AEIS - Earnings call transcript Q4 2020 | Advanced Energy Industries, Inc.

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Operator

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

Edwin Mok

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

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

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

we that As will events occur, make announcement.

Let today's and Yuval? call measures, non-GAAP that, our on With a President financial measures pass should release basis, in explanation future as update and based with management's contains and on no February XXXX the transition forward-looking any uncertainties as performance. found vision risks GAAP and me and Information remind not are found on as amortization, call, integration compensation, excluded the be to of press statements Detail items. unrealized and our risks cause that goals today, let be could and our to aspirational stock results otherwise respect concerning estimates, our our be from actual these non-GAAP subject will long-term costs, our me goals CEO, restriction projections, to and today's exchange the Long-term specified, is a filings statements guidance. interpreted All assumes that can today, forward-looking results reconciliations differ uncertainties you assumptions as for which unless include that On in financial XXth, financial them. well or guarantees SEC. Wasserman. losses, company gains call in materially presented our non-GAAP targets non-GAAP foreign between presented and results, are Yuval and are not obligation to today.

Yuval Wasserman

was QX you thank non-GAAP demand record. up this driven year-over-year, products of morning, of good finished top $XXX everyone on Advanced our range. Thank Energy year Edwin. across results for strong revenue midpoint and our last revenue and our call. with the on million, joining increasingly you, guidance EPS Good XXXX a by note $X.XX Service our execution The of fourth us above strong solidly XX% for were markets dynamic most quarter an of at again, operating environment. in set and guidance a

challenges. all QX operational great despite and financial with us on extraordinary the results proud demonstrating year, of constant global our response organization's of a of year I'm performance that pandemic agility the throughout built AE's extremely presented Our coronavirus the changes excellence. to

shifting computing that business and outperformed Our pro the a data strong system, enabled XX% and footprint, a grew requirements to center market. XX% meet chain, nimble semiconductor safe reported our results growing supply revenue record XXXX diversified global customer a on forma maintaining billion, XXXX with XX% $X.X growing and as XX%. basis to hub operation deliver effectively management a healthy workforce AE to and and inventory

revolution conversion power enabling eVoS, technologies processes Energy solution in the and advanced clear the beyond we the $XXX Advanced believe electric for XX non-GAAP in help details are next of of than more cash behind AE many year, leader precision the also in Last more used markets, our mega generated accelerating and expand earnings our to we and but remarks. technology from products his brought flow $X.XX RF on these a we speed power the include; share economy. industrial our Examples to to generation plasma multiple will operations. into Power nodes. market. addressable innovations we is financial of in will over that major data market up new million Our capitalized doubled go Paul diluted introduce customers control. per solutions continuing in only not trends innovation enable fourth

power Additionally, our allow efficient cost system and level to more data become effective. power shelf XX-volt will centers

system while Our growth farms customers fuel help breakthrough a In power lower Versatile with and the line by AE richer to strategy highly Versatile growth one control continue yields. continuing supplies. diversification XX enable intelligent year indoor that expanding completed our differentiated with consumption now end and crop and products and increasing we leading experience to with will portfolio relationship field-proven expect accelerate our our market XXXX of substantially of acquisition medical the we brings customer RF power regulated with at medical to lighting our its innovation technology companies. enter We will our Power, of XXXX, well-established in to a the medical market through acquisitions, of in and Power reach power strategic the working an costs,

current In market technology scope addition, our example and using Versatile cross-sell scale. acquisitions grow we solutions another to our AE This is to expect across our integrate leverage our roadmap smart enterprise verticals. of to into and technology Versatile's

we the STEM Embedded plan. to in launching are track education. growth affirm support to platform. In new to top structure, a time original target scholarship in diversity we meet of into advantages Our Power investment the synergy goals synergy to the believe fully our challenges, we COVID-related ESG a aspirational pursue integration Despite half success we or milestones competitive scale With continued our on as integrated as exceed integrated Artesyn drive scalable the of increased cost initiatives, acquisition that we technology strategic and our AE program a exceeded scope industrial we our sustainable and long-term have continue XXXX our and of organization long-term on tier company, goals. in business as roughly the delivered the we QX, results functional and our the

interest We with across universities various disciplines. have multiple technical from tremendous applicants

to all deliver of our ESG value We our long-term enhance our will commitment continue to as global of part stakeholders. initiatives to

on our Now, performance a me comment let fourth markets. across quarter

logic our at rate was growth NAND. of in robust and strengthening revenue an end previously semiconductor exceptional high by half second driven XX% stated QX foundry QX, of XX% after to demand the Our

market We extending plasma We're new as condition and in to new a we MAXstream. the power Paramount including remote expect healthy improve launch a in semiconductors RF further HFi, QX. our high generator, new leadership products, source this the

across and our we Overall, design In business by replacing expect among as DC the QX environment. modules design OEMs. multiple equipment our win semiconductor demand RF computing in our strategic semiconductor one power in further PECVD expected, $XXX QX application. back-end multiple market. addition, leading the embedded top integrated the we It's we and allow in platform will next the and for shipped evaluation center generation we continue an our edge we eVoS fronts hyperscale semiconductor our for increase for with competitors by units a increase reflecting to of data our Korea, outgrow during a quarter want secure in next-generation new data to a to the secured to new generally tool. industry, Turning solution. success customers of Driven RF the NAND center equipment In declined In number million CVD wins in to digestion to of weak in and spending a accelerate customers QX for market. ALD a market, design Demand IT

are to into but our later leader return over a fast from we becoming to grew to extend we a market XXX%. we expect growth We to In anticipate market as revenue QX, by continue hyperscale, this year. being transforming follower condition XXXX this

this innings we of Although are still journey in and the lumpy, this market early we growth time. over believe could expect meaningful be

new mounted for reiterate and XX-volt at density. In secured an to created X leading performance production we XX-volt to the deliver a secured make converter hyperscale transition capture shipments customers platform computing In as target continue for We've computing, DC-to-DC hyperscale We solid computing started win at Tier capitalize by to customers industry also service. additional a X our efficiency this enterprise to a Tier shelf, customer power design we customer. our super new leading our to customer and high power XX-volt progress year. selected QX, additional a and at hyperscale continue opportunities win another board on we design our to

these adding incremental and in improved revenue high over QX coatings XXXX. million saw annual solar Industrial grew X% volume market conditions wins of panel of for expectations. demand display, manufacturing, they medical of take across by hard we time, While $XXX our consumer as cell support devices. revenues and sequentially Macro may our flat for roadmap production several the surpassing good

and used demand on reported declined growing from critical for care filtration spread of lower benefited also air elective quarter. in win we applications. which is preventing sequentially some medical applications equipment a Revenue systems COVID, care for for last demand We the

applications diagnostic medical the we power quarter, wins fanless for secured supply. design several our During with

portfolio medical of strategy applications to Our digital enable smart and products our advanced with capabilities. for is industrial through

During products the our from farming a application pyrometry and quarter, medical. indoor we industrial heating across and to new of introduce multitude set

focused primarily With macro expect cell we white design networking, industrial facing medical wing and year for for and important IT a investments solid market U.S. XX% the QX significant constrained year-over-year, the In we pipeline, are investment. programs. a Overall, small QX and ahead, this based X customer. design improved in still are key up applications down we the further slightly radio which investment hyperscale and on for vertical see telecom to conditions to reflecting to winning is we're about an box networking the be improved. as success telecom we Asian XG in well-positioned networking some condition design for secured Revenues of Tier remains to general While designed designs. from for remained win won our XG of a a and slowdown seasonally on our pressure In from market. flat QX, we XG infrastructure grow

continue We earnings our higher optimize for to growth. portfolio

improve unique of demonstrate from will short-term, impact While QX the successful the will strategies over opportunities and revenue believe overall on position value-added our benefiting our strength aggregate, resources higher actions markets, in taken focus our results and Fourth the to team culture. our these summarize, To in and across steps and continue our our Industrial growth the XXXX margins. we Revolution,

being market new power on we opportunities. and play leader into serve, share, expand pure outperform us a the and exciting focus gain enabling Our is markets to

on capital XXXX, a cash invested top end ability to and shareholders We At regularly return delivering return our have to announced commitment capital. our inorganic the of track dividend, flow while quarterly of to demonstrating in growing pursue than a our generate we growth. tier built our to regular faster earnings revenue consistent record continuing

continue will aggressively in markets. and invest enabling our forward, Looking bringing to to products we solutions new

XXXX. in in reflects and pipeline investment converting the challenges to due macro near-term design Despite coronavirus, bottom-line those growing results. our wins Our to our continue tangible of grow top to expect success into we

is growth forward, sustainable to products, services. and Going well-positioned deliver innovation, AE long-term technologies, through

know Steve my result delivered seamless me for Kelley, company. this Board, and into introduced over March to the a Energy. the technologies, our an developed accomplishments AE March Before and I the technology transition, some standard and the to morning, proven of CEO industrial right and we our over comments, time. the confident in support shareholder as level Energy drives AE the turn like worked customers, shareholders, vision, teams, leader creates My lead and our company, success. last grateful our Steve. XXXX. leadership of employees as that, To Board the Xst. the innovation, will I the CEO I'm Executive he an through Directors call With Board succession transformed next of closely President grown thank a journey the years. shareholder products fosters for announced builds that will identify I these and have we look financial who planning Advisor a found this the next Amkor, of created and been Together value I Steve you conclude an ensure is over who as importantly, of CEO We our of Paul. let the relationships new to retiring that become value, our will remain to It retirement of I'd am effective has to process. results, CEO be amazing previous I for have will for most I attributes proud person of is few and have record President team, Advanced their growth Energy. we and as I'm with strategic with Advanced Advanced

Paul Oldham

you, Thank good and everyone. Yuval morning

that stated. Before presented I financial today begin, non-GAAP unless otherwise on basis please note will all measures be a

the long-term to related press liabilities. quarter also to executed can and again team to losses in in unrealized strong record non-GAAP and our generation previously from the revenue outstanding were financial GAAP effects highest our high reconciliation the and $X.X quarter annualized guidance last and from cost year to results markets. of end be midpoint income ever in costs, earlier in Shenzhen found was with million, and second and Combined XX%. our growth pension the our restructuring reflecting $X.X our non-GAAP A of million, in in our return quarter delivered related our issued well and from This operating of very million Despite on Sales $XXX per $XXX almost above exclude last synergies quarter. in our to an announced earnings flow revenue XX% today. control, up primarily non-GAAP and results million lease the over We demand, sequentially release industrial environment, but of nearly closure quarter delivering facility semiconductor customer non-cash measures QX. with the semiconductor XX% primarily share challenging capital year-over-year, we X% achieved down the levels good fourth guidance flat range. at invested cash Fourth of

power. XXXX Our full growth and to in continue extend the leadership second as half we year and semi industry again, our market outperformed

Our investments pipeline introductions tangible last yielding with R&D of and a the downturn design are multiple wins. results product new during strong

logic further as fourth and first expect the XD into on digestion began in accelerate demand $XX sequentially center computing down Looking foundry million, applications. strength NAND in grow quarter continued Data expected, demand market quarter. forward, and semi in we increased sequentially revenue was QX as QX in to and continued the that the

benefit declined we to the from than expected driven due near-term digestion demand $XX driving by continue normalize. in the critical across expect film to grew the revenues with growth and sequentially our wins design better expected a higher photonics, several from as million. forward, thin motion and later of investment to Looking QX and year. increased data new revenue to X% impact to applications, including beginning The performance markets in our strong computing industrial Medical revenues was cloud care control, medical Revenue coatings. center

but investments applications over Looking expect will revenue revenue this continue ago. Telecom forward, industrial global networking we XX% million time. quarter, near-term. QX from well our level of expected improved from medical versus a year-over-year. seasonally down was year XG above the remain but $XX revenues muted benefit the the to QX, the should in and China Near-term, and pressure in decline slightly up outside in market, to industrial conditions are from impacts COVID Overall, but be QX, macro to relatively

improvements, synergy down factories. margin in actions, product XX.X% In our portfolio pivot value material XX.X%, slightly from cost last we optimization lower and across this points, expect we optimization basis was increased addition, and Non-GAAP margins impacting mix, including Year-over-year, to as by on portfolio driven revenues vertical actions towards improvements our begin gross productivity quarter higher gross XXX the applications. volume. quarter for accelerated

volume we to While QX margin chain R&D last from the gross expenses gross action margins $X improve achieve XX%. costs. our supply next $XX.X sustainably to were in expect project timing further enabling due several of initial our over to and planned and margin quarters, quarter Non-GAAP modestly us decline million expenses operating synergy million, gross variable challenges, lower should or down lower target exceed on of over

during Our a controlling good team expenses of the did job quarter.

other expense. quarter $X.X the $X.X for including margins was XX.X%. operating result, of Non-GAAP million expense were a interest million, As

to million range. million in expenses remain $X to the expect We $X.X other

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

expect in up we to for GAAP remain lower tax the quarter range. on Looking per and a ago. from the quarter forward, XX% $X.XX were non-GAAP but $X.XX earnings last $X.XX rate share, Non-GAAP from the XX% year revenue, down

record and in a data our to macro semi $X.XX full factors. billion. growth related in XX% driven by financial XX% XX% to a in offset XXXX center primarily growth On industrial basis, telecom computing, as-reported revenue by year COVID to and declines results, on Turning revenues partially grew by and forma markets, basis increased pro XX% an

gross XXXX first approaching sales. Gross the increased initial almost after resulted and long-term margin year was XX% doubling full XXXX. profit of from operating sales, than more full dollars XX%, from just growth our $XXX income integration. year or of synergies Our of Leverage Artesyn XX.X% model XX% the acquisition Artesyn on in million to

share, a $X.XX a more As was result, per than from EPS XXX% record non-GAAP $X.XX XXXX XXXX. in up

million parts and doing XX improve $XX declined million to Turning quarter and associated now by of reduction improvement we purchases Inventory increase fourth by QX. securities up ended by to sheet, days. on X.X inventory payable offset million, of actions timing marketable to the was turns cash from the and $XXX DPO times of with $XX taken structurally accounts lower largely This and in management. balance a

and cash million. $XXX $XX cash last flow million. level continuing $X.X flow both inventory days rose sales for decreased record QX, payables operations Total We the XX in depreciation slightly below Receivables $XX.X for year days on constraints. quarter. from full company XX, supply Operating of and flow the and year. quarter we at $XX.X million Free to expenditures chain two DSO million, from generated was was a operations $XXX Full from the were up continuing quarter. last Capital capital to to just manage largely the million and lower million working operating record in were increase for expect net cash QX was days. was

We about continue X% X% sales. to be capital of to to expenditures expect

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

to gross leverage X.X XX-month decreased trailing debt times. Our

stock. any not During the quarter, we did repurchase

we share, paid Finally, per dividend $X.XX will as record as of last declared of February which quarterly a to week, of announced shareholders be XXnd.

Overall, expected let seasonal and partially offsetting and telecom to revenues computing to following the with declines QX. expect market center data computing last solid we except turn a Data year-over-year are year. networking. ramp digestion market our growth me in strong, verticals, QX On semiconductor, impact to to as remain portfolio strong in sequential the due we Now, all at levels optimization center similar be and and medical of basis, guidance. a demand across industrial expect growth

products, COVID-XX ability QX we revenue our costs, volume fully our impact million Operating the these expenses into strong on to this constraints near-term. the While to guiding in be are demand Factoring demand higher supply plus to risks industry $XXX we to million. for lower to ongoing with could in expect margins electronics related expected minus risks global we to see meet investment. and or Based up slightly non-GAAP gross our combined $XX are forecast, increased R&D XX% chain be be supply XX%. on the

a we be $X.XX. non-GAAP $X.XX As minus expect result, to or plus per earnings share,

for I like my open perspective share I questions, Before to of on our would business. some

the demonstrated, As expanding and growth deliver execution also Energy synergy on trends our gaining benefit to the model. markets, our is our new share and our from across while into in team, market by our doubling solid earnings of revenue to ability growth reflects well-positioned Advanced leverage XXXX our opportunities. our secular operating plans, The market

tailwinds forward, business, should ever XXXX. are in across as markets excited Looking prospects about as we have demand we for the as our our

electronic EPS, of couple and us in in achieving and new in $X.X $X.XX challenges earnings we global billion COVID revenue, and in aspirational of may share both time. billion and dollars impacts quarters, per meeting the of next in our confident goals vision of in long-term chain $X.XX remain over revenue $XX delivering over the non-GAAP and growth the three-year in supply XXXX our Although impact

the new few life. take Kelly, for level next transformation my lead his Energy the enjoyed like Finally, Advanced Steve working personal thanks and his Yuval of in with With ability to has vision, and the questions. your of company. he Energy Yuval forward success to leadership, well I I'm look with of in Advanced to years would personally to his over immensely and commitment have these this chapter extend I confident last Operator? wish working let's I success. him that, and to equally to led

Operator

question [Operator Hosseini. Mehdi you. in Instructions] line of it's the And first Thank your

Mehdi Hosseini

the one Yes. to luck Thanks for CEO what question change of role, plan, for and aspirational taking the I best given my the but in want Yuval you, Yuval. I'm have surprised goal. to understand better of I and succession question kind understand instigated your

be provide terms great. think share And especially you So, continue Japan, share if in you gains, of in specifically And you're semi with in want I the report, tracking about talked see your us in could about Thank with to gain, your color region? will the then I traction should you. how cab? some how Japan

Yuval Wasserman

Mehdi. you, Thank

all person part my XX disclosure, time my Regarding have of experience, believe some profile the found with it And company. plan standard old I've with been Steve the he year and planning and continue the We joining attributes that decision put Board to that. earlier, our Steve identify company as of will personal said succession retire, I'll we I can interests. turning that and together. has more just excited this to process. the do strategy to skills, the really capabilities, lead Full family, about Kelly. working years we is pursue to be to and track to the is my my very right We're and attributes closely that with spend these pursue the record, friends,

know, more gains, of the amazing you XXXX, us. products, as in while than COVID-XX. company tremendous managing was share company amount XXXX any Regarding other space market We through for in an year think, introduced our our I

will products generation nodes, MAXstream, the enabling, Some industry, of especially technology these of next RFDS. the the eVoS, are in especially, some semi enable these products and

gain to unique RF that is matching strength Energy share. is of our continue area gain really to we traction, We networks. one Advanced continue And

effectively matching, grow, share. RF gain area continue the which are RF power get ability This really traction as in to to another and into plasma. world critical leader We we is deliver is for the the

continue design wins Specifically Asia, as have regarding good in reported. we I Asia, to

increasing traction share advanced that, in beyond an to Japan, are very we Specifically information. and Japan, with higher levels more in applications any player of I cannot

Mehdi Hosseini

it. Thank you. Got

Yuval Wasserman

you, Mehdi. Thank

Operator

Your next Graham of a Securities. from question is Rosenblatt line with Scott

Scott Graham

hi each known this but terrific been a Yuval congratulations, I record good obviously, short track you've and other and Yes, only transformed morning. company. know, has really while, for And the we've here

and So, of congratulation luck. best

Yuval Wasserman

you Thank so Thank you much. much. very

Scott Graham

I maybe So, to three-year well onto prior maybe wanted piggyback talk question. goals about as and of kind the the

So, front EPS is which at why would rather be through why putting for now we than talk XXXX would if of particularly waiting target, the input? you to today for maybe since target. out top, a is change the these have full pretty quarter assume in the healthy be this I may growth Could a we that Steve releasing I

Yuval Wasserman

So, really, question. good really

not driven a of So, succession successor. out, did planning conclude three that to is The process. process said as Street was the a Steve When point, years on by at I a earlier, updated we talk hiring we aspirational that standard about goals

company terms our announcement came the in timing, our decision after So, of of Steve onboard to to goals. aspirational the

was here if for successor, time. shifty by the period right So, it. didn't will retirement a tricky nothing there's the of driven stay of The identifying probably about my longer timing successor, about I right decision identify we right? or And

your that my question? by retirement of identifying was timing the Does answer So, Steve. driven

Scott Graham

the which results, very most part. the think Yes, does. are not in I Again, questions it about for sneak the I just could here. you're maybe more If ask one straightforward. hearing Yes,

potentially, as there's down XXXX Does maybe from of and -- kind on his year you being all I Steve, guidance of leverage sheet the you Again, everything. liquid. of longer a term, clear. be head of, change here? a way a your ahead nice basis, you back kind one again? so, Steve that, on really think M&A is on very thinking slow the is, to I would big plan had Do this for that balance net You gets slowdown guys guess the was for and around integration I you're Artesyn quarter process potential M&A was to the a

Yuval Wasserman

Yes.

Scott Graham

are What your there? thoughts

Yuval Wasserman

Yes. Good question.

The approved goals, of the out. And to let Steve that, great me years let to company accept opportunity transition years review the on review right. board to little approved together decided to not and review give term board company. going And strategy, do The hiring the CEO. Steve So our bring expect and me and a our background, plan. goals. offer aspirational the Board, bit has the has long you deviation X has approved strategic board the strategic company. decided a both and Steve me the our had any of after X doing out excitedly our strategy I to forward. major from to a our goals join board see

very increasing inorganic that will effectively value. allow at his growth, shareholder in has EMCOR really companies, very model, healthy be proven inorganic value model, we powder us position with sheet experience to financial have acquiring acquisitive, our to to a business do growth. Our over strong we continue yielding dry our go last and a great years the pursue model have a delivering extremely results X balance are of capable, to operational themselves them, normally ahead and and pursue Steve plan. And, yes, previous integrating

So of and hiring process Steve, supported during Steve and vantage term him, to linked aligned and Steve Last goals and long is board. strategy plans from team long point, and, goals management our aspirational my the after with the directly by term is compensation comment, talking our objectives. to term our the fully again, long

Scott Graham

job and thank in congratulations, this Yuval, company. the great transforming answer you again, for clear. very That's

Yuval Wasserman

I you very much. Thank appreciate that. really

Operator

question from line Your Diffely Tom of next is the of D.A. Davidson.

Tom Diffely

Yes, clearly-- me well. congratulations Yuval from as

Yuval Wasserman

Tom. you, Thank

Tom Diffely

done. story, really beginning well then years, and the growth …a so a the job in nice impressive of turnaround at recent

Yuval Wasserman

you, Thank Tom.

Tom Diffely

My pleasure.

in telecom you're like anything the like medical, And trimming Looking sounds at the color that be a drop seasonality? bit off your on purely then side, to there networking is adding would it just that, helpful? beyond any end sounds Is industrial markets, portfolio that? that bit it a more it on

Yuval Wasserman

Sure.

definitely really affected was indeed, COVID-XX. the medical medical by seasonality. And yes, also, business strongly So our industrial

from critical of coming equipment. we our the a care critical that saw procedures power you little ventilators when world last same headwind. time, a supplies, the As demand year, elective in we At equipment chasing was and of recall, decline that bit required saw whole a was burst

Just everybody, business remind to three our years ago, right. was medical zero,

it have ago, growing we expanding the is medical just few strategy. part industry So of and years and entered and started our a

we And the wins the into forward, entrance the one just very applications, to sophisticated medical see Power. acquisition diagnostic driven also, growth design continuing Versatile of about we space, equipment. Going like new I'm announced diagnostic, in by entering about into excited more expect very and

knowledge you power Power to going brings are we -- day capabilities to acquisition, at Power we a bonafide us power that RF about acquired a we was And in reason the If for ago, player this result experience our bring applications. general these which our global us one Versatile world recall leverage pursue market, them to medical our about accelerate business the infrastructure to the for on XX plus. time In operating scale expect leading RF medical brought analyst used as for procedures. in supplying RF of accelerate growing in power is an deep highly has. scope, GDP they growth to Versatile to in you supplies should area in companies supplies that and and to the industrial, procedures. the now see are the The AE are of in we and invasive supplies right. months and They talked

to the we that bell products, curve products today shifting earlier of we some As that that a a and said is area portfolio will and of increased terminating strategy some making a shifting to combination areas, value result an in the prices of end is and area the we focus margin of that are great pursuing areas, we focus mix is in in other The XXXX. in optimization progress. higher life add networking some mentioned in gross so areas, other in telecom right more are area the earlier,

anything, very Tom? value classical go not the as to is Did products the across to shift miss XX-XX weed process I to strategy our Although, the out call I -- high solutions. implementing to healthy and continued a board,

Tom Diffely

Maybe Paul, lingering COVID, helpful. chain? as in OpEx your just from even feeling quick there and both cost us a in you maybe how that's can much your supply No, for a is follow-up, give

Paul Oldham

talked kind little more XX a range, points bounces bit and less. a we've in of the little that running Yes, bit basis around about it

prepared our to to capacity. headwinds are the global in costs still logistics has higher supply that remarks, key full part mentioned due many we as shortages to running chain COVID due the specifically in and fact some suppliers on below part seeing a related I As some demand of and

that bit So range. it be headwind of is in continues focus to a a

Tom Diffely

Thank Okay. you.

Paul Oldham

Yes.

Operator

from is of line of Company. & question next Quinn Bolton Your Needham a

Quinn Bolton

on congratulations customer Thanks and you demand? power comments limiting on my to years. supplies your with a chain, retirement, several need to are does wanted shortages, able question, about all demand up Paul, ability your some in the for potentially costs components then get taking Yuval, first you the question. supply meet the team operations shortages got your over meet your And follow for and those your if Or thanks to to the start I've quarter? of leadership wondering past the in for the component semiconductor

Paul Oldham

set see when supply to you're I pretty But open Yes, It's dealing just do enough demand continue we strong. to in that's guidance that's about with industry. to with. we deal daily chain, contemplated have be -- we're of we and impact tried that broad a parts. in reflect broad the the think operating think we is industry we operations problem talked in a us it's out. and always around numbers will the the the to to ship term, the have put battle. product tried ability our the But continues and guidance; that our Obviously, there not And a near risks our microelectronics across in we electronics which, getting something environment be it's

Yuval Wasserman

And in of So, the month. to forecasts reflect we that benefit later and are have guidance adjusted risk the the the Quinn. reporting

not be visibility that in few happening across It's you automotive product. the all chain. industry the bonds So what's the supply affect we have everything the And components, I IC components, it's other able few think of build to market. a need to components us, in industries. just really and a a better Obviously, the

we it demand. QX. earlier, expect adjustment reflects I in in related have our and news, good demand to semi strong And we to the at our the So shortage ICs. said is risk guidance as term, QX growing accelerate really Short

Quinn Bolton

Great.

could supply could you wondering will of on on I'm bring that if for be just way with follow-up do months nine it issue, can you supply, they facing your long a for Just an think conversations they additional some going my But sometimes think XX-volt you're then so the shelf win that, constrained, if if in wondering chain, Yuval design securing more how volt be six on most it capacity take to probably was color to status? power just sort and you like just wondering sounds around, the update design you And business, year? second XX you're of you. to shelf opportunity give some Thank on that power question be additional wins.

Paul Oldham

Obviously, bottom the And that's Quinn. supply chain said. question, more all That the good difficult a in it's to clearly parts. continues course, to answer. get of you've to demand one a everybody in together as to Yes, top grow, working

going So week, don't see this as in isn't but we be a long-term issue solved a -- we either. to it

you monitoring We couple us last be it closely. factory onset, where up, something a COVID catch demand. took quarters with to year saw in we'll to similar it of if little the will the a So,

it for industry big the So I goes, see think focus this area whole and we'll is for of how but a us clearly

Yuval Wasserman

that power multiple and a new rack into as power XX-volt XX supply the is recall, a one support volts, And shelf. servers, regarding the for hyperscale number separate goes two a wins. Quinn A are customer power right. these is our really you shelf

volts from The mount DC-DC XX server designed second board the this is design XX win that in converter. in not to into itself, volts one And volts XX convert the is a shelf.

So, different two these are application look way -- you two spaces. in can that a at as

center It $XXX wins many adding that experience XX over million the production. can the we our put to space. to targets prove past by XXXX. annualized the and go telecom technology have technologies But years. and time space designing application have networking for incremental the we the We of modules into in our expertise, And in revenue that reason, of for been data an quickly this support long-term mass that takes very really

Quinn Bolton

you Thank Excellent. congratulations and again, Yuval.

Yuval Wasserman

Thank you, Quinn.

Operator

Company. from line is Cowen the Sankar and Krish Your of next of question

Krish Sankar

the for hi. my Yuval Thanks at on Hey, And term solid taking question. congrats AE.

Yuval Wasserman

Thank you so much.

Krish Sankar

Thank you. And I have two questions.

was semis. on First

of You giving in aspects QX. are function you spoke you about and QX? of QX through in and mainly QX seeing the the WFE Is strength other growth NAND system? Or moving it spending like sequential a

Yuval Wasserman

the a NAND time, unique few drivers in both to all it's semi drive drivers we you think we market see at a But that I terms in and foundry. same of our business semi. see the few -- have

new And than you million to we our with power application RF the embedded we continue know, to industry. the semi we also, products the of share grown SAM market market, in the into have in launched expect see gain embedded $XXX As faster that we business the cross-selling matching to power supplies growth. the space

QX. is right, I demand in that our strong point, QX can based to market. the And and can tell deliver going is obviously, components everybody's those So we earlier, demand will products on, we accelerating get we now to right challenge to grow be very mean, the that vantage I multiple and all strong But is excited. to mentioned in IC on drivers you from be, the I business. information But time as gather, have going and our

as see XXXX, we the an in general space for expect Obviously, accelerated semi growth a us. to earlier, right now said what we be growth is in in demand. We year

Krish Sankar

color Got dilution center then that and you're a there. it. seeing And data Today follow-up. Very helpfully the quick you some gave on Yuval.

curious this Is recover prepared second the or later I improving year. key indicator should think catalyst are where you're the you mentioned for budgets drivers IT -- is leading for? half? what pick to like center in what it up data your more it looking the enterprise of comments, I'm or kind in

Yuval Wasserman

Well, you new know, the microprocessors industry adopting new microprocessors. and is launching

of the the being microprocessors or in it's lot demand GPUs the the that launched centers, a industry. to are data So buying by driven

came XXXX a rate growth we just zero very in Now, from the position, business and in are Krish. have saw years was a you as XXX%. two We ago, grown unique

and from came nothing gaining a market we As viable bonafide becoming share. player, to displacing leading incumbents

this our are still But the hyperscalers. the do presence X the We a we that is -- and Tier And not laggard, -- at go surge small, Tier presence XXXX. reason, as have same time hyperscale saw the among in digestion, we growth for all industry right. X as through the in

we this into tier And we additional years rate design So transition production wins continue have we mass at And year. our a growth. expect wins later revenue to expect we design expect we as the grow out, as that later convert industry hyperscalers to our this to we growth few to top year. into reported,

Krish Sankar

Thanks it. again everything Got it. and congrats for done Got Yuval, you've AE. for

Yuval Wasserman

it. Appreciate Krish. you, Thank

Operator

question next the of of Amanda Citi. Scarnati Your from is line

Amanda Scarnati

Hi, morning. good

First off, Yuval congratulations and enjoy retirement.

Yuval Wasserman

Thank you, Amanda.

Amanda Scarnati

up of or just just a which look by and followed talking similar about we early in Or as where going a not should data we you're big to welcome. to be is think large DC this to that want on I sort about? this see digestion? this out in still You're just at you're step this cyclicality So started? be center of topic Should market of we forward? digestion way just a follow-up that inventory going semis builds on it's matter is get period and really building lumpiness -- in

Yuval Wasserman

a it's good question, Yes, Amanda.

I in market. think is it's both. digestion definitely There the

behavior have of very large heard the microprocessors investments, time large the And also As last investment, effective Edwin, new Intel's capital to this digestion and of technology publicly transition investment from two tend digestion. talked decisions. investment are these very you think, the timing I by whole Intel, static the new they followed buying transition affected large to we market,

continue them less the Now, see we in our -- present at if all lumpy were of not the are case, fluctuations, players same make will us today, time. the we if more we contraction the right, grow. and we all market were susceptible bit have in The because of is, growing, expansion as fact a to third little and a we only to

production, As lumpiness. less our be migrate obviously, design into more susceptible to will the to we continue diversified we wins and mass

Amanda Scarnati

how of Can your that side. SMIC semi at if China seeing guidance? to the be about might over demand Great. any in on OEM talk handicapping side you switching unusual and the you then generally And you're or all, pull-ins and sort

Yuval Wasserman

the said in affected as products. I indicators right need, behavior the components they They demand I forward. in any semi The us need going on a is is the automotive don't we and now think to right when give by short-term pulled demand signals time. hub all customers now, need earlier, with industry, we including business. see what saw build product operate availability just growth based from is semi And on way all that we we abnormal IC the our that real They our key them. we of in that

we think right Regarding now to including product SMIC, as SMIC I ship get comment is to honestly, and license everybody SMIC. to at SMIC, look we our trying customer on cannot

I stage, this don't think on So we at can comment that.

Amanda Scarnati

you. Thank

Operator

line Your Molchanov a from James. next Pavel question Raymond is of

Pavel Molchanov

question. Thanks Yes. taking for the

the of, US or inauguration market I'm a regulatory -- what company. normalization Biden's Chinese happened change since US prospect what last as meaningful is China. extent the any obviously that earnings that's between things have pressure other kind the the of the faced curious the of the would you One specifically? from AEIS be you calls To trade perspective and and in

Yuval Wasserman

Thanks, Pavel.

that elections. nimbleness one that, change any decision half So operation proud risks, we to of IP world ensure changes, a are see even Malaysia, everybody's strategy the at to in about political the to diversify with don't that and continuity build change talked business our idea geopolitical administration. focus really to et and in think I going ability about is thing years on was don't changes, us factory a to The have the two the cetera. around way address -- our result as the I led a that we AEIS you're whole ago, And our before

footprint, to it. ship and us where we that global fact customers, the build a today, we with to have way have extremely and our where the our product, to So it together flexible, our make to be allows decision

customers. outside alignment ship China, local of can you alignment, to And make obviously China can it's can and make to ship all with So our to can -- requirements. China with we regulatory of full we in we ship in full outside imagine, with China, alignment to

one ability So, COVID-XX this well reasons and the be the to that flexible and have was of of agile. nimble we last year, so done the one through challenges of

right we're about administration. So change in out the now, not freaking

believe effect. did also time it We it. if we does, any -- take to have going it is take And to for decision to if agility to respond the

Pavel Molchanov

time up bit helpful. quite at stocks that was a $X.XX the lower obviously, a Follow dividend. were question the on you the At That's Okay. the setting rate, than guys quarter, it the is today.

this is, raise yield to policy? roadmap You of or X.X%. stage you know, annual a commit dividend now say don't earnings some at ready the the a need will kind over plan be with Are So, there barely but dividends? just to be, big progressive to time? to increases You how the will

Paul Oldham

would Yes, good there's revisit, but it's and to grow. actually a we room the will revisit when for the time, over decision said introduce that that board we a program, that we Obviously, that's question.

specifics but certainly no obviously, So, over that, there's that time. grow around room to for there's

Pavel Molchanov

guys. leave I'll there. it you, Thank

Paul Oldham

Thank you.

Operator

Misra of Paretosh of line BCM. the in is question next Your

Paretosh Misra

morning. guys. Great. Thanks, Good

the be productivity? of to basically done play back that was their So about wanted there's this in power customers helping if boost shortage, side chip news increase supply advanced anything terms can just can circle flow from and any rule energy So just that can wondering, that production? from

Yuval Wasserman

various be and to capacity -- We can because as We but demand capacity, the growth, increase in quickly. increase enable in increase able get Well, for that equipment from decide to companies we are monitoring, what to supplies cannot I've -- look and getting last market, in semi same the industry, years, these enter through that at, respond capacity into, increase we were in see respond when the shortage and and with we've power channels. been market of quickly and over of XX tools influence processing, capacity semiconductor cost been general, technologies. of the to time, the the me components, we decide, IC some fab. an use the will where the end at add from customers obviously, up, benefiting the really effort, sometimes obviously, manage components customers if gear increase in market And is there devices, you demand, if before, in

environment very there chain very dynamic us sophisticated So, we to will that supply and it's before, recover. have team, we've nimble management a been a allow and processes

Paretosh Misra

statement QX to worth to purposes, Thanks. QX Thanks we the for income guess, items for as think all and for you depreciation that And flagging, any these is modeling about tax like rate, SG&A, beyond? Paul, follow-up think relative I details. changes

Paul Oldham

range. about, just on the tried prepared remarks. We a say, generally up staying about in speaking, We in tax slightly. We I'll there the Yes. But comment talked rate to talked change. should, lot that XX% OpEx the of

no, various in no changes no, line -- big those those items. in So

Paretosh Misra

the Thanks, in in you, again, And, much. your you congrats and career all your to for for that all best achieved next you Paul. all -- phase the very Thank life.

Yuval Wasserman

Paretosh. Thank you very much,

Operator

you. Thank

comes a Our Twigg Capital next Markets. Weston question KeyBanc of from of line

Weston Twigg

moderation second customers? the is? Hey, do it's signs cap regarding half, thanks you continues? typically I a first know sounds said or I semi of And the acceleration know your But just strong the for not what accelerating more any you in demand two. taking that think do visibility it's in Or your from quarter than see QX. extraordinarily year; I'm half wondering, don't the the quickly, question. Real you of

Yuval Wasserman

We to, year I our signals that became on one earlier, strong And Energy. that The general, will as an customers, demand. deliver that think demand, it's XXXX in ability I thing all comment allow the in speak, QX do in we us heard is this has year accelerate said it XXXX growth We to will is the agree this exciting partners is to the you semi. on don't a year the for a second is have that. half. about, we demand in we demand in and in And the qX. as as us, The are, we growth talked general be XXXX support with again, QX for going growing on industry I a and can here, stay visibility. growth I enough you Advanced that. to year about can't we on that. And will that half, to time, the consensus QX to with be be tell clear that from Well, and I shortage have expectation comment second cannot In

Weston Twigg

helpful. of That's you how then can a contributor tell finally, virtual power, revenue is? that us And much Okay. just

Yuval Wasserman

tuck-in companies of in unique well, a example -- market an of small. unique on, technology, to scale our acquisition It's special with it's of point unique the to was surgical expect footprint leading that growth very That from and we and world. due acquisitions the outreach. The equipment see And very with relationship product capabilities. brings one

Weston Twigg

Okay. That's Thank helpful. you.

Yuval Wasserman

Thank you.

Operator

the remarks. back now Thank you. I call. of turn conclude to Wasserman closing over Q&A Yuval And the that any portion call does will for today's

Yuval Wasserman

a and been pleasure to engagement to I'm It's of over -- about So, the thank six level, Steve you last my the years with or great joining success to future He and Steve. day. I I'm with like get while and Kelly attributes support in the you I’d all your or about six company. know a company excited everybody partnership and Thank you. for and the and have years. half the work company XXXX remain a excited all working I'm next interest. March nice us. and be again, brings fading the and to until a a to to will then board the pursuing take away to support personal

Operator

call. Thank you. This does conference conclude today's

disconnect. You may now

Advanced Energy Industries (AEIS) 10 Feb 212020 Q4 Earnings call transcript