Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Advanced Energy Fourth 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.

It is now my pleasure to introduce your host, Edwin Mok, Vice President of Strategic Marketing and Investor Relations. Edwin. you, Thank

begin. You may

Edwin Mok

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

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

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

subject contains me are materially and targets not to be SEC found goals remind of no company estimates on are you should concerning assumes management's today, and statements presented Let be actual to and differ today guidance. risks and as our Information these guarantees risks call that statements to forward-looking cause as them. update long-term the today's not All obligation could future filings. aspirational Medium-term based uncertainties performance. February in can that that results forward-looking interpreted of X, XXXX, are

our call, presented charges gain press our financial found unless release. stock financial are today's unrealized facility restructuring A and exchange loss. today's On between reconciliation and non-GAAP detailed and measures non-GAAP related compensation, can Excludes foreign results are expansion costs, otherwise non-GAAP acquisition-related or on basis GAAP in costs, specified. a amortization, results be

With that, CEO, let me pass Kelley. the call and to our Steve President

Stephen Kelley

thanks and manufacturing taking We call. solid the afternoon, delivered in joining availability Good healthy of advantage quarter, for demand, the results Edwin. fourth everyone, improved Thanks, execution. and strong component

of more execution markets each company. to earnings our robust grew into achieved our of all record billion XXXX. $X.XX, revenue $X.XX of XX% thanks record share For year, across improved Sales per or across and markets we in the full the and demand of

These number qualifications operational performance the and technology in alternative execution. parts markets. products wins in design employ the of are in large, led and successful better XXXX. year our in availability, We good and XXXX, semiconductor products nature. additional to new doubled By improved these of and product new particularly manufacturing redesigns proprietary leading-edge Overall, and to component launches due the medical industrial, throughout

expect to activity fuel our as focus delivery profitable Advanced years leading-edge customers' issues differentiation. forward, accelerate into to We Moving In solutions top in will our customers integrated Energy. position now Power the win our of come. growth believe new in are product shift SL chain expanded supply for power medical we XXXX, enable players. power to the we XXXX where and SL from products we one market our their successfully design

capacity addition, North former customers Mexico manufacturing prefer we and accommodate a SL in American Power In adding are who the capability site. to at factory

supply computing, to FETs networking in has Now I'd and lead etch These industry, on environment. and across products we turn trailing are revenue and reduce Scarce the some the are in components has which our gaining of seeing equipment, telecom in electronics their the chain still particularly us provide order fewer industrial our ICs semiconductor to normalize for used applications. This are the backlog. some parts shortages. color industrial, most Power times In to markets. products, two like enabled customers current constraints. automotive allowed are widely significant

line each XX% year-on-year for Now I'll semiconductor, $XXX our increased provide the to In more end with fourth revenue color in quarter of our expectations. markets. million,

and in wafer over Energy In market applications. inspection in revenue much full WFE. grew we source secured than new plasma XX%, design this the year, overall wins fourth Advanced remote quarter, For the faster

revenue million. XX% increased book We markets, medical QX. record industrial also year-on-year in order grew than platforms still new medical introduced $XXX the to industrial shipments, quarter for Advanced and those technology etch. Despite In our fourth more

and life capacitor In integrated charger supply diagnostic several secured we a We launched the the In first quarter, product. market, we fourth the power medical science this in medical low-voltage FlexiCharge, designed high-voltage meet wins equipment. and our laser, been high to leading new single the supply and surgical, industry's in customer enthusiastic. medical power Initial printing, in applications. feedback configurable XD and industrial laser has and applications we power industrial industry design technologies. laser voltage by In of space, combining measurement needs the wins test secured product

Telecom our $XX revenue quarter markets. computing million, computing, totaled Now a Fourth the moving revenue to new XX% customers million. for year-on-year grew data to networking company. center telecom and from networking record $XX and

to into coupled both Our quarter, turn in driven late parts our those was ability quickly scarce markets improved with revenue. by in the upside component deliveries

XXXX our as move new I'll the for well the Now to priorities demand year. picture as

still market of pockets expect down year-on-year, pockets these we of there volume. down are ion wins, believe the ramping lower strength, semiconductor and a XXXX. are to including will products, of our to our are service strength, structure this better to design demand year Because and though revenue be environment. our We that taking overall which business, implant will Even be that actions perform to XXXX cost new recent in the than high-voltage market semiconductor we in adapt will

of our quarter we on a the revenue of healthy and we into of due demand, We markets. lingering Also, to we semiconductor, the year-on-year. believe a should will shortages. XXXX be variety non-semiconductor carried large in the sell order Outside smoothing into markets the overall have a believe aggregate revenue book stable relatively parts first combination effect

priorities for XXXX. Now to moving the

that, to product push To priority in development R&D even We new to teams investments we first and we and to faster. in the our momentum. our to Our our design win want move be maintain maintain serve. leader technology intend market is do every

chain in the make operations. to of our manufacturing XXXX. a of second We can supply in improve and The efficiency more is even and priority progress made lot XXXX

two our the over optimize performing and footprint network suppliers. lot with supply will last years and suppliers. and our to our streamline our learned the We strengths concentrate a about subcontractors factory of best We component of and intend the weaknesses base business

to priority across customers our The our increase is with engagement third markets.

to to have applications large of worldwide medium-sized our and levels talented use this small strong at We high sales larger intend while a resellers. needs distributors a team team service focus fast-growing customers. and of on and customers network the We and maintaining value-added

Finally, we expenses in XXXX. care discretionary control special to take will

to I few with close would parting thoughts. like a

we First, of just years record in Advanced wrapped up one record performance delivering a products. the history, of Energy's and new best financial number

Second, momentum carrying we XXXX. that are into

efficiency ahead full across go will efforts improve speed company. We the and our R&D our with

the Finally, past semiconductor coupled to energy with slowdowns. increased than we will market of in variety strength substantially believe better market a in advanced markets, our pockets of participation that within allow semiconductor high-value our perform

more provide now detailed financial will information. Paul

Paul Oldham

scarce highest afternoon, quarter and and leverage strong Thank and good delivered record we additional our both in you, XXXX inventory EPS results channel second Steve, We reached financial supply to everyone. an of and the the million, the of secured better a ever backlog company. perform than to the low $XXX began $X.XX, components fourth as of for Fourth market. revenue levels quarter

not XX% of of customer from organically. Overall, $X.X $XXX orders billion In fourth declined moved which and XX% revenue out our the decline the the end quarter. sequential to backlog quarter, million, Approximately at were China-based canceled. came of third the XX% semiconductor backlog grew year-over-year but the reported we down from

demand reduction despite non-semi times. improved markets of as we ordering in Backlog unchanged our quarter-on-quarter rest robust in changes for lower our customers backlog reflected remain patterns the lead The shipments. and semiconductor from

further we work total several we to the As level $XXX our million. a down part backlog $XXX critical resolve next normalized issues, to to of quarters over more expect million

from Revenue announced more over the me a decline down detail. XX% quarter. financial the in go let half XX% in was was regulations market Roughly our of results the Now of record direct up a result in control QX. export $XXX million, year-over-year, but China-based the semiconductor

normalized customers plans which their levels. to offset customer the current inventories in restock In by lowered back our our build addition, to largely was partially ability response environment, towards

$XXX Revenue year-over-year industrial up XX% market quarter's record in and the was with last medical level. flat and million,

a upside record. Data was component We networking availability quarterly XX% continue X% believe $XX be computing was sequentially. and and to to year-over-year and million, $XX this X% center new up in constrained have as and XX% we Telecom improves. year-over-year million, revenue sequentially up parts revenue market

to last costs. primarily mix, down continued material gross points and Fourth quarter revenue higher due lower margin volume basis from XX was XX.X%, favorable less quarter

recoveries continue to to premiums began with some gross in the in inventory. end historical we see to costs of and through abate our expect through year first XXXX, half second as our margin moderation and the of towards gross the costs premiums Although impact material the quarter, margins improving higher the of flow half gradually we

was $XX earnings, Operating quarter $X.X XX%. million up mainly by infrastructure Operating Non-GAAP last from million expense Depreciation $X other expenses for and of offset better losses. were slightly foreign the timing interest adjusted margin due programs and partially our EBITDA to million, on was investments. quarter was the $XXX for was million. quarter, exchange

cash on the million the and benefits be earnings on interest other higher range, Given in interest to our swap, or expect to plus our going we $X expense non-GAAP forward. minus, our expense

targeted associated volumes of plan SL, consistent our million a other consolidation integration During in reductions restructuring lower the we higher-volume and initiated $X.X with and costs, restructuring quarter, recognized with the in XXXX. factories primarily into certain of production

factory the will In and at end current close addition, within we at ceased quarter. the Shenzhen the facility our production QX fully of

restructuring we $X $X million forward, expect of another Looking million to in QX.

by we these end total expect to of XXXX, the our down operations. mostly attrition, As XX% of factory a combination headcount actions in approximately and be

Our mix positions. by to non-GAAP XX%, annual level tax year-end earnings, of and geographic rate true-ups driven the tax was

was from and of quarter last to in down from For GAAP are EPS and XXXX, modeling $X.XX. year's XX% quarter of we the third up record the non-GAAP rate $X.XX, our EPS EPS XX% Fourth $X.XX range. tax

revenue quickly of full we let results. XX% year-over-year. touch In XXXX, our which year billion, Now delivered on me $X.XX was up record

Power in center markets. industrial data achieved and acquisition, grew revenue computing record SL the organic and revenues XX%. the We medical Excluding semiconductor,

critical paid other premiums material the parts. to $XXX On million hand, secure of we over

our were EPS surpassed reached non-GAAP and record goal our of Although, our impacted. share customers, portion a Despite from XXXX margins recover our cost, $X.XX. half premiums of $X.XX sizable negatively gross were able aspirational second annualized we per earnings this a our to these earnings

X.X from declined slightly began to timing now from flow X.X levels. the up purchases Cash down net quarter, to balance $XX from ticked Total at turns of last to and cash parts. in the the XX million. sheet. slightly continuing largely as XXX end days and DSO was was XX we of securities marketable up inventory Turning million. to consume inventories of XX cash and to times, $XX quarter days to QX non-critical lower were due times days, operations million, DPO of improved days $XXX and Inventory with fourth

XXX quarter. last As days a XXX from result, net working capital days increased to

of the quarter, began $XX and initiated to During the the as expenditures capacity invested many investments fourth infrastructure year. we the we in CapEx for in incur cash earlier million

expect scale on forward, of run to project investments to X% CapEx our Looking completions footprint we optimize structure. approximately and sales timing and our of

paid also million principal and $XXX,XXX stock we of quarter, of $X.X payments made the During $X repurchased at debt in approximately $XX.XX share. per million, common dividends

equipment on normalize fab pockets revenue of decline to the market partially with our be this mitigated customer now in of and strength the restocking our sequentially impact market, Turning wafer we the complete our decline high-teens inventories ability the our expect in the guidance. Based to down semiconductor the of levels. to to by

components. continue other by stronger of to critical is demand While in be supply revenues markets, our gated

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

lower in on gross range QX improvement to cost in modest and expect the margins We volumes XX% material be premiums. low

expect We investment balance and on operating of growth be modestly to initiatives. the to factors slightly the increase critical inflationary for from year continued but in down R&D and QX, expenses QX

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

Before a open I few to XXXX for I record up year Advanced it points. Energy. highlight was a for want questions, important

of grew Our outperformed markets the fab or year-over-year. XX% each wafer market semiconductor more revenue and growth equipment substantially end our

inevitably to this will XXXX, in result to market than the tougher the While perform of we the over year. expect better in comparisons continue course

to into the of stable perform positions substantially demonstrating our strategy. and our service benefits in backlog multiple better and inventory believe than enable and larger market cycles, more customer us previous business long-term will importantly, healthier More diversification markets, we

the which our gradually chain improved half in margins improvement dynamic, While critical supply allow premiums with improve components second deliveries and of year, us of lower efficiency over remains material will the of operational the in gross year. expect coupled to the the we course

controlling while During and will new we time, continue our company and accelerate footprint. to products this the optimizing spending discretionary scale our

over result, we time. grow and expect cycle, during As earnings positioned emerge is Advanced to Energy a as stronger markets the well and continue revenue outperform to recover

Operator? we'll your that, With questions. take

Operator

Thank you.

question-and-answer a your [Operator proceed conducting with Instructions] Company. question. from session. now & will Bolton with is Our Quinn We be first Please question Needham

Quinn Bolton

only guess, strong or the in finish stay a Congratulations going half in expected the Steve, guess, are I the it first on year. range the I the in by back question. you improvement gross aspirational Paul big of fairly like guess, the modest It think of XX% takes maybe to to year with model? of low guys. get envisioned I picture what margins to XXXX. half second sounds to the Hey, flattish margins XX% do the kind XX%,

Paul Oldham

It's good I'll question. Quinn. Yeah. a that one, take

through half, higher still we our those in the half. the second to those clearly, material given term, continue these by So first costs. inventories. And expect the in to just be we the rolling of near begin We'll timing abate to impacted through costs largely see

year, pick up we have the to offset that will volumes XXXX. these us give rate is the an But levels. -- the some exit Now we're to improvement pickup to any in see in we do later certainly start to anticipating as not which in them to expect from

In down the of some a in restocking bit expect shipments fact, second won't the this be quarter. even quarter we our first as from get little may we quarter

we'll or So back taking we'll as headwinds to volumes. are then we course our based see from volumes actions we that to back be XX% and optimize begin that get year to expect hold, the track recover that the But of as that, on take on footprint greater. over to the

Quinn Bolton

in my I at next answer It but the where like guess, of of you are us had hinted you the an I restocking kind opportunity to give just to jet those sounds then sense to end customers? And the levels question, at in terms to a fourth bins it. right quarter Got (ph). you're perhaps you I and think the the levels to more quarter, March probably in of inventory that quarter, by in your assume restock the like jet semiconductor expect terms normal back first sounds bins am but you of it begin or

Paul Oldham

Yeah. That's in as those. I largely in of quarter. that to my right. able benefit And We definitely been some saw fourth the comments, we've restock said,

of we -- little little But they there's the their like have so first on first shelves more benefit quarter. get Now anticipate go, in the be the more the will that would to we'll a customers inventories that, quarter. a will end by

Quinn Bolton

it. Got

you. Thank Okay.

Operator

you. Thank

with Our proceed Scott Capital Graham with next Loop question is Please from Markets. your question.

Scott Graham

sorry, technical… I'm Hi. I'm here. a little

Paul Oldham

Hey, Scott.

Scott Graham

to Congrats thing. it you think Couple just year. a million I million questions, million does $XXX or misunderstood that -- good of on you're to it. I $XXX the same how you Could looking when finish you meant out? backlog you to how -- sorry, you play does by said so Hey, -- -- the either where bring that is, said I down you're -- -- maybe to to down I'm $XXX that million. $XXX I missed think that said looking

Paul Oldham

Yeah, no worries.

$XXX given probably a reasonable than $XXX more level. We actually would bring million. be That backlog, we a the levels. to as a about quarters. think more nature days, we historical markets, the we expect little that over to And it normalized target that's to expect million levels. of several that happen we'd just to We next like these But said, the that's think

to healthy very have continue backlog. a We

and flat As about we for Industrial the for actually others. mentioned, backlog non-semiconductor and our Medical was increased

an quarters. scarce over that some be bring we in we able next parts opportunity and to backlog the for get So bring times, continues the be our levels, it's into to critical will of normalized lead or actually several happen more as expect that to us in

Scott Graham

just does split the that -- business? the us Thank then $XXX just you And how maybe me or by million, tell you, remind Paul. can

Paul Oldham

Yeah.

time able to have entirely as historically of to demand mentioned, backlog, out. markets. we the our But broken semiconductor in XX%. of a And our mentioned able out really our their the was the customers in in concentrated largely down. lower removed this because that been backlog I of lead in reacted part as the haven't that We was earlier to in question, some we've and orders course, reduction brought our was or my concentrated China times were environment And orders, the rebalancing down. semiconductor, reported We I about fill rest backlog some bins, bring

some you of demand lower backlog would quarter, that stronger to deliver if in to demand really reflecting times happens line million bring to $XXX look we about in was therefore, try buffer with if across lead backlog flat and $XXX more million to outside get can we goal So to for markets our go our either last or additional future semi, line be our continues and opportunity an and if more that But the bring forward. parts clearly from upside those target. represent in us that that as

Scott Graham

for mix The I quarter, for And one you low that? guide of me, the got fall mention the in then does Where you. XXs. just quickie. key last as delta. a one gross didn't margin components I'm mix of the surprised first

Paul Oldham

Yeah.

the bit certainly, to the recoveries. less kind material some Those costs taking tend the I have PPV but fourth volumes the does at the of think still and first quarter. offsetting -- lower to the are quarter like mix the kind things combination of impact, we're we actions said, second of actions, expect higher I of have are the from of sort the But if tending of we're little impact recoveries, -- taking overall we -- overall. fewer you a go to as from look

bit little costs taking and or the flat. It's be expect the it's other perspective we net-net, down I'll of in actually, improvement a function actions material offsetting little good we items. some pretty from down hold delever a to a think, a And down we're bit. to say, So margins, to

little of where think go. gross markets look we think as As about or margins these the we're plus on around by Quinn, depending trough it. particularly factory really forward, impact see see can probably we costs to thinking we in margin second the help the in Those towards a impact revenues as see to -- XXXX margins if we subside, continued and the at lower but back kind But of similar should kind levels of target. XX% how our half actions year, sort margin minus, back of to I'll a And improvements material in little accelerate taking as the that's the half asked of to and earlier be XX%, we up was optimize we're pick position either hold able us our improvement or footprint. volumes say, the bit, full

Scott Graham

That’s Thanks. great.

Operator

Thank you.

Our your Sankar question with Krish from Cowen is Company. next question. and with proceed Please

Krish Sankar

taking Thanks Hi. Paul, on them, my of too, for to comments. just up your couple had earlier Yeah. a question. follow I

revenue factors You seems on kind should first QX mentioned of about these happens revenues and reduction of of volume margins of of that if sequential me to gross and a and this to your QX the the it or the starts triangulate second offset improve other is bottoming curious, year? way some your visibility improve the think brunt to today? kind declines. try half what should half decline Is cost Because into QX. answers, I'm it in I basis and that linearity

Paul Oldham

Yeah.

other year. to semi at We we about stable down we this we expect -- flat overall, generally semi or But in is to we're markets be as have obviously, coming look be market operating down to where our overall. relatively expect this and

brunt second a operating stocking on be of we have And more to won't quarter, particularly we're -- first semiconductor you're the side. perhaps we perspective, is of the way inventory the as an quarter, the in the benefit so in planning expect here the little right, most from the

kind for balance those of to of levels And bounce the the year. around

that's generally it's margin of our revenue people sure. gross think know a consistent now. to I that right And that's projection. I the operating sort and of market how give far color that reflects type But hard look with see the Obviously, assumption. out for

Krish Sankar

well during Got outperforming year, it. down One is company other year. obviously, questions. center guys WFE. Then did Typically, had underperformed component WFE really two you I last

than curious number, to year? in had WFE I'm think up you WFE or you kind think to line, So be down, a where if pick just ends relative worse, revenues of XX%. I this How that? And semi better XX% about is a then quick your Would follow-up.

Stephen Kelley

jump here. I'll in Yeah, Krish,

fact the the should I XX% we is AE non-semi is well first now think as as semiconductor about talk XX% thing revenue. that

flattish year-on-year. we said revenue think we before, that As the non-semiconductor we could hold

that's business good got So pockets -- semiconductor past compared us semiconductor, our to strength And ion have implant. downturns. is a position for much in cushion than of within larger in think it's we stronger we We've quite and very in service do past a downturns. been

a we've across some application ion a people you in to certain as serve ramps try And know, extent, number then there's shortage. set power And are to the of as new address the out for of a lot IC of product got which happening the downdraft offset that still demand implanters semiconductors, to semiconductor. there in

Krish Sankar

a final it. backlog. then just Thanks, And Steve. follow-up on Got the

of Paul, think, backlog assume to $XXX it And mentioned XX-XX million a semi that of $XXX if you Is decline? million. revenues probably roughly is to those mix it quarters in non-semi? at continue and to of you a couple normalized to levels level, fair get I

Paul Oldham

we've takes. of we've say, that seen demand a pretty but backlog environment, long it normal-- good at of kind sort out We outlook adjusted this our It how the know China customers' on the don't to I we've basically demand, of point. the quarter. and this reset depends semi took I'll already

that I&M if up this balance, quarter. the again, in most think kind you about where medical is and rest shipments, backlog backlog industrial our I near again areas, which was of, of said, the record the despite So of

a ability lead eat relatively the that and think and And of other We actually markets the our into our stable, looks parts demand, these function things that depends continues. bring it all a times on well down. how for then bit backlog solve So to demand considered. critical

sense take how bit of a that's quarters in two. I it that or quarter doubt roll a range get will that, going that's few we to think a My our little down. to to is, target it. So

Krish Sankar

Got Thanks, it. Steve. Thanks a lot, Paul.

Operator

you. Thank

Malik next you’re is from Atif your Citi. with question. Please Our question proceed

Atif Malik

Hi. Thanks and execution. my for nice taking questions

First, center data market. have hearing been maybe about what you're cloud, you color if versus moderation Steve, market about if the that can seeing have in you and talk enterprise on we

Your that comments backlog that stability indicate seeing you're on in market.

So are in market? seeing what you center the data

Stephen Kelley

Yeah, it's in participation I in we have seen say major obviously have demand. interesting. We that strong could market. changes that not

In in by fact, that And market. our supply still power constrained in customers we're supply the manufacturers hyperscale quite constrained market frankly. are us, like

also we're pull is continued happening. what we're So a from it's And the in seeing our but customers favor seeing transition moving basically.

move It's starting to see accelerate. We to the XX volts.

we're the leader most and there. go efficiency for environmental prominent, cost as because the XX-volt the a efficient move solutions. applications. higher type strong still best We first We concerns have good electricity were in see We technology of to up the hyperscale and we are position the a the more become we're

we a intensity. strong intelligence it to density, see places that's artificial GPU and an on a we memory power where finally, area really increases And And and move excel. which also premium

over term, strong, I pretty In by but term, to availability. of these we long demand medium still advantages well see to So share have. gain the the positioned short we because technology think we're component gated being

Atif Malik

for Paul. Great. And follow-up a

margins? there Are gross businesses up and those lift you restructuring guys into areas prune on to products optimization where there can a or If as you asset Thank to can you. head you come touch some opportunities out? downturn and fixed for eventually are

Paul Oldham

Sure.

level is output but So match isn't or as our company. a of part do try our a this actually we for footprint. to improve reductions some few that targeted goal this headcount announced footprint largely as around We is and the plan just production think around to to optimizing restructuring, to of our

to areas some want our to we larger and So leverage some move of around we're where There's products our make factories. investments. going factories those from smaller

larger will acquired As strategic gives in Mexico And our North factories efficiency Steve around attractive place an some mentioned, America. benefit continue in that's newly to footprint our optimize us we'll and because think we capabilities. expand and those

maybe with, ability we from out a an expect So a but would come certainly move and to next efficient more better of a smaller bit scale this footprint, to perspective, say, into upturn. headcount the I'll one as we little

Stephen Kelley

of And a businesses, no had networking I businesses to improving ago. your bottom line computing question could there. good exiting say really couple job about concerns And the just the of we done any intention some exiting a And address about we've have we performance business. years and

So I'm two We've less a done much refocusing spaces. concerned years proprietary was job than market good on I those resources also within our opportunities ago.

And higher-value I so job looking better and a job between business tactically managing our pricing that better a on opportunities, better. focusing think is much

Atif Malik

Thanks, Steve.

Stephen Kelley

welcome. You’re

Operator

Thank you.

next question Markets. Capital with Please is question. KeyBanc your Steve Our Barger from with proceed

Steve Barger

Thanks.

compare And acceleration just this to more a time and perspective? talk how product can For market design about you the of solutions? wins new margin modified wins those year, and expected from custom do expect traction from standards you full or

Stephen Kelley

Steve. Yeah,

combination frankly. quite a it's think I both, of

will close, customer changes, The our this ways. the that as data across it customer one new introducing medical new those say, but in I thing need goes happens the that's needs, as platforms. The and significant modified That's two but And a like what say, important with is changes. few will or we're meets well platforms, some industrial semiconductor, standard or lot and I areas more hey, you're a a need pretty high-volume center.

to the because but And being a other it either it of with years come. I'll sole-source end we're the And ends But what that's for source as way, many custom feature well. product you I leverage and up a have happy product. more a of day, at this revenue need of

Steve Barger

dollars big in a difference the Is margin and between there two?

Stephen Kelley

really. Not

typically. customers, large products go to to higher the So tend custom full so they're volume,

small the towards more of modified and the gross is they investment higher with medium-sized is But those So require more much standards to engineering but effort tend percentage dollars be products. volumes those the and will be similar. The then of less. The customers. engineering types upfront, products both margin for

Steve Barger

the you product resellers. in and versus in markets, newer especially distributors fully you talk there's covered of the industrial, geographies? mix said a in sales? impact Are strong network having those you direct more And through can about And of those channels of value-added and terms it. Got medical channels, go

Stephen Kelley

look at position to a competitors, relative than we our our think I I If worldwide most. Yeah. more footprint have of

strong can have in improvements said, there's make, That lot and we North of Europe that. organizations we So and we're doing Asia, America. a

trained conferences regions more customers. much held we've past the a sales tried external to so all effort partners And really align and teams our in in sales to medical with internal concerted our year penetrate and make industrial

high and do have could in lot better this XXXX. that a hopes we I So year

Steve Barger

Understood. Thanks.

Operator

Instructions] Pavel Please next with Our James. [Operator proceed your is from question. question with Raymond Molchanov

Pavel Molchanov

the question. Thanks taking for

the headwinds XX today, demand on M&A that offering Given environment now is you've in better times than happier of outlined curious the I'm it of landscape if terms perhaps prospective the opportunities months or was macro XX kind target-rich in ago. side

Stephen Kelley

in Yeah. for I'll today take is better last environment the strategic that one, Pavel. than We or XXXX. buyers it year think was

So positive. that's a

think to handicapped I many shortages. due the companies that from of the two our part the operate have space, past in been years

to think is get, good about right? of some going starting think are shortages to I away. those to they're probably as going go I so And And as this it's realize

those come So up to with the there's they some valuations engage more I financial will lead as XXXX but with we demand think, reasonable challenges, performance in targets.

I favorable So environment, that. bottom answer question and more to advantage of line is, yes, we'll take the a your it's think

Pavel Molchanov

of quarters, minimis de had recently. balance last share buyback much a M&A and the not kind think you sheet from perspective, I And two

opportunity? openness be cash What in sizable for on thoughts to sheet needed a the net your position. lever are soon pretty balance So if off the kind of right you'll

Paul Oldham

Yeah.

right, Pavel. You're

We have a good sheet. balance

we a agreement we that's in are after cash time accordion we it. about fortunate and that through a again, credit we're equal. here. or very should cost through can some that good cash, net generate brief the And And have debt low during line a when have were credit downturn cash we of relatively within extend either We features place that

return. the At that's opportunity So be make that more don't if credit our I have same Money we to the cost that to both going balance sheet to right sure acquisition. we position think saw able days to lever over capacity balance company. ensure these use right make our we time, we're also the the and and to

a in ratio. times a we, target X So of going not beyond have general, leverage

you those did. that value add M&A through we manage make things would sure so to all we that And any

Pavel Molchanov

quick clarification. lastly, a point And of then just

what the the company is right now? manufacturing footprint of shutdown of Shenzhen, With the

Paul Oldham

It's have three have very have really main large and the still now and in we a China. we areas Philippines. footprint We Malaysia, in in where good We Yeah. large factory have factories. one

some of acquisitions of, different local we've of done time. places we have also teams factories in handful We them, call aligned the for boutique a over with engineering kind

Pavel Molchanov

Very clear. you, guys. Thank

Operator

[Operator time. are today's Instructions] questions concludes This no this further at There conference.

You lines this your may disconnect your at Thank for you participation. time.

Advanced Energy Industries (AEIS) 8 Feb 232022 Q4 Earnings call transcript