AEIS Advanced Energy Industries

Edwin Mok Vice President of Strategic Marketing and Investor Relations
Yuval Wasserman President and Chief Executive Officer
Paul Oldham our Executive Vice President and CFO
Mehdi Hosseini Susquehanna
Robert Mertens Cowen & Company
Tom Diffely D.A. Davidson
Patrick Ho Stifel
Quinn Bolton Needham and Company
Call transcript
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Good day, ladies and gentlemen, and welcome to the Advanced Energy Industries Q4 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks we will host a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this conference call maybe recorded for replay purposes. pleasure the my to now is to conference hand Mr. It Marketing Vice Relations. President Mok, and of Edwin Strategic Investor Sir, you may begin.

Edwin Mok

are call. Thank you, fourth me and conference Energy’s and Oldham, and our Smith, to Welcome our Executive today CEO; With Vice Paul operator. Good Relations. quarter our morning, XXXX Director everyone. Investor Yuval President Wasserman, CFO; President Advanced Brian earnings of

Susquehanna would be conference begin, I March. like conference The participating in Morgan we that in will to Wells Before AE the GMT at Stanley February. both [ph] Technology and mention Conference

As future statements that are now projections industry, the no its other events subject February are All concerning contained cause and occurred, company’s assumes our obligation conference filings of we that could differ with including uncertainties the will and them. XX, to based to results actual materially management’s risks guarantees are of These make view is SEC. performance. performance, of additional to and risks company products, today let announcement. remind and assumptions statements as on in call And current Information the statements applications me XXXX, contains and not uncertainties forward-looking today’s update these and forward-looking outlook. estimates, you business

We’ll referring on available on call Yuval? to in yesterday’s of to contained earnings the President effects section items. also CEO, release, that, Energy’s pass of our our Aspirational our non-GAAP and other the this be call which goals as the me acquisition-related intangibles, costs Reconciliation adjusted non-GAAP as of and not investor conference is targets financial discussed between restructuring in and page discontinued material includes the posted presentation measures compensation website respect well. exclude Today’s let on which of stock guidance. and should call one-time are Advanced GAAP Wasserman. slides Investor expenses, Yuval or charges, Relations interpreted be With website. any earnings measures, operations, in amortization

Yuval Wasserman

conference in the spending operating of and thank for Good of quarter, margins operating has growth X% grow XXXX In the our continue in call. end and seasonal affected semiconductors, with slowdown the resilience feeling were for lower decline we products we investments while for in you, been for Edwin. growth growth. model. industrial Year-over-year and footprint. capacity decline company, highlighting our the while of and in in to the around market market. equipment half flow global quarter economic the including slowing joining several policies and the negatively including by the Financially, on morning, us environment semiconductor in of market, everyone, weakness capital solid QX fourth and digestion XX% semiconductor cyclical in strategic we over technologies trade In operating of of Thank strengthen offsetting and even expected devices, accelerating revenues our on solid and execute you starting down operational cash global in LumaSense earnings uncertainty our semiconductor industrial delivered maintain demand fourth process impact year-over-year, delivered cash Despite grew new significant revenues, diversifying flow the our second solid non-GAAP and service profitability the addition XX% partially semi. to both factors

will our Despite both our shape of deposition challenging Our mostly devices core out application. impact future semiconductor has technologies inventory business finished The broad- based by of and the lower is impacted and in of customers. etch we see enabling the demand pursuing market. at environment and further goods customers been our was new inventory reductions that

critical areas. and have in to gains aggressively expand believe and in technologies are there RF we result, new pursue our these investment and share a As opportunities accelerated their products offering

expanding multiple During five incremental customers technology OEM and opportunities. roadmaps secured gain evaluation market targeting support quarter customers while to against we key the our leading the These and prior accelerated share new investments positions. new shipped revenue already In our we leading in various design plasma and to share allowed have our quarters competitors applications based customers. the products etch position wins

we share example, estimate For XXXX. by OEM market in one our leading equipment points overall Korean as increased XX has

the implantation we significant other in In market by XXXX position expanded have including secured in we wins addition, share EV we voltage our and process high a in QX inspection metrology displacing we our steps. competitor. position in tools. In at believe ion steadily most process advanced control And expanding leading

expand term topologies, long higher leading-edge leader advanced in and remain Beyond in system semi to our to our supplies semiconductor increase control within a we growth positioning the power drivers market. in power serve. levels, power sophisticated industry our footprint with the strategy for our to strongly bullish continue AE as on technologies Demand the

increasingly as market semiconductor on quarter balance This anticipate stronger driven and decline proven out to coming the position for market. As organic basis by year underlying expect, with market. of important year-over-year key but this demand industrial revenues the both our growth QX, our has the our this position growth. we both in significantly our they be to markets, in customer’s a technology grew an normalize resumption downturn of inventory stabilizes in share In our sequentially in and levels

two Over nearly strategy. industrial sets. the our highlighting industrial have revenue we our our has Within doubled the success major two years application markets diversification last

coatings. material called involve such advanced materials, display, which processing panel PV first, as to The film extending technologies and Solar, flat market, adjacent thin our we glass hard

markets. such with primarily PV QX when power the precession due and instruments productions glass new projects thermal level power sequentially medical hard set. end industrial expand acquisition both These and several of year-over QX, soft in in secured are these solutions business technologies. grew we and and is and as requirements. to power which and devices industrial application power typically market design out general footprint Applied wins serving stringent Although second in analytical Applied in significantly lower LumaSense coating and seasonal growth solar our sequentially decline technologies

term LumaSense, several we our science multiple medical Beyond growth into a QX. the be supply market. secured supported wins this to and we in expanded as position new that the leading medical structural that long the win market lasers in continue and provider medical instruments designs with by sales analytical devices power In the life new to continue markets quarter we

During the quarter we acquisition LumaSense into business. need progress integrating the towards our

a initial taken be starting plan portion realized. streamlining have by to to the our the achieve synergies We sales channels. of Further, is steps direct distribution into business our cost integrating in our

now synergy opportunities of excited confident acquisition. in revenue the and Our technologies customers new the are with we are we this that open

we actively Beyond spectrum technologies with M&As a LumaSense pursue of continue sizes, to additional across the capabilities. and target

was base new solution quarter inning. the challenges the Advanced a and years. the Coupled opportunities particularly installed confident through a in our end deteriorating the coming retrofits In believe the Our was compounded such in business are recorded our record as of the the annual that service engineered summary, over in providers conditions growth market year market halves, we year still our semi with the year. rate solid greater inorganic of two our XXXX XXXX. execution a robust expansion profitability, Energy very annual low. in and and record successful of describing service service remain service early our is third-party programs We business upgrade, consecutive Visibility in of and will strategy with acquisitions. than environment XX% a growing with expansion by its year revenue of highlighted completed service revenues, sustain from record flow and share geographic the is cash good growth current Despite very QX year third three gains

conditions expect lower through than We of QX. the market our the with half QX XXXX least in semi to at current persist sequentially first

deliver Longer cash for term, discretionary in increase content this to to momentum will we of costs At technologies to time, in flow. our we’re invest same we and in devices continue our managing product bright see customer’s environment continue and our and improving driven growing efficiency power a However, capitalizing the of future solid new business introductions. in complexity growth, increasing equipment. by semi profitability the

of our technologies committed level timing maybe and in forward semi that, the pace industry. and recovery our our the growth. Paul. upcoming service to per of $X.X Overall funnel call inorganic thank offerings goal industrial long billion term $X.X and earning as and partners many active, turn between the drive you grow let continue to support. financial to nicely we remain valued We I’d to like impacted by of I and of the to revenue strong our Our employees for acquisition With use to our over remains in to position see aspiration quarter. $X over share. customers, shareholders, me your look

Paul Oldham

feel fourth to revenue morning, Thank In Despite our you, seasonal and with industrial cyclical combined the of in in of range. good quarter quarter in continue semiconductor, weakness mid-point everyone. the challenging the fourth impact the environment, our the our guidance near slowdown we market. came Yuval,

Our higher accelerate non-GAAP from quarter. was R&D and and the quarter partially offset from investments tax gross by margins from rate to a decision Total a year results by impacted our expenses $XXX.X for last ago. XX% resulting certain slightly lower XX.X% EPS revenue million, lower down

XX%. business down were with industrial generated $XXX in and decline semi QX up record full revenues at to service Despite decline X.X% year semi and the industrial. Our XXXX in revenue the growing offsetting QX partially million X%

reflects despite this diversification Our to-date revenue the total in success and strategy. environment importance the our semiconductor growth, of decline

For of the XX.X% our year, operating we cash generated adjusted $XXX.X flow was million. margin and operating

and in by sales quarter from at the quarter last year-over-year. Looking million, market, semiconductor $XX.X was down revenue XX.X% XX.X%

our the industry demand our as goods of decelerated their ordering finished as customers reduced During inventories. power and quarter product reduced they

in half. QX which revenues year. significant XX.X% revenue QX result the QX limited, third solar did forward to expected technologies Although further our to for acquisitions, from a slowdown. could that million platforms due expect in additional visibility repeat not film, as we a the seasonal growth which the the XX.X% quarter in market primarily activity Year-over-year and shipment provide to of we continue $XX.X first us going recent grew thin believe down declined step Industrial is in

grew For the full organic win by XX% delivered and design driven total XX% in year our industrial robust pipeline. growth revenue

quarter Looking from concerns our was expect from X.X% for rate. consecutive the products at economic sequentially. to we the quarter at year. term, mid-teens industrial growth to compounded XX.X% we expect last a about record grow industrial revenue continue third QX up Service $XX.X million, macro third growth in despite Longer forward, and revenues a annual grow to

XX.X% service share $XXX.X fiscal the which revenue greater than our progress growth, XX% from For up gaining by growth installed long-term ongoing base. is third-party driven year million, our service than providers and better was in of annual target in

completed we year and QX. LumaSense additional new after of With Consistent semiconductor to we challenges to the provide color represented was our business. expect flat first Technologies, $XX of sequentially the its the service acquisitions the in revenue in approximately holiday, in weakness I’ll semiconductors revenue lunar historical quarterly million run full sale the which the mostly industry be just LumaSense XX% in on QX, – historical lowest the during quarter. due rate quarter

semi by from revenue LumaSense to In our was internal international addition resulting third-party weak in environment the team impacted distributor the the a and of inventory. transition sales to acceleration drop-down channel own

to by QX this continuing QX. trend expect We normalizing before to

the is to negative. While term near impact revenue

our XX.X%. We are growth compared margin gross last quarter more strategic with to margin was XX% will quarter. fourth non-GAAP in this for customers XX.X% Gross the a the confident future. enable and that was faster change On relationship

and also volume, warranty saw In tariffs product costs addition on shipped higher on obsolescence of than component. a our impact to we some average the increase legacy lower and of

forward. have the of be XX to impact to the we overall impact basis on to expect looking we vast XX points margins majority mitigated Although the tariffs,

margin we lower down XXX gross Looking expect mix. be XXX basis primarily and to QX, points adjusted on and volume

are in As lower you’ve our regional production and options mentioned, of in in business improve mitigate additional future exposure we the continuity our evaluation Asia. investing efforts all risks, Southeast profile to to cost

expenses to period. compares $XX.X primarily due operations XX cost cost QX GAAP XXX lower operating operating quarter or of of XX.X% nearly or starting quarter. Non-GAAP by lasting restructuring expect we expenses; million anticipate prior expenses continuing revenue. QX these this of the in and million during basis increased in long $X.X efforts from and several compensation million and XX.X% over This higher $XX.X the $XX QX in While quarters incurring charges in to million to the full additional LumaSense neutral transition to were and point an run amortization at stock expense. we

cost were operating of control the critical measures expenses Excluding partially the long-term primarily to addition increased our by temporary offset the investments These in innovation approximately expenses results engineering QX. $XXX,XXX LumaSense, growth. in and we programs drive accelerate of took

discretionary investment expenses are we efficiencies. integration continue synergies be strategic taking Looking flat offset actions operating overall of forward, as and drive to sequentially to this we curtail businesses acquired expect in by QX improve the we about to spending,

$X.X activity we to As integration yield over the compared and operating cost cost sold. I compared for to footprint operating mentioned, expense and $XX three in restructuring good to in was split of the improvement. to efficiency QX our business realized million GAAP between our XX.X% XX% we’ve QX quarter. manufacturing recorded optimization, related expect savings XX.X% We in margin was last annualized Including Non-GAAP margin actions operating XX.X% next quarters approximately QX. quarter these acquisition of million.

margins of acquisition LumaSense the Excluding adjusted operating XX.X%. were

lower income quarter, was results quarter Our we X%, the primarily R&D tax rate credit. cash additional of items discrete last high and the discussed for foreign fourth

rate tax was X.X%. non-GAAP Our

one-time forward and fourth our was third $X.XX inverter earnings per We continuing a and business which and operations with earning in from last with was ago. at U.S. to diluted expect for a a the QX share the impacted quarter $X.XX $X.XX rate tax to to year associated Non-GAAP was write $X.XX $X.XX be Reform. compared the expenses loss range. EPS tax the for of last $X.XX of looking the Capital the quarter year to XX% down solar compared Tax in in quarter and XX% by quarter a

at sequentially end the of by to our during $XX per $XX balance day million cash $XXX.X were over bringing by marketable times million flat continuing one by Net from operation increase adjusted remains inventory levels. quarter Operating balance balance Days $XX.X our and now XX was million to decreased million, working the to QX. capital days. and sheet. securities Inventory decline historical to as Turning million about by receivables days. back our and DSO the decreased cash levels payable at XX three $XX rose acquisitions turns flow

spent shares $XX.X During price the at we stock repurchase average an quarter of XXX,XXX million of $XX.XX. to

million million inception $XX For approximately have the XXXX shares. Since $XXX purchase repurchase million of approximately to shares. spend we X.X in we year, million to our program spent the X.X

we profitable year market successful revenues strong and XXXX, per between current a conditions very $XXX Looking expect $X.XX. quarter In forward first the million order of between ended be and to share non-GAAP to weak. million given $X.XX in to levels and $XXX be we started summary, completed to and that

challenging year for We semiconductor industry our expect a as XXXX the to investment. business be reduces

share. opportunities and weak strong plan to even However, during continue and new it to cash earnings company. expand expect questions. acquisitions the We and to operator to market invest flow. the cash Further, are to the core let growth in quarters the in while will turn profitable per cash continue earnings interim, and we’ve been growth, our in able we we over synergies market. in With growth to bullish Operator? position me drivers potential the to solid use efficiency pursue executing that, across our on strong long-term flow committed for addressable about our from programs critical remain our long-term and In driving deliver will and improvements drive our


you, our first will [Operator from Hosseini Susquehanna. sir. of Thank And Mehdi come the Instructions] question with line

is Your open. now line

Mehdi Hosseini

differently also this answer be at great? semiconductor it million. it guide, assume of Couple XX CapEx to commentary Yes. we I your Thanks at Should to maintenance is Yuval, kind for my if million you of customer inventory want suggests were Or and OEM look manufacturers? if to QX of revenue question. would semiconductor follow-ups. your the reflecting maintenance by taking quarterly and XX it

Yuval Wasserman

remain we it can at assume that level. Well, that

Mehdi Hosseini


half in double-digit about week, first the talk decline the talk That's QX a go it So have and would you would where when we sideways. you about weakness?

Yuval Wasserman

that Yes. the in quarter, business change set forecast general saw weeks. in saw of the happened QX, believe we last don’t but correction last we Maybe we setting of the four or that right? most over We a

Mehdi Hosseini


Yuval Wasserman

right And believe what think at the is we trough that us. pretty are now much we for we

Mehdi Hosseini

XXXX right. AE and the under XXXX, from technology at migration And semi, of both over investment follow-up memory through manufacturers, years logic. a then past All benefited on just the couple some quick Okay. then DRAM one foundry the capacity

at I Does getting not change the it dynamics minimum that see here? just a technology more I would semiconductor your capacity focus migration. forward wafer and am Looking business? color on right. Any for great be Or

Yuval Wasserman


to and think technology of invest in and the products now in benefit opportunity I in This are us for customers have a for technology And to in product invest is tremendously QX pursuing you’re slowdown continue our exciting with fabricated comes over us, development industry industry wafer when the an technology. product the during it’s technology. the that invested one significant right. invest designing processes that next it technology is last there materials. development the that’s we’ll significantly tools our right and and RF accelerating to significant core especially and the time reasons development, in across an new we next-generation generation and the That to pool

in shipping mentioned products applications. prepared remarks, going we next-generation technology are we’re now to that fabs the for As right

and we for ALE our and a invest continue space very been accommodate the course, so reason product so for on, get and technology etch, technology that forth recognized in applications, And as from from deposition to our and accelerate the around has enabling. ALD, development. broad OEMs we strong Of demand the investment of to and world

Mehdi Hosseini

migration? multiplier those part in? capacity to to as need a to wafer story Or Would we wait technology lead of come at revenue through go for new we products do

Yuval Wasserman

even XX factory. between We volume months the months you know technology, industry XX expect run to the new high the or months to can as XX of in adoption

we expect early new are ramp. stage. our in fabs, to in that of technologies Pilot Some productions

market higher with stronger this a We incremental creation. revenue expect and exit with to opportunity position year for much

of Some revenue. will of production these of will millions tens drive design wins dollars mass of in realize incremental

Mehdi Hosseini

detail color. Thanks for


our come question Cowen & from Company. will of Thank And next line you. Sankar with Krish

line Your now is open.

Robert Mertens

Hi. I my XXXX haven't March of guide, gave for in the in on for and earnings some This EPS OpEx came the gross I question. you is revenues margins end are your the early Thank know taking dollar. quarter the around since Krish. of the around Rob If for your look at XXXX, to maybe seen behalf terms color the of where you guide. levels Mertens what you

looking the margins year, of sort sort little improve would towards expecting decline to the And of will are We’re level now need later do it you of to breakeven part so levels? of be a bit? also you revenue

Paul Oldham

a great question It’s Rob. Yes.

I you think its semi note been made I that structure business XXXX. – bring down at five our lower mentioned bring of mix as acquisitions and companies if companies the by quarters thing them. if acquired could we’ve would six look is at actually But are look the revenues those you at with they you the is levels offset that that and argue they revenues first last some that, down our that you sorry, some actually four we than they cost in I’m and late

earnings on so new businesses we’ve added is then you’ve see an on right now. impact at And model are same earnings operating seen you this -- what that

– earnings platforms today. forward to in us contributing those new give companies are a platform for give fact greater us growth looking Now, and those

saying, way the simple way of if we of hadn’t worst we And that guess company be it have. diversified the the I could so sort

be technology think believe we As And mentioned, of that well at market paid in revenue investment There’s happening difficult strategy, recovers. diversification lot a dividend. very the has semi we’re our all about if environment. we’ll excited despite we and positioned you’ve what

take actions around we company occur, We still solid point, you we breakeven could QX certainly Now breakeven. still just And the have guide that can we’d our at at if into see a revenues from you very and financials. be a $XXX as we if low we drop profitability ensure very the to saw there’s model. range at million before that look profitable cash. solid other a generate broadly believe perspective, a And

environment to as stronger a continues exit company today. this position take this ourselves a we’re think downturn be advantage be to time to in to we of So that the we

other that that’s Now, quarter was and annualized implemented also some And take savings. A about types we sales. we’d cost those in we cost natural it We measures even would could about see the investments mid-year growing over expenses overall, the of see those this say on be and that of improvement. margin we actually temporary able bit restructuring be did little funding and think year. things. of the course large a expect $XX these in will keep saw we R&D But million that to part flat

to – our there’s as mentioned, some modest continue investment to going probably manufacturing Although be we there's diversify footprint.

think in recovers. lot model. robust the market as we So we’ll position model stronger be semi there’s think it’s think we We room net-net a the ultimately still in and a of

Robert Mertens

Great. And helpful. LumaSense your you. just follow-up That’s around Thank business. I guess one

model, so So a like looks I'm time? quarter you and you recover from or forward service. at lumpy looking this bit Or business in? million is lower quite is out like the I If industrial you're to or a little XX XX% just guided so industrial expecting it have revenue of seems the and a of there. that like from visibility reason down business semi a I’m coming But at it is a this solar certain business is it looking quarter-over-quarter. backing sounds that this it know big more around bit

Yuval Wasserman

industrial actually a We down question. because it’s to be Good Yes. QX, quarter. sequentially. guided seasonally our business In low

of solar little bit a was in a the that, little -- was little QX, shipments it into broadly. was and industrial oddly PV order, even grow a expect because PV software business just remember that some if also bit we was large know seasonally a actually you in below industrial little was And look in part But QX there’s The which area. sequentially of lower to revenue China from little delayed more we sort aggravated lower, and had those at bit, thought of enough. of exactly in what will markets. was we industrial off you industrial about a mix this and was and QX with And in the off the revenue shortfall semi solar solar compare. large products fact, In

the it be So in range and up if will QX. of we overall, in growing to that grow sequentially That basis. been continue mid-teens believe annual company, industrial the had look fastest the you at will section

Robert Mertens

Okay, great. Thank so much you you. thank


next Thank the And come of Tom Diffely line will from D.A. you. with our question Davidson.

Your line is now open.

Tom Diffely

Yes good morning.

First in little a your for OEM there the malaise inventory just is markets, a the there as clarification. When by well? here at is you first quarter, correction the look driven forecast the bit a end little that of or step inventory in solely down in markets end

Yuval Wasserman

both, inventories. the also Tom. both of end drawdown but It’s the market, It’s

Tom Diffely

then And working through Okay. the goods said finished before you basically system. just that

Yuval Wasserman


Tom Diffely

where kind Okay. at little of And goal new product is as you that a this the going then is a mainly be increased normal more when based, look active just Paul forward. the project R&D, spending. you new view development or to the your Do on

Paul Oldham

sense we’re an the of Yes, normal. careful a its things customers, we you done pull it can these know, at a I’d where it’s and R&D projects the are to think semi new and in look the seeing our impact from more evolvement And recover, of when a year term which could makes of term. we more not the to industry make the look near at out have two one say sort We’ve review lot relatively opportunities don’t year time. of investments this and if three our continue make to that term to out the and

level back level. down, is on count R&D think wouldn’t I right I around So the this dropping

we roughly don’t this that here think would it. way up need Now it. is it’s going the add I grow think to investment range right in of in a step to. made to we’ll say I continue We and investment

Yuval Wasserman

R&D customers accelerate now at that We’re customers terms continue us right with our new of development will in our key level in in to with will allow and now. R&D a generation roadmaps, sure to around the for and the Tom tremendous conjunction product we right want also budgeted investment we alignment design have wins to to amount us use properly. next opportunities right fund are now their new of We make our that technology to world that related just approaching that devices.

Tom Diffely

Yes. has the crosscurrents the industry guess months, that makes the next That look there you all ultimately in when meaningful few then the last utilization over been in several impact over in your a might of quarters? I at rate the sense. the change And field service the tools

Yuval Wasserman

so, think don’t no. We

Tom Diffely

Okay. nine in Has when the term industry. over that’s happened And industry finally, or your potential all you look potential at changed then just the six, months. this of last energy anything long view the advanced

Yuval Wasserman

all. at Not

underlying We demand repeatedly, the the are are as industry we in said strong.

of accelerate the the a products industry using technologies. our period of suggestion to in the -- and are We in right players new of now are period of digestion. this In opinion, many new the development of

supplier those architecture. look we architectures these you to, you and approach you know much at moving know all product new require more processes, If is materials that delivery technologies. deliver to the new companies are to And the that, complex power structures, and with new industry new

Tom Diffely

your for Thanks Great. time.

Yuval Wasserman

Thanks, Tom.


the Thank you. from next question Ho come line of our And Patrick with will Stifel.

open. now is line Your

Brian Chin

Hi, so This few us good letting Thanks ask calling morning. for actually for is Brian questions. much Chin in a Patrick.

question manufacturing. First, the about

is to some power in of going desire diversify you to Shenzhen from I first Southeast mentioned order of bring manufacturing to how of mean next the that, much anyways Asia. Is you’re And you I’m natural how of pursue much that related I process of is had that think I year? away that it business. terms capacity up curious question? in initiatives think you’re – some going kind that to relocate of some to, to to have that’s the my

Yuval Wasserman

funding we move address factory planning, QX started to to So continuity. Allow of flexibility more the our footprint that business cost. that us at addressing a just and I to to have think one hub in evaluation also operational than from the aims products major

that believe the project of a above. term It’s take we some investment. very project. the all capital will and intensity terms be a cost long it’s in neutral low that So It’s it will of time

assembly location As our know diversifying and products. filed about just the you we of It’s origin more of test.

that, to Paul? want to anything You add

Paul Oldham

Yes, there a we’ll about our adding that do, our neutral actually just and once, more do not that factories, bit we of But nice insurance it’s an because of be give lease amongst We be have expiring a forward. We you’re them, going flexibility extension place all gives a right. in balance would which little really a in us would diversify just information. said, -- cost that lower, Yuval second have window balancing cost be to us is factory, our also it’s incremental. for to year, or will a to total between these Shenzhen. two balance

Yuval Wasserman

So term, be on are one going relying to factory. we more than term, long long

Brian Chin

makes Got it. sense. it And sure I’m

when things, of You know things are up. business slower and these sorts is kind to when of Right. do wrapped

appreciate customers. So detail breath in all the another of the on and product terms I evaluations and there question. new certainly some

You contribute you towards in terms dielectric later? of versus sooner and could NAND put applications know said, front would that the being what

Yuval Wasserman

question? sorry, I’m could you repeat the

Brian Chin


think five about talked new like customer you I evaluations. So

I’m sooner side in terms breath the nature? that curious, evaluations; fruition under NAND in you on to You could of of ones applications do are that be sort evaluation. think of those come the know dielectric the would and products,

Yuval Wasserman

deposition the both the complex industry materials. foundry, new all and thank also is moving -- materials DRAM and Look, And Etch processes. of ways you. NAND structures towards board. board, the the more in different terms approach It’s -- new unique because require require These and and much layers logic across require is across in totally deposition the a different of and challenges related NAND for the eventually RF in create the processes strategy, processes. that enabler of processes different increasing example, the of power a these Etch power number material distribution to It’s stack that is

Paul Oldham

been areas four platform, The DRAM as and content third other is -- addressed if we’re into about if the other Brian a chamber. at said, Etch. all at expanding Logic five have look all you’ve you you thing deposition the And our mention I’ll quarters each. of look NAND, at historically, And last around we and now quarters, our

participating And logic towards so see foundry we as or that. in we’re shift investments more

a of And broadly as all so those because with well, little applications. the bit in we our shift timing investments will those business play

Yuval Wasserman

adoption we for a of And applications. ALE nanometer for key require and more devices X The supplier comment. logic One processes. EUV are ALV those will

Brian Chin

look standpoint, the did strategic And amount Appreciate based stock question continuing us. one -- you Thanks. of you allocation that repurchase. a what’s acquisitions you at potential might capital detail, about back last your might a in in as QX similar [Indiscernible] to exhaust on From current from all well. authorized that bought talked I you you here think

just capital of forward? kind you’re moving allocation curious about how thinking So

Yuval Wasserman

Yes, Brian.

the through that’s Our Then that. share have that that fundamental it and repurchase, we’ve repurchase relative small medium and our authorization to regularly, or of case growing and our deal as company of to capacity the tuck-ins larger XX% meets quarterly philosophy to kind also hasn’t capital have kind And as we’re with to then regularly And the the of said our available board changed, we consumed tuck-ins refresh to strategy. both, of acquisitions is the every majority be we we open as LumaSense the that. and allocate quarter to continued reviews do but we sense. makes and opportunities share opportunistic in

going anticipate So forward. I wouldn’t anything different

Brian Chin

Great. Thank you.


line Molchanov And James. come from a our Pavel with you. Raymond Thank of will next question

now is open. line Your

Pavel Molchanov

the Thanks for guys. taking question

that It M&A years cap you front, imagine in fact of are think too it’s, you bulking early. it’s some the in the pain, do additional many middle been the and now players opportunities, is than On the I pursuing to time a given cap consider industrial feeling semi value are. focus guys you’ve now, the but still perhaps for up the semi more pressures lot obviously or chain, market pain

Yuval Wasserman

verticals Thanks, and Pavel markets. accelerate new the for the strategy markets our question. the diversify those indeed, entry had companies our company from by accelerate diversification been to acquiring Yes to and into

acquired Some content in of a them. these companies have sunny also

company. we when acquire the For XX% example, is LumaSense, LumaSense semi industrial, XX%

at critical world, company, leader As potential these we being that parts the power especially a semi go in into the is pure consider you look targets incentive for antitrust, if play, and like applications, the number almost then us a right. zero supplies be of leading

other related or buy a non-risk a supplier antitrust acquiring likely will for be semi the low to products, either semi components fairly -- and different into in but a that are most effort and not the to go selling are also some challenges them commodity margins so usually in So, partial industry carry industry cannibalization, risk components, enabling that of of little which and cycle engineering.

very semi very opportunistically. strategically. at at industrial targets So reason, We look for that look targets we

Pavel Molchanov

I return That’s updated accentuating to flow your probably also Any topic lend even, ask perhaps as remember on the kind again. of of Okay. capital way This on your themselves a I quarter and the call dividend, think to shareholders? of question about a comments initiation of this. of break was last discussed helpful. thoughts cash

Paul Oldham

Yes, shareholders. plan the We sell of point, it’s the regularly same, which a do choice as thanks strategy strategy discussion including At our opportunity capital allocation this use a to to dividend. to value question, is our Pavel. of to the good method remains repurchase its review turn this

Pavel Molchanov

All right. Appreciate guys. it


And you. of question Needham the with Company. Thank and next come line from Bolton Quinn our will

Your open. now line is

Quinn Bolton

and letting ask Paul, few Yuval Hi, me questions. for thanks a

of much might from Just just question in correction be inventory demand coming wondering about revenue wanted environment sense and you versus versus drawdowns some follow give up slower if of overall the demand. us March, able on Tom’s the how the of lower to lower it’s to sort level inventory

Paul Oldham

customers tough is If three our but in see. question perfect the the Obviously weeks to and they into a kind plans last have reset all and one related. it’s good level. it Yes a to But, seen at have activity planned customer’s and the longer we business degree, will what work answer. And lower don’t this to you’ve inventory. visibility as four it’s through of our clearly of then lower, take on peers some a or market

area and we said condition related there’s that be impacted then of continued the of that fundamentally, there. kind to half, how is go expect the to that that. But from expected persist And element remarks first So an we and down drawn things remarks, to we’ll through inventory too. these we be see some in to prepared our

Quinn Bolton

thoughts, on up other think talked I of sort end about LAM on front guys OEMs have you follow Do inventory as you half, that some in their more the just the is, your that a about overall exacerbate being does call of Paul if WFE of the looked will I or WFE and I WFE guess have low. second guess down seeing? currently Yes, out; shape to you’re that. of back-end the a talked question XXXX? drawdown be the customers in XX it’s trends loaded what speak any

Yuval Wasserman

OEMs, second business this with development earlier, their as the second even from in when the in more serve half. growth, So we and everybody’s go the capacity to also we that without to customers both commentary. comes OEMs when everybody’s visibility enough general, different call of believe a right nodes going logic a the is target sure take in OEM. and they operating different the of the affected focusing to rich OEMs advantage to memory we in commentary markets different that of by on it’s they the view talk to the that I into are a of Different of different technology when of basically make some the and product us is resumption don’t good details, exposures and believe and are from help market to foundry what anticipating centric, and now the centric, we year end answer for market In We as or great an wins view to design exit it slowdown are you rest when have year some industry the fully them environment different accelerating downturn. them see kind read more is be question, for call And the the the you half primarily. of about aligned the

Quinn Bolton

Great. for me. question Then last

recovery able XXXX your WFE XXX How position it the long term Just in if dependent be you factors? of model a How set XXX in to exiting that wondering share dependent other EPS. on level or to on in spending? on us is improved is might your of timing

Yuval Wasserman

So semi a help of of timing obviously timing us the the acquisitions that will impact and profile the are pipeline are may we recovery of the that at we target accelerate cycle. growth. very that, But acquisitive, semi same to time, the of and pursuing despite

the of activity maturity it’s recovery semi. combination of So targets, a and M&A the the and of those

of behind said that in and we again seems aspiration confident our very right a are market stronger just a earlier, a with as and in position see like kind that low and are We world. believe it’s much position now, a we the And much footprint know temporary it strategic semi. stay situation recovery to we goals. the But you stronger expect around we

Quinn Bolton

questions. Great. Thanks for letting those me ask


you. showing this Thank questions time. further at And I’m no

is closing or back my it the Wasserman for over now So pleasure remarks. any comments conference to to hand Yuval

Yuval Wasserman

joining us today. Thanks everybody for

develop earlier, mentioned we invest, market. new and an to rejuvenate, as I to to period and and technologies products us right of this the for to view exciting As now accelerate our period the launch

world decline OEMs the dynamic the is market We multiple their around Obviously, by we driven explained. into are tools. as adopted QX being in new the right process now by

market, products QX at better semi you peer into product, Just QX decline our in we line a and is to cases with if that note, to the position. in in are from our companies between look some go

we ready seeing few months. looking we next forward So much technologies. fruitful are terms in we to and to strategic you out with investment, And year in new a the stronger downturn investment. of Thank of come products this you and to forward and look are


have may does program you the today’s you gentlemen, This Everybody wonderful and disconnect. thank conclude Ladies for your participation and a day. on all conference.