AEIS - Earnings call transcript Q2 2022 | Advanced Energy Industries, Inc.

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Operator

Greetings and welcome to the Advanced Energy Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure Marketing your and my VP Edwin now Strategic of IR. is to host, introduce Mok, It Thank you.

You may begin.

Edwin Mok

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

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

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

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

Stephen Kelley

the Edwin. Hello, joining call. everyone, Thanks, thanks and for

execution of and share per due expectations largely quarter team. to good improved operations and key supply Second our our revenue surpassed components by earnings

the availability scarce evidence While delivering term, integrated also our components, be In the circuits. financial continue target This we markets. revenue, grew the of the is significantly near constraint performance record will primary on to demand backlog. strong of across our our breaking particularly

the technologies markets, short on key ICs to of our on markets. growth. to are products new into launching and key we procurement which focused are highly our are applications engineered end, products need scarce those allowing solutions, value innovative long-term our our target While our highly teams that to Within is customers. focusing to development deliver term us performance, To more

cadence In our of SL expanded applications. power acquiring across the new wide introductions medical by the addition, reach a are we range the product accelerating market second quarter, in In of Power. we

years. number medical sheet engineering We Energy's player SL complement footprint and are within one in recognize They the the the strong and of acquisition manufacturing capabilities, become aspire been next to now top Power. the Advanced a to that strength player has five Customer positive. innovative balance reaction

current regarding some let further provide the color Now, environment. me operating

As environment dynamic. on key I we primary mentioned process nodes, channels. of remains older supply The issue. are and broker all built the shortages, through partially mitigate ICs, availability To the dealer certain components buy the earlier, of which is

buys. broker of this absorbing associated these price effort Our customers some premiums support with by the

even second remain While contributed second performance. our customers with of working have the pockets boards ICs circuit qualify environment boards entire there redesigned procurement overall results term. an ICs. to near we circuit have our redesigned the should hard-to-find improvement, larger alternative to also by quarter we to on and impact alternative These the closely eliminate and supply will components. in half challenging are Where delivery issues mitigating that necessary, expect We're in

to XX% of more Advanced I'll million. semiconductor from quarter, grew markets. for nearly for revenue maintain network. to Energy. details our continue This allows quarterly second to take new the each and our lumpy quickly us equipment surge components. now sequentially XX% of record is throughout deliveries We This of In capacity advantage market $XXX target factory a provide the scarce year-on-year

continue expect XXXX. semiconductor WFE revenue Energy's faster in will than grow that Advanced to We

deliver development customers. well, etch to strategic to progressing programs our units Our for dielectric evaluation and applications source plasma key us enabling remote are

In addition high revenue voltage Power. these believe In and to industrial revenue design our improved power long-term as we Advanced sequentially as will year-on-year for growth market that availability, wins XX% and medical multiple conversion secured for parts well due We and of gains addition, share SL drive products programs products. XX% the the strategic market, Energy. grew

for GROWINSIGHT. a is deliver for we medical teams power delivery of development the SL digitally Advanced software in position introducing board automation, mounted power the solution the single and under power a second Power range Energy a and medical SL called of controlled modules, slots film This combined broader now combined lighting Since industrial products increased measurement, acquisition an have are other is US. and the to of farm the indoor solutions in in continues particularly the major printing we to by markets, industrial the expanded a quarter, industrial paced to wins leader. with matching and team key activity, have portfolio April, farming, demand medical of Power quarter. ICs. Year-to-date, order medical solid. certified new at secured won medical seeing by industrial book a customers. revenue generator, factory critical data we several our acquisition, be and and a We medical one networking second enhanced a OEMs network. we variety our Our design indoor design telecom our into temperature In and computing, new, tier together in In multiple increase launched of RF center number markets, pyrometer applications. power industrial new including outside in products, of an a thin supply Since But regions in medical the

the we in demand remains several To During value designs our won products strong. markets. quarter, for summarize, these high

revenue positive in XXXX. impact. are We Although and a continues percentage be believe to having our the to track availability growth of on scarce constraint, mitigation that earnings primary we're components deliver double-digit the efforts

Looking revenue, earnings. and encouraged beyond is are deliver coming provide customer In our will financial results believe positioned which new in short, by profitable and we products year, Energy share technologies, acceptance our of review the detailed market Paul years. well and we that drive sustained will guidance. to Advanced we expect now this growth improved

Paul Oldham

to sequentially we billion. performance provides look XX% predominantly believe this as is backlog, solid comprised Thank quarters. you, grew of next the our ranges. products, Steve. strong, We And for of backlog good afternoon, record million financial our guidance per runway earnings revenue the over $XXX to share our everyone. proprietary In quarter, remain Demand delivered of products and which $X.XX a several we and $X.XX, surpassing second

remains quickly focus products as on operations to and critical Our getting parts securing customers possible. as

and material to redesign At very challenging, and premium higher we other ability actions Our see a efforts, positive at impact. recoveries. a mitigating even to parts same to secure premium, are environment the continue time, the costs having move overall remains quickly supply and

quarter result, to indicative over our the a per the our we As achieve prudent of target in end ability our earnings by remain results will year. believe of are our but of second planning, $X.XX share

of results. year quarter. our XX% Now last let XX% from and $XXX me grew million from over last Revenue financial go

the growth our was backlog revenues. Excluding the million, strong, record XX% $XXX acquisition, organic quarter. last last from despite and Demand up semiconductor year XX% and from year-over-year was XX% market sequentially. of Revenue grew the from contribution Power was revenue the up X% and SL

market from working medical parts customers in and to Revenue closely sequentially semiconductor We the quarter growing was deliveries from half. again last and quarter. to expect and last second are our revenue XX% industrial the both million, XX% with prioritize the third grow year our in critical and $XXX

Power, center and sequentially, and meaningfully supply continued of computing components. strong in and telecom was SL networking driven to growth of organic data be both year-over-year ICs. improved by XX% critical Excluding both Revenue and impacted market supply by critical demand

margins million, result, the year a up increased flat million, and margin from computing networking declined pass year, quarter. were to to customers dollar a sequentially. by gross material data basis last quarter and $XX we in from Telecom on but basis $XX impacted was last to and second that similar to margin, points zero XX at points mix Compared output. revenue X% Premium on costs. declined As margins on reflect was factory better costs was QX points. our have XX% to basis but gross able X% recoveries, sequentially Gross last which to the XX first approximately year up revenue and higher center basis XX.X%, due at been XXX

continue further. that negatively to and margins supply the will Given third impact and higher related premium environment, gross our in material quarter extend dynamic could recoveries the we costs expect

will quarter. quarter. last couple from X% and over which to help challenges, mitigating annual our SL to largely believe the of salary our a these we year last given Although from sequential assumptions actions XX% take offset and impact, next some up addition the we Operating million, more the quarters. was conservative expenses approach $XX in of cost of occurred were increase the second Power The increases, due should

last for $X.X $XX million from year was $XXX,XXX losses. margin million adjusted $XX quarter last XX.X%. operating interest Second up other of quarter and $X.X Non-GAAP of foreign was million. was expense million, And $X.X EBITDA exchange the expense quarter. $XX was our and million, Depreciation million including

the of tax XX% the is in non-GAAP the of beginning the Our took XX%. our XX.X%, year. R&D historical due slightly was effect and to rate tax of primarily ahead US target of rate at The rate above that impacting higher our of expensing change rules

Second share, from quarter. up quarter earnings $X.XX last $X.XX last $X.XX and were per year

earnings negative impact greater than would US change have share. of $X.XX rules, in in per the tax been Excluding quarter the the

partial the acquisition contributed of and opportunities $XX.X per our briefly comment to share. in way capture first inorganic earnings Now us are cross medical top revenue SL a selling makes approximately let In business. and integrate me SL the and Power our This million market, to quarter, player non-GAAP we acquisition. on in the on $X.XX well revenue

net cash ended the and with to flow. balance marketable of debt now including securities the $XXX million total a quarter $X sheet fourth cash Turning million. and of We

term, repurchased operations days. elevated, times stock and Cash Power capital we the at DSO critical near the turns improved less flat of we remained we flow During working next EPO as our approximately see In about declined to $XX days, $XXX of improve to begin improved consume the components. several XX as common should modestly to we was to to million. of from to $XX share. days. quarter, we scale inventories to $XX.XX contributing per for inventories back million Inventory but expect parts, Net at cash million of the remain SL quarters. higher XX XXX slightly actions turns inventory critical over impact less paid and slightly X.X flow

in million million and $X $XX.X about payments QX, million $X.X expenditures, During invested capital paid of dividends. debt principal we made in

$XXX through million long-term to an our support Since today, $XX ago, we price that last repurchase a strategy. our million Board of our of share increased addition, our $X.XXX stock the stock in per authorization second approximately authorization share quarter. announced the Directors In of of at repurchased end of repurchase year average we opportunistic

to Now, turn let guidance. me

remain with low Although environment ongoing we for our for a visibility continue parts premiums of to to strong supply critical material products, in and see some demand delivery dynamic components. we the

minus As to QX revenue $XXX we be $XX million. result, expect a or approximately million, plus

QX about higher quarter. Our will to levels flat includes is to full Power. the into as QX be semiconductor from and continue a assumes guidance contribution costs revenue QX gross quarter third grow revenue margin SL persist to of material sequentially, expected

SL in operating the a We be primarily operating range, to expenses. Power to $XX $XX of in expenses expect full quarter million million

approximately We continue XX%. higher to on tax other and be be to million our rate to approximately expense interest expect expenses $X.X

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

a our me in revenue quarter, share $X increasing And our our four consecutive with we Let chain confidence achieve In per executed will persistently some performance, of well our revenue second although to our guidance year-over-year challenging earnings costs. to quarters finish pace despite year-end constraints annualized QX supply closing higher of continue thoughts. targets reflects growth, environment. material

new in our well our potential questions. to drivers of order to take the chain pent actions position forward, and to supply company we come. solid believe demand your the earnings in we're profile quarters up markets, Looking Operator? taking products challenges book, the us deliver for With that, on many for mitigate investments that let's

Operator

Instructions]. [Operator

question first Capital Graham Scott from with Our Loop comes Markets.

Scott Graham

growth the a year-over-year. up was on hoping quarter, could you I XX% unpack semiconductor nice Congratulations guys.

product Just give some maybe us maybe strength lines on like. color little outsized the were that a and more bit

Stephen Kelley

the the Like was me semiconductor make markets, comments let by our really Scott, a there. constrained our few the parts. better has of last rest It been of part year. market for

semiconductor parts into to demand our able supply demand the exceed parts and turn pay last I qualifying we the change a alternative we this were QX in circuit There's going should really some So, what the We're happened and meaningful revenue. throughout in is quarter of that requalifying in big boards second procure for was second those ICs business. more seeing pattern. half year started the of and starting though, us into work mention, year. off to starting on no way

big happen. thank customers with to working calls us a those you for to make So our closely

Scott Graham

are there semi where areas you line. maybe pretty little So, broad stronger a no were based in semi? particular product of by It bit was

Stephen Kelley

it's it's Yeah, we very could supply based. just customers everything are broad Again, and limited, show. about taking

Scott Graham

Are your build are second weaken, the in idea still things center what's to companies have maybe year. saying an year continue plans have particular, there. business a tying customers, half the the it's you have On however, smartphone that potentially sometimes it's half side, next saying What and your other Give That's a centers? half on or the us fine dozen data and in good market? even in data that on back into market, of market. really say to will a weakening in to are of customers that going

Stephen Kelley

see market. that supply a of again, market. And still it's in a strength we Scott, constrained lot

can we everything taking they're So, build.

I we that quickly Difficulty] to market customers other are complete components some rack. for to think to we customer. see in were those in different the only market, that able [Technical ship the waiting thing products a their is

in daily had from being we're market these the have we basis and just customers. a far, so on constraints expedited So, no hyperscale

Scott Graham

if I in just don't And here, you mind. one sneak question last if could

into that would on real you chart people on double guess pockets, be that semiconductor if a is first And the there? page what do is backlog $X.X backlog of is there I the X in telling, there's have you. that growth of that there in might is potential think in in lot is of Your most much have I pretty versus what think there? think I is, a that maybe getting and ordering, of as percentage like a some concern some been the billion, weed. available, has the it that the How weakens slots, order OEM double ordering closing – markets, cancellations demand you believe

Stephen Kelley

is that an backlog a good very all-time look Scott. a Can that's closely Yeah, because question, it high. we take at at

more backlog. integrity you that some let data So the me just give to support of

dates XX% right us. our the that of is for have which we your our is medical next look I that's about in months, two-thirds the backlog currently all, so in next perishability. markets. it's demand If First know that the it's backlog important addressing months, shippable of means at because take specifically industrial a in six within got customer to that six front of is semiconductor, question – and backlog of request

believe all that earmarked And nearly we source. sole is all slots. specific for is So, that that

is perishable of supplier The much that's where business think every that one those there's part a we more is for backlog, there. right? Because So, the one than there's perishable don't boxes. that's hyperscale

that so, dollar of track backlog, riskiest we of part value very our represents but our backlog. it the It's And XX% of only the closely.

we that's on very buying the parts and take So, a approach where integrated hyperscalers. piece circuits conscious for

So, inventory. get sure covered unsold so that left that with we're we don't we make

Operator

with Our Sankar Cowen. next comes question Krish from

Krish Sankar

growing worry week same and customers impressive is do First Lam number your good. macro last of I'm everything, their the inventory. but are and the and your one, curious, about like who people at very kind time, just Steve, next reported But year obviously

you they slowdown rather to would kind just cap from it a own if drawdown you? your assume your buying is happens, it versus inventory because semi and see might I'm customers from before fair of curious, So when

Stephen Kelley

recently major message I lot with Ship in the clear. of a spent of us very our all second in the in more them time past customers the semiconductor, And almost half. was month.

parts issues Advanced issues. see their through other are solid biggest not Energy XXXX basically suppliers. anymore. they So demand and And into XXXX. It's Typically, it's that's

off nice so, is market part inventories. about customers, our biggest the And of we with that hub work

product can even inventory, that ship need could turn And we it. when specific put they customer product no the a and into still the into if need then for today, they'll so, they there's

real today, our semiconductor equipment customers. major to in also hubs So filling at replenishing addition we're demand the

So, our customers to we those into feel rate shipping high ability well a very XXXX. good keep about at into

Krish Sankar

And then a for follow-up quick Paul.

Just a I'm your of be, whatever it hypothetical If question year, that Power are some X% XX%, to to portfolio? think or kind let's just down you added model how curious just for in on operating also say, on or reason, leverage. the the now revenues have leverage might SL about next

Paul Oldham

in I think the XX% is our range. leverage XX% to operating

it that. majority gross margins, run a downside, But probably costs. our the remembering of costs than the would variable higher little On bit are our

constrained our because inventories inventories, same inventories, our who [Technical have little cost this higher so, of lower, companies are year is parts. cycle. see an a yeah, in that if waiting have at those certainly that manage found type cycle up the we fact, customers a higher some mentioned every they're the look we down. And do expenses not on critical every there's And – Difficulty]. time, we nature – us But different, we as I you our is on inventories base. of company we lot too. it's the big at revenues variable up, saw could a it have that we're before, manage that think in that a as they but there have are including supply who our in of most that And as expenses, one if, the to can impact fixed do variable is At pay program. And may large we person things that on Clearly,

as think us areas from runway their own a customers their or the forward, our backlog take look their hub we own do borrow own places equipment they've softening today. some where provides inventories we we demand believe where either demand [indiscernible] or environment to to even replenish meet in had to just will So

Operator

with Our next Citi. question Scarnati comes Amanda from

Amanda Scarnati

a got just quick clarification I've question.

In terms easing, sort sort new terms of designs general outperformance? components where of in impact of the the you did the the some of of restructuring of benefit versus in biggest sort see of quarter supply the of and

Stephen Kelley

hit revenue we Amanda, redesigns I IC the in the would ability That's semiconductor. the alternative say to these due to where area. more the quals biggest that and turn probably benefit there's far biggest the as saw semiconductor within as board

Amanda Scarnati

going does Just are plan in to the capacity your right-sizing some and of how know more you the sort or plans CHIPS Act But business about including Asia. Or general terms CapEx of the of forward, concerned at capacity look that of the you passing sort this US equipment just suppliers, I footprint? with there's at change capacity shrink in your through still point? in

Stephen Kelley

CHIPS Asia. credits We're where the years, capacity, you'll or regards we significantly Amanda. bill. don't factories don't in operations. coming result because puts particularly But going see I direct expect be any takes capacity we we're Act, money of ones think With tax that expand grant as the open to going expand our modernizing We some a to us and in see benefit. get to any There's investment close new to and

However, benefit from that. we that our believe customers significantly will

is So, for for Energy. good anything our customers good Advanced that's

Operator

Bolton with Needham. comes question Quinn from next Our

Quinn Bolton

broker and outlook. channel. Congratulations on the about question guess I a I've results the the got

it, have needs only might also minimum higher sounds more multiple your like to they're order it which not the commitments asking, often heard but channel, I've fulfill you prices quarters. commit that win to for business about in to in As

something go sort which about, guys of see shortages, one case, as buy keep quarter are broker high that look of else. higher can of next year? game you you for channel, And quarter And to components that at to it's will you the just kind gross committed through it's at if a supply that's you PLDs, or the into margin premium just prices when constraint, quarters of next where sort MOSFETs, talk also drag on early sort next us these quarter so, do of you the several costs whac-a-mole it's the

though next even and of a from to component. up supplies these you've so the a different critical And back might comes broker you have go quarter type need one the for quarter, channel got

Paul Oldham

buy driven material buys first, us than get parts much say, of tie I'd from usually the you our that And for from months. more month handful frankly, to that. optimistic to these needs, It's broker And can't tend they immediate out fill not from channels. by multiple nature the a of many a anywhere be trying of slots might channel a quarters. an to

quickly. going right bought I the kind a to we period critical to for. there's They So, door don't think bit parts But second a It we're the be game that time. consuming your of a for They a parts be and long of they're because risk consumed that we're right. out long little that of is come tend in is pretty looking comment to of or parts been show get issue get we're supply. yield of visibility other And problem, whac-a-mole. and some some now able are supply in parts. able was has there longer other now to And been but there a that chain we've up hadn't was problem issue where the that there's because a certainly not a or a gotten supply components better

the both and the do supply is abate opportunistic, sort I general that these will that buys as of nature So being activity of broker improves. necessary this think chain

about, And persist on We we talked third we our haven't improve supply quarter. that this expect time. a seen chain if yet. pattern over It that see the long-term the comments, don't will normalizes. we But into being particularly to

Quinn Bolton

that have that QX quarters and This conditions? third you more to sort then point of any thoughts second you're in Shenzhen may for buys And the longer get facility as question, line to down the you've update relative think give impact mentioned I shutting question. expect you on us open QX? second same broker of in surge it as Can normal relates that the basis when my keeping did to you back about a things XXX the to be premium maintain Did or your capacity. sort

Paul Oldham

as the seeing In we're said, costs we into QX. persist general, higher material

do didn't expect say buys, we or same year. close on sense. I'd to specifically improve as capacity. So, across semiconductor of we'll are range could bit, broadly Steve our keep we it but part in respect the which only how to depending sites the we've that's goes. by we dynamic. that vary the obviously revenue on a closes end say to capacity. increase visibility something broader the can And And while It And grow capacity probably adding said, ensure see we adequate is that to little as makes that of to Shenzhen, Shenzhen broker got maintain, speaking, could environment that With our ensure economy rebalance but the not It's

Quinn Bolton

drag Paul, is for right is Shenzhen, basis that about that point XX ballpark? the

Paul Oldham

think that's I Yeah, in the range. right

Operator

question with next comes Our from KeyBanc. Steve Barger

Steve Barger

you in next mix end you're you equipment go the have semi you as you're continues tougher seeing strong rates show that medical into organic do what think backlog, just When like slip? higher do and semi comps growth make than industrial and continued markets you expecting about that growth. or expect year in Sounds to

Stephen Kelley

volume business for by continue been I&M We has And actually to we But strong us. has I&M mix, low it of more XXXX. a higher potential restrained really be be to more expect to parts. because tends semi do think see through lack of got

to are medical quite going industrial think the the you're an so, see business, for we And and more medical parts able industrial get as uptick to space. I in

Steve Barger

XQ. Really $X in than good your earnings in rate see to more in confidence run

per case into think the half, that and parts strong demand assuming you you the ship? kind can backlog, first all you plus that of year on Given to base next as minimum comments environment your going quarter get about XXX a is need

Paul Oldham

number. the Yeah, can to upside I there's get think that assuming to ship, parts we

situation, continue So commented, constraints we backlog, environment, the if soften in seen in constrained bit. as remain a we And to supply in we next or Ironically, the us saw help the environment. we've little supply might which of benefit operate given still demand year. proprietary some comes strong. And sole demand even source it macro down a into nature as the would part actually go demand softening all to those we

that it. give keeping a where we're we're we based close us markets upside, perspective. continued of believe all our eye strong So, a at the from But combination and backlog on parts do profile on

Steve Barger

just add you comment increasing one to is can that mentioned I the faster? to you're you're product kind slow, new related processes of internal to were of get – streamlining cadence Or function to question, your is R&D about introduction, things if if some there of spend? that pushing a And market things accelerate to

Stephen Kelley

It's a combination.

We spending a are from to certainly product R&D going But technology really our we're more development. money market. accelerate to it's in standpoint, how

to between get units, very that continue to for business output improved up. organized product new focused we into us are that's target we've into causing industrial So, as go important which our highly And And us what's think our I the semiconductor, it's two, on markets on XXXX. cadence and medical.

Operator

with comes D.A. Davidson. question Hans next from Chung Our

Hans Chung

strong the result. on Congratulations

there some I and are So, color second contributions the medical first, Power. can around you kind of SL me that know segments quarter. during the from the give industrial

see any just and color growth. strong what that? also around I'm of kind We very organic the curious driver about

Paul Oldham

A my couple of comments. remarks and in I of noted inorganic sort organic growth. the

have been it's the in Steve all medical, across about around verticals. has medical. And and strong. industrial driven we of several number broadly. lighting, commentary industrial the farming, his And strength In and of in a general, a So, more indoor demand mentioned and parts. strong by that's did quarter those

backlog, So, quarter. this add products, SL again, medical in we did Power We and and grew industrial it's across areas. multiple

us under do the it the for the existing just was part us accretive expansion our as products opportunity mentioned, added give people for does revenue Power clearly joined in well think as As in SL million grow And of of to a of the $XX us of with I significant combination and that that medical we the as footprint channel, combined acquisition, the market. and quarter. medical,

Hans Chung

for in say, some [indiscernible] from rate $X target from party, probably margin see for the the the third benefit growth assume more this let's the sequential year, run will also the – of – moderate XQ, by and line Regarding IC. gross end premium you contribute see cost top EPS we may from maybe

And so, $X to my that quarter? driven more kind be in plus or by line achieve fourth both equally for Will question driver top you rate be is that, a on the or will of gross sides? what major EPS run margin the

Paul Oldham

in get these would that would $X the gain gross the we uplift our of we of the per earnings annualized for end margin chain some cost supply and earlier improving which to think some I year, year, the of premiums we see contribute would share. would and felt be by abate

So, we is, cost, points good customers. because higher become a come that been our job has been but able out. think on of That's in to done we've all, pretty couple product parts getting I focus a I current at we've get to revenue as think of getting first a

if sort XX% look QX, that nearing are of share we where the so, you $X.XX gross in in And are per into today and range. we're actually margins

the think tempering we're cost how by persistent But I going improvement parts on year some will to we'll as guess the on and end the our today little view we parts support get see is gross bit to to also, that, our ship volume I higher more, margin comments a of And margin. gross that try we'll see So, the improvements be. that. based in indicate are able

margin. improves, we in uptick as increase believe a to performance. the as additional margin to get significant gross financial $X.XX can tailwind And that that we comes, environment the gross in without be our just will supply So,

Hans Chung

one quick. last Maybe

that. color? design the new curious So can geography any [indiscernible] around how to think you second long potentially the comment convert elaborate it be color I'm of kind segment? just in center – take or could on And and the what's you volume will helpful. win product the any line is order? any color I data first on or And to that half half, is

Stephen Kelley

data year-and-a-half. in through the We've a been past market center going transition the for

is been designs. So what we've value-added doing higher on more focusing

we're lot a can't quite as lead I situation. in we a who could playing color with sole you we're the is exactly the you that's there could and a the be to I of or where of sourced we're doing dynamics So, cost tell market, the hyperscale with. customers. two some bit actually the hyperscale pass same progressing the able given either on At the increased that playing And to But parts source I'm we're to because constrained, time, pleased which progress. supply also nicely. source give better in

So, well margin the performance, in today. gross seeing both the the business, future winning hyperscale as current we're I'm business the as business, improvement

So with I'm happy it.

Operator

from comes question next Ho with Stifel. Our Patrick

Patrick Ho

quarter. nice shown you've few Steve, levels last have increased off, a production first Congrats with the quarters. obviously maybe that on the

efficiencies about which talked You've come the in there from are more us past, give you that your on your is results? it, ramp the optimizations Malaysian helping are allowing the facility some output to and of financial update an can that obviously occurring

Stephen Kelley

months What basically the output. past our we've growing been doing We're nine floor expanding for there also our space. is

third the up couple to are three next going a that's building and we finish floor in floor the here months. of factory, So

is operating made a September, big we've what in brought chief officer factory. output seen there. We've steady increase So of who's impact on the in a operations our out Malaysian new a

brought a also manager in. We new plant

And And that rate average come year higher think than is I I've a ago average. has Malaysia. was down attrition noticed below one in so, to the much our thing

you and the quality we've your employees, have situation have when output your up of So constant that a goes seen that pool factory. And when up. in Malaysia goes you

Patrick Ho

some long go industry different Whenever a Steve, down this up, follow-up don't my But a is obviously as know, this are Because, everyone I to aspect the time. your could towards very tend out is your to figure costs trying that along end customers? How question, Maybe across on been go of that obviously, you environment. cost ecosystem. increases in be over the passing permanent time. you've they

Stephen Kelley

that actually were we up But has a And last that wants happened catalog increases seeing we across right? to basically price pay more. just that way those gone Because We are we price. easy, the never increase ICs, nobody had approach the major buy in actions almost everything not we but all fall. is, board, of the

margin just laid need we'll increased absorbing for as not dealers, costs. it. that's this so, sold how continue And that's we very we're basically to play we And And We're it need some We're is to how prices what our we these need help basically we to to out customers, it, increased to adding manufacturers. our particularly we're well compensated the be the the with costs. transparently customers. we increased saying, brokers paying, hey, and as experiencing,

raise a think prices need do at So, the to team better it's a again we this know lift I it. year, gotten if how we it. It And fall, heavy to heavy was but has last lift.

Paul Oldham

everything, our That we've recover That's over away in the The will other our that we'll are them One transactional. we're of support talk two recover raise can through our costs goal cases, actually about where increases the transitory. of a And track help we think efficiencies us, willing largely record. price think or dealer customer, seeing on own In things they're those time we're just increases through structural categories parts that OEMs to to and It's We premium to those costs buy on over and in we customers those, They're the cost oftentimes, but those. broker buys. there's pretty When we we of either the go these other and passing to are that. along, had prices, our do don't is lot passing and we've price really most transitory. they're recovered whether time. suppliers our before our reimbursing again, good very it. a view. about

or inflation to We'll along as because to over entire that's ecosystem. think time will to about make we believe as in able it's pass that more always we So our improvements that them. something cover offset those be we able costs be structural,

Operator

from with Our next question comes Misra Berenberg Paretosh

Paretosh Misra

is In your which exposure higher to way think a there semiconductor of as about have your versus exposure? a to business, you these to memory logic

Stephen Kelley

in we to general, exposure say higher I logic. have would Paretosh,

little some downs the a affect others. So than ups and memory bit us less

just what that was few memory it's ago, like Today, a total years WFE, look at take XX%. you a If more the market. roughly two-thirds the of

and market I While is it's even logic leading the think both trailing significant, edge. bigger, edge

so, more we the foundry spaces, than space. And to participating revenue we of weighted do memory towards all but in our space we're have the the

Paretosh Misra

in I China, operations COVID impacted QX? With in any guess, are normally? running in COVID they now Is still related QX? quantify your the by normalize regard impact, that to Will lockdowns? And it

Stephen Kelley

very remarkably, Yeah, this recovered quickly. that Shenzhen, we down The shutdowns. factories. But shutdown very for our QX but had in We only a Chinese were we in year fortunate we was had in no no QX, lockdowns shut week March. we've at

Operator

There turn Kelley At are to in further this for questions I no back over comments. time, queue. would the call Steve like closing to

Stephen Kelley

interest. appreciate you today. Thank much call for your joining the Really

some Just takeaways.

quickly. good parts think market. quarter. expected revenue QX we ability long find to over able to was a new parts growth were those finally, new scenes, bringing working designing deliver and the we behind hard our And I have profitable in superior, more into than technologies turn to We products confidence We're the great and term.

thank So, the today. you again, call Bye-bye. for joining

Operator

today's concludes teleconference. This

and a day. for your your You at this great may lines participation have And you thank disconnect time.

Advanced Energy Industries (AEIS) 4 Aug 222022 Q2 Earnings call transcript