AEIS - Earnings call transcript Q3 2020 | Advanced Energy Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Advanced Energy Industries Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over to I would speaker conference to like now your the today, Mr. President Edwin Vice of and Marketing Mok, Investor Strategic Relations. you. Thank go Please sir. ahead,

Edwin Mok

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

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

Before at virtual mention investor to event. this I you We that a Monday, on be of December XX. hosting would begin, event I welcome us AE join like all will to

multiple in participating we coming the be In addition, will investor conferences at months.

events will As announcements. the we make occur,

no found and X, today's guarantees press statements, to are Yuval and cause on that, that remind be to presented contains presented not me explanation filings Yuval? targets reconciliations in be measures well are to be between me guidance. With as statements SEC. as interpreted forward-looking On estimates, specified. are All our Let GAAP let results concerning measures today’s Information uncertainties not management's non-GAAP company non-GAAP the on actual call today, financial call them. based can that Wasserman. our results today's unless and to as should the will An could otherwise risks these subject Long-term as and found our pass for uncertainties the assumes performance. you CEO, of which and non-GAAP our targets future release. and include and of our risks financial update goals materially integration call, financial basis, forward-looking today, aspirational assumptions in which XXXX, with November the is obligation projections, differ a

Yuval Wasserman

associated market us cash and everyone quarter on for morning sequential Energy validating earnings was earnings delivered and non-GAAP this call. model our goals quarterly data and and up strong, teams XX% accelerate share, our We in thank investments respond great revenue enabled products chain our synergy ongoing be and technologies Good to demand. on operations by Advanced of Good approaching up growth. execution in this joining COVID-related our Xx our our operating on by service. margins with ability burst us data an outstanding center growth continued gross the operating flow. you across Overall, demonstrating year, and in revenues, for to all over Overall, Edwin. resulted highs demand to leverage and last you, driven Thank record from recorded per supply catch computing earnings semiconductor, verticals, and execution for and to economy, of continue with the financial new delays

meeting we During It customers, business in our global is in quarter, operating Malaysia customers' continued one we to our as factory, provides the integrate optimize operational ramp continuity and our dynamic leading next which footprint. with a and of us demand to environment. resiliency our

execute to continue record on acquisition. Artesyn we integration plans, addition, from accretion In delivering our synergies and our

and through our structural be in We realized expect supply changes XXXX, to we additional as synergies manufacturing execute chain.

and synergies, in incremental semiconductor we both secure cost drive industrial revenues those wins to and Beyond have across to we design cross-selling XXXX. means new started expect markets, end

forward. to across for six generate new invest us and going products to continued AE to continue aggressively are different win all enable design the to which We new quarter. across growth These offerings during wins launch portfolios in new wins multiple and markets R&D, expected

performance Turning now to and market. by our products

the record high, market supply as process As semi one XX% and growing believe sequentially also has strong from year and retrofits. meaningfully driven of for semi become over upgrades regions Service and chain. by our utilization We last the we nearly I record, multiple segments power and equipment within demand XX% across the outperform fab quarterly peers. a improved mentioned, semi reached continue revenue revenue fastest-growing subsystem was to

market semi XXXX. the and share are leader with gaining revenue combination market to and the than are As of critical wins market exposure, customer faster broadest we end with of share strong semi grow portfolio, our driving peers growth product gains in many all The our design for market our processes.

QX QX. growing advanced in technologies For are edge getting our and XXX% doubling in in RF deposition advanced over matching in multiple resulting adopted revenues example, after year-over-year tools, process

this capture deposition Our revenue. remote of incremental And dielectric In packaging a grew advanced resulting won track win enable additional secured in to of at have Korea, designs continuing areas, QX, we one in We memory an investment exciting OEM new in design XXXX, in of double pipeline sources several dielectric will to expanded etch applications. and revenue millions opportunities leading us suppliers. on in and of the we dollars again plasma quarter is and wins including etch. in our product development for believe double-digit

general are expect to and XX% in factory with strong. Long backlog positioned output remain we to our revenue market. our semi sequentially, industrial design markets a increased the strong in the to content nearly Revenue on market wins, outgrow continue driven by we industrial believe deliver by power term, trend, improvement and to markets. increased forward, medical QX from favorable well and we growing Looking

applications. applications coating well critical in improve, pre-COVID but improved. electronics levels. to Noncritical example, remained demand and demand driven applications began applications consumer from For below motion control Revenues medical for also for strong, remained care continuing industrial, care by

of Of next-generation of we spread the wins one solution and secured for we position medical COVID. quarter, air note, and imaging a our our multiple for power into medical, wide diagnostic, new was This applications. therapeutic of source system across diagnostic range at a analyzer won sole design blood customers, designed leading preventing filtration a

with modest expect look markets current and forward, revenue industrial QX. medical levels in we As we continue the around to recovery their

IT should in digestion, center and design new but data revenue a and next to In a slightly from another year. third the digestion in Despite and wins outgrow jumped QX, hit market. to data was record have and XXX% hyperscale, revenue year. headwinds additional good from helped made up quarterly down generally Revenue sequentially businesses initial QX hyperscalers meaningfully quarter customer wins record X% offset share enabled last from in growing revenue from progress environment, computing our a earlier new spending center to of us hyperscale XX% weak year-over-year. industry from that contribute winning we Our

ability long-term we deliver to ability in Demand due recovered be and the OEM to the our share. to remain to customers confident in market quarter-to-quarter, capture needs growth and market this in to revenues Although outgrow market. customer partially market enterprise lumpy QX, our from

to In platform addition, our wins one of prior started wane. higher performance design computing into

a those going our high-density expect the is to business We racks. server solution given secular for for product our be industry-leading requirements meeting density power driver forward, HPC high-power, for that the ideal

Looking and is year's remain expected center computing revenue forward, levels our data to well rate. last at run above elevated

market data in revenue we to QX. in However, our digestion impact center the anticipate

trends. of return to in new in Telecom from revenue QX from investment XXXX, catch-up cloud backlog networking improved in modestly likely grew XXXX. a growth releases center expect XX% additional the and also gains. the first with data as gains. incremental enterprises We Data some and as working our the bright share by this the trough revenues remains traffic driven to shifts share the remote over of benefited due networking spot from market shipment half center levels our from data sequentially CPUs by and accelerated market in to

the migrates considerably In design a has XG investment delayed. telecom during our to infrastructure of investment in will XXX-gig products as networks. applications large-scale China we win the sold addition, market, In networking a overall outside industry secured that quarter, limited, into continue critical XXXX, platform next-generation the growth revenue in XG of remained risen support to although be in mix cloud

as Looking strategy us to deliver investment Minnix, enabled synergies for employees. would remain innovation, summary, DelSanto two a efforts QX the our market's of this challenges I'm myriad environment industrial I earnings. to serves extremely and term, these market our to levels safe complementary outstanding the and new signals capability accelerates. year strategy in to mixed. our our global to add responded XG capture new has clear growth, have our proud who and members; to welcome and revenue who – XG validation industry operational knowledge, and next-generation leadership, our Board market Lanesha us This experience winning of and to model. networking recovery Board. come financial also global infrastructure Anne as ensuring around deliver a In are results like team while forward, business QX prepare designs Long revenues our in expected results

strategic of growth our our continue growth financial we on being we As a drivers base, revenue company with goals, strong diversified results. are to tier realizing and a top industrial deliver leading vision

growth As see we up increased coronavirus, XXXX see be setting term, new we term, AE. we of look for risks to longer due near year but forward, the to waves a

some expect and semi, efficiency in our our momentum investments, with portfolio global and by gains continuing in gain, earnings, Although share quarter-to-quarter, continue in and driven we we optimization XG macro hyperscale variations see recovery synergies. combined to markets industrial grow our to

update dive to date, briefing aspirational our to discuss deeper goals. shareholders, newer like thank are to an December We I planning into to an in employees and to our With investor and of these our partners our Paul. customers, you speaking especially markets with progress upcoming I'd call me your in times. for the look over during the turn support, challenging quarter. many to that, let our valued forward a

Paul Oldham

and Thank morning. you, good Yuval,

note from non-GAAP measures please compensation, foreign basis, gains and a integration financial transition costs, otherwise unrealized today presented unless on losses stated. are items. and results restructuring and will begin, I Excluded Before all exchange stock be non-GAAP amortization, that

costs $X.X the acquisition-related transition. recorded million we quarter, of Artesyn and This acquisition to related

found non-cash, losses A long-term unrealized today. non-GAAP We to $X.X measures press issued release related lease liabilities. also earlier our full pension million be from FX recorded reconciliation to can GAAP and in in

a team metrics. of record guidance quarter end and of meet the to to mentioned, an demand our our increased by financial high Yuval this wide was our As customer for and execution ranges. surpass exceptional results our Strong enabled EPS we range requirements revenue as delivered products across

by earnings our over operation we annualized most the we addition, million. to XX%, on accelerate return In leverage performance our $XX demonstrates Perhaps balance over model as business significantly, strategy and cash increased invested validates in financial and an execute growth. our of our capital our achieved

requirements. time and from the Third the quarter a quarter ago. million, XXX% $XXX short to of that across from last We million record and at all burst of year deliver stronger markets our end quarter a our able to saw customers' we demand lead sequentially order $XXX a revenue was XX% up activity were

In able revenue forma were a addition, during upside full to reflecting roughly guidance supply of quarter including the Artesyn in XX% capacity XXXX basis, backlog in year-over-year. created of to due a constraints, our we half periods, quarter. ship revenue prior QX grew the early pro to On

XXX Artesyn, XX% Excluding grew sequentially organic and year-over-year million. revenue XX% to

center Xx to on in semiconductor XXX from revenue pro up the up revenues medical and a of a semi on nearly XX market and QX and a revenues with both second the exacerbated XX% increased quarterly forma On X% was quarter revenues quarter. markets the revenue nearly pro memory. sectors, industrial OEM and market. result a record across share doubling forma quarter forma gross faster by almost sales were for networking points from for Sales XX% digestion pro sequentially cost market, declined Margins another than higher logic Non-GAAP of as up over Telecom XXX gains wins. by $XX increased and in Hyperscale and the with revenues cloud offset matches product sequentially are XX% to basis. year-over-year, overall basis XX.X%. as catch-up XX% following a million, XX% primarily the record year-over-year. RPS over than general revenue XX% was of absorption a benefited basis, slightly by as demand in cost were good by up were strong sales year-over-year company. up Revenues XX% Turning basis, year-over-year. partially more up in year-over-year driven from basis, year. by second Data year-over-year, grew from of we a prior million, computing fixed a RF On was foundry, design quarter began, up and from favorable several and increased a Overall, up better in both and volume, service COVID-XX million, result revenue margin other our but quarterly backlog. On Both QX. weakness pro peers sequentially. growing demand forma modest industrial the last levels declined record. from sequentially crisis. Enterprise our were flat were sales and from Revenue was improvement of $XX million, still in our ongoing QX

Importantly, shine business we see through of validating including to improvements model. portfolio synergy the cost are increase, our and our optimization beginning benefits as volumes actions,

margins gross were sales plans expected and to year. points over Expense Although to of and on top lower margins over over just we operating coming R&D make margin as from of on than incremental progress X.X greater our strategic our in up decreased improve our the in investment last QX a slightly as achieved revenue is versus XX.X% we XX.X the XX% operating ongoing by and million, quartile complete to decline continue to the due volume primarily quarter. million XX% margin, last operating sustainable basis peers. or Overall, to XX% to consolidation goal percentage programs gross reflecting in quarter, XXX expenses quarter, innovation. of leverage we great Non-GAAP synergy from next

result, another interest million, $X.X other As up Non-GAAP improved non-GAAP was $X.X of million, expense. operating for million company. and income the sequentially to $XX a XX% expense including record

total expect million other in to the range forward. going be million to We $X expense $X.X

structure Artesyn a tax year-to-date Our of or our and tax as primarily a of million integration $X.X of earnings expense result favorable on into basis. mix non-GAAP the was foreign XX.X%,

forward, we on revenue tax the Earnings quarter XX% were margins. expect in over range. The last past Looking Non-GAAP date, year share from rate To earnings share. be per the earnings share, up over $X.XX our record achieved Artesyn quarter growth. contributed accretion goal $X.XX GAAP ago, synergies we the meaningfully non-GAAP from and XXX% accelerating our demonstrating to of $X.XX higher was for now a quarters per up have of per over financial over $X the earnings annualized and to one acquisition of million results. $XX four XX%

plan of our combined we a In of our schedule, accretion. functional $X.XX well improvement way, efficiency opportunities $XX we synergy targets as our annual achieving is annualized into synergies its exceeding remain continue and find over addition targets integrate to X we confident new of in share meeting over organization. for synergy Phase to ahead per on million long-term and EPS in or of X Phase

four capital of continues continuing days flow XXX cash XX.X operations our X.Xx. Energy. Operating last XX Inventory expect for sales X.X CapEx was in down from operation. decreased expenditures generation. increased were quarter facilities Turning and with than we and $XX.X cash in and million, sales. free were million, now of fairly with X% capacity linear due highest million. for cash the turns was were was $X quarter Philippine XX, were of higher million flow Free in in on Overall, Payables XX expanded remain XX was to historical balance operations investment seven Total year-to-date and ended the a normal support The shipments was sheet. We million to million to QX days this about levels to million. Capital DPO. expenditures improved quarter from $XX cash The million ever. X% to level in capital one-time QX. to line the Advanced depreciation continuing the our up cash $XXX.X deliver higher by on million, excellent representing quarter. Receivables marketable during net securities DSO working $XXX from business slightly days The of flow days days quarter. from to

During on bank repaid the principal $X.X total our with of quarter, debt, amortization debt of ending $XXX.X million million. we

gross XX-month range Xx trailing Our decreased debt within well our target Xx. of leverage to X.XXx, to

we quarter, stock of per also average of $X.X During the at $XX.XX price million approximately share. repurchased an

be to markets. solid me expect Overall, continue guidance. demand vertical in to let Now turn the we fourth quarter, across our to

to to Revenue in share computing QX lower XXXX following we half digestion, be above center is to expect strong overall market first second of several quarters for levels. with see We growing and customer-specific XX% XX% semiconductor and revenues data applications expected as strong, half remain gains.

medical and and expected limited in and are we XX% million, operating and in plus and or revenue minus are telecom gross to industrial markets expect guiding Operating related We Factoring the we visibility expenses mix COVID, ongoing about to $XXX relatively to stable. to macroeconomic expect and $XX million. be to QX Based at in demand ongoing on range. anticipated the COVID-related remain risks flat. volume, be costs, non-GAAP margins XX%

XXXX share, earnings as half forma accelerated to on XX% would second will and plus would Artesyn summary, Based expect In XXXX goals pro revenue on half of performance from goal over year, from ahead year first we half a for or be XX% and basis. to year than full $X.XX that achieved integration be the guidance, As XX% up of demonstrating be be double non-GAAP full our expect financial the $X.XX. organically and the earnings very would Advanced we up both of have grown for first share per strong XXXX, XXXX the our a our of and related be we revenue growth. per result, nearly midpoint growth Earnings minus Energy, more a acquisition schedule.

of In margins, our are that gross third financial long-term and XX% performance addition, margins in over our targets financial achievable. the operating illustrates over quarter XX%

industrial markets improving our continued competitive drive being to provider and revenue of growth enabling a on is key strategy further profitability. operations to Our our growth focus power pure-play and advantages

overall solid. with is growth believe a XXXX drivers products we that, timing good our be while verticals. With for drive quarter-to-quarter for AE let's multiple questions. remains and setting may take across market up forward, your of And Operator? to year demand orders variation, some Looking dynamics our

Operator

[Operator Instructions].

Your question from of the Securities. comes Graham Scott Rosenblatt first line with

Scott Graham

quarter. morning. taking Thanks Good Hi. for Nice questions. my

Yuval Wasserman

going? Hi, Scott. How it’s

Scott Graham

have bit talk give big is high-performance this data enough more Could where a about you the us and secular ramp that of guess listed of center I So page. could a for it's you a little a I calling even within that on and it some you just win if – couple. parameter driver, how this computing a computing is type important

So color us more maybe that? give can if you on

Yuval Wasserman

specifically focus focused computing, high-performance of power migration applications and hogs. our So it's competitive as machine now are their conversion, comes power significant These we area density learning computing. of advantage when edge on provide to a solutions And I more the intelligence, well-positioned, are of cost increased of think we requiring and in it high-efficiency the actual total right trend this AI, to by driven a asset. aptitudinal see of because power, ownership and on amount power our

information Now to of maybe, growth. I of comment the Edwin, market, the this about cannot benefit Edwin? from continue on and are positioned the we I'll market. you definitely size if any a trend that ask grow, this have but will it's well size to

Edwin Mok

Yes.

power and a we learning you believe that become typically an a platform being that those has So more more higher that's which design advantage grow, lot. density And about and area critical things machine this are that's we they high-performance this. then there that’s why high-performance think OEM idea have module that becomes as and as server is suggested, I kind they the for as of you computing forward, grow, one, those parameter all area or talk important company from we applications right. winning enterprise we're And an substantially that right. will this systems as higher who adopted hear an power, whole computing this move AI particular won on are rolling But out,

Scott Graham

Paul, helpful. Got Thank question you. one it. That's very for you.

shipment to of that clarify or you you a lines. something And in of all sort well? was the that to Could quarter about I'm non-recurring third said gross quarter this, your something, something margin of end about and talked – expected upside for benefit along comment or missing You in quarter those the both gross one-time half due margin. the sorry as of

Paul Oldham

Yes. Sure, Scott.

of an up essentially from had about said So outstanding upside the that in to range even quarter, gave on from catching the half the above our came year, we revenue, backlog we was earlier that before. related guidance What operational supply call COVID. a is result of obviously constraints on we that

could So that than was we do. better we thought

wanted had we quarter So that good why call particular, out, catch-up a that we to on backlog. that's and in really to

were Now saw. if able still end of you some at fill strong quite to the very at of we our numbers, they backlog demand the the were that due in quarter look strong we because to

that portfolio, shining cost comment sequential gross the largely what what we've rationalization And margin, though said quarter on the The well underlying volume. of was improvement improvements from second illustrates is are it higher result made is we of through. really the as last in some as

savings you to structural some this over non-GAAP Even next though we cost or chain on and basis, achieve a so. are quarter As XX%, goal. that to our and kind Phase changes of think around supply year close the which margins our cost almost material saw can is we completed haven't X we sales

wasn't gives volume, gross really get over confidence see come run we're a through, gross ability margins the item starting It's to actions really the volumes business. benefit our which as taking of seeing us to good margin. lot but in the of one-time it we're underneath any the that about So more in long we to XX%

Yuval Wasserman

mix, to it about and burst in the they customers to that comment quarter demand very our to need ability and is allows in One and in deliver to changes volume quickly QX. us respond when addresses

Scott Graham

expecting that spending? just don't One their that that a of said of one, to 'XX. tied you in if your networking Is that thought briefly market, I get comment? what Could mind. saying Yes. to better. simply that is late you talk – Is that about Thank customers you. telecom you XG last you're the you're and push-out quick

Yuval Wasserman

geopolitical year. XXXX. late in see XXXX, came a Telecom and from computing, talking 'XX. I although some we trough We in next think we basically XG recover later of because infrastructure, push-out center in we see recovery, late networking, delay basically said the will about not into situation data in some and investments in we – some

very And products we of we only telecom drives in However, networking to networking our to go us, – misunderstand in don't the radio sure Telecom telecom excited that growth networking. sell are the base make verticals, about people XG stations not XG. XG all towers. the and in

XG X.X, drives our devices, semiconductor increase the automation, for et for increase tools. the It that in Industrial semiconductor cetera. solutions increased the migration However, general which also for to in in drive accelerates need processing need industrial, of for advanced for medical, some

So for believe And the that the will we about are is go drive into XG. XG not power our for continue world extremely growth that supplies beginning and infrastructure. excited we verticals, of to that the of all the only just us adoption secular the of

Scott Graham

it. Thanks for I that appreciate clarification.

Operator

question of Berenberg. next the from Your Misra comes with Paretosh line

Paretosh Misra

how growth that Thank for Great. business? And that of you you. is the adds within are and medical part Good industrial is medical the looking the How potential business? much morning. medical What component? for

Paul Oldham

Overall, said we're about about. is we been This and our it's area an medical excited Yes. is $XX growing. million, last quarter that

ago, grow that back virtually both been presence products organic in three we've able If growth. market had you we've go four or years acquired and and this through no to we

forward. an So growth see going area of it's that we

Yuval Wasserman

life equipment a mentioned and the term, science became of a coming I a sequencing, Long And to by goes diagnostic, growth and from growth imaging continuation additional care into driven would therapeutic that development a analyzer critical examples non-critical applications also need applications. for we see some a to few we go just and blood – testing. that applications supplier short-term expect need burst for the also of vaccine a both like social ventilators, we say the applications. is and gene and And

Paretosh Misra

that business, And markets any there when not those recover? on growth? you Thanks Interesting. think color. are growing of And might the for a specific then part have on industrial thoughts any growing end within drag markets or end been slower that that

Yuval Wasserman

the in are non-medical industrial highly investments. that's it's they these market, because the cycles thing beauty And the could industrial have capital if market, investment every right, at the they lumpy exciting be diversified. you world, the because about about So application could and it the of look part,

see So tribological mix for of see and consumer and coking. we in this from see mix, again, should growth expect part specific motion very coking coking, see broad product or expect market market, automation changes control. optical a in application our But and these are dynamically. and We aggregate, increasing coming at electronic we And to you continues to this GDP business product mix to plus. that grow need

Paretosh Misra

if maybe capital sheet on just quarter. up quick just And at for And one last Paul. I philosophy, end could of balance Understood. ask and your this where allocation the given you ended

Just to any thoughts the on ahead. how cash are in looking you deploy quarters

Paul Oldham

to every and that mean quarter, did return goal smart an to strategy be and And continue opportunities provider. It power available but a buy for deployment to to shares to the in make build primary stock And continue a to as shares. of would in looking opportunistic the capital few buying to Clearly, historically done our with up like to at that speaking, we'd deploy we to that look share as we're doesn't Yes. additional roughly XX% out to repurchase dipped pick – market. We've program. pure-play to shareholders. away this is we're M&A quarter, cash we sense our continue our grow the you company. stated as balance that, We've do through broadly saw

through XX-XX quarters year. split. of is purchased we've $XX will million $XX million the goal year-to-date, or our think And like three first I of that vary this something stock roughly by but year,

Paretosh Misra

much. very you Thank

Operator

the comes Company. Bolton of from question next Needham The line & Quinn with

Quinn Bolton

wanted the comments about I to on growing than results. the Congratulations guys. semiconductor Hi, business your come to and faster peers. just back

think sounds talked business which both MKS semiconductor business. its power in quarter perhaps over overall year-to-date, about and growing faster I XXX%, your think than I the

couple So if got you at belief I've a follow-ups. And you wondering here, Thanks. faster your clarify be apples-and-oranges or growing peers? about you're of looking than comments then might just can your

Yuval Wasserman

you for Sure. the Thank question, Quinn.

apples-to-apples. I not looking at think you're

take really a at the deep to need you think of and definition power. I look dive

you if to saying half MKS. we'll growth, than half be to I'm now, half at – talk show you faster year-over-year growing and categorically, year-over-year, and able some are QX numbers. we Now versus first year-to-date, right look later and you second

growth are we you that at. define we're share in drives gaining we're don't faster and category growing they they more know every power. growth. categorically, market area I how compete with MKS that than of we that growing look The So comparison do, them, than

Quinn Bolton

for you. that for clarification. you Thank second question Paul, Okay.

talked and You to in the constraints about the for supply upside up earlier this due catching quarter. on half backlog COVID year of third built

As you come is catch you third demand that catch-up all into behind you largely of back upside, quarter, expect additional fourth and or quarter you? you're the do to on do with think up now the

Paul Oldham

I and operational things we're that some the And caught power constraints up came side out of to were IMM products. our most of telecom due Philippines. think that and out challenges, supplier delayed largely embedded from [ph] of the particularly of type for

position caught across said a So backlog we're we continue other markets. we demand think very continue we to strong see our Having because that, to have up. largely good

look or necessarily wouldn't quarter So forward. big a But that we expect drawdown backlog certainly. as think that that we to catch-up we helps the see

Quinn Bolton

great. Okay, Thank you.

Operator

from Hosseini Mehdi next comes And Susquehanna. with question your

Mehdi Hosseini

in up I if would market Japan, and And semi have few update it how to couple I on a you a question. presence give as or Yuval, think very cap. us an of increasing follow-ups follow have especially one relates follow-ups. helpful could share as Yes. you're a it Quinn's to I be

Yuval Wasserman

careful Well, information business customers’ about we size need sites. maybe activities obviously be customer and at and very to our

and between is areas matching dramatic We Asia, RF We the growth deposition. that are multiple glue that we to as RF etch know, to processes. including the is our and sort as you gaining are it's definitely of process. in see used drive gaining share in the And power an And in are advanced technology. share general being critical, supply matching related And Japan. the area especially frequencies extremely are

area, prepared if an matching you remarks, exhibit our for the as at We technology. adopted leader is to RF are the RF RF in look phenomenal. back go And in can be the across continue you board technology our we that's the a the in and matching enabler which matches rate next-generation growth to reason,

Another area semi business the in both grow technology. to strategy continue incremental continue gain significantly, and also and product source about answered line the plasma for our I question, remote plasma we locations your first other hope continued openly remote the to that generate revenue share, to expect we is around And as is to key we future to world. source talked that Mehdi. Asia in in our

Mehdi Hosseini

And you. go want back some your of I to Thank targets. to Absolutely.

of of goal billion cash target desired You have consistently highlighted $X.X of $X.XX. and exceeding revenue EPS your

I opportunistic you this and you as look or exceed into acquisition? XX. be a is to to of and future, But think backlog Your going QX and you're to despite the as do the future, that selective to growth on continue results, going your organic organically And into look this going you you from December provide earlier one-time update an that understand adjustment year, the above rate. run us puts you're mix to targets

Paul Oldham

about, Yes. Those long-term Mehdi, not acquisitions. we include do that targets talked

that's achieving To would that our we organic additional So numbers. see as to those acquisitions, degree incremental the targets. we get growth

So, date. obviously, we've we're made progress to pleased the with

I Phase Certainly, underway. – more think we're around do. and of ahead It's structural at to margin And the part there's time, gross Yuval improvement talked I'll same X. of the say schedule. well about

and we've you volumes to the the numbers, can those all right, higher a the completed already approaching with made, opportunities encouraging glimpse over really for we've us But We're our of next which will year, changes continue to efforts of make thing kind to expect drive in progress that to improvements or before good these the supplement thing margin. future. I think gross improve business. exciting is the We the see

Yuval Wasserman

a maybe realized Right. will QX before future of integration even points in come here. synergies completed peek kind two is into of reemphasize Mehdi, to all and will be the Artesyn synergies after that these that. that future, we the

you addition And that In the aspirational acquisitions. our to when to include point described we not we plan to made, put does that, together Paul basically the remain goals we that acquisitive.

Mehdi Hosseini

Excellent. I highlight just want to that.

question – regarding the one more just quick Now, one momentum.

book-to-bill about you trending. But in qualitatively Was QX? you business your different quantitatively. can You you the see or how talked above units answer X.X do –

Paul Oldham

get outside jit, we higher. But I hub. from order feel in least products, no pulled. embedded for They in [ph] really them. we a There's would especially to they're just a even some answer from a as our balance, tough our power, have backlog, the Yes. question of a book-to-bill, semi, at to is catch-up den know, pulled because, say or on of lot in maybe our since you X.X It's book a certainly, and book-to-bill don't degree,

Yuval Wasserman

-- again And

Paul Oldham

quantitatively. Qualitatively,

Yuval Wasserman

And and purchasing know, business on based agreements are every as or of purchase Right. every week portion being long-term you significant our is orders that placed not day. Mehdi,

customers long So of our a it's pull hubs technology, they flow and need these them. products when our from term, are demand

Mehdi Hosseini

Congrats. you. Got it. Thank

Yuval Wasserman

Thank you.

Operator

Diffely Your from Tom D.A. question with next Davidson. is

Tom Diffely

where for success if be was little cross-selling you that the great. you Good could could now. a hoping you've It highlight morning. the opportunity And talk I that's what's coming is, opportunities. bit sounds from Yuval, like little about would and more a the question. Thanks had

Yuval Wasserman

mentioned realize we quarters, to and see case, number Thank than in products, itself it's you, and SEMICON power, Tom. in launched West Yes, we cross-selling, called in of in faster predicted. with multiple that unique the embedded serve as Tom, a goes power. increase And previous earlier can applications power an we started that industry our platforms not auxiliary product at this iHP it's semi we process have into we

whole doesn't they mean Now then do the important. not These it's power that machine operate, it if doesn't not move. supplies,

the really and So fab, the global packaging. capabilities with platform, of these that back process, inside outside the end in also of power the not but the testing serve are unique important supplies fab only

semi, or drive markets. we is we product coming AE native to different basically area belong we continue this native additional either applications as products that start an them to in moving We're also but lines to see cross-selling growth from different that industrial now So Artesyn. to

the area to well infrastructure our it's plays table growth in drives start high-efficiency manufacturing high-density capabilities and excitement. our incremental into those of these with locally of and of into What and applications, power some the world. conversion looking support global efficiency our footprint, of significant performance and around a potential bring we lot an global who of So around the world

synergies we the the that. excited So recent revenue that very associated we're with view acquisition. of about one as And

Tom Diffely

it you this takes Okay. a integrated the And fully few catch into opportunity? where release gets so are to the years have these before situations product cycle,

Yuval Wasserman

of would these cases, in design Well, cycle. say, I some yes, it's a similar

with and a perform not not solution we our their incumbent because However, point, us that related in operational perform few allows could back our our help products cases that could when to issues to of or chain. were not to of derivatize COVID-XX either to displace could supply because will An to customers' to At customers. we come asked that an incumbent customer help a a plug-and-play perform. resiliency and had step quickly very needs

Tom Diffely

Great.

capacity have or record already capacity? Paul, then the a next you of business, a add as And Okay. a follow-up, or with reaching of hyperscale to wondering your side segments growth I'm on customers would in you a it, couple call adding handle, to do couple have capacity the levels, of year semicap double-digit new

Paul Oldham

get have that's have And restraints, the capacity we It's No. the the year semi have across ability things both COVID-related constraints. been as do people board. grow We well this constrained data been, the to as a say, in We continue to I'll question, into just have factories Tom. physical certainly that us center supplier to believe to good challenge. capacity and

Yuval Wasserman

question, Tom. great a It's Yes.

continue to grow, quarter-to-quarter variations our We customers' demand driven but expect by see profile. our to we industry may

we with plan So test already equipment, And costs we volume. for have have the the vary capacity, the we a fixed designed variable and we will cost the managing in bursts. have have place

very to expect be in address to able increase, it to we a efficient also only capacity So do the not but way financially.

Tom Diffely

time your for Okay. Thanks today.

Paul Oldham

Tom. Thanks,

Operator

Molchanov question Raymond James. Pavel with is from Your next

Pavel Molchanov

a the guys. different impact, results of assume a and to a that business? that taking the election the in for any, What on the trade in would by, still let's little China of there specifically. ending change be your are will have for Thanks Obviously war approach if with sake trade fluid question, administration context, argument the

Paul Oldham

general difficult footprint, trade I have for probably with lot our for economic we the of improved and impact. war haven't in good and of customers, effects business answer a we big not that's industry of one good a in lot there's seen look, question, probably have dynamics. because the regard, trade a it's Obviously policies, But It's to have growth our think trade Speculatively, that as then overall and effect Pavel. – far that's tariff think a we Because broadly, a I change so a global global broadly in on directly. a well. economies had

Yuval Wasserman

Yes.

to us Our our customers manufacture allows deliver Pavel, globally global customers are. and where our footprint, to to close

unless to that across we restrictions. that sense, on that thus in we far benefit increase with don't haven't the dramatic impact there geopolitical in us, reason, our is So board, an see see we expect business will dramatic changes. GDP And landscape expect for will seen increase to – which

Pavel Molchanov

Understood.

to service victim me turn In a you're success. own certain of kind the your revenue. sense, Let of a

relevant that kind past your XX%. than you've in less now so service about as perhaps that's that --? in or much stream. recurring if kinds I vis-à-vis of product context, that service to sales have to revenue And relevant the M&A, of a is something software more know acquiring building You revenue any slice now up is businesses be of mix the that would talked create

Yuval Wasserman

Yes.

make when comment service maybe them from them and back ship or back they sophisticated repair expensive advanced extremely to as high. for percent declining about these power so take is to the us the if are being In that, customers, came they're supplies power me products. you care of world extremely clarify calibration, of of of revenue. treatment normally and our you something asset need or around So acquisition, our replaced. being And shipped labs you business or to and comes fail, and power they're relative to we the repaired of embedded these many business being that value the the the not they when are because through Significant service made total process portion Pavel, what revenue let a our a comment our reason from we power native for our call AE, may. And the the

a it's service category. generate revenue. revenue, doesn't product which generates it of So matter And just

to service refurbishments, retrofits, like offering the cetera. native installed expect service business to to base et growth and of business Our business by with accelerate grow we products we upgrades, and continue this continues our grow, the

to mix. the but result a of percentage total revenue product So that of will grow, continue decline the is in sales

products important to Now in progress our you that in big going customers and are continue our this customers grow the That to an analytics, to semi, these process and other insight continue well. product market, adjacent is asked software providing data products telecom our investment maintenance like beginning as to and in we diagnostics. products power to offering, and software industrial the first, about, business software but offer is us to with an our launched unique core predictive we're provide aim will as our that area making capabilities later for and and to networking

Pavel Molchanov

clear very you. Thank I That’s and clarification appreciate that the point. on

Operator

Company. next is Sankar question your and And from with Krish Cowen

Krish Sankar

in. have two I of me squeezing for Thanks Hi. them.

as building because at also down, than COVID. your do that some worry especially rate next And that understand with your normalize growth your shipments theirs. of buffer at this and is clearly with point look customer like it and Yuval, one, your like First revenues up your should I shipments looks customers? is much customer when rate you slow growth semi I But peers your or your it year, compared cap semi Lam, to some your contrast catch higher inventory cap could

Yuval Wasserman

that, answer to want you Do Paul?

Paul Oldham

you. are – a market changes going and manage careful anticipate not not the mix. to over analyst. prepared growth. in we of capability long trying for we We to range be are see be volume the respond the the believe to industry and that we I'm have trying to and to to I'm But predict And market

industry. have to going into for quarter right We're up not prepared are We every the that.

a was capacity. to demand a really the Now demand. in of happened, I quicker. that we burst had that we It faster And thing and the other deliver believe have QX, especially

We have to demand. to operational respond to this excellence the be able

the the us about Now of that your restrictions that the industry question, of will is trade war it not that And the building was in some can significant you're some driven you to that – going by, tell in on point would industry. the inventory that say I'm But asking dramatically of inventory more there it sure forward. building shipments. it's I and impact I

Krish Sankar

IT the just of spoke very the there. Yuval, follow as lot then I'm it, center on the other year? kind trend is budgets curious that's how on and segment side And do Thank about a you traction that see see hyperscale part a of the expect to the like of up data enterprise this business, helpful. Got you. business data trending? you into center, your are how which enterprise next It the do to looks spending, year? down And you

Yuval Wasserman

let look right. we We the third on inning journey And hyperscalers, So top that the products – believe the of if into me the hyperscale are based have address basically first. recently our you At time, we shipments have information earlier additional three products same we in our our we're into progress you in the quarters, great a of third the product into set hyperscaler. with hyperscalers. last at the our got over in shared designing making ramp designing

a in Now look just in concentrated are few journey, right the if where you highly we're hyperscalers. still now at we

prepared think they XXXX. digestion we coming the at market, as that believe the in hyperscalers I to the see some resumptions in Now short we inventory we're see going to in we hyperscale, as that of of acquired. the And remarks, look the term, basically market in growth expect said use and a our we

a share. share we our and follower power density. recovers a with gain when competitive to offering very continue market product of market better to market the energy unique fast as to And gain we because than continue market do expect conversion efficiency We because

and that's we IT still the enterprise computing enterprise area, area. highlighted the slow, is why computing right for On but a driver become will now, high-performance this see spending space, we

in computing. excited it, are We the because investment high-performance more we about see

participate and to New from in we're recovery. a will believe forward XXXX, also catalyst investment be of Intel AMD looking to in this cycle a and CPUs we

Krish Sankar

is Thank you. color Got Also, you. helpful. very the

Operator

Twigg KeyBanc final comes from And with Weston your question Capital Markets.

Weston Twigg

follow you In mentioned can in doing picking other just activity mentioned is of and the question. QX quarter color if kind why words, the on which you doesn't kinds some of were temporary? is through Hi. if to at wanted of order more up sort the just Why was down like of it the it, in just I'm this comment. that Thanks of demand the wondering customers why QX activity add QX? carry there, to burst order of end for taking end my I burst up last at guidance?

Paul Oldham

when the get we prepositioning some a of at surgical look To to was seasonal kind as that clarify, think shipment that we of It's Yes. – question, saw, inventory of ahead patterns good geopolitical of Overall, we that we by some stay in That's largely in that, talked semi but near-term comments – all about few. geopolitical despite we our just not strong. items said to you've still all expect by what customers, in QX. we Wes. a

not that's So guidance. our driving what's necessarily

got customer-specific is backlog bit. quite industry We also the a and digestion. be in going QX, secondly, And said in on that then based earlier the to to we don't we expect center lower this data of kind repeat catch-up QX that from year also that and we helped said

digestion to lower just that's We've the see we we'll managed guidance up, market there's largely those. big a the backlog in center lower lot continue center. are and don't of environmental drivers. behind That's on. the expect – is primary catch two repeat impact that and risks data around lower that lead the things on that to data But that. those other items Obviously, COVID So to

Weston Twigg

follow-up Okay, quite telecom semi other other inventory the XX%, next grow talked of is range in is then could better guidance have in nicely if the getting was XX%. year. that margin you just growth year below years. this that over you the you drive next headwind it gross that wondering XX% restocking year gross about have XXXX might maybe that see or that to Do segments see The and a or the year? But staying range, you semi through And margin. medical, And few demand good, growth the helps. I'm question just I the part XX% industrial, – next in

Paul Oldham

having up, making we'll Obviously semi up you look our impacts are improvements. have at desired is look The look, effect. the embedded in margins synergy power products so we're into but perspective see and some – And are are a impact. gross Yes. areas. this they're as and can if year, consolidation we from both some as next But up year, mix having more that perspective our

balance, on continue markets. we swings think drive your in relative gross to the the could say So some if two I'd mix can is to answer no. margins. We question there saw be you But impact big certainly

Weston Twigg

to clarify, you margin just the some variation? could So through generally with speaking, mix up gross but year trend think

Paul Oldham

Yes. Generally speaking, yes.

Weston Twigg

Thank you. Okay.

Operator

I call remarks. would Yuval over Wasserman closing turn now to for the to like

Yuval Wasserman

thanks this company about So us with excited Obviously, today. joining We're future and for of our making. company. projections everybody extremely the future progress excited the extremely is the we're

future. the We're and new XG. update to gaining applications, the in center, in presence, us a those to are We of forward drive you to looking December our four penetration very have deeper goals. much. provide the you our Thank invest we that applications new you growth I'm expect growth share many of medical semi, markets. continuing will and seeing areas serve excitement; we dive when we for analysis accelerate trajectories, targets we allow our of to products and and company data the on to aspirational And continuous expand in

Operator

gentlemen, and this concludes today's for participating. Ladies call. Thank you conference

disconnect. may now You

Advanced Energy Industries (AEIS) 7 Nov 202020 Q3 Earnings call transcript