AEIS - Earnings call transcript Q4 2021 | Advanced Energy Industries, Inc.

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Operator

Greetings. Welcome to Advanced Energy's Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. the of to Relations. Strategic turn Mok, host now President Vice Marketing will conference your over Edwin I and Investor

may begin. You

Edwin Mok

fourth Vice Kelley, our Thank to and CEO; call. afternoon, Good Oldham, President CFO. me quarter our Paul Energy’s Executive With Steve you, conference and XXXX are everyone. today and earnings President operator. Advanced Welcome

QX ir.advancedenergy.com. press it on find you If There also you you release, have not seen can earnings find the website our at presentation. earnings our

like I'd several the months. begin, Before that, at mention I will participate to investor we conferences coming in

me call found update All On acquisition be expenses unless risks call, that gains the from Steve? as Let concerning remind cause results differ Excluded Steve otherwise risks long-term measures guidance. compensation, financial me be today's exchange a Medium- forward-looking on you restructuring that not guarantees should will pass specified. February uncertainties CEO, our call financial losses. can foreign are basis in conference the are that, the press based to Information stock of and are non-GAAP related or presented contains filings. between to of on estimates subject and cost, interpreted amortization, With non-GAAP reconciliation targets and Kelley. results let results that, non-GAAP X, unrealized today our and be A XXXX today's performance. our obligations GAAP and detailed to release. found statements in to President today's them. materially these SEC are could management's no actual forward-looking as statements today and and not presented assumes can future company be

Steve Kelley

million finished everyone Advanced joining the and in for Energy. of Edwin. the fourth $XXX thanks nearly you, We for Thank a strong, record quarter, with year new revenue call. Good the afternoon,

we acceptance our carried we in a also our full million $XXX is a $X.XX and And backlog achieved with products billion. technologies for more Demand XXXX. revenue products of a customer very new record applications. the across performance. of strong. than of year, We're For variety Also wide pleased

our company. tempo During integrated added and successfully brought roadmaps XXXX, Versatile two talent the which Energy. onboarding of and increased Advanced and acquisitions, growth our medical, we product We the senior valuable expertise Tegam calibration strategy, clarified fine-tuned sensing to management Power

by Our IC performance shortages. constrained short-term remains financial

new However, to remained and At customers. teams customers are sales marketing and and power those to are it's growth technologies that our leadership, squarely our And engineering focused delivering adds drive long-term note of value will the precision developing focused market technologies for which technology taking important our and Energy. throughout teams which world. a the products profitable leading on we in on all our that way, products, technology core, Advanced about

stems us quarter. for ICs gives and from lumpy staffing factories need incremental us the parts advantage provide on originally critical revenue than ship earnings and more to though end to quickly fourth Now share surge surpassed into additional quarter in last we were which or per we fully to unexpected performance. secured take shortages ability color of the year our critical of our Even turn fourth and to full delivery revenue more high output. a This guidance. I component made off This it We approach full year our us constraining anticipated. product will Fourth keep capacity enabled decision ICs product quarter of staffed. the paid

industry where in nodes to of come and early challenges. that most our chain supply most XXXX. supply chain mature capacity the capacity year, the the wide of Most or remains of to are The built that on incremental semiconductor dynamic. to is ICS later buy is are. of are Moving capacity expand and we suppliers constraints scheduled Many this diligently working online process

customers we're much addition, summary, of we availability. with this ICs will year. alternative expect In for working that be better our to continue qualify closely issue to with an In IC shortages

in and second do we online comes improvement new half, bear as expect efforts our in redesign capacity the Although fruit. qualification

We to high ICs to prices secure supply. continue critical abnormally in pay short

also We unexpected continue experience certain supply [decommits] from [ph] suppliers. to IC

our prudent Given taking factors, a are these we to approach near-term outlook.

like each to on provide markets. color Now of target our I’d

market quarter sequentially fourth semiconductor and the into grew shipments year-over-year. Our

availability. the products for our expect persistent fourth supply quarter in In the revenue full which December, multiple fourth capabilities. to XX%. the medical voltage, designs two featured markets, critical the grew and products. Also industrial embedded record West edge achieved with won three year-over-year. launched of we semiconductor our improved XXXX, sequentially, we In first up power market, revenue on At semiconductor For component over advanced we Semicon control grow past our sensing and new quarter, the and years, high issues. the year, year-over-year, and sequentially, despite in by we the new revenue And deposition revenue quarter was tradeshow

in full an fact, well year fourth as quarter, all-time this high. hit In market revenue as

We market demand in the substantial expect into robust quarter. first in carried a backlog XXXX the and medical industrial

During the quarter, launched and we industrial products. medical new fourth three

data and well the In revenues applications. markets, networking manufacturing and solar computing, horticulture due design In component were to and addition, and expectations measurement, we test of secured center wins improved quarter telecom availability. ahead fourth medical, cell

generation our in features power efficiency the During leading next quarter, density. which XX% XX industry we power volt shelf, launched

to grew telecom equipment. quarter, due in demand for fourth revenue Our infrastructure largely XG the increased

our year in I'd Now to we've some our to of the touch strategy and past like on made accelerate initiatives. growth changes the

drive delivering customers to target our revenue best-in-class is in growth Our overall markets. solutions by power profitable precision strategy to

Energy’s most foundation typically and growth on challenging strategy. talent solve of power solutions issues. the technical long-term we Advanced their Our delivery The customers our proprietary innovation to rely are are and developed

put XXXX, a from leaders The efficiency Energy blending We teams with processes. new improve and the to outside of development works place, shared marketing our our Advanced speed leaders product team company. are priorities our reorganized product and team technology in leadership well together we new During development clear. the new and longtime and

medical to engineering semiconductor, resources markets. addition, industrial and have allocated the more In we

We expect to win markets. and in these product output our increase more new designs

we taken organization. supply our operations to quickly Finally, steps improved availability chain leading precision major product prepared revenue. Solutions industry in strengthen extremely believe the turn well into We closing, we for component have to remains are that demand In Power strong. our

mitigation our the We coupled supply half in expect that shortage environment growth a will revenue chain drive gradually the improving of year. second with actions

our precision provide detailed a our now execution of on solutions results guidance. to the our bring strategy remain As target financial in we and focused to company, Paul will best-in-class, review power customers accelerating long-term markets.

Paul Oldham

execution also good material earnings Thank our us we've fourth Demand and per everyone. the Xabove of cost guidance delivered $XXX additional afternoon another the we you, In secure XX% to quarter, parts, ranges. allowed to incurred. Steve, factory our premiums Good revenue our growing share backlog increase recover increased output, begin team by and million. with and high-end to

performance demonstrates parts, QX quickly we to to strong able as supply revenue. convert receive we're that that Our

however, forward, environment supply the Looking dynamic. wide industry constraints and is persist very

supply potential significant continue near-term, earnings we but to see pent-up result, a prudently in improves. environment the plan as the As

the rebounded allowing up XXX down strong our year. portfolio Demand million broad Now from our semiconductor by year-over-year. in the expect sequentially, increased secured quarter. of XX% XG $XXX us revenue markets a to growing were XX XX% costs again sequentially the quarter strong, results. robust again was $XX financial X.X% we shipments million, million optimization year center million, and gross sequentially quarter let go Fourth investments, to industrial and remains performance. based from unfavorable XX% up Revenue ago first anticipated to sequentially driven achieve and X% the Sales to actions. by our related over grew revenue to this demand slightly but XX% grow last parts revenue Customer driven $XX year-over-year from record than year-over-year. in XX.X%, to a and a XX% and mix. more increased to We mostly strong result sequentially for material and and record was medical telecom up our margin as semiconductor a Non-GAAP fab market backlog X% computing and me declined infrastructure, Data quarter. Telecom XX% this sequentially, revenue networking and X% was million. in

In recovered addition, customers premium a purchasing materials. high-cost by benefited the of approximately for incurred from have we our but quarter These we during negatively XXX points. portion revenue, margin the recoveries percentage premiums basis gross impacted

million, percentage and expect were continue increased in $X.X the margin and foreign to our We Operating recoveries The was including higher year. quarter up in improve interest but last operating expenses due was quarter. margin the gross term, of XX.X%. later investments and million losses. from expense. increase expense programs $XXX,XXX near in million $X.X $XX.X Other was sequential to critical costs material for million, the $X.X of Non-GAAP exchange impact expense, premium to to SG&A

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

Our tax expense was tax year-end The to due largely approximately lower-than-expected was non-GAAP cost $XXX,XXX. discrete benefit. a

been earnings item, increased on a of tax mix have rate adjusted and would credits. approximately XX.X% this Excluding tax the foreign favorable R&D

XX% we tax for were continue non-GAAP in last $X.XX the range. Looking $X.XX share, forward, quarter expect to rate per quarter. Earnings to and to compared be our the GAAP

have discrete would the per been share. earnings Excluding tax $X.XX benefit,

ICs industry related data grew material X% levels. XXXX revenue was Turning financial due and Increased achieved Sales of factor critical up billion revenue impacting to medical out margins. gross center our optimization computing primary year the results. and X% despite the markets operating and Semi and supply related full to impact to XX% wide grew both networking telecom supply our the revenue constraints. and our portfolio COVID We supply constraints operations to record constraints declined on $X.XX our actions. into of the XXXX cost record from and industrial

XXXX per non-GAAP year-over-year declined share. result a earnings to $X.XX As

from cash $XX operations the the $X.X million. We payments and $XXX paid cash debt and Turning million of million. $X balance principal made of now fourth the million million with quarter Cash million approximately $X.X $XXX and of was We dividends. flow total to sheet. for continuing quarter was in net CapEx ended

per stock decreased million opportunistic $XX.XX basis In addition, of repurchase in on working share of slightly we decreased at X.Xx. QX XXX capital and $X Days on improved revenues. $XX.X part program. repurchased our higher to net as turns Inventory days share of to common

demand. XX time. to on But We allows this upside fell demand decreased bait flow expect term over days. represents on and believe operating quickly investment based near us in to and shortage to days, to cash respond to is some parts DSO payable as pressure critical upward to Days customer a see the inventory XX

For from parts. critical our $XXX million flow raw year of full the in continuing we we cash operations. investment await while Despite materials of XXXX, generated inventory

$XX.X use during stock XXX,XXX to repurchase we the common over addition, year. our In million of shares

Now, let guidance. me to turn

with continued critical component on dynamic, remain We expect to risk timing the supply environment deliveries. of

Our QX. orderbook increased strong after the even

We continue supply. be to by expect will revenue paced

As view QX a result, our the outlook we provided largely from unchanged quarter. remains last

be or QX approximately plus expect million. to minus XX We million revenue XXX

will QX guidance will sequentially, by assumes revenues decline other revenue Our grow in availability semi while markets of parts. limited the

remain We costs margin favorable expect on material lower expect gross relatively elevated slightly and to mix material but volume. and lower we QX premiums related Overall improve product recoveries. more

We slightly. be up expenses operating to expect

$X.XX As be plus share of to result, XX.X QX million expect on a count a based minus we shares. approximately or non-GAAP $X.XX, per share earnings cents,

quarter, parts. secure of we end current be up improves strong for of than it that for greater and shipped can million proprietary as as we Based quarter. provided per demand supply last make products me quarter an can $XXX the with some beyond called mix open I on with backlog We revenue XXXX of outlook the questions, entered record towards soon XX% largely XXXX. over comments this Before let that as

meaningful in as confident do expect higher available. we the achieve levels become these remain ability our a improvement on parts half, sustained While in revenue not we to or first basis

can costs Operator? $X we premium greater take of deliver this than earnings normalize, addition, your With XXXX. potential in share exiting per as annualized In questions. additional we earnings pent-up year, with let's believe that,

Operator

Needham with question-and-answer time, [Operator session. comes be first Company. a this at Our line question we of the Quinn conducting from & Instructions] Bolton And will

Quinn Bolton

in the you're to components fourth way assume the probably to down the in are guess your XX% Hey, in looking think and the implies of quarter secure your the are at received guide. you're have guidance strength guys, quarter. quarter? that that nice execution first about sort line revenue component in at the looking I QX. able you the availability in components with Is March I

Steve Kelley

Yes, This Kelly. Quinn, a comment. will make I Steve is

QX, we're looking parts. So of current at sight our in line for

the weeks can end of quarter. seven So see us what in we the of front over or next to the eight

in guidance QX do thing trying to second with of is confidence The our make high guide. got in to we've relatively midpoint we're a our sure degree

hard IC Last but And we'll delivery forecast quarter, unexpected, again, always I the happens But surprised do we critical of upside better. on a lumpy these it. hope chance to forecast with were think it's the there's we very can't ICs. that we deliveries.

Quinn Bolton

beat to-date, So saw it January you you in QX? that And at allows the you sounds in the truly month that like fourth activity lumpy. quarter to and February that lumpiness it continuing of haven't is level same seen

Steve Kelley

we It's to hard expected quarter, have suppliers product. half That's pretty action this our the second so quarter. to dynamic I as characterize, process. most the a their takes of what far of think received Typically, receive we place in the reallocate

So it's hard to forecast.

Quinn Bolton

me your recovery but explain recovery, on what's for to said that you costs, I you you sounds that higher give you charge you're was just able hoping on minute talked to us And bit premium price some for said can a maybe a But higher able color premium premium actually pass on to more with think like recovery? about, little a margins. going a I spend points. gross Understood. recovery the along I think you But you're products. I there input XXX misheard, a or and Paul, could then, premium basis was drag

Paul Oldham

question, right. It's good a Quinn. That's

noted, market. to we've premiums paying the So some we're as on sometimes cases, just get in significant parts open

Our getting because getting them. the it's those product to to only customers support parts us sometimes path

able to to And cost so them. pass been that along we've increasingly

along we're receiving those essentially, cost to of that cost we them, revenue pass the that when covers However, parts.

cost. it's essentially XXX% revenue at So

it's so level. helped our equivalent increased our the but revenue it And in in of sort quarter an costs

have have we the margins, that's Now, cost. the had traditional good our but you gross you a see not cost the a otherwise, at would cost, because through going impact But news is revenue we level. percent margin to recovered that negative more just more in why recovery

Operator

the KeyBanc from comes question line of with next Steve Barger our And Capital Markets.

Steve Barger

the much sense a and get is the as just of how to for that progresses? Hi, in how working progress and flow work on I'm waiting ICs? currently year affect cap backlog just will cash trying

Steve Kelley

Yes.

think we the the look just XX% next it, would than more already would critical I more parts. product what XX%, when awaiting Steve delinquent think the way that of shippable characterize to want was is coming in at consider maybe is wanted, or we customer quarter, we they about those the and backlog, quarter, sort in

that parts Now current way there's we're going not time. able be But to all ship tells backlog. to that because no a very we'll you in get it it's those

as backlog Now, is vast quarters or can we've as as in three soon seen one increases two or out it. But majority well. the we shippable build the that go

in we've be That's increase we've is the they've the because don't that's up we're kits should to critical reason what of think of capacity critical way we that recover ready. our to able get been to as able the full really why why think are That's it. means and kept just about have the parts, backlog, the many then higher parts. I why That's And kept quickly. output, factory. that and pretty we products than then the some one have most everything other inventories we these the of for our on

to turn little get result of as where around able parts. we're quickly. saw And And think I burst example very of an we to revenue were a some is that. you able QX a those in

in and down become we and earnings as of that across revenue so higher at could But when much So receive higher gives much environment operate certainly supply us it confidence critical we available. look we level all quickly a a level as that the how comes parts to year these and parts. improves,

Steve Barger

I last that when start are that draw help guess see you I down suppliers of know efforts potential you year. to to Yes. And be mentioned started that could could specific you can little backlog? a benefit And you realistically, point. But process? you requalifying timing more those some new about that underway. that

Steve Kelley

parts Yes, in new customers also, cases, of the with qualify to our good existing and boards alternate do parts. to think some job has quickly a I team accommodate done working redesigns

that So progressed has very I well. think

to half year. of the impact expect this We occur major the second in

some the take it place XXXX. in will seeing effect the of half, we're positive So, of second half most first but in

Operator

Sankar the Cowen Our of next question comes and Krish from with line Company.

Krish Sankar

I had them a couple of too.

also U.S. growth. Steve, one, is constraints First similar have revenues your your last up. any look I has But experienced I I semi? a at your kind your constraints, peer, I'm [indiscernible] when curious I semi who look of rates? limited on really at business grew mean, we growth XX%. going the twice what year, of kind understand almost with what's follow there to if

Steve Kelley

Yes.

your is parts what I really right? wins is think we're is core determined there so good And our doing Let two share, that opportunities and all strongest or by seeing conductor losses guess me question winning conductor I the in the products. Krish. that's strategic answer defending, our pretty major we're And the we're first a edge, far which edge. job market,

we addition, will allow and new that areas new grow some and dielectric. some to have coming share us in like In years technologies the RPS

feel you ends, in the looking need and think, between time look I design where market lag we're your at. when design then you're to take pretty at As strategically at good production. share, a But about I ends

that issues we for because in quite WFE. ordered the customers because in I the the XX%, our underperformed two-year more at Your market we would our We guess ran burst And share. starting XXXX. by on revenues period, frankly our in look semiconductor XXXX. parts XXXX, we we've be early question ahead the of of grown And is point technical outgrew XXXX, is into. If which

standpoint objective a better semiconductor. is in XXXX shipment to get our from in So

and and with help rebuilding hub customers cope have the our to by to start rebuild our their we intend into with inventories. them year, Because demand also problems we inventory the eating keep So last now up hub inventory. shipping

Krish Sankar

to then the just Got statements. supply constraints like and a it. linearity of year Steve. to follow income Thanks if revenue at, It about that, OpEx million to a token, XXXX, margin revenue and quarterly better. revenues. be same outgrow And this up then your like And that when math, is run I XXX half And the looks as OpEx, And ease trying tried I'm to should look gross it the And seems for think your in going the A) should in improve. growth for numbers Is the rate right? progresses, Paul. second right? how do like create year

Paul Oldham

Yes, so Krish. a couple things,

into is of that you're over do we expect that. continues important in that seasonality but to first think second challenging. improve environment as think that believe parts results becoming year. not the the we're to parts when about to we right, are the QX half. the would the going available, of we the redesigns. continue But more course QX at taken around to that's to internally And look more have when well. of And only it's we expect in The actions to that we be part We many even that And

parts So we QX outlook, at look to QX, similar our we based to on see very when would expect availability. just

parts better. to as and earlier, is I year we is, chain at of $X able to And get second significant Now I open be as on in paying costs also higher as thing this why revenue said margin, have we've or a don't have allows $XXX we a I'll an rate to become where expect a which those annualized to million the exit market, that the think, rate X of normalizes say which we going rate have think the we parts this an exit share. premium priced $X that's to share upside we're situation us to improvement supply gross these, our mentioned levels, on available, for

be half just the higher is timing. timing pent-up of and exiting its parts a performing do question best availability second view that and we should So company. there's we The is lot at of year a the this And financial much to that is earnings think the in our level. key that

expense. is the expense little revenue. going of at of most year. contemplates the revenue rate than Now that to if because think operating bit that over full if of probably you're you you year acquisitions share beginning a flattish the said X%, revenues up a expenses math, XXX right the about year-on-year, next growth, see growth. and with operating we operating have that you'll that, relatively all cost more in you are year, pieces, do we little have look And year but growth that the that made Look, million operating we from that's about do inflationary, even during just that exit believe are annualized Having per a expense $X be higher

environment, that So Steve's fundamentally, the are environment, combat we earnings it programs, and that lot efficiency sense actions through pent-up costs think taken soft reorganization that's of by a in invest continue to cut some created it to believe critical to makes it’s spot pressures. we a the there's and sense talked to about. shortages. in invest part to seeing this people, don't around some model some this continued we've constrained inflationary in makes our supply in we our We've But

Krish Sankar

color, Thanks the Paul. for Awesome. Terrific.

Operator

next line question with SIG. Hosseini Our comes Mehdi from of the

Mehdi Hosseini

I the joined late. call

question customers billion for the second assume new follow highs. the talk up/ on XXX comment Steve, asked? in apologize we WFE second shipment half enough I'm have repeating accelerate a very support your And WFE? I that be I Would about to which some Should year? substantial up you been XXX half? this with that and to understand, of and about you're the way wondering, have may WFE. billion just want you when hitting talked I But not OEM is availability year, component So already your catching into And component the a of

Steve Kelley

one. tough a Yes, Mehdi, that's

going if towards I that you trend driving take are strong. and And they're our So indications the XXXX artificial look strong think right? underlying there, are growth. very cetera, extremely a positive, from the XXXX secular XG at X.X, and be pretty fundamentals industry intelligence and are all et to customers some

I think not standpoint. means they that's of trend the is, moving are inventory. chips putting to the other many finally, got regions only the the buying more but world just is also case, posture, customers adjusting number which you've part of need, what chips, some insurance important in trying in become And place even from self-sufficient to in driving equipment. a which for

So to rest going I grow well, quite subsystem suppliers in it be critical hits WFE to likely And XXXX. think, the hits is us, the probably limited it as right? we're an our So industry, of parts, and by customers. hits

And expand get have in to we sure important very ecosystem. to so, parts the and together need this make we we capacity work

Mehdi Hosseini

Sure, premises, XXXX. I customer benefit your OEMs from become given we follow just is through a year, come co-invest WFE other secular new to probably each and for will parties a What secular message chain have thank are management, hub for partner for The and once and of paradigm consistent that take opportunities? so would able out to help have their that. the that both we a it to continue trends? And you. and inventory OEM are especially to supply same are you in what with later grow a up this localization the shift, this with

Steve Kelley

think I Mehdi, it's not money. really, a Yes, of question

and relatively quickly capacity cost. parts. relatively We getting low our The the own have is issue the at to expand ability

to our more suppliers, nodes. their specifically capacity their really ability build product and at expanding it's So older

buy nanometers XXX we So type almost products. is to everything nanometer XX

as mature. So around it's it's boomed basically back And contention economies the this industry the automotive to in year, been life came world. and

that all for limited capacity. we're fighting So

more we're also seeing the is, nodes. And investments same today IDM happening older we're what's seeing at make So the foundries. the happening things in

some to the down. takes down, going it the come. So And see time capacity think months, XX six to over to next things we're it'll I bring but settle

Operator

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

Tom Diffely

Steve, Mehdi's question. just following up on

a hub or will So forward, larger you they have to maybe hold inventory inventory larger think forward? going the OEMs going a require

Steve Kelley

yes. Oh,

And adjust that on think customers depending those safety a One happen. is, rebuild bit risk will will our I may tolerance. stocks. their little two things their stocks OEM they

to probably be for that's going So good us. news

own to examining supply to weak going identify we're The is, we where And upgrade. inventory, And we're our build we're chain. also second we going links. where can,

in many built plans. in that expansion may factories parts So cases, buying not are that long-term have

to the technology, And be for to many so it's actions come, those this point, upgrade available proceeding at that we're so parts years will using will and that year. up that engineers be our plentiful to so two

Tom Diffely

even supply fourth quarter, Maybe a just the driven new possibly great. actually a Okay, you suppliers producing When did color by suppliers more little more? like markets? you you slug on in that bit the they allocation? core get product just more dynamics. you or them Are is find Are your new finding giving

Steve Kelley

the capacity we to dock. staffing maintained of And certainly parts part on the see think the the us. But show Well, lot happy And couple very I in to quickly. company, this that frankly those into our products case, we them products and don't throughout shortage. going we're full more And there's we've behind despite quite allocated on a and curtain, it was a of is model, put which recourse who power -- up suppliers our full shipped the that's see.

So when them upsides, we can into do get quickly. those we very revenue turn

Tom Diffely

on a being supply bit of then, Okay, And year-over-year down issues? Paul, How bit was versus optimization a your basis? business great. that portfolio about the telecom a you much talked

Paul Oldham

we ahead products phase think you of if see, low was year strong customers but But about buying say probably number Particularly sort I'd we to in very bit, of ahead the quarter telecom to quarter, half -- ago, have I a new a changes to a had both. in little it's think I essentially that a it's in baseline. fair that It's and in we we mean, I'd XX:XX. moved you outs. the recall, networking, as QX, And said XXs, because or saw then, lower of a price fourth

saw a got that able been to not had fourth because little a good that we of And you bit demand bring to number fill new and baseline the glimpse we've that this we've parts in of of parts. quarter, able we're some think Now up. year off I

occurring. So things a of combination it's both

Tom Diffely

Okay, then, with are here, process? done the at last more to look when you Or do? optimization, question that it you still is

Paul Oldham

at this want think being in, elegant year our it to an visible But where in we in up do of we're lower prices trying a constantly we ended have calendar looking we effort, just feather largely on areas do is and telecom as saw kind it's tried that visible do of in raise that's that networking situation. difficult say an process, shouldn't it way. focus to in what networking, in How to engineering areas overall an of portfolio? improve put in our think in our telecom didn't it a So ongoing kind we how How margins? around and ongoing it of I end. do last blend differentiation? this more resources of I'd market, customers which I and optimization to effort year. we but more more be as that we we any bit We're particular done,

Operator

Raymond from next James. of the our question with comes Molchanov And Pavel line

Pavel Molchanov

application segments? are kind We're chain, any actually it the your to speak? I the are or seeing not outlook medical, COVID. in and ask, believe not. the medical wanted third pandemic, demand of of so year Mine the near-term So, to as industrial healthcare you medical kind subsides, deceleration of is And about or what component in supply the of for

Steve Kelley

as of activity, in design the indications We're as well both side. Yes. revenue seeing the increased side

we're that for of And quite good medical be good and for up the in the so pick happy we're winds that a would we're think year I market. market us. also, design year revenue XXXX medical so with level seeing And a earning

Pavel Molchanov

counterintuitive. dividend, then this one-year Okay, And little the a interesting. quarter dividend. I of of That's guess the institution on marks so your mark

front? Given that that to on moderate or Any yield is basis dividend policy, moving on pretty, progressive just on stock, thoughts points. any a pretty the obviously, XX perspective

Paul Oldham

the perform time, sure to something cash over that in said at not our time. make we we've made put our that Certainly, Board of this could review Yes, a we constraints, of it's the Certainly, over we flow and the to this question. point, look the not good speaking, places given Generally a this to point, level, model, increased dividend. higher at we which at right we when But the Broadly a sort dividend increase point. have company parts the decision assigned said want At continue portion we does. haven't can dividend. a speaking, cash dividend. that's we increased to at periodically the we'd the we've out we

Operator

question of Misra the Next with Berenberg. Instructions] [Operator comes line from Paretosh

Paretosh Misra

cutting are that issues the chain are potentially cost footprint, supply the under that your margins, of control for some moment, that and actions impacting other can manufacturing example, besides measures? as at are there your So optimization well, help

Steve Kelley

make over a turn then it comment I'll Paul. to

costs building think I majority costs, great our of materials. when the look the are you in at the

And so offsets there's to not trying we that parts could much the do, manufacturing optimize that costs. footprint

shortages our are once fact, manufacturing do we opportunities we the to that, parts lot expand don't want rectified. to In because of a see

more bill. boxes them. we're relatively It's And other capacity fact clean build after cheap. It's building those way, we're so probably It's probably right? test we're It's boxes going This going inexpensive to a and room. shipping the we wafer fab, not is a a relatively not capacity.

Paul Oldham

Yes. add struggling the it's however, lot full factory. And this of couple disruptive. right. a exactly it side. on consumes disruptive Steve's in environment I'll is where just quite would I chain the quite add, comments. that And with time you're supply a kits

opportunities the believe to us continue that's improves, improve And for focus the So we that also efficiency be as on. to we our to do environment continue operations. of that there something

cost we're exiting some for It's some carrying, does not efficient in but very add that of capacity so are have we can it ability more. China, us a right that from now, output that place. in factory We additional to

So certainly I think over for there time, efficiency. us to be will improve opportunities

to pass transitory. on. margin that As these those cost now abate relates those able the that lot it of costs premiums we percent right they're to and our starting will It think help improve in time, doesn't over gross we're form paying. material but should Unfortunately, to increased of the these are margin be significantly. a we're

Now, through in over by recover there's able be And increases time. material we largely price cost. we'll and also that large, think, to some structural inflation

of path or get think a XX% do of there margins isn’t we better. to to gross our clear back model So

some very abatement rate In we fact, we environment. can see this an as talked assuming believe year, supply the we be the close x of that about we've to in

Paretosh Misra

next it. product? competitors Got how similar then a can other shop, Thanks potential the this for XX-volt new power that. think about generation And should we make many product? that How

Steve Kelley

of a there we're efficiency power would for the density. this and level out with power I XX-volt say one shop of first

hyperscale I more needs in the customers leading meets the think it So of market. the than

move do So into platform to with our we forward to we're well needs. meet think customization positioned customers' further this

Paretosh Misra

worth for plans me, last And Okay. this project year, on any the large the for flagging? one just CapEx

Paul Oldham

potentially some We of within around of that We CapEx look, don't needs beyond see revenue. are a of that, some Steve I pretty any, variety X% our us increases always capacity X% our things. low. to anything improvement, stay And significantly but about will equipment, talked facility X%. have would model to drive expect X%

Operator

Barger from And Steve the with KeyBanc Markets. our comes line of Capital next question

Steve Barger

the I And industrial it? for versus Or focus gains I&M book-to-bill versus through growth. been about other accelerate? to order reorganization, prior this seen know you medical segments a have you've for team gone and talk and can as rates rates year, or frame those share want you however you has

Steve Kelley

products engineers I we're we Yes, designing that increased get level market. of the the medical industrial detail is, of ready significantly not Steve. number to say can But into yet, have what for

increase the already, output we quarters. coming increased are continue in So that's to going seeing to

and FAE second thing is sales The significant our of force done applications. really medical and a on industrial we've part refocus

definitely long And in pipeline type bigger. that's really are what These that at. is because good wheelhouse. typically right life getting And so cycle, we're this products. we're encouraged our sole source the And is

Paul Oldham

also to just from medical that these Steve backlog say, for remarks. just about revenue, prepared for going products. was a and I again record his on commented quarter noted commenting, this And just Steve, industrial increased we was

winning, demand, lot of we positions. as room there's clearly new a we're And of revenue So, get lot growth parts, here. for a there's

Steve Barger

follow was my that Yes, up.

what's are that side, approach specialty you it industrial of kind the medical of side, is really and manufacturing Or the on medical taking? you're manufacturers? products really niche For device the targeting

SteveKelley

the I say are here of be to most medium-sized going opportunities small opportunities. Steve, would and Yes.

and for of lot a doubles, a opportunities the last it's industrial medical market, So long singles and but time. the in

we're them, able each of these but build upon So to customers.

our So average that's margin. really kind of tends business up it it is corporate gross to and

so horsepower So we've that's put behind that effort. why much

Steve Barger

Yes, you growth accelerates. so that it up mixes as

Steve Kelley

Yes.

Operator

Steve closing will turn the the over And session. for have remarks. reached therefore, our question-and-answer now to call I of And we Kelley end

Steve Kelley

you. few Thank closing Okay. A thoughts.

demand the strong. First, for is our very products

best-in-class the strategy Second, target And focused expect we as supply to the our in execution bring finally, of conditions thanks our we improve, are today. joining to precision performance. markets. drive power solutions And to customers for improved on call accelerating

Operator

concludes disconnect for may your lines conference, at and This you today's time. your you participation. this Thank

Advanced Energy Industries (AEIS) 10 Feb 222021 Q4 Earnings call transcript