- Earnings call transcript Q3 2022

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Operator

Greetings. Welcome to the Advanced Energy Third Quarter 2022 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Edwin Mok, Vice President of Strategic Marketing and Investor Relations.

You may begin.

Edwin Mok

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

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

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

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

Stephen Kelley

Good the and Thanks, call. afternoon, for joining everyone, Edwin. thanks

revenue and with books, the earnings of was more per million quarter of third Our for $XXX record one than $X share. over

operational delivery products upside, our supply, technology shippable the X efforts This cash revenue. strong our suppliers outperformance opportunity the Demand of nearly for conversion ultimate is new components their with improved on critical gives function improve largely focused Strategically, quarters. for near remained particularly development manufacturing execution, of critical product execution. and and in commitments. undisputed should redesigned strong. delivered be components X/X goal our the our technology qualification quick backlog That $X.X of are part of us achieving was we billion addition, our will and a in leadership markets. we upon component sourcing good flow. In component accelerating term, on into those the of product current the In of our tactical each focus and target next

Now, the color some I'll environment. supply on current further provide

Deliveries are have see we biggest dynamic. largely While ICs, critical production our the process are nodes, remains to uncertainty produced which started on source process. environment of older planning the some improvements, in of still

our pay for costs. premiums those some to ICs in continued helping the absorb and customers continue significant support incremental appreciate We critical of of to

have and to us revenue. in convert surge capacity enabled to to decisions XXXX. strategic mitigate in turn, parts components Our into deliveries lumpy quickly maintain much allowed This, shortages financial aggressively performance improved of has scarce

demand of to like additional provide on areas exceeds Currently, I'd many supply market business. demand. Now, our color in some

and safety inventories are U.S. such driving closely forecast. be are will customers semiconductor as demand, we choppier revenue conditions, fourth is controls. changing XXXX. the with stocks, our In to market, in macro market recent export demand channel adapt however, the recognize, quarter need the market end changing, market the working to do to of that our key with end the Solid and that replenish environment coupled factors We tightening

support ceased have shipments We ensure and We Chinese-owned compliance as rules a necessary of percentage full companies. revenue the to and steps from taken small derive have only the required. our with semiconductor

demand we expect are will their the trends decline and on export by new XXXX. end new current customers regulations non-Chinese and build plans. our the market market of many impacted However, in controls, been Based currently reassessing that have semiconductor

Over plan medium-term demand work the our forecast. to our with closely fine-tune coming weeks, we to customers

Moving other growth industrial, account us for medical, and our They revenue. provide portfolio for Advanced now even maintain Energy. markets computing, cash to of and semiconductor dip The nearly telecom sources our profitability balance in half markets, demand. are which important to profitability and flow, to should of though product a our and enable good networking

significantly, We base in at now grow The and also of quarter, of a of much wider offer expect has generated $XX selection revenue advanced pace. value-added third continue services. that our energy service steady installed to million business, which a subsystems the will grown we

will XXXX. portfolio, Finally, we further our are encouraged in we share design believe drive across wins which an by gains of accelerating rate

of Now, for I'll million, record fourth the that for XX% semiconductor, although expect will down we company. sequentially, up more year-on-year revenues, over were more revenues quarter color $XXX up than In new be And a each provide XX% our markets. target year-on-year. to

growth expect the more revenue semiconductor For XXXX, full year of we than XX%.

overperformance new On design development for products such and in markets, key quarter In our source remote the a backlog, medical technologies play evaluations flat health for industrial Within drivers year-on-year million, roughly revenue advanced are our a care. we $XXX strong, and Industry the progress. win etch dielectric conductor quarter, making record applications specialized company. growth and applications. third going product well. customer industrial for despite of in deposition to long-term front, are electrification, applications, quarter. Demand as reflected nearly metal of the X.X, etch, indoor which the new a range of the in logic benefiting XX% secular remains from grew plasma many secured Ongoing third we are which we good our wide In farming medical, as remained

that us historically the industrial increased a markets with been strong design pipeline, to win enable in as overall coupled outgrow macroeconomic believe engagements OEMs. substantially Medical sensitive our whole Tier particularly year. SL offer and an reach, the have our conditions, with of acquisition market us, medical products will important coming We increased medical is suite equipment the now we market a While the for power Power. of after market X comprehensive medical have to

charging significant in measurement quarter, medical in wins forecast we outshipped positions In life applications. we in due market, our availability. to quarter, we third center, In parts in the better industrial surgical won electric and markets, key equipment data telecom the test the and and notched largely networking market, and science vehicle applications. the This

the well quarter, strong are During performance. designs, a we quarter revenue we won and exceptionally long-term the drive high-value profitable will growth. performed third quarter forecasting help fourth to several which Overall, in

highlight that our next in design our exposure XXXX. into Looking and focus year. moving areas pipeline, solid markets low order to channel to forward, I'd closing, market win believe outperform we enable In us balanced inventory book, strong will our like

will bringing to products we by accelerate growth and revenue First, technologies innovative our customers.

given review optimize Second, for we will our look now manufacturing seeking maximize financial Paul quality. results our for company. detailed strong opportunities, which guidance. M&A will and balance sense the continue will to flexibility make we provide and sheet, and footprint, our to And efficiency, strategic finally, financial our

Paul Oldham

Backlog per deliver team of demand million approximately Thank with you, of share, continued solid ranges. $X.X Increased Steve, declined revenue quarter, potential EPS demonstrating on $XXX our slightly operations combined results In to us guidance of financial some components, range higher for our and of third the quickly, respond our ability in delivered both to of revenue, billion $X.XX a products. much good to everyone. metrics, company. well the we critical across the the of above enabled supply reflecting afternoon, extraordinary and pent-up earnings

We continue next drivers to enable Energy outperform believe quarters. markets backlog evolve should and the our AE-specific as to position several Advanced multiple our relatively over

results. me go our over let financial Now,

the from $XXX record levels. and growing a record a grew medical XX% million, quarter record operational market also and XX% and allowed XX% XX% million, from was us from execution in revenue Improved last the in sequentially and quarter to $XXX industrial deliver Revenue in million. Third XX% year-over-year upside $XXX XX% second year the the to year growing sequentially. achieve supply revenue reached last quarter. and Revenue semiconductor market great and

year $XX on Telecom with million, Power, SL quarter. to record supply million, revenue strong XX% levels. and allowed sequentially demand second was year-over-year last supply growth center of par computing Networking revenue and market XX% the grow was improved XX% and Excluding from XXXX's and ICs. organic to critical year-over-year driven sequentially, us $XX up Improved XX% XX% & data also XX% by from

margin which for run approximately the scarce partial paid the XX primarily overall basis due up higher quarter, recoveries from to our is continued material Third half mix. points and quarter, continue by recovery XX.X%, margins accounted to in quarter last premium gross unfavorable at from premiums for peak points offset parts customers of XXX impact. Higher was factory levels, gross output, and of largely costs impacting basis by about

in results first and XXXX, will impact we the we expect into Although timing sell-through. and continue recoveries to quarter the potential related premium half the costs of negatively our see improvement, material fourth inventory of given for the higher

adjusted $XXX revenue. the based were SL million, quarter. down and expect However, mainly was EBITDA full record variable margin these a Operating a due Power million, we over of the actions quarter costs up mitigating quarter course quarter expenses come higher to our of for will last XX.X%. costs was for X% on chain. was million, approximately and XXXX normalization from million higher $X.X last $XX.X quarter, supply Operating and of $XX from up strong on the Depreciation our gradually the

by onetime million million, Non-GAAP the foreign expense $X.X was nonstrategic environment, higher rate this gain of including in million acquisition. prior range a due losses, interest exchange interest $X.X to expense and of items. income little expense of million increased other and on and non-GAAP sale forward. a technology $X interest of offset $XXX,XXX to going $X.X exchange $X.X and other be GAAP the million we Our million quarter other partially gains a $X.X was to Due trend $X to expect million unrealized the foreign income to other from

$X.XX per second were from last up record EPS share, Third quarter and year's earnings $X.XX a $X.XX. of quarter

strong DSO quarter, We last marketable improved operations declined to improved from the a modestly with to net to third quarter X.Xx cash sheet. Turning slightly to flow including securities, due Cash days. higher million. million ended from cash, $XX robust the $XXX our now to this of and and of on $XX continuing was Inventory financial DPO revenues. million total primarily balance XX X.Xx turns performance. days, quarter XX

working a As days. result, capital improved to net XXX

payments principal million quarter, $X.X debt CapEx, of we $XX dividends. $X in During the third made in paid and million million invested

worth In per share common addition, we $X.X repurchase stock of our part million share opportunistic $XX.XX at of program. repurchased as

our me guidance. to of many remains let Demand supply. than turn higher Now, in markets

quarters. we to more the of continue next normalized over times, to critical our expect levels we improve and several As bring lead our do parts reduce backlog shortages to

plus million, the we quarter, million. Advanced the fourth guidance in for growth approximately quarterly revenue Given headwinds third of or reflects to second Energy. be our impact midpoint the $XX be market, initial and minus the continued of XX% would for semiconductor QX the ever revenues strong $XXX the in performance parts constraints expect quarter highest year-over-year and The

decline QX sequentially gated XX% year. our assumes semiconductor Revenues increased Our components. based but of on by revenue from other supply guidance last will markets be will in over

margin QX XX% be material We cost to the gross expect continued on in premiums. range high

We fourth investments. expenses in slightly our Based set operating to QX ahead of tax on for our earlier per on XX%, earnings specific up be target and $X.XX, to to year our exit expect plus or non-GAAP XX% the programs be timing $X.XX, rate. minus we of share quarter expect of rate

in the few the to as to procure parts. are illustrates the performance make Before earnings want able I a outstanding to I our call the financial quarter third important potential operator, critical in model we substantial points. The pass

levels Looking a can market at cyclicality. revenues times run balanced book, during exposure order rate higher large multiple of market and drivers forward, believe we historical support our than growth

target target our factors allow markets And strategic addition, on improve flow the will chain, to us Operator? achieve that, XXXX with In expand to to allow continue margin Overall, term, and improvements to in position should to the proprietary of believe and let's grow we strong cash should gross material generation combined will programs start demand our time. to lower liquidity With outperform deliver efficiencies costs Long to over pursue markets. our to strategic Energy for our investments enable over take your Advanced our manufacturing XX% time. focus in these in products results. our our operations, questions. continue supply us optimizing and as

Operator

of [Operator Needham Company. line the & Instructions] Quinn comes question Bolton Our from with first

Quinn Bolton

next in into on WFE couple nice Congratulations talked I I year. some looking results. a the have questions guess, about environment think changing, and the this the down sector Obviously, of WFE big of XX%. is OEMs

you server? think businesses how you backlog hold up those see in – medical, telecom your signs position, question Are demand do would down guys also XX% the restocking, given those is, markets? demand in semiconductor to end seeing for Or And environment So are second the business? question orders industrial, is, better do you and are my need my the WFE lower? do those first you you see than better that beginning markets to are in some starting trend within

Stephen Kelley

take Okay, those. is Quinn, Steve. I'll This

providing advanced our memory are factors over forward, market the some But when favor. at the semiconductor market logic I as XXXX regulations guidance, That's correction I new we with the comes see being without control XXXX, working there XXXX also are to the issues see as down think some and equipment I the softening looking that and in it probably in demand. that there. clear export definitely look

with those work with to refilled. need our customers largely be we First bins. usually of bins inventory largest And just-in-time all,

as So With customers to other most the customers, semiconductor have into our a moved approach. year. next move customers just-in-case that's are somewhat of cushion in we non-Jap a of those

And want put so again, in they going to us. safety help that's stock. to And

the us last as key service I was mentioned in million us for business. factor Another a script, quarter. is $XX for business it our Service,

years, connected that's market. value-added to the there's then offer Maybe we about largely bit view market and grown quite And leading-edge lot through few basic categories. X also, and I think over a latest There's cycles So semiconductor a it I more the grown. has our base services. demand. past goes consumer market market trailing obviously And investment memory installed the through the then market, And general. in supplier in cycle we're going memory the essentially. the logic because edge there's talking

to I factor still And market. that of comes in we're trailing size big the one continues think is reflected the the the be pieces think, largest that That appreciate not chasing market it of pie when oversold, may the edge -- the that's, people I semiconductors. fact fully of the parts. to is

throughout other year. market So back XXXX. strong And X that think the I is of half in second be probably next come to going markets will the

So far I that's as as semiconductors. what see

and now, medical, networking data there. the Right looking markets, Now other of and industrial, see don't at softening telecom, center we so signs forth.

In still a fact, areas. of shortages number we parts are tackling in those

next are commitments lot backlog a of as a we shipped upside suppliers lot the their have to X gets So improve there think current there's that quarters. our able we of over

The in the we other key our point they markets, of of rest cycles. with and in is business play a wide different variety operate

where up, overall, more semiconductor. So be others market a one may think and it's stable environment I than down, much

Quinn Bolton

the then basis And you If on a Paul. XXXX, it. impact higher quick think material follow-up I just including cost, Got mentioned XXX for about components. points

you a probably to it of your than year, markets. get but some revenue product probably the as going goes And decline that other becomes into end mix away as looks semiconductor more next like headwind

should offset think component how as through they factors? you Do thoughts trend more think about Do of product they’re year of next next year? think And the you level, costs about we percent offsetting so think helpful. mean, be margins from you recovery I any about would than sort as gross XX mix? the margins

Paul Oldham

That's a good Quinn. question,

premiums of a were as well we ever the this recovered. First, it thought last that actually we component that seen yet. that our to paid and scarce quarter premiums point talked haven't as might we and be we continues, quarter is for What about highest certainly as or the remember, next half take was But subside, starting kind environment full earlier costs down. into through is costs cost Because year. fourth this the and even for it come P&L, roll impact the of the to to will quarter is premium the so after the us to continue probably through going means about first quarter start of input

So there’s subside, vast to we material I point time. couple XXX in costs basis quarters. at going those of least – we we’re pick probably the range for majority think And shouldn’t as say, I’ll this reason over up that another then recover, of no stay

the slower progression outweigh recover mix shift of the we will I margins think next the do it’s think material over any a see to And that year. recovery I see. be to going So course in

Operator

Our Markets. Loop the with Graham comes next Scott Capital question of from line

Scott Graham

Can Terrific you quarter, congratulations. hear me?

Stephen Kelley

and yes. you, hear Loud I clear.

Scott Graham

Okay. great. Great,

of saying moment. with into that think you however, side So as might year give I'm the wondering, them edge third, are big the semiconductor memory I by well upon some in an I I’m that wondering, first memory very the less we us your assume views how being with. as quarter, and down your tilted seems, memory out into we your that makers And just versus speak year, all WFE on actually and us trailing It is you XX, understand your weakening business sort next interesting some idea itself? later and head business that the Could just move appreciate could the of and the your of in you observation. you of towards as logic market And second thought guys help logic. more maybe who are maybe foundry depending – is exposed. oversold

Stephen Kelley

talk in about Yes. I that. could general

is tilted higher is because than side of in etch business the I the foundry intensity conductor logic think towards in is equipment the memory logic side. our more

WFE the feel But think, I XX% memory to standpoint. today have to remember, market XX% certainly the total memory a of will we So roughly about, slowdown. we is from

less need complex today They to the logic, edge yields, and right? market, investment participating because with memory drive to the the logic so more they invest generation. edge other move and we're for continued to customers next structures, see to still next those What are generation, we need higher part the leading there which exposed together. in is trailing to of And we both the we're than is

be So development the even though new some ahead, they expansion, capacity full they're and may new pausing moving of development. product process speed

us technology get new into those customers. great a So it's some opportunity to for

Scott Graham

And and little sort shipment schedule Okay. an schedules look extension and us maybe Could sort of firm high the push them those shipment bit firm back. I’m an I flavor those of of not like? delivery customers a guess then how dates, backlog looks what just you and that are backlog, next my have like extremely what I are that give one of for question, you is, assume that dates? they wondering could

Paul Oldham

Yes, seen in. be Look, is consistent pretty demand a we've our that good Scott. it's the backlog question, close

In from to backlog like that it's fact, we've X it. want either months, said quarters, it continue of our and date, -- see either next within it customer a request they now X or so approximately they the X/X would

So it's change. of out could to a not that be subject that's scheduled over current backlog time It's backlog. long period

Now ask can our more matter, as we've practical expedites certainly backlog reschedule to a for than people and to But customers seen continuing reschedule. backlog. date,

we backlog. few level. feel So to good quality a more going that And actually very it's normalized to like quarters down take it's still a a to us work

our the exceed Steve supply. the said, demand of As many to continues in markets,

Operator

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

Krish Sankar

I actually had a few of them.

First much out billion that the one, backlog, how is on semis? just of curiosity $X.X of in

Paul Oldham

We've said and total. the of about medical of that represents semi industrial XX% the combination

the broken haven't So in ballpark it it's but of we XX-XX. out specifically,

Krish Sankar

you Fair look an that actually WFE. upcycle. then at past you the Got WFE if down underperformed And it. downturn, is, Got clearly, outgrowing And this the I year, other typically, cycles, question wanted in to is enough. ask in it.

So of from year? inventory using up next wouldn’t purchasing why are going I’m downturn, your that a up to it’s that end customers your versus you assume be cyclical normal just you. the curious kind case If

time would this why around? different So behavior the be

Stephen Kelley

Yes.

inventory the out think is Krish. biggest there, a just difference of I lack

their our there's our So as into and customers of there. inventory out look customers, into critical very subsystems we little direct

X.X all, of over going installation that they're still JIT depleted needs, second to from for to been they're first those pull needs. immediate years. have us some So the And of pulling all, of past refill bins

type us. some to for technologies. with combine So occurring people correction if it's that think that a new as different of are I And think transitions you I move

and down position good part to have of there, serves cycle. of the a very the counteract also that We some

Krish Sankar

into enough. All And final cost the just question it. Got overwhelm the right. leverage Paul. pass-through decels, year negative and revenue help some get a kind next deceleration just margin it. gross from next normalizes Got what because supply or of this the the is you quarters, if of impact would year? of but these tailwind Can cost Fair from that for us then thing is your And fair be few revenue any leasing? this you quantify to

Paul Oldham

good over basis And recoveries, getting quantified of a been we it's essentially range. of XXX impact X question. that kind XX back at if this XXX revenue which to we're calls, it's Yes, last XXX the That's is that's basis go X both the points, I X quarter. you premium margin. in had the about basis point guess or conference our

that but change. calorie-free but next You we but margins. look make a change go wouldn't which revenue revenue, gross our And gross headwind margin can Krish, would expect to the better. revenue, essentially won't do year, math to on be that's that, That's down, going means that will model to

about wherever the not other real or In any gross away. our that, getting will improvement we brokers amount that the we're go from recovery that to to paying an pricing paying should can. not only will we're normal we're third supplier. improve That's parts equal that earnings. also not but parties Those improve be to margin get to model That's we premiums premiums That of for. addition have

points basis in going it's negative of points XXX that to chain there some there's But at the revenue, basis better said model. we've also our factory to it impact trade-off. point comes so will XXX think some will from way Clearly, for time our is there's lower But get entire leverage some it the back normalizes. of inefficiencies should supply about in I that margins. think And of as we some to free and be effectively be XX some

an higher probably equal of got this volumes amount quarter. fair it's to the say leverage think quarter, this we I with

volumes. kind inefficiencies, of higher offsetting the the it's So

back the that's basis So think much leverage. to is because don't points negative maybe see on XX of think would we as expect, way you'll maybe get it. And the XXX that what efficiencies that we the to I of

Krish Sankar

it. If Power thing. you could helpful, squeeze $X I&M in about quarter? just million Paul. right I Power, the Super Got ex SL more If revenues on in SL heard I was one

Paul Oldham

was much that. it higher No, than

I think the number is $XX about million.

Operator

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

Mehdi Hosseini

you be Paul, Did million mean in million imply to OpEx a range? should you to said up. $X like $X

Paul Oldham

Yes. Mehdi. It's nominally. ahead, up Go

Mehdi Hosseini

Should assume in OpEx Okay. pickup throughout in the of that business kind I this ‘XX? XXXX especially you’re semi part expecting of latter a the

Paul Oldham

Yes.

flat, I the what see little and whatnot. we think be even at we is some But you'll a across will efficiencies beginning bit as it maybe the on down year, focus go as continued we've continue to particularly in growth. programs and in we intend horizon. which drive And on to the critical see our strategies invest to battle that continue will to inflation, we engineering

improve ensure where and year, So improve can delivering productivity, be we'll next on the obviously, market, we'll focusing synergies be we we're softer efficiency. with

up, I but up so spending expect would And much. to to not see flat

Mehdi Hosseini

you. then And Steve. Got one question for

thinking fit? valuation the Is the how Given better area in understand to that is market, in as any that centers, will Or of focused offer semis, be better M&A telecom, are a we you’re just how thinking Any on are potential combination about public strategy. value? you targets. Or try there acquisition you the color a you strategic X? current industrial about great data

Stephen Kelley

Yes.

strategic reasonable us rates market, allows general, high be calmer interest environment Advanced with buyers is M&A I prices to XXXX a and in a like think for going I to think pay assets. us favorable and Energy quality in think, that I for favors

in products. and We still high a for like companies of sole-source a market with companies in operated good while a like We base a medical and semiconductor, Our strategy strong the have markets. of looking We're mindset. engineering power have is the industrial customers same. have the and portion that for companies

Energy. So nicely that dovetails with Advanced

Mehdi Hosseini

markets? was something Or that more looking for equally Is specific. end you value? for distributed are opportunities a I there different better offers market any guess I

Stephen Kelley

we about medical products what ability think that I semiconductor, to industrial the customers. create and like for is our customized

high is ship long into turn are percentage of that high-mix, business. into our So they're primary annuities low-volume in they're and sole-sourced, kind wins think design And But markets sticky. a very, we very XX-year products cycle business. of life and we a essentially. these those We're

Operator

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

Hans Chung

Congratulations on results. the strong

want I to question, the margin. first on follow-up So

and chain component So redesigning supply the mitigate I of cost right, either constraint, the could help or to remember effort, that you availability that the talked for about pay. you

just playing I so just from that impact we to how commentary I into year? the think around wonder how going on So next think just premium. know I out a cost about now? far? then that helping the based that should want does lot a the not your it’s what’s progress tailwind being And

Stephen Kelley

Yes.

of our margin just continued the what XXX the points mentioned has gross me park charge to Let percentage. shave about clarify Paul And earlier. basis bottom line is effect of the

XX%, we're operating So at roughly. of instead XX%,

for we're than it product part is matter. year redesigns shorter missing box. But much these and incurring year, to different Now a And are drive the us They've our it qualifications higher ago. of last a we still revenues allowed is alternative this year but and list takes costs scarce than parts. part all scarce can't was actually one the build significant

So as gross we move into XXXX, margin. drive higher primary X factors going to there's is

extraordinary the part is dissipation what First variance we charges. call of piece these

in continuing a The mix. improvement second product our is

forward our that of a objective We better efforts basic moving margin X.X all can focused all of sole-sourced will That's as on past in drive a mix operate been company. so our good markets. think So above our we this financial in have gross times years products XX% in the and bad.

Hans Chung

it. Got

side, ‘XX let’s decline OpEx on downturn? Okay. business? during the OpEx leverage the the think so we And model, to then how the as should – semi going that And the we model what operating about about see into say,

Paul Oldham

Yes.

had mentioned be as fourth right we've million. first think And the very in SL Power I the modestly quarter. we $XXX a and think full quarter quarter of earlier, we'll I is I this were just under

and inflation, those going to also We to we're will continue moderate help strategic things invest do our costs, in some fighting but we're markets. to

generally, as the expense as you flat operating should next into think quarter go rate. from to you So up run about current

Hans Chung

Got it.

of industrial customer then mean, if the sectors, back I And pockets just I behavior, some mean, changes in in Okay. signs are trends I market. of the seeing you softness, any on across think wondering see market, maybe in weakening or different industry. they the just I’m overall

Stephen Kelley

Yes.

haven't We seen that.

In our last I&M a though significant very QX, in we seeing quarter backlog we're even stay outshipped our strong. the in fact, flat. backlog margin, was And by forecast roughly

orders replace we means to of making. the shipments that all new in we're coming have So

I and that's is the impressive. we markets, demand. is in, that's and in much pent-up in measurement, think specialized other So the it markets strong, we're is seeing -- horticulture, What test like demand of operate that

those undershipped the have markets We year. past for into

So about has of a shipment some been ago designs. in pipeline, as the on but also based new in catch be the winning medical much only in great and faster – we're is couple which general, not catcher a market, we're our And the of playing moving time based to as as than areas improvements, team on going quarters grow think win we stronger quite the for up. kind think next those a just industrial industrial design of But on a medical we strong for us we still company XXXX. sales can we see And playing markets. refocus our markets, it’s very job lot I year we done into than

Operator

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

Steve Barger

percentage direct have could you the backlog, customers? U.S. don’t restrictions Going be backlog exposure a by of an But you you on to back have to Chinese-owned for of lot estimate what affected do companies. the said

Paul Oldham

Yes.

it's probably in currently customers. the backlog to that high the those direct look mid- single digits If at overall, would allocated to be you

that we ex see how $X So you we'll works around more Chinese could but about But can't billion and clarity as if what any our out about things else get can exposure. equal, shipped. think backlog -- all be

Steve Barger

the the at Got almost and midpoint it. per is look of guide, revenue quarter. If million I average XQ $XXX XQ the

that thinking Should on X backlog, medical. next Orders you have, get the million, as be average $XXX of run be seem first base $XXX shippable noted, a the of rate, million part could You case more the good, especially you almost still of if that for half industrial, parts. we year?

Paul Oldham

down, that and you customers still as would guidance point. general, that, less a WP I the this if said than macroeconomic the a relative base look XX%. should articulated, Steve in just providing semi but probably it's think WFE, be not I environment, down. We our at with business I'll have say, high And mix But for think down at little case. of our broader We're be

in the obviously, lot of So right now. parts there's economy moving a

some I a so think should in fill softer a that's point have markets form to thing opportunity from We're and view you first better supply-constrained maybe and our for the on that. environment, entering the however inventory. perform, to an than do is we we'll

think perform there's other the We things XXXX. And have now of new moving there, products and right looking I a how that's think Steve. thing the the us to outperform that I help pieces still will markets. tough relatively markets should lot But at is

Steve Barger

Got I ask big has in that know one & focus. been it. I’ll securing Medical a more. Industrial wins

finding you your through that you the channel? are you’ve Or more marketing, of sales increased about inbound and can marketing your new you programs . versus direct getting percentage inquiries customers customers? are sales As from talk

Stephen Kelley

Yes, was now force, some our and But XX% Steve, we our we I the incentivized comments. sales solely thing in revenue. sales on wins at looked make industrial did and the people mean and design can I of roughly force general are medical first

And have that didn't before. we was that change. key So a

of thing medical programs, focused which second as primarily put we industrial group. high-volume them we company development a transferred did from into and the and our on hyperscalers number were networking engineers customers, a we The was

applying really pipe that’s for opened so we’ve engineering and been bandwidth, horsepower the up the new opportunities that world really. And to across

And needs. broad with engage so I about starting to and XX on kind the the pretty today customer refocused of their months customize we’re able basically with these ago they applications, the portfolio and think to products company a

because for make powerful in wins last It’s going long years, keep we design it’s the buying great most the so customers to a it. but of very to as time, these product as a playbook. it’s long continue coming play a the and out business And

Operator

comes Mark of Our from with Benchmark. Miller next line the question

Mark Miller

congratulations add my me Let record results. your on

look be would Would of Just profile backlog. . you had it your same? or in a the about of How your recent at large higher terms margins? question margin the backlog that

Paul Oldham

Yes.

look and backlog a the generally up XX% run rate. margin it's current our industrial being you If semi, at the and medical company from

in I ought same backlog. think the or to that we're for the wildcard better for in that is get to abate? parts be how it -- generally, quickly do the paying the But premiums

Mark Miller

SL indicated SL than sales slightly Power were profit What the $XXX from contribution? was Power less million. You that

Paul Oldham

in I of think to in the of a little continues mid- or quarter and haven't the $XX SL it said operate in And of Power, performance but we was we talked that it's teens a EBITDA, that high about revenue. to operates business SL specific better. million the Power

Operator

also participation. the concludes phone Thank of we And session. And conference, disconnect this and for your at reached have this time. may end question-and-answer our your you line today's you

Advanced Energy Industries (AEIS) 2 Nov 222022 Q3 Earnings call transcript