn now several was million, payments $XX operating includes continuing Turning cash

of quarter Total million cash CapEx up DSO million from payments timing was reflects expenditures $X.X were Excluding receipts DPO. increased payments, amortization and decreased million and with these loan. and the $X.X higher of by operating Receivables were million, due Payables decreased the of to on securities facility to million X.X Inventory times. $XXX marketable as We $X $XXX full $XXX manufacturing was quarter in the Malaysia. days. and as to new ended $XX expenditures and XX cash QX. investment days the $XX debt over quarter million. and The million XX Artesyn was was million. flow one-time payments slightly represents related after a for well capital decreased depreciation turns Capital

any not During we repurchase did the shares. quarter,

let Now, guidance. me turn to

markets. Looking strong led expect forward, we continue orders see to our and demand growth data and products in center for QX sequential semiconductor by in

encouraged revenue demand XXXX second and we a forma while solid believe that recent environment the visibility the coronavirus. in are expect and related near-term, projections addition, improvement to year both challenging In In basis. impacted the actual for half, be revenues on overall China is in in low the markets in to will pro growth be by we our by an and

$XXX QX. we non-GAAP revenues result, $X.XX. or plus earnings minus per a $XX We minus plus As to QX or million estimate in be million at share estimate $X.XX

to some uncertainty on the we near-term, are the our costs of production range expedite our actively customers supply we transportation based with In and see increasing expect current backlog. increased suppliers our fulfill wider for and coronavirus work providing delivery to guidance we our utilization and fees, as the outbreak, challenge mitigate Due team’s product created to and factory a the by novel planning. assessment chain,

Artesyn non-GAAP As to under but earnings. QX to just a given products more half impacted to to note, our be be revenue, guided expect footprint, our China still we and represent relatively accretive

and products to is strong, revenue is continues I guidance. grow for our stress to want the our demand above

wins design growth realize XXXX. Combined and on should growth near-term disrupting capital we chain invested we and expect increased the improve recovery securing success solid efforts near-term, our time. our enable return year-over-year to synergies, earnings accelerate markets, our in to with supply is mitigate diversity coronavirus still revenue our over believe additional impact in for the continued in Although and the

questions. With we call the to that, will open Operator? your

Operator

Bolton [Operator & first Instructions] with Quinn Company. from The question Needham comes

Quinn Bolton

semi fourth results. wondering sense March guide on to around Thanks the impact of you If able guys. all look you think the kind on $XX the segments, us segments near-term for me thinking the off million to makes strong be the easily might I be Hey, through your quarter could data that of off due center and March or or being quarter how the to some for both if both demand but Congratulations cap being guide, shaved coronavirus, shaved quarter the right qualitative sequentially ballpark up you about? outbreak? color the is up million that $XX have give much equipment

Yuval Wasserman

Quinn, hi, this is Yuval, yes, much. pretty

Let me confident explain execution situation. Obviously level operation. highly a of temporary focus with team's a and view and We in as it’s the the our nimble strong and from but coronavirus. evolving daily we our little bit are that high uncertainty, agile

to risks We factories around our capacity some the strategy again people of in drew in people globe actively yesterday yet we factory our a accelerating supply China our seeing and channels and suppliers management as reopened because factories of managed to and functions have of and the Malaysia problem said work of planning and that demand expedite through many return means just of opened up support that recovery. some Chinese we operational component Philippines like earlier XX ramping chain are temporary comment alternative from a materials, our the February transportation China our we and capacity factories we us and have home home start to work solutions uninterrupted implementing working from signs have delivery in I production as so restarted are direct Paul etcetera not strategies our have different labor have is helping of to while outside multiple

Quinn Bolton

XX% of XX% Great. gross you can Paul does points from of some you can sounds term incurring coronavirus? the of some And a give us from to impact the then virus some near expedited the expedite because further for in or give kind guidance follow-up any margin you impact the like are it term of us effect mentioned fees, basis another the of not just sense is to you that include just XXX guidance those near sort costs

Paul Oldham

basis strong did obviously, think, from of virus a broadly lot benefit I speaking it semi a is the and margin that’s associated next a quarter is in mix with Yes certainly, XX amalgamation impact corona will just our was right? little but that probably gross of to inefficiencies bit number. they the the to demand factors, And XXX

Quinn Bolton

published considered fabs it And licenses you last product that Great. to your semiconductor a yesterday know news too such me, saying Yuval, recent and foreign U.S. the capital question direct product to looking I department business change commerce impact for quantify? might Journal then for require this an is or of the rule worldwide equipment The have direct article what foreign Street be export may have to sort change in very is early but rule on Wall

Yuval Wasserman

don’t that us we will impact Quinn this right now, believe significantly.

Quinn Bolton

Okay great. Thank you.

Operator

Our Diffely next Tom Davidson. with question from comes D.A.

Tom Diffely

Yes morning. good

Paul of the it ramping look backlog here? would you down time thought the First, ramp up never nice is that was this question a ahead where be semi of sequentially by year like on the a I XX%

Paul Oldham

Tom, so not pulled you reflected that our product have of remember backlog time is semi orders in activity adjusted the Yes, only thing a majority partial basis and is on is reflection of vast a is our backlog. because to one

Tom Diffely

guess Okay, are is do demand inventory I that your is their then think demand build or semi ahead have close right the seeing seen you makes you are your to of demand about end you market And you you to now are rounds? actually seeing sense. talking what customers equally some

Paul Oldham

good quarters right which are to of up revenue number market of but we demand our is logic the were is Well I inventory saw for exposure the reasons a are customers our also talked to from foundry than of have overall headwind have last benefit from related us think winds are headwind that had seeing we I last few effectively we design year drove driving think a the growing some of year would last I that QX not in faster about the the pull customers is seeing so benefit third that. the faster build the and giving we as we inventory over other our I that although basically incremental of market growth December where not we a rates that saw market in secondly at you the anymore and seen now side strong our think which one we lot have say we

Tom Diffely

And about that XX% then nice the talked Okay. ramp center also is there contribution what from data on Was Artesyn it expecting. there? side cost little a a the so more you than bigger than just were upside we it or drove the to the reduction

Paul Oldham

have a is is it it is said. $X.XX of we and combination Well, what things

Tom Diffely

$X.XX It is right.

Paul Oldham

and benefits get right $X.XX bat able of sales in that seen off costs, that’s we to that initial have did we accretion good especially EPS we the the we have track to the out to see of of the are the and took we of of we or good have $XX efficiencies things around how are leading to that pickup of corporate yes interest channel excited the are the are accretion, think a right growth the working initial combination to achieve we are excited about after we which in at there structuring revenue we but we take implemented on coming together finance is we of see organizations is little over start benefit it so some of off are seeing bat been directionally the rate million coming I also some of the incremental costs right actions restructuring synergies some are some out a able those from term savings to are those coming QX number the think we annualized actions an you that longer our together

Yuval Wasserman

about exciting. is other revenue the wafer are we that news the Artesyn than earlier equipment fab acquisition, potential and about we the bookings opportunity a the talked synergy generating we products started industry so than is for thought this cross coming already semi selling this Artesyn great is Telling faster really from

Tom Diffely

And the supply talked about you coronavirus there? disruptions demand by side great. what Okay, you the you finally look I how the have was when guess lot on a any seen impacted then chain

Yuval Wasserman

ahead. Go

Paul Oldham

and but Yes change QX early that Yuval we that demand demand continues into QX seen to the I to in coming sort of to be the maybe think out strong have too Mentioned think we robust. impact and have saw we see seen certainly a as it start no I the pattern quarter picture of

Yuval Wasserman

demand by The not driven robust demand continues and just we to allocations be center about we computing strong area demand any or concern needs see by additional one shortage do area. semi see example data and healthy driven market in for other

Tom Diffely

for you thank Okay your time.

Paul Oldham

Tom. Thanks Sure.

Operator

& next with from Cowen Company. comes Sankar question Our Krish

Krish Sankar

questions Yes, Street Wall Journal go speculation. Thanks I my taking hi. on for Yuval, question. just of the earlier article wanted to back to The one

article on curious am sector of kind minimal just curious there more for talking I the is you or impact why is minimal that see your based am impact you think you answer customers to that said I that true? is only You like if

Yuval Wasserman

Journal know. right manufacturing don’t we on are customer impact customers we not did we significant we knowledge worldwide This sell our to is talk the globe don’t assessment have we was around The customers Wall Street worldwide any we term as business it now of obviously the where since on article sell we our our based our see and near base and long when comes term published

Krish Sankar

bottle neck or how getting the chain that is up labor the XXX% open it the your it, in production on ramp China am and board got That’s factory take trying up to then to all people ramp the up really what affected ramp supply said on will bottle it it long And facilities like is in but utilization? you it is Yuval. is neck that output and very is question helpful, it. kind a to what just the typically I Got of curious

Yuval Wasserman

channel government and rate see number So wanted ensure of the holiday health the it rate of return first and going are was is is back in return a by extended put transportation Chinese after the driver significant a government this that is of And factory, that we to employees the means talk means of the expediting year back other is was the also various lastly it combination area that of the of in transportation priority to of was will areas can that are and of factories some employees number rate to the safe ensure by earlier some and employees immediately factories transportation employees quarantined factories. working that to and that working so our to the we said people in the new were that a the driven factories we that that get not basically companies our suppliers to our across we limitations work material of of our capacities that for and fees wellbeing yet material together of is this the of vehicles in back with we move one get third by and and how investment aspect the of government and we started and other are so by is the practically in the means the our and back do in the China suppliers a ability and I controlled three transportation to safe supply it's about multifaceted. protected pipeline an get length into around drivers also means closure that that exactly is the to areas them it the the are are inventory we and our material we with is have that full growth measures return not ensure health ramping closely especially are means to its when in how locally and the ramping under that epicenter ensure suppliers are in small to chain reroute material and channels inventory work as there the are way to the

Krish Sankar

ramp up China but does very do Thanks still that color. that’s nice a with you see this right. it timeline? your virus for consolidation final the to or Got lot one just facility question for Yuval, facility Malaysia think the delay

Yuval Wasserman

come situation in independent Malaysia Malaysia of to of into global to get of basically accelerating how obviously get products to from are it ramping the of are and is and our remember that from need Malaysia the the how how go supplies factory factory we factory shipping in totally factory very process also we ramp material were we that is the some it the coronavirus the No labor Malaysia because executed to fact carefully this we to china around planned ramp our so strategy customers. a

Krish Sankar

you. Thank Yuval. you, Thank

Operator

next Amanda question comes Our from Scarnati Citi. with

Amanda Scarnati

morning. good taking for Hi Thanks question. my

June the higher is Going of June or it. a to that quarter the question rebuilding on you in this hopefully, ramp in trajectory the last capacity in significantly Could on have rate at is be to this shipment do under a continue the your coronavirus, term the of fabs of quarter? demand sort met up longer to demand

Yuval Wasserman

back we that a would lot be recovery point. shorter don’t is probably couple a come we environment uncertain Yes, fast Amanda back it of realistically fast but a would is the up I there at at continues a see things think little of how we to things this evolve longer before know think it could point, take quarters can variables depending on a this full ramp but how fairly little

Amanda Scarnati

continued confidence you gives that of mentioned revenue bottoms back to the of Okay. you the pressure there are March start can year you talk half recovery? you before potentially And see that another you some the one what telecom and And then in sort about seeing in in what quarter of business down demand networking that the can to quarters the you the expect is two

Yuval Wasserman

Huawei Well, upon bottom further of there think market delay we of infrastructure as of investments we and around of all the in companies XG there the our the is well are involvement is factors benefit tend expect investment the entering we in recovery XG mind are later the also leading radio heard the and of government there our XG agree potentially advance may in impact infrastructure we a and impact recovers will the the this acting that for serve investment to made as from the driven mainly strategic XG those out see XG on applications and market we market that that because recover forces market the in the so no a positioned there first of are is the quarter combination the multiple lot the of a that. situation push telecom doubt consents is to and that investments towers two relationships very this some and you of of industry recover I the with close market use when UK to LTE that also government by within and will year a from areas this out relationship or saw with market a global infrastructure other some we to that when

Amanda Scarnati

and versus reduced would up [indiscernible] that, on comment your XX% be And to then Huawei you exposure just if can there given on if XX%? what is that’s following the to impact an

Yuval Wasserman

a of we Huawei manufacturing through volume customer engineering is our small very and Asia. and teams small this serve customer in ours,

Amanda Scarnati

Great, thank you.

Operator

question next Our James. from Pavel Molchanov Raymond with comes

Pavel Molchanov

Thanks for question. my taking

why the that the legacy the than coronavirus Artesyn is uncertainty mentioned is AE business legacy exactly to business exposed that? more You

Paul Oldham

mentioned of I Well Artesyn because nature the that we the one well. Artesyn based the for is already of so as but products there in balance in and factories on there China chain supply exposure the say is of is more large china would

is it those of the So combination things. two

Pavel Molchanov

that your years still down is question, to leverage quickly many, obviously sheet priority you for of for balance very debt? bring reduction negative And that as many has $XXX net Okay. turned it million been

Paul Oldham

so all amortization obviously to our healthy related $XX from sort underneath as generation of see we debts It cash had reduction ago but a lot about we of company by that quarter the continue was increased want $X and is but and a QX cash it over we those ago QX debt and debt items going of million we higher transaction cash combination in been of to of operating way was our very in number payments and is months $XX legacy QX underlying and just flow should move cash months million when of in assumed we our positive although is was of paid a already the the encouraging and balance $XX that fees making but lot is total give cash as payment about down debt number flow from negative priority the have that part that’s actually did cash net that of rate leverage a are exclude us five acquisition this note those on paid deal million have to a costs quarter. lot four forward the the the of so down payables if one positive the I how out Artesyn million cash this we the think we took that we

Pavel Molchanov

Okay, I appreciate it.

Paul Oldham

Yes.

Operator

from comes question Patrick next Stifel. Our Ho with

Brian Chin

organic good But go of semi morning. of first just like versus here are from of allowing a to for sequentially down maybe and think semi calling for the just supply you to to request what's cap may in if customers buffer a you saying line ask Thanks And want sort supply sort just be be flat just shipments a transparent, are also, it sounds in Patrick. what I'm the couple wondering Hi, back questions. your to that going may of QX Brian demand in cap on that to standpoint? actually a add of you to It’s XX% questioning clarify me giving stock safety business to is sort ballpark. of layer chain naturally of a clarify to then think light your

Paul Oldham

Yes, yes, thanks, Brian.

not demand other slightly Artesyn question means demand the by drive probably market we impacted, power I more. asking you would the than we a the sequentially. underlying proportions we for I to or pattern look up how think First did be revenues be impacted impacted products be would would speaking that think semi Broadly expect impacted if less the thing say be and the think hold actually relatively clarifying thanks somewhat will which embedded those

The second…

Yuval Wasserman

our from they our pull a inventory Well, and and inventory inventories when they material in them, our semi needed like inventories customers this bins in just-in-time have as just-in-time buffer. acts with

Brian Chin

catch more it impacted? quarter Okay. there data and to the be cap is particularly up anymore there be term of And between just a anyone a if of it that couple think foundry/logic near you memory, center sounds or the impact semi do in like business may question quarters takes might sort

Yuval Wasserman

can we answer that think don’t question. I

Brian Chin

on in fair natural QX just – in excluding a there QX, okay growth data data what way your Okay, basis, center jump And is might gains, might for nice market a your been? have just even the growth there center, forma way, obviously enough. revenue is and there rate characterizing what pro trying share been sequential kind to of have understand the of

Edwin Mok

Brian, Edwin. Hey, this is

of it in we of the vast Just is got about talk the data majority we to growth majority on you the sequential, some center, due we that were share XX% give sequential color gains. quantified to

Brian Chin

Vast share is gains. majority

Edwin Mok

Yes.

customer a That new we is Tier one, had a said, that customer. we hyperscale X As ramped.

Yuval Wasserman

you the The little an hyperscale obviously data center give is color. bit business. of me important let a So more part

the effort into part for has segment XX significant design significant and last in reason, the to hyperscalers. the months, is the part business. computing that hyperscale the data in share Over company the growing in view hyperscale put put effort of center getting months a that the of was gaining XX We fastest

if increase, design in converted not production data match to volume are a business wins joint shipments. So that all is center increase won increase, these result most, XX% high of of a in computing this recently

Brian Chin

you of you going you TAM the probably referenced client hyperscale well. are in QX a that, way might a Okay. lot well And of obviously, I there, expect by enterprise what ahead know as I baseline a there there think as strength perspective sort to grow obviously guys sort grow perspective, Is from baseline calendar a of to you of in you lumpy or want kind of business. being if bifurcate of maybe know ‘XX, don’t it versus or cycle? way but from

Yuval Wasserman

And right. you for we I that, answer have that. now the don’t think Yes, get right can back with don’t – to I

Brian Chin

Okay, no problem.

Yuval Wasserman

and believe that but be gains at say TAM to flattish, Right mainly share accelerate, grow we because the we that design than allows XX% grow the market. us we hyperscale will those will CAGR, now, of about wins that right. faster And

So get back we can to you.

Brian Chin

chain the like is and doesn’t like of sounds it’s your effects? seem the sort where from, sort coming supply oriented based way China is on of that impacted from It demand necessarily

Yuval Wasserman

that. wouldn’t I say

our products. I think that all of impacted China coronavirus effect

Brian Chin

how affecting a effect. And be in factory backlog, effect then having any point It’s out can just this you. markets Thank near-term. of these it a temporary ability a we of get of come see and up is quickly China the things near-term? the that okay. effect are don’t just term on we and the We matter longer Okay, the in to how stay demand able or we between think at gap achieve essentially and basically our things quick we clear, the it’s to coronavirus converted to output and fill

Yuval Wasserman

with growth before need China excited demand this products We situation are we across the our very for in short-term very recover. we excited we – in through are continuous We to go serve. markets the

Brian Chin

Okay, thank you.

Yuval Wasserman

Alright.

Operator

Mehdi from SIG. with Hosseini Our next question comes

Mehdi Hosseini

in taking of and if it’s I follow-ups. Yuval, had since excluding year Day? that months the your the you core throughout your when question. any additional thanks your of for than the Couple how thoughts thoughts am evolving and a Analyst market mid-December Analyst X I wondering the have Day, couple follow-ups. cap, have is see different you back how my almost coronavirus do you just been Yes, semi on

Yuval Wasserman

would think general bullish quite memories. we news Analyst obviously, XXXX not the since foundry will more we for be Day. logic because we we in are us, way in served also and in market memory. impact I only which that the foundry become logic, we good and the than more the a temporary And slightly the our coronavirus in both the the in Mehdi, added balanced consensus road, constructive assume is of becoming We saw around originally. has capacity, better but believe Without thought market bump

Mehdi Hosseini

see increased of a drivers it’s not pickup correct? diversification So beginning to in that in now demand foundry, a like are there market more just end is you memory, is

Yuval Wasserman

Correct, correct.

Mehdi Hosseini

then just And one follow-up… Alright.

Yuval Wasserman

processes. new by way, new the that, materials, we see by technology, And advanced additional investment with technology, some new Mehdi, driven

Mehdi Hosseini

Sure. – semi be your Did say the would revenue remarks, that did December? you up that mid-teen you cap March versus say prepared in in

Paul Oldham

versus mid-teens up quarter We in will said the current sequentially demand QX. that

Yuval Wasserman

the the demand, in continues temporarily But is the our Obviously, rate China, up coronavirus is mid-teens. situation yes, good Mehdi, deliver affected strong. demand but of by ability to to catch, this be demand to demand

Mehdi Hosseini

or X In is minus question the in I cycle, Sure, how XXXX, and cycle equipment. in thinking next you how that’s multiplier thoughts plus to XD as we years NAND in prior add of semiconductor March X model can the Xx have to should now we to as do let’s out you next about playing the you you there, past, the the wanted years? revenue What the this my say see and layers I still from factor here you the or look this have the other forward, multiplier, going Are how XXXX benefited a and past is you for have to do the it? attributable $XXX to because But NAND at okay. foundry. be looking XD any and now you million still come with a is for additional Xx to how quarter learn DRAM up more and

Yuval Wasserman

of a years X, a high we maybe you quoting converted talking XD industry give been what when consensus me about NAND. X let opinions ago have So, saw level kind

right. and So XXXX a that general be strong year not we the will XXXX that’s year I growth will market forecasters. be think growth very consensus right a are consensus now, And the is

basically we at general hear look register So, information. what and that we

forecasters. at especially the half greenfield give of multiplication became the fact That yields I industry greenfield market we saw NAND. capacity the were in That’s from and Again, more not be first and the what first saw was years additional you. efficient, XD and additional ‘XX, we half, Now ‘XX. are can conversion memories, fabs the low. the relatively to level we We by higher ‘XX was of are of believe especially that that capacity ‘XX/XX/XX planar at not an industry will commentary the yields level also driven only

we as the still than past. have market we have serve the we we in However, will done drove demonstrated, faster as

Mehdi Hosseini

for all Thanks the detail. Sure.

would Paul, and out out half we some recovery to play absorption gross initial switching and were you the the expect assessment half from to XXs? second quickly that second see Just half, to if the first margin of you into especially the should get revenue as uplift, your the pushed

Paul Oldham

we to aggressive. that up, are goal that’s revenue with Certainly, start certainly $X.X working to that and on time. implementing fully efficiency the is be picks actively to volume up billion, get Mehdi. would levels synergies basis long-term the but margins as a approach over too But improvement and I $X.X range, No, get synergized the XX%, on think billion our we

to certainly not So fast continue certainly broadly getting goal to speaking our up, that to improvement would modest too be will that second would there level. that that I’d margin bring to level but get be that maybe but to be in on the half. direction, say

Mehdi Hosseini

it Okay. go And the would how from midpoint? should I OpEx, about $XX million the in think where

Paul Oldham

going in see structural pickup, structural downturn. the modest to broadly cost, we some reductions will in of forward. as we speaking, a variable but make didn’t have adds increase lot don’t of revenues a make We Yes, lot

it. the this cost about with to think variable think some way pickup I So level, probably modest is around broadly right

Mehdi Hosseini

you Thank guys. Great.

Operator

this remarks. not back like Yuval for would am at time. to I question I showing the further closing turn any call to

Yuval Wasserman

for joining today. everybody us Thanks

excited extremely company. in temporary a bump We are the coronavirus the a future as view about situation of of Artesyn the We and integration the road.

for end-market as operation to can seeing serve forward in products of demand many to Thanks. increased we quarter. as our am from you I terms China. of and verticals various seeing during our markets those ready looking are We in we are the soon

Operator

Ladies today’s gentlemen concludes that presentation. and

and now day. You may disconnect have a wonderful

Advanced Energy Industries (AEIS) 18 Feb 202019 Q4 Earnings call transcript