AEIS - Earnings call transcript Q2 2024 | Advanced Energy Industries, Inc.

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Operator

Greetings. Welcome to Advanced Energy's Second Quarter 2024 Earnings. [Operator Instructions] Please note this conference is being recorded.

I'll now turn the conference over to Edwin Mok, Vice President of Strategic Marketing and Investor Relations. Mr. begin. now may you Mok,

Yeuk-Fai Mok

Thank you, Second to Energy's everyone. Good XXXX Earnings afternoon, Quarter Welcome Conference Advanced operator. Call.

Vice With me and and Executive CEO; President our CFO. President today are Paul Steve Oldham, Kelley, and our

press earnings ir.advancedenergy.com. our find can release presentation website on and at our You

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

today's non-GAAP a presented our financial financial basis, On results are specified. otherwise on call, unless

amortization, related be charges costs, foreign reconciliation our today's stock related losses. A can and facilities non-GAAP between impairment release. press asset in accuracy and detailed GAAP and compensation, non-GAAP expansion and gains restructuring or measures are results found exchange Excluding unrealized costs,

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

Stephen Kelley

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

sequentially revenue earnings sequential and growth Second quarter semiconductor of of we pull-in demand as Data from guidance. as our well a benefited in drove AI. the Strong XX%. share revenue revenue per data exceeded in as market strong the XX% grew center demand market, investments Center in

AI than servers. significantly power high-power density conventional servers suited products which high-efficiency, are requires for Our well more

through pockets as slightly In work of to was Industrial and down revenue continue Medical, inventory. customers

we channel, the through close industrial Since to the market. medical However, our half in is point indicate encouraging quarter. bottom reaching distribution second data the an I&M that I&M could roughly business and sell-through products the increased are of our in goes this of

extremely is product our robust activity Design across portfolio.

their products leading-edge our systems. to a variety We of into with power are working precision customers integrate wide intensively

healthy growth expected as to drive Our revenue is design profitable gain share recover. and pipeline win markets

markets, in a acquired solutions. Technologies. advanced and very high-density closely technology and multiple to accelerate acquisition, innovator gallium we good Airity several power development is with across on the to projects Airity joint an that work Airity feel To we Prior talent innovation with Airity focus energy. about on nitride-based the efficient, high-voltage brings

actions loading and to XXXX. lower In gross a while operations, Overall, Mexico. of the improved U.S. our consolidation Philippines factory we will the upgrading level, At in factory productivity, Malaysia, the reduced are part taking our believe the footprint efforts. consolidation and to enhance cross are fixed reducing Europe, The our we operational our in threshold our of margin XX% is advantage and costs quality. plan we product key factory effort macro in accelerate China, factories

are term, give demand, a which and Because short a respond in important for customer market are it's levels forecasting in flexibility. operating quickly the environment challenge. strategic to added sudden In changes dynamic where to staffing us inventory, we can maintaining we be us

our of markets. Now some each provide me on let color

on largely were we revenue and due sequentially requests, deliveries that quarter Based We demand. accelerated semiconductor Second our these to increased second projections. the AI X% increased exceeded expedites into some believe quarter. customer

will and the and to over fabs labs qualification we customers front, eVoS the are for activity the with platforms qualify This On few migrate quarters. eVerest deposition new product development processes. from closely our etch key to working next next-generation wafer

memory drive now ship logic and We this both meet strong share new delivery to than and are the believe systems in of expect before more XXX these We to will expediting year-end. demand acceptance schedules applications. gains platforms

our we customers features field positive. been Initial units to year-end. we launched the the combination performance And differentiated eVerest which best-in-class by customer which RF has nodes. and deliver pairs in network, matching directly At with quite to generator. our NavX enable etch feedback expect The process NavX SEMICON up West, and have XX RF pulsing deposition advanced capabilities to

very wide Industrial wins wins surgical with and and four second the designing different applications, measurement recorded at is slots industrial systems diagnostic and multiple medical, production. test quarter, including in of In across range customers. strong and secured robot coating, battery in we activity in Medical therapeutic glass applications, important including a

technology quick latest of specific enabled customization the meet Many of are these enables to modularity application wins by platforms, needs. our which

website are number with past increasing year and industrial into customers. the website has over wins. new popular our is design Finally, inquiries turning of tripled an in medical Web traffic

was In applications. upside AI customers, from Data both for demand strong Center revenue enterprise Computing, by mainly and driven our hyperscale

believe to continue several robust will revenue quarters. for demand that levels drive increased We AI

During production won to a design this we the a expect ramping major win to later hyperscale AI-related quarter, that and leading at begin customer year.

Telecom revenue and slightly Networking increased quarter-over-quarter.

given We over levels the in slow demand. recovery high market customer to soft and inventory quarters, expect conditions a next few remain

Now for revenue second playing is out pull-ins expect first in second into quarter. than as to higher planned. half still This We half, some thoughts. roughly the the after even the closing be revenue year levels some

gradually expect Data and than through expect revenue and quarter revenue, revenue inventories remain to In quarter driving we normal semiconductor, we as second be and OEM and fourth revenue XXXX levels. Medical, we be similar and under pressure half. that year-on-year third In half second to third quarter Center, be will return XXXX, the than the to higher revenue channel Industrial In better to growth. first into fourth to expect

drive profitable we beyond growth. ability XXXX, Looking are our confident in to revenue

mix. expect product to ramp richer wins to benefit design new from a we volume, As

to this year through of begin factory continue and into In will benefits cost our consolidation addition, XXXX. flow P&L effort our later the

will conditions higher drive market utilization and improved expect we forward. Finally, moving revenue

customers I West the opportunity however, will month, At view customers. our this term, Long meet our all driving the Advanced most nearly important our Energy. of major growth semiconductor SEMICON with be earlier had how to factor

and is now enabled how are bringing weeks, market. time in about enthusiastic they eVoS group, for to products we products by our new a derivative are measured modular architecture. As eVerest Development

data of and ago, out customers. meaningful The suppliers. A X,XXX few more This center out top was commitment. us. of we than X management largest award high from X execution, we innovative quality, supplier our weeks received design top very since called award a were our operational for one

we with medical are more easier has Finally, do our an gain that our receiving business positive AE and partners They key from our are in distributors drive industrial way. feel to become steering who company business and are feedback major to share.

detailed turn With that, to information. it over I'd Paul, like more provide who financial will to

Paul Oldham

and Steve, good you, everyone. afternoon, Thank

of revenue million in $XXX pull sequentially data increased quarter demand our million, driven semiconductor. in strengthening center demand of by XX% Second to guidance market the and computing ahead of $XXX forward

as up was we margins to cost margin improved structure closely. basis continue XXX operating and Gross points manage our slightly quarter-over-quarter,

we result, earnings $X.XX a As per of share, delivered our $X.XX. above of guidance

revenues be playing anticipated Overall, expected with full or year line out communicated and to earnings we as we better with in what quarter. than XXXX is last

As current the production half our our to Steve consolidate in now mentioned, to to leveraging first of manufacturing the XXXX. final last in plan completing We environment are we China, fully sites. plans production our with accelerate site close

further costs Although lower this confidence and it in XXXX, sustain to in result margins action us to our enable transition over increases higher structure achieve XX%. gross our of and will fixed cost will

market down detail. XX% semiconductor Now $XXX sequentially, revenue was results $XXX year. up year-over-year. million, Total XX% more up let's review but X% in and our sequentially financial million, the was over Revenue in last X%

meet execution to enabled Solid us guidance. to customer above our needs results deliver

year-over-year, mainly both power and revenue by sequentially hyperscale $XX XX% demand from was solutions million, ahead Service and and our slightly and from record Industrial million both and AI customers. and decreased million OEMs server revenue year's of Center roughly for flat $XX X% up The destocking was to Data Medical XX% was at quarter-over-quarter revenue Computing upside and of from increased levels distributors. XX% was due last inventory quarter-over-quarter. quarter. enterprise last revenue Telecom strong well $XX Networking driven guidance. our continued

income million be for million, million. With mix. primarily and $XX better interest Gross XX rate from our qualifications Other Operating Depreciation sequentially swap sequentially $X we which $XX support margin million favorable slightly new Gross early benefited million million, interest points than and of our around was platforms. was our less last decreased for $X.X were $XX margins expenses million income for EBITDA in Operating of income expiring of was adjusted million. anticipated up offset our to September, the guidance. quarter QX. to volume, due R&D the other income. higher QX higher XX.X%, quarter our $X more up to from lower than expect $X on impact $XX was and basis customer

geographic to mix rate QX, XX.X%, was For of due items. discrete non-GAAP and below tax XX%, earnings favorable of to XX% our our target

XX% be to to expect balance tax the for We year. of rate the XX% the

tax of regime we the full tax to expect the to XXXX, to our minimum increase XX%. rate For adoption global XX%

per to compared $X.XX $X.XX was the share a EPS share quarter per per quarter $X.XX ago. previous and year share Second in

receivables lower to decreased to Turns net which Inventory and X.Xx. driven now increased $XX $XX with Cash operations cash cash by tax or XX $XXX The revenue. Total improved of quarter inventory of $X investments million on days. payments by and the higher was closed sheet. was inventory XX. made days, X% Turning balance million higher flow from annual strategic to $XX slightly X at the due June to were million acquisition, sequentially, equivalents continuing DPO cash XX partially cash balance but the revenue. quarter. second to higher days on DSO primarily the million. the end in increased million, on and increased slightly sequentially Airity

second of expect in million During to XXXX we X% sales. the and be quarter, continue CapEx we invested $XX.X to CapEx, approximately

debt $X million also and principal paid $X.X of million We in payments made dividends.

Airity and cash with excluding approximately X-year high-density, a retain power XXX,XXX acquired customary in organization. talent we period indemnity to approximately critical providing quarter, issued paid applications. the of capability us holdbacks this for We high-voltage over net shares earlier, noted the As $XX.X Technologies, new million,

guidance. our to now Turning

Data We quarter QX in to expect Computing. slightly Center continued third from on strengthening be revenue up

at QX Medical be to to roughly Industrial a semiconductor Telecom despite levels and expect quarter-over-quarter. flat and We Networking and and higher remain similar

approximately we're quarter million. forecasting revenue to be result, minus million, $XXX plus a $XX our As or third

benefits We manufacturing XX% activities by the and material in third to the around quarter expect consolidation margins gross of improve mainly and initial our to premiums. lower driven

sequentially higher to to million activities new increase noted last expenses costs. support product $X quarter, and As expect variable million we to operating $X by

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

quarter recognize last we third expect to other $XX related to million the our and million, mainly in in of $XX factory In to China. the in onetime closing severance addition, costs exit

Before I highlight points. questions, opening it a want to few for up important

with be to results XXXX quarter. last communicated better or expect we in line what slightly We than

Center Data to expect up in semiconductor for the year. in Computing, investment second should for the to continue flattish which quarters. driving continue is and We be several half AI strength

expect the low stabilized through that million continue inventory impact QX. customer will and to in Telecom and Industrial Networking next $XX to range destocking for the We Medical into and QX quarters. few have appears

Finally, manufacturing volumes we increase as execute cost we expect our gross margins improve. optimization and plans to

slightly of expect as our markets next we meet over long-term in of With gross we China last in recover position be stronger higher plant, our XXXX. transition will the goals to costs but closure production quarters, the a couple margin

as Beyond ramp the share new begins opportunities We supporting to revenue our term, near design XXXX. in multiple have wins volume and are gain products we drivers creating believe growth. for production

long-term By with investing new deliver operating model translate accelerated in market improving customer combined should and environment our prudently inventory and to year. expect enable levels, These normalization of growth solid scale, and we growth. to earnings to leverage products, next growth an

an have we active Finally, potential acquisitions. pipeline of

committed targeting are over and align We our financial acquisitions with value time. to to strategy. are shareholder create discipline that

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

Operator

[Operator And from Quatrochi line Fargo. question Instructions] first our Wells of Joe the is with

Joseph Quatrochi

the Industrial Maybe the about one your just think and trajectory is it to just we seems the your like into inventory? current do forward about and level? guide, that stabilize And Industrial looking Can in Based visibility Medical. how on going this revenue channel side on kind talk beyond of maybe and the 'XX. you or visibility in

Stephen Kelley

answer to started to we go happy QX be That's question. when back I'd Industrial in Maybe just Steve. Medical. the 'XX. of correction is and that this Joe, see Yes, to

about we're XX months the So correction. into

distribution then sell-through track and track the And track so the sell the -- and We closely. sell in what we do we We inventory is we inventory. we the track distribution. very

time QX. And in So Resales up after sharp look that in the declining were these at metrics, in steadily the is somewhere good a the distributor we we 'XX is in we think news reach lines, 'XX QX trend QX frame. supply-demand channel. QX decline balance inventory or as the

So close. we're getting

because roughly us a indicator of through I good half goes our think distribution. it's for I&M business

what think. So I that's

based have be I in year the think very pipeline XXXX is Industrial that both design going Medical. fact win decent strong and a we on to a

into so And a I designs production going those next year. of are ramp lot to think

Joseph Quatrochi

helpful. That's trying guys margin. as gross to a talked this the it. we're to past, you revenue XX.X% I Got year, follow-up, margin And as in of in recovery we about get about exiting, I target the as think of think $XXX of million XX% to, kind XQ gross thinking exit back a or in

to about When level we I&M, of gross range that that think the little think in reach how a balance about still that AI margin in kind revenue maybe the to maybe we perspective? Is bit revenue strength the way do gross mix it? of relative of from and that margin weaker a to right outlook

Paul Oldham

I million. range discussed right time. going last that's be to think We And generally, We're in on Yes. that this $XXX time. commented around last we

a Higher in revenue few that mix be little both affect can bit. our little or that the negative a quarter We this QX. Data reverse variables. of little there's bit for a it bit think that. saw would and high-volume Center Obviously, a I product mix

on those the market. as time come more in over products up the margin we've implemented and strategy this general, gross But of our differentiated on part has focused

on So saw XX products the way be XX balanced other. basis of was to point, mix you our if the heavily the or something impact in one that might

we'll But headwinds there show around little could I mix a So that be progress. good from think level.

gives good leverage we're that as of that. we production which in up as going that to be bit it course, us a It remaining China, last thing of get bit It cost Those bit cost little of fully we out coming equation. carry to our of out will other will markets cause close that announced, It be site ramp because is recover a actually but us extra aren't China. production fixed thing. will other a more headwinds headwinds. allows significant, will of better The of sites because we'll cause a little basically carry of to little the that

balance, through and expect on QX improve to margins we So QX.

the right some have is where that neighborhood. be then And general, lower. of be ultimately last the depending gave there in we model a think in headwinds. QX, little help time We if a may in could And us on comes is revenue that benefits could bit stronger. I think a could or little little in, I

markets to In discussed. on middle roughly year, general, we're by to track, we margins assuming believe, get our as we've over XX% next gross recover, of

our, All of action, by largely should of time. that sort factory completed be

have more us, I from think that that feel good grow as which cleaner we're cost making. fixed a give we again, the revenues about And structure, leverage we'll will progress point.

Operator

Jim question & line of next Company. with from Our is the Ricchiuti Needham

James Ricchiuti

Question on Center the Data business.

extend beyond how visibility, on extend? go In gave guidance -- directional some terms that? of far does QX? it Does it You

Stephen Kelley

-- a business, Steve. it's is the cyclical this it's interesting hyperscale Jim, Yes, Yes, business.

few after these inventory X period we've The is market for a cycles. And a X through typically gone is of seen to every we've what time quarters. strong So digestion. of

at we us will So now, if hyperscale year. QX momentum QX, that right take least believe of the in next not through

At the market in gaining of applications. same we're some these time, share AI

So we going is stay XXXX. perhaps hyperscale for most strong, think to of

James Ricchiuti

scales Or QX? customer revenues you meaningfully early that hyperscale design, in then that that highlighted, does and contribute is win in in That initial more for that does AI 'XX? that it

Stephen Kelley

the that, I for a win view probably are way older best replacement technologies phasing that think that as is to out.

then Typically, these life fast a is ramp the a pretty of years. and decline couple within cycle technologies space this So of market.

important with because one But intelligence. artificial it's this an associated is

in more conventional we content dollar roughly we with than racks. racks those server do typically, to XX% XX% have so And

these move to and we we're more as in going more So see forward, of applications AI-type hyperscale.

as important power of conventional consumption go power. us our play consume the lot power the up. because really it's of for many Xx racks. AI differentiators And into X Typically levels servers to come server the And a of

very becomes important efficiency customers. our So to

power important a size Our customers. lot roughly box, put the to extremely to more the same to ability our power become density,

Paul Oldham

we're applications, quickly, in typically said just these I in historical margin typically, better as this than they're our this Jim, market. before, winning margins as And

I think contributes positively. it So

James Ricchiuti

beyond appreciate I both color, that. the

just that Just or whether a quantify from those come you alluded can you that know that the memory? area on final to. question that if color for I of -- me pull-ins did Or any some is don't say pull-ins? which on

Paul Oldham

an I of think board the we from that pull AI across I commented kind think there's a perspective.

that these for that. but for activity that. on we second the we'll the customers accelerate timing think of It's carry-through the definitely hard would some applications us support Jim, into of quarter. assess saw it's to they And things, I exactly some see So

we for overall that up will our semi product flattish still be the pull-in -- in year. second feel Obviously, and selling that full despite the our into still half semi

So but couple some how customers. of saw through, acceleration carries we'll see that definitely, we from a

Operator

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

Sreekrishnan Sankarnarayanan

I questions. had three

First one Paul. for is you,

are gave run You kind gross set that the rate. of I'm XX% underwrite is to curious, run on you XX.X% so to million and $XXX XQ million in $XXX margin that before? rate willing color some

how The the it asking quarter guidance, reason the of 'XX if into to and up step calendar about so, gross and and how parlays September rate from I'm run is margin? it a for like seems think revenue huge midpoint because

two had questions. other And then I

Paul Oldham

Yes, it's to fourth the some trying number. we question. a annual largely good an to quarter, talked quarter, Last get for about estimates

quarter the than hard of that to other handicap We expected quarter. also the we each said each from to it's previous at the quarters time grow

guide point, than don't quarter typically this we at a one, out. So more

that QX expect I to think QX little we be or Medical. full dynamics play particularly and be be given the a the higher. year feel that to about in yet good is and Industrial Steve to seen, same QX? discussed between exactly bit we out How still will better Secondly, and the

from So margin good I of of being think, around we perspective. again, the kind million implications $XXX feel about a

Things are A related will a affect positive I elements could plus to bit long related little structural Zhongshan in or think transition that but to minus headwinds of run. be bit net be closing there. costs the little mix. that are plant, that going the a to higher our

Sreekrishnan Sankarnarayanan

lot I'm next Clearly, on cycle. it. kind recovery? the see like you a on do How curious of Yet there's of recovery. then, of kind the shape And the Steve, a V-shape optimism not Got it's year. of

I'm kind to cyclical is think at this figure quarter way the really happen drivers? are is a to of curious, that out see do what prognosticate? what the also, there And you would recovery? inflection tougher Or

Stephen Kelley

Krish, you let Were Yes, kind or me semiconductor a in ask coming clarifying just talking question as of a you're about AE out. and because whole only?

Sreekrishnan Sankarnarayanan

of The semiconductor side AE.

Stephen Kelley

semiconductor. Yes,

Okay.

so a gradual seeing XXXX. -- what is So we're in recovery

think with semiconductor been X.X past dealing issues over I two we've in the years.

is first other inflection. issue obviously, The demand been But has inventory. the

about just the is think I end by downstream. the inventory think we've the we So completely out be year. we'll good through issues worked this the news of And think issues we of inventory

be customer end XXXX with without will inventory fully demand any connected So influences.

in to half ultimately see were into second year. acceleration wafer in a as our believe labs those shipping year. particular the on fabs development lot into units, the we ramp half because next and in of a early as XXXX eVoS these an products this and units we second What going is see We're these eVerest customer of

things two basically, so And together.

we gradually recovering, gains on but market based our The the power. acceleration see in plasma market is an first share

Sreekrishnan Sankarnarayanan

of I conductor just to for opportunity, dollar Energy like what there [indiscernible], Is a then like you've [indiscernible] it could squeeze spoken decisive out a opportunity conductor on this Advanced have kind instead example, a Advanced last. the etch. way of In much what And is your is use? spoken for helpful,. in XXX,XXX [indiscernible] want standpoint, one from a to for XXX,XXX the if Very metric how for it. Got technology etch about figure opportunity Energy every with about customers month, [indiscernible] you past,

Stephen Kelley

we there don't formula. that have was. right now, But wish I

conductor both and good what etch So is technology speed doing our etch think full for applications. on a we're because fit we is both pushing dielectric now ahead

can So we're course in the where and the dielectric leader, we we also increase in and conductor etch our into way. big current in break speed a think share we that already etch

nothing next almost percentage a that few goes significant the So over from to years.

Operator

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

Steve Barger

XXXX. For guidance, XQ semi in the equipment sequentially flat and said flat you a versus year

inventory year-over-year I a down XQ the could that out on request much And square by XQ you up can implies that the of be year-end? accelerated with in that pretty the is and bit a channel just think delivery basis. idea

Paul Oldham

Yes.

would in there's that just year. flat our went I of shows we minuses. if good we you if year. have in an still slow second we a the pluses the recovery, feel quarter QX think to dynamics up with math Obviously, in push be flattish bit growth said a If market, and we of a flattish QX, could the seeing half little out, about some this be things better in completely kind

QX So we is Steve, than it as be like feel half And today, QX higher. that was see second up is just half with QX higher and I we in it flattish QX. QX remember, assuming think, the would checking

of So is base, on that a higher right? all commentary

Steve Barger

flattish X you year, higher quarters hearing -- right? little right? linear So even a It's on -- last kind the you expect if XXXX, of trying in up would more of a a to you're base, if XQ, the in so I'm I'm bit in it trend acceleration a kind of it's just but

Paul Oldham

parts of Yes, market recover. the I gradual think recovery that's right. new a different of market some of second technologies. Better ramp half, of of because the Steve as based described, these on the as kind in That's

the when look, to The hard recovers Steve, market I'd we of say, it's know is, quickly, that know. only is market and And predict the one don't the it thing recovers, timing semi about thing we historically, this that.

prudently to to sure inventory at the available we make same and we're have point, people trying this that at So time, needs. quickly customer plan respond the to

from shipments able a customers. do to to that Frankly, because we were some quarter and couple in this prepared accelerate we're able we of were

then continue market goes. be how prepared monitor the and we'll to So

Steve Barger

here related lot companies And my Or and related? in cycle is to equipment cycle are two industrial auto think but leading things for good or semiconductor you is those XQ. also that Do trough industrial. business, diversifying for you're indicator follow-up a the the the the like concurrent the really message industrial that a it. the is seems of is It chip from not Got industrial into? semiconductor

Stephen Kelley

wouldn't I relationship. call it tight a

As of I when important it's out when into equilibrium I chain you crisis it, market, out the reach And then you view the to right? came think when figure and went supply that determines you kind again. of

And in year. Medical, we Industrial last came and so crisis chain in out of supply of for I&M, us, QX that

QX So the we're next in of QX to XX why trends support thesis. It think going amount months into it out this or That's time reasonable I seems a like in year. of that it. of year we're be of

years I negative think now, industry I right? been in semiconductor, of think X.X XXXX. it's went the in QX

will of And where around year point things so probably seeing end again. I here turn towards think the a this we're

or said, data. Paul tend guess, based first estimated. a we're ways like trends that best little based But not at seeing. both that think historical And they downturns I forecasting on it's So than It's be on we do it's sharper to upturns. but a great we're

Operator

of the Next line Mehdi question Hosseini is SFG. with from

Mehdi Hosseini

semi would backlog understand you take customer to for to your you is can guide a team. about a your to to other what XXX-ish, if get maintain readiness to building I words, before without And In business the of backlog? to peak to were ability accrue your $XXX for unit. prior back term trying So it business semi follow-up. million which have This support I'm extent is I able the again? for and be having the

Stephen Kelley

significant this business think inventory But part will and Mehdi, in one. operations. or goes through I'll Paul hubs our just-in-time start, semi, finish of a I

don't they our we up, those we size obviously, bins They have want inventory more the more a we pull track their from us. much do what specify. customers of of really as from hubs. So But business And that the backlog. is picks

is Medical not but a question, the I&M make in I your which Industrial anyway. I'll think business, the comment side,

to the years, few been the short think more past so than year, term I They're right? But today. between years Industrial much our in they've visibility past pretty is is again, lead it's are X a backlog significant. because in today. anywhere different weeks. And shorter times And typically to and up Medical the XX

inventory So us some make so some bets quickly. can to that in place we react forces and put

Paul Oldham

Mehdi, I it's the think long-lead that, some fast more of on invested adequate we've Having particularly expand then the inventory, or and quickly, that, sharp is how to we've If make that in challenging recovery question recovery. you parts is on a it's strategic respond can to so challenging. said the respond workforce Maybe kept we've sure quickly.

strategy So responsive depend changes it demand. is -- in And can the Certainly, pace. that. be No our so to higher. be we peak on prior pretty to we're we about have trying capacity material the or the that question will at to the goal to manage

Mehdi Hosseini

And And or over as the customers quarters, enough. recovery can the get you years ago that then shape X downturn. never predict X couldn't your fast understand can you trying of It we on your Sure. your partners be OEM able to only and adjust? And imagine, cut after back I'm past capitalize learnings then could of been able just they OEM to the was to years how to better have enough. couple

'XX. fact And in -- positive determine is back growth about nobody in readiness. just was to the But prospect SEMICON, is the given your for trying planning And of I'm everybody that it.

to second question. move if any I I before on follow-up have wonder you my

Stephen Kelley

customers, pretty these us say for we would that all important essentially. acknowledge furious, And our Yes. and upturns topic a that's I and right? are fast

put so know, thing the past one we piece X of inventory, strategic parts in some the insurance inventory place we've quick upside. in most we've years do which Because of what the can some haven't of piece so is on is And done particular. replaced the parts alternatives, a we taken with problematic, or in we strategic to ones right? respond form So based

The is staffing. aspect second

bit could of not our loading, given factories, because back in more what see the in the to but we demand quite late we current quarter. cut certainly we a So have chose in is comes

have last X.X we up flex so quarter. And the of in months the typically to

Mehdi Hosseini

think I done increase in be then of actually in of And especially on about into X to resizing to CapEx And 'XX it. Paul, given you're reasonable? by with you Got increase would couple year, quarter a CapEx year, million. the a year-over-year increase your that your investment, on your Should some X this then that, looking increase next talked target assume second this I per be and OpEx. especially CapEx to follow-up a down quarter, Would as basis? is

Paul Oldham

Yes.

on I OpEx, million the end time sequentially $X think to up last through year. expected $X So each OpEx this of we to we quarter said million be

think I gave again with quarter. the guide consistent it's this we

we base year, certainly, our cost cycles, have but general, Next inflation structure level. should in operating stay and pretty normal merit

So that selective variable costs all hiring is with and have normal that. inflation. Very go we'll

how a little So think that's bit you should it. of

rate half grow we to -- to general, expect In sorry, I'm rate the sales the growth. of grow half revenue expenses

Now sales our leverage we don't expense lot growth get of of scale quite structure. quickly. We a up. Again, can to out need

and some investing our infrastructure we've coming. new investments we capital have we're are because ahead in tools and We're factory talked running doing in NPI about. products tools these a perspective, making From transitions. And with we're systems we as capability

these of year. I the So next late to largely conclude think middle-ish sort

in see rather X% out to go kind revenue. back to X% of you of CapEx expect months, as certainly, towards than XX to XX X%, So time, revert we'd our

Operator

Scott with Graham is from Seaport Research. Our line [Operator the Instructions] next of question

Scott Graham

have of done can Well are and and quarter. I so to they quick, get all easy them. X questions, X I hope or several I

where is doesn't The we T&N at thinking of Telecom going point a telecom business, level this But and is weak -- sense. kind we're big now where all business to that a it market. maybe revenue thinking know the we're a some Or in pop be are make there's thing more going that strategically, of get we at back? a we're to business,

up? sales business can wondering the is, I'm thinking this XX% than mean, of just on longer-term the are what your I back And this of kind thing more down. pop

Paul Oldham

Yes.

supply did see I a of [indiscernible] of the lot isn't while, think coming business. this crisis. big sustained of that market pretty we've growth. last couple It's a kind that dynamics a you've the out pretty We the for well. ramp years a chain one And of said has captured

a of think, were lot, Both up kind So unusual. lot. was it of I it's a down but those,

back than towards higher a now a state be it a bottom getting is in So little maybe this. might steady

like this some others, in we this in customers. looking marquee have market But

some common. have And We places make we where manufacturing. where lot of architecture, can focus, a we share all in we think We these markets, reasonable products, have common they common returns. common

It's not we're something we on whole it's a to reasonable to out. carve to grow want of the able have So sort not to easy one of business. would and kind to Rather, or think we that's both strategically this capitalize -- again, because can think of returns expect on of focusing market say But we reasonable. lot the the divest are wouldn't product. I where we a

Scott Graham

your so giving next are -- Steve, succinctly. answering -- should guess you quarter, little for not but centers past at quarters. a just bit it of the to you is something beyond longer, is hesitance The pace in you that not wondering I that Thank of business, strongly couple quarters? I'm couple of saying go data be up the why of the indicated maybe that next customers not this

Is years type that to is everything wondering saying believe read for be X things. in going just I fairly I because to that this strongly the next growing there -- as is market I'm X several

wondering in of next comments your you limited just I'm why couple the So quarters?

Stephen Kelley

Yes.

I XXXX. me trends clarify. positive. and transmission. going more think data long-term And is storage, very Let strong mean, just Data you're Center right, to think I We be more into are generation,

So up nowhere go to time. it's over

is market. But a this cyclical

digestion a after exited of really quarters strong least we're going X of which have year, typically, you X this so at period, revenue. QX to to just And

much about now. as to that's we're willing as so right forecast And

given trends this our going specialty areas But level now revenue But type I certain. to I'm hyperscale, towards share of and we think say some market the there's 'XX. could sustain gains a through chance venture for we that and will not right in within of

Scott Graham

growth forward. I the your any answer that aside and pull back more talking versus the like revisit great. there? previous think forward just I you're it optimistic somebody unbundle semiconductor Tim you your to that give Why away the I was you're business That to, ] to else? can of market sort was logic from or bit pull Okay. again, mean, more from want in was curious question go little to trying color maybe, I in as about, memory, feels a maybe just the the [ when

Stephen Kelley

Yes.

I working and logic add closely just this I new But and what's for forecast that West, to which in leading-edge edge with was NAND me NavX, and think our and of eVoS earlier at leading status difficult customers it's can record to the tool There's commentary that's on month happening processes. say forth. SEMICON are so we prognosticators already memory very and lot our is what too of technologies, much logic with market now eVerest to secure DRAM the and out introduced a who there.

we So the it this is of mentioned very, part important. very the And scripted during call.

hustling working over repeat. just products XXX our production in these eVoS qualified eVerest fabs so soon next year. as they're half technologies in have this of turn, products to me as And customers. in their orders let But to year, wafer and these with second we for we're Today, right? the and And customers of get deliver these

some very for favorable see we are Energy. So Advanced that trends

next because are year. market share, Some edge. us in But independent enables some to particularly connected it those gain growth of to leading are

Operator

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

Mark Miller

effect on Just wondering margins? factory of quantify if could loading you the lower your

Paul Oldham

Mark? lower said right, that is you loading, think factory I

Mark Miller

correct. That's

Paul Oldham

incremental -- $XX XX XXX million maybe improvement the of for points roughly that we've I'm sorry, said is of think What that that revenue. we roughly points of of Yes. basis margin reverse margin there's every basis improvement

in costs well. pickup been why certainly as margins the as is that can seen have material downside because lower. haven't you contributor been the on That's anticipate better got revenues we recently a So biggest

think So it, about that's the way I to think Mark.

Mark Miller

And the is bookings, it's than impression of better I've and semiconductor and is gotten it the in of kind Or flattish? backlog, questions that? the from terms call that

Paul Oldham

so think But we bins. pull and go the a and market generally, trend of demand customers we're semi kind from here balance the should JIT through around shipping really bounce will that as generally that that And not time. through we're year. because of largely the in our many there's backlog over Again, up of particularly concept at that the levels, this we rationalization inventory

term. But all we new have for to It's in markets a downturn really been a products good growth these hard set should a things of accelerate coming about in call that recover. as feel while. very that the near And we great have

Operator

our This also today's will This conference. will question-and-answer session. conclude conclude

you your participation. Thank for

have your and day. You wonderful lines, a disconnect may all

Advanced Energy Industries (AEIS) 30 Jul 242024 Q2 Earnings call transcript