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AEIS Advanced Energy Industries

Participants
Edwin Mok VP, Strategic Marketing & IR
Steve Kelley President and Chief Executive Officer
Paul Oldham Executive Vice President and Chief Financial Officer
Krish Sankar Cowen & Co
Scott Graham Rosenblatt Securities
Mehdi Hosseini SIG
Amanda Scarnati Citi
Tom Diffely D.A. Davidson
Paretosh Misra Berenberg
Pavel Molchanov Raymond James
Quinn Bolton Needham & Company
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the Advanced Energy Industries Second Quarter 2021Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Edwin Mok, Vice President of Strategic Marketing and Investor Relations. sir. ahead go Please

Edwin Mok

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

have QX earnings press not slide it presentation. can release, you There our at website our ir.advanced-energy.com. seen also you you find If on find the

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

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

Steve Kelley

joining Good the Edwin. morning, thanks you, everyone, call today. for Thank and

strong design midpoint met earnings and our remains guidance. share target all of significant wins new Second markets. record Demand we’ve quarter the of and our in revenue per very

was revenue of other components. and key quarter integrated second shortages limited by circuits our forecasted, As

third priority output to factory quarter, remain due our the revenue resolving this from in supply employees of one improves. was will should the also in continue to Near-term, into these forward. concern, in Additionally, expect COVID but number moving quarter recovery this QX risk the limit restrictions Component healthy much constraints. our restrictions. mitigate Malaysia supply shortages quarter quarter, beginning is that constrained but vaccination of late Malaysia our we the COVID as a

As demand. it’s to strong, we that very able very more order is which ease well we are with deal supply for sets constraints these us supply well growth important issues, to note revenue XXXX bring line with book as and in into our

of to procedures. flat ease, markets, record industrial medical, revenue an the conditions robust grow. new wide XXXX, constraints industrial products of quarter, demand market, strength and the coatings. heavily market, care XXXX. be second expect XD In our all for to increased of macro growth in supply we this to as half industry During in even into stronger. our sales semiconductor the markets invest In for first the market continued across expect After half capacity. in power customer the demand sales continues we the strengthened industrial plasma setting And panel we as improved. a across the printing, uptick in we saw the saw variety automation, as industrial displays, we In from demand benefited elective in applications In medical

sequentially. second These grew demand We half trends demand hyperscale from the continue computing second enterprise and in revenues and also solar, of battery also were stronger demand Datacenter applications. both up the customers saw in and year. horticulture, quarter should the into

U.S. infrastructure units forced largely investment production shipped we hyperscale the in customer. addition, in increasing In to initial the to due telecom improving market Demand XG a is

to and telecom in winning are new, we designs revenues both be Although in paced markets. high value-added supply, datacenter second will both half continue by

growth and strategies our to turn me let Now initiatives.

shareholder key industrial value This and where competencies, Our be to accelerate sustainable which ultimate leverages our proprietary particular in technologies, focus the approach To drive expensive delivery are enablers complex markets this markets. revenue excels. our our precision engineered, by our through we objective of medical growth. operational and on excellence Energy customer the our power highly power We achieve and engineered and growth, of sources putting build these systems. developing and intend profitable base. leadership, increases success. would Technology reliable meets Customers machines, intimacy, semiconductor, core that’s highly growth Advanced is to manufacturing

are seeing products we proprietary long with lifecycle for strong quarters which good have our revenue. applications, product develop evaluated and other In continue And current datacenter the in our of products, we this power target telecom, markets. focusing our delivery development both customers differentiated three teams, markets and grow By are OEMs. which and position are leading the our MAXstream leading and a In deliver that on such these as our starting by sustainable eVoS steadily and expanding semiconductor, markets all capabilities differentiated of profitability. and challenges. to these solutions we approach drive networking will building plasma should We the most the on We nearly team power solution flagship RPS with our sales believe accounting new growth. in applications great solutions, system a customers’ address will profitable highly difficult focusing traction are and business being computing,

been very Additional has encouraging. customer feedback

for of provides therapeutic industrial design During solutions power in quarter, enables takes in market, test is science service This in new second Tegam critical time, in industrial In designs in we second quantify the stream power. product revenue. Winning the thin platform multiple steady acquired business. a customers medical market Advanced have quarter, recurring systems. Tegam, medical precisely the RF In the to calibration power and RF the to wins Energy’s to instrumentation lifecycles we manufacturing in two our systems. repeatable, development plasma data processes. applications. the life delivered technology we also won the imaging, Tegam’s expand market, quarter but multiple ensure including a leader of and film long custom industry the this

after power computing design AI tests power market, stringent infrastructure and the supplies, by several we of addition, the and yielded applications. opportunities performance a In focus wins meeting multiple datacenter measurement DC monitory density launched recently telecom secured we efficiencies In customers. design the high-performance high on requirements computing market, programmable and wins. family key In of new already has networking our

multiple efficiency. on the DC power superior the DC a converter, base those win expected in to XG to deployed a carriers One We XG be secured customized U.S. by a of featuring in second wins with is space density and station,

global to strong leader, John a is solutions. John new technology-based markets. world. Finally, experience Donohue. customer Energy's products differentiated Advanced selling our strengthen gains for very healthy professional the with a will seasoned share relationships in demand in hired sales drive help target He In July, and with our our extensive closing, markets we around are

the our to be operating Although environment order continues at is book challenging, high. an all-time

the to expect our market up to component us and XXXX.We As up setting we criteria. for financial meets lookout growth continue strategic strong catch abate, charges opportunities, be a demand, for the which to inorganic on

made our technology past three the enhanced tuck-in and which have in position. portfolio market we've six acquisitions, Just months,

results meet growth medium our to execute will as provide or long-term that well-positioned exceed financial company Finally, and our and we Paul detailed strategy, now the our guidance. is financial we targets. believe review

Paul Oldham

above midpoint operating In second our a despite Total up and the good we the quarter, X% revenue morning, $XXX Steve, delivered everyone. of you, revenue sequentially. guidance, million environment. year-over-year and Thank of X% was slightly challenging

solid very in remained service healthy again We products quarter, also business. visibility Customer demand the Power generated demand which an XXXX. and record provides revenues our in resulting into in our book Plasma during order

the products several hand, and in Malaysia June. output resulted On restrictions idling further factory semiconductor new days our our limited other for capacity in COVID-related in for

expected, shortages margins share. to markets, parts our discrete target. resulting with earnings offset upside, this chain resulting across all of were be in these supply largely critical per tax cost addition, worse pressures of continued in QX gross In quarter, our rate Favorable challenge shortfalls the in $X.XX limiting below items revenue associated a our than

and We be Malaysia restrictions challenging, operating and issues. key Supply expect very environment remain few significant with to the continue dynamic chain pandemic-related in suppliers risk COVID ongoing the most particularly a in being to the near-term.

end closely with quickly across through in we a suppliers our year the to and our of while optimize and made to get our to our QX have With before and the on meaningful and improving able be fourth customers both capacity have are Shenzhen factory in capacity decommits deliveries, quick vaccinated working we impact While as impact recent outlook quarter. to leave network are mitigate improves. More to the to actively a improvements, we production expected employees times respond recovery. extended enable supply maintaining are lead respect the Malaysia, broadly, plan some to additional to

ability While confident significant operating medium our results these we the environment near-term, challenges the will have on as to meet our impact long-term and a remain normalizes. our in strategic goals in

have me impact the our on let our sales $XXX our Now, sales were quarter resulting strengthened the off Plasma quarter, availability. continued late a $XX of sequentially. restrictions just last our to X% impacted a contributed industrial year set ago our Revenue greater to increase from demand Power year strengthen the would million. medical overcame results. of book. record degree semi some and record restrictions and COVID-related parts our the increased discuss XX% in than varying market Overall, markets, team our million markets XX% Malaysia, order were which QX. from the and in Revenues Without the Demand sequentially, further to across up in in grew sales throughout by of QX products. in based to $XXX from these Semiconductor million,

decline was in expected was $XX well giving chain margin I&M the material with and in into which applications. Telecom XX%. was was growth constraints. Non-GAAP growth strong, from both costs. Datacenter enterprise favorable visibility us mix XXXX. revenue and computing to lower higher supply expected up was networking million, revenue quarter, million less for coming sequential to Our book revenue due due logistics order gross the and and quarter particularly hyperscale sequentially The to solely support $XX XX% is than primarily than

lower also productivity exacerbated by We saw restrictions. Malaysia factory the

the expense related sequential of was and in in due including quarter we was margins $XX,XXX constraints to million second expectations. $X.X $X about environment costs, for slightly quarter the operating million our were to XX.X%. be long-term program and margin annual and margins labor increases come Operating the to of higher were additional as to over and the million, under expect our expenses meet chain planned losses. gross While from our up last $X.X supply interest change FX spending. above addition and of Tegam The of Other expense customer $XX.X pressure million, Non-GAAP we improve. half, confident ability in goal XX% gross continue

expect the continue in expense $X forward. range million We other to million to going be to $X.X

non-GAAP primarily tax expense – our quarter. will or not X.X%, million which on Our favorable next rate items, tax non-GAAP was $X.X repeat discrete

we forward, last quarter tax expect $X.XX GAAP range. ago, and to non-GAAP a rate were up to from but remain down continue the in share, $X.XX year per for the the Earnings from Looking XX% quarter.

We from was QX. Operating total to the now quarter cash Turning just revenue. of a and of million, or million net sheet. cash ended cash flow with million the slightly of $XXX $XX $XXX under second XX% balance up

During paid our in payments. in dividend and million debt of CapEx, towards million in the quarter, $XX million Tegam million the $X.X invested we $X.X acquisition $X.X and

days $X.X working flat In repurchased at we addition, ninety stock days. networking capital million capital of of a From were a about six at during $XX.XX worth quarter, our share. perspective, the

by as support million, to higher we were levels. materials raw acquire times. to X.X However, continued $XX Churns inventory increased demand

level in shortages are few churns to we with Although a XX expect to ship largely rose critical the Receivables $XXX million, DPO short-term. it DSO of XX fully associated abate payable days, inventory we demand. the able quarters, offsetting $XXX increased and parts rebound Accounts to was and to to take may million unchanged the slightly to as rose of days.

announced increased million of share stock in repurchase long-term, authorization to Finally, our today, $XXX repurchase support that our our Directors of strategy. Board we opportunistic

demand Overall our continues supports into let be XXXX. order strong me and growth well Now, to guidance. to turn book

larger supply challenging a our around a more the have environment, chain to a restrictions, in and impact expected uncertainties related near-term. However, to levels few integrated circuit particularly revenue COVID suppliers, are to

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

approximately flat to based modestly in quarter second half revenues expect year-over-year levels. the on rebound projections, parts with and However, revenues first we fourth grow half current to

next the We in around year. on improving and to Operating to continued volumes full expect fourth costs quarter QX on lower invest chain as XX% the of about Tegam, we before early quarter, of costs, higher higher programs. realized material full be gross in XX% and margin to being flat with supply expenses and be critical logistics impact R&D slightly the should

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

are strategic programs. customer order solutions, book about forward, our power and Looking we are strong demand encouraged traction we in our solid the the in for increasing achieving proprietary

We technologies of operating impact are to taking supply multiple next-generation to chain the delivering staying actions focused challenges, mitigate while and new customers. products on our and

operating we take XXXX. strong your are coupled the growth believe improves, to actions the revenue With environment we current enable earnings deliver solid let's As that, taking demand, Operator? questions. and will with in us

Operator

first Your of line Instructions] question comes Cowen Company. the Krish [Operator of & from Sankar

Krish Sankar

my question. Thanks Hi. a of them. taking have Yes. for I couple

I clarify, think, you just be mentioned, Paul one basis. on First QX should up year-over-year a to

is right? well of should margin given we should you if revenue QX this think And $XXX constrained about gross A, that are in of And have kind million. implies environment? then basically for a I that be still QX follow-up. So what so, north

Paul Oldham

impact Yes. the the near-term balance, we increases expect we’re But through. the It's also Krish. as from QX on those good in question, full material seeing of we’re roll a would higher cost gross and to volumes. On seeing the levels that based margins improve

Year. gross margins modestly So, say, as the improvement we from into I sequentially the further QX be New would would move up with

Krish Sankar

constraints. Got and given Got a you question helpful. a Steve. it. little guys side are all Really on revenue And the double bit a side both the then cost It of for like whammy the seems it. having

least you any share that at losing do you side importantly, in ease? your the to because said this Thank QX, to competitors? constraints constrained And the some those cost should easing. expect of given revenue When constraints market environment, you. of improve are You more

Steve Kelley

Sure. Yes.

questions. So, those let address me just two

when share. and about then are constraints and market cost those You asking ease

So we talk cost issues. about

we're actual about seeing been cost that in things. two increases We have talking One is, parts. for

fees Some product to of price is that we're the just paying is increases, expedite get some quickly.

is The cost. of increase other area shipping

So amount world. we've a to the from pressure other of seen Asia of tremendous shipping on parts costs

taking on to customers. particularly are action take actions. the we're quarter actions, some sure we the to the for burden with these on that took on costs And So, our - front shipping pass sharing of we'll first We further these make back in customers our that. cost

think actually, the in short market is, we're answer I we're share gaining losing think a from market standpoint, no. share don't semi. Now share I market

to at about I So, market years, it look think WFE. about we share in not rate largely more And This customers the course of going to market coping underperformance WFE. And I as we're consuming parts over the partly quarters. of think when somewhat share, ahead the I that with grew by due demand And of our semiconductor at us from hub ordering to year, customers twice our XXXX, was our relative shortages, products do from inventory. wave. the our are underperform

So really shock designed is a as that absorber. hub

for our pretty been has working customers well and And so far for us.

resume catches growth and with X.X move supply the to up at more to comfortable expect more we hub demand x levels. WFE, year, than as inventories Next we our

I on market is, there point particular to lag is design time and a and semiconductor in other also our are production The significant want products share make proprietary. between in

So, over you the years share in market course need losses to and quarters. look that at of gains

eVoS innovative bringing fashion. key and timely products the us, for market out those in to a of MAXstream bringing like the is new growing products share So and

grow and those continue So customers, moving are if by to they we products, if is be we going our to then share forward. deemed deliver and cost-effective our reliable to

Krish Sankar

Steve. Thanks

Operator

of comes question Graham line Securities. Rosenblatt of next from the Your Scott

Scott Graham

questions for morning, here. taking Good thanks Hey. some and

I in you you maybe in case? factors buffer details, just of the just plan mean, I like guidance question it's margin. of and share. kind - $X.XX first a OpEx a take don't but to quarter getting a is, in of gross there it of have it when and some third model, just just Steve, seems fudge lots sort Are So, know, roll a I old there. putting the the through maybe polls, have in and flat simple the I hard It - sort

Paul Oldham

that Yes, me question. let Scott, maybe take

I when different biggest forward, year that in there we And gross they of are to we’ve are think impact say, change that the look - are impacting we really is three that been, I'll than transitory. relative is And were I'll factors a more quarters three last where one. most that two, margin. or think number four say ago,

logistics. started It will in costs the progressively more near-term we materials also is a where we've our gross some some as price pronounced going those result why the piece gets higher we first worse ran that clearly, see and in see before of And will between the The logistics in inventory time, we we'll quarter. and second margin things. think through both described to the cost to are but expedite impact to part normalize increases. little that transitory there is, chain factor third we That's very like, quarter over it Steve fees, get think biggest supply that's That's fourth better. the be quarter. see rolls in full in it where

parts. factory a utilization, just The waiting is, we for thing factory second because have our lower is

will do third decided have parts we believe around supply preserve capability, Malaysia in, chance Shenzhen to consciously maintain be capacity a to in the we environment the that we've improve want and order the our us to of will as overperform We to is, flexibility. thing some able to chain delayed give and quickly And because closure turn factory get consciously them and to we

haven't nearly we've bit fully extra preserve inefficient. ago, resolve our a couple down over efficient ramped products. that next the That's highly semi, factory of had also will essentially capacity. we quarters. one itself to little So we That but Shenzhen Today, semiconductor ramped year this putting was

So, some those as margin again, of we move look, things as that. in drive think I'd them in and say until that quarters, impacting couple look margin. improve that are gross move there path we'll are like - those the upside XXXX. are certainly year into And of have that we going impact But factors a is us for for to clear a next to

Steve Kelley

further further maybe And Scott. a just comment, maybe comment,

a theme, customers keep priority. first common that we’re actions the this taking think our I basically these happy. our That's that lot

run the for a pays us cost that I off Sometimes bit but it more, Energy. think long Advanced little in

Scott Graham

guidance just I the to of see possible off And handicap the to are a that question the Just be circle beat you want it's horse, saying just that but just dead you want lower here. to guidance my don't to can on gross that? essentially laid than that against out. you've margin Paul,

Paul Oldham

this and that it, in right best tried of we have And wouldn't our market margin say of I call but best look, dynamics our that. we And realistic our of view. is the think be We gross that's to best now. the conservative view can. the we'll it's downside. a try given or We lot it to factories beat

Scott Graham

enough. Fair

tell how to the on gross segments of comes Okay. performing you the it third see just you Could kind each then best margins? us the and quarter, that when also, how you mix of can impacts and

Steve Kelley

Sure. Yes, comments a few there. I'll make

we all our demand circling First the strong to prepared back across see comments, markets.

the demand us, issue. the point. for at purely this supply not for case the It’s at next that's least. quarters is three And just So,

our on front. well now. very the think, we And almost all win front, charts markets it's the doing the in design so, right of we're in off demand And

Scott Graham

And sales drivers, I markets or you industrial, well. indicated And you if you squeeze as of medical just Artesyn the company. if proprietary. of really you're semiconductor, as nice in since noted, that I Steve, wealth you, main brought know steering but now and mind, XX% your for are one your know, you particularly of sort more could Okay. question a don’t

am So, reading of the there? the drivers being into datacenter much versus drivers sort too I the telecom, secondary and main networking

Steve Kelley

saying the am I are accelerating on opportunities. what proprietary think, I No, focus we is

medical, business, other telecom, in also areas. in interesting in also industrial and brought very and in Artesyn particularly datacenter So some some

are we pushing to Solutions. basically to in opportunities partnered those Energy. our opportunities, more Advanced are on come we're unique like so, up proprietary because And customers with typically resource at they with long sticking. And and we They really the lifecycle of that's development our because wheelhouse

Scott Graham

Thanks Okay. lot. a

Operator

the Mehdi from of comes question next SIG Hosseini, line Your

Mehdi Hosseini

the the me your and follow-ups my you It of most the have came from customers I a And couple in is A this OEM to have I are expectations a that at with my had seems most shortages that end. and required I least sectors? follow-up. you versus reconcile experience that experiencing? revenue segment lead longest inventory have that curious just am that And sector managing of to other should from shortfall, of semiconductor semi How for are components how then time. you

Steve Kelley

I'll one answer Okay will and then, our complete maybe. Paul start on that

First, But our are our we're in we of sure to biggest make their seeing we semiconductor closely very surges satisfy working immediate semiconductor. markets across with that all customers target including needs.

daily But could a the being And think gate I So, I obviously, QX did to a it's well. in our as struggle. say, Not job. we objective good that's reasonably QX, their in production.

we customer so, in we closely are components right that we the And using products sure the to with needs. customer work make have the the

that's our one So, priority. number

Paul Oldham

our very June, add to little expectations. the question, a orders than If time think to we right, could That answer semi recover. lower fully ran your result I the I control late in just primarily movement of that, in was of Okay. Malaysia tactically in on out to short-term which was you're just the

And - look you sequentially. getting that's and If are remove better actions would take. both have grown have to that, Malaysia had able we would in semi we

get second Now there. would vaccines we that half, see to the would our into And in in grow semi people total. we're expect we able

but expect grow the half bit, between Now and semi in a the record off half. the we'd levels in to second first timing on depend exactly timing parts little will quarters

Mehdi Hosseini

percent is which the datacenter, your recovery, is you rate And Thank like on year Okay, these telecom see a on I trying telecom you a a recovery one And had decline of each coming for finally I got have decline trending to the stronger understand XX am look at to some - and sectors. beginning the basis. over regarding But are down, year you you a you. better me it how of to see that year-over-year like, datacenter, it. encouraging. very seems of

Paul Oldham

say gating materials. I both good The is Yes, earlier is comments. question. a our markets factors, in it's demand like said would strengthening, we those in

And the we to investment commented of beginning this to networking and products the so, growth that investment and end, say, initial we're sequentially. we're our the be of uptick in where a efforts, can talked get seeing the that telecom levels we our the that But begin the about expect see telecom worse wins actually much decline I'll will see markets. how the over had XG function hyperscaler. levels a which couple quarter, quarter of big optimization to of in in as current time. a impact revenue pronounced certainly, to over that in how conditions quickly telecom, we parts. computing we but design in we a year, datacenter in the last more bounce a remember, as look in decline. Where balance of on fourth year-over-year as were the shipments we And We is parts said we most kind portfolio is part similarly in resulting around of

Mehdi Hosseini

for that demand margin similar? remain end-market one then, strong, the I if different assume item And sectors from at for and you Thank profile assuming Great. to year all look the - I for like should that were me is, now different are sectors as a last

Paul Oldham

Yes.

there Part in that is all we place. would I to our going markets. optimizing aren't dynamics. margin are a And see think improving able is across in that I recovery various optimization because margins of profiles across expect just volumes. portfolio more the to of the environment. our different similar, of factory normalized have say to as it supply But, of we get and you chain Part will that our be into programs be be will markets would part

Mehdi Hosseini

Thank it. Got you.

Operator

of from Scarnati comes line Amanda the next Your of Citi. question

Amanda Scarnati

Good morning.

I of question the there just Can And adding us is power portfolio semis? traditional on what first the Tegam businesses? The have outside is acquisition. sort what you the it’s of remind impact to in your

Steve Kelley

be I’d comment. Amanda. happy Yes, to

remind, we leader technology to to RF what instrumentation. impendence is Just power their is because was very in in industry generation complementary saw RF matching so Tegam And AE’s, we're networks. leader calibration the and the

think is together, So lock which that to ecosystem, international trace Tegam an when you combine enables AE-qualified and we standards. AE

think we the RF our the is value particularly, overall business So, enhances it semiconductor proposition, and with customers.

Paul Oldham

customers, just I'll impact. I when a than in would the than on that million We revenues range support we in $XX annualized was That's market. that say, of Yes. be said, there semiconductor comment greater of Tegam acquired but would of more XX%

Amanda Scarnati

of side. approximately been quarter? strong over supply What in fourth the happening over half-over-half X.X, commenting that the now X sort half around demand your recovery, quarter, But in this Great. changes sitting levels of X% that in that and months? And I at confidence to confidence recovery then, QX back you've second switching talking we're just on we sense maybe kind flattish. of growth is XX% about, gives – were to about what next here the still know last you're talking

Steve Kelley

parts two think there one growth. Yes has Amanda, and I been One constraints is Malaysia. to is

employees in be So, all by will this Malaysia, practically end of our quarter. vaccinated the of

we Malaysia factory. as our out COVID equation, So, pertains of least to taking it I restrictions think at the are the

So big plus. that's a

again, ahead can So go we And that's at primarily. in Malaysia. customers semiconductor full for speed

going of right now few I are will as gating There lot were us QX start QX having hope better get our see are the a to The surprised. to now far supply. get couple September only could QX their others was parts up we've a But we've with daily in help solved because, set QX. it's We to over as and a and That better in that our surprised of commitments in going - thought issues. that conversations going you suppliers we're and into of with a lot most me tell parts, I lot are is a steam that months things what we going gives and that said, I to next to we things sense us those better suppliers think and to better. been I

Amanda Scarnati

question, of more follow-up just clarify. here and kind to One

You mentioned Malaysia? Shenzen that what's is that Shenzen is factor part in that's - that Malaysia just Malaysia. you up gating And each is here and how demand Can its fulfill, it? that still much replacing of open other? And actually the how and offsetting talk so taking some but into going can’t about operating

Steve Kelley

Yes.

expand So on these allow volume doing in the it reason the generators lumpy what could and capacity, have some in a fashion. way components supplement also to RF we bit are in, a come us burst aperture keeping Malaysia. It And because our we're Shenzhen to is open sometimes high allows scarce matches. to this

And expand as to we can if opposed basically one. in locations can build amount of a we given of amount product the time we so, two have

Amanda Scarnati

Thank you.

Operator

next comes the of Your from question Davidson. Diffely Tom of D.A. line

Tom Diffely

morning. you the for Good Thank Yes. questions.

Is looking So, to suppliers I to in of again just more revolve first talked was new of just is all, truth around, you there a expedited for mitigation about curious, parts? lot that? actions. that in

Paul Oldham

these resolving lot our mentioned, management is and we've Steve number is as of say I'd this priority made progress. a one

key to the across lot at look you suppliers if of able gaps likes. we've few But we have said, parts, a of good are broad not those Steve As a resolved. the where been close set

options. So, it looking is at all

other alternative in parts places can in hot more to those parts, similar on get cases, we ways a flexibility. the ourselves find lend faster. channel, to working are run expedite And with we can few the or may, suppliers to redesign sometimes lot in actually some some longer are give to it's parts get that of sometimes from those we those Sometimes parts

it's And there few resolve core just down chain of a shortages. last work improve here. these So hard no throughout actions and management to bullet this key to full the press situation. effort component help It is day-to-day silver to a it's

Tom Diffely

involved customers along help these you And of front, of and and customers’ on supplies, that Okay. have customers well? some your kind pressure got as

Steve Kelley

one here. suppliers. comments it our on certainly few a involving more difference, like I’d a customers sense certainly where We're pressure And than makes Yes they made occasion. concerning our

more extract from suppliers channel. us everybody involving are or our parts help we the from So, that can

Tom Diffely

sounds to on Thanks, Okay. to wondering vaccine. had good there the on how an It’s issue worked it to getting going well? Shenzen like get I to Malaysia and then, vaccine front, good that be to an Steve. the it’s or success pretty am as the access you've is opportunity And hear.

Steve Kelley

and work special of to with the other parts program and key and employees they Malaysia government We Malaysia. in in had Penang a vaccinate

So that's getting early. are QX. we employees our vaccinated signed why up in And

high, job of has think I did good In a not Shenzen, also in us. is vaccination pretty team that I rate believe for the So, our a concern so been them. getting front

Tom Diffely

you Great. And Okay. Paul, your had that de that mentioned, finally, contract the implies? then commence, is when supplier,

Paul Oldham

then mentioned we I for that that's think supplier That's it's from have expected a they right? number date as is any of had approach could the tight, you moves supply a look and this so, you if when of hiccup, out environment. the the reasons. to essentially ship the committed And where we And dynamic when that ripples chain When deliveries it date, supplier through a be system, the parts.

you get of and few around a and seen parts recently. expect You to we've even have those move commitments when around,

a look, lead is, function may that's go you be if hand change think times. of is And view. from had quarter, our we thought that we moved in out. I some this back parts the biggest a And

over you the bit the industry and so broad circuit, particularly - of adjust across the if think or the ripples a through look little those the last integrated to I seen as the you've lead times people parts, quarter range that changes. extend

Tom Diffely

the Okay. Thanks color. for

Paul Oldham

Yes.

Operator

from the Your of of comes Paretosh next line Berenberg. Misra question

Paretosh Misra

morning. Good Thanks.

year So, delta. $XXX billion about guidance, compare it's million three QX goal %X.XX I your sales of with of when the

could get hoping provide you provide So, might thoughts some your end-markets was which target? a to improvement bigger on to if I long-term

Paul Oldham

Yes. continue effect run. is market market going strengthen is that's certainly, It's in been a seen essentially upside supply been XXXX. that have ability is could that near And full think of think term, a through the little challenges market even of in limited to that these and strong to has stronger. the from deliver that Paretosh, the but lot can there be all extending the information to We've come there of conventional the suggests going I in of to and markets our the in demand we semi bit

where move it's in expand targeted that our period a been areas coming expand our some channel. expect other into products, us, configurable portfolio, actually are medical we one we'd further Industrial investments and and product We'd we faster growth than of. So, able that are making focus certainly, to digestion has expect grow and the area markets, from Datacenter out semi. is for a as to computing

Telecom don't networking, even we differentiated lot along, a our growth of we expect to focus on the of there So, said more proprietary we or parts a market. that lot. kind and grow more all we efforts would expect as

as grower and to as as traction So balance, is But fast three. capital the to market, will out help starts equipment grow the - rollout on that the other demand, the of faster areas. probably slowest there. not infrastructure get be will XG it actually market

So, little a gives hopefully of that bit color.

Paretosh Misra

Yes.

say, segment useful. – very these you Now supply chain most it’s And affected issues? semi that's very, or would this by end-market

Steve Kelley

all affected it. that say would I markets No, are by

So, we're areas. for segment. the semiconductor close given that of a in obviously, is But gaps priority the high in customers our working hard to all us, importance

Paretosh Misra

Got last And me. the it. for one

improve on color in high of three any an give or could that book, And time did more three be all order the all three would you or is it’s provide on some least could context you on it’s segments? your – segments more If all great. major them it for

Steve Kelley

comments parts. in all comments, if across that's Yes, at just meantime. into we there could earlier orders clearly, the had in of book absolute we've the growth hear of our look is And if ship in lot ship demand We don't in we Semi, customers. buffer the there. a as take that wins, areas. order it you more our but Clearly, that's the you necessarily Steve said, the kind we in

will getting come good comfortable growth to and more your certainly those growth higher have semi. in that on back we so, level help to continuing we think there And

actually Our is in order book strongest industrial and medical.

have additional have – If well we very telecom it's both we you to that's our ability in parts, that networking. come because the we we But relative resources attractive. think and again in we over to, look encouraging, at think deliver also had datacenter that's to shipment and our are because effort the good levels and market, really demand orders that applying

certainly So, generally, lot order of demand a a in But perspective. and growth book from semi confidence stronger we it's strong best have our overall. order little is in a the number in I&M

Paretosh Misra

guys. Interesting. Thanks

Operator

Raymond line next of the Pavel of Your James. from comes question Molchanov

Pavel Molchanov

a taking the you actions to mandatory taking Or a utilization? that Back restriction in plant? matter the purely of are you at for are Thanks terms hours Yes. under legally it operating of, Malaysia, operating curtailment factory question. or of is precautionary kind

Steve Kelley

Yes.

in less So but June. under much the definitely operating back were constraints, they we are than Malaysia, in are constraints

we of work maintain model our XX% capacity the is current So operating think something with could and definitely production output. we

Pavel Molchanov

And that XX% is…

Steve Kelley

regulated Yes. or That’s But and That's Yes. mandated. that's choice. enforced not our highly a monitored limitation.

Pavel Molchanov

even for In I you six potential not the supply in that this a in interesting discussed kind that And have smaller am did that standpoint, some presumably, more opportunistic are some Understood. pain perhaps if last of creates shortages feeling you than context ago? players months of your M&A half from amply exist the hour, are. been curious the space

Steve Kelley

of any are have appear not is And reason. I are. quite M&A their But because think smaller some open players that seen thesis because the we your seen we opportunities customers the even up yet that that. opportunities of we than correct have worse feeling of

Pavel Molchanov

Thank tomorrow. guys. least you At

Steve Kelley

Thanks, Pavel.

Operator

Needham next of of question Company. Your Bolton Quinn the line from & comes

Quinn Bolton

guys. starting for consensus Hey, just below the But it. about looks it third I you're was. XX% quarter missed off like Street where the maybe guidance, Maybe

is the get it limiting able wondering bigger that And factory from that the for be looking in XX:XX? constraints How components? you give any can't us ballpark, one of how of sense contributors? have it Malaysia split are movement to impact output where Is just if of on so, much Is relative supply might thoughts sort might quarter? a restrictions the the you or you much factor of in

Paul Oldham

it's the parts. We talked that quarter, the over Yes. sort of to third COVID availability quarter, restrictions improve. workforce that about in hopefully, third do the Quinn just predominantly We as impacted for additional late better think restrictions vaccinated the June. and in get us in much there. a Malaysia materials to of we things get But course we expect quarter continue being our

predominantly supply our QX. chain-related. So in lower That's it's revenues impacting

Quinn Bolton

outlook quarter. XX decommits from experienced some had question, second I the half wanted just fourth follow-up you the to for ago it. A kind Got mean, and you've on obviously, second in the bullish guys more days suppliers. confidence of a

read makes again? think you what the So, that doesn't I you mean, press. happen

Things and But kind on margin. are still to hefty guys fourth a the things. other talk trend XX%, start be Hopefully, of companies upward bad. we’d they pretty quarter-on-quarter quarter. you sequential You chain up supply is the pretty maybe XX% the talking to guide plus for for

Steve Kelley

Yes.

As we're our gaps most Paul and last down of earlier, to closed few. mentioned suppliers we've the with our

from the four lot last And focus those problem from what of of most and commitments lot see, months give suppliers a could last we're in this few of suppliers those And of the getting year. so, I pressure. a better you are

I that number that confident to in relatively faced But see of recently. can of it, because the not we QX, meet issues I QX, some am certainly, actually I ready commit but it. am exceed upside hopefully So, to and we

Quinn Bolton

good then maybe last guys question, you Great. sole the are the said you have to Even sourced your solutions of percentage a you deliver on customers.

other just everything to mean You fees, guess, I of your likely running am relationships. some on almost things not constraints environment. you your you hand realize that expedite customer obviously, not customers understand either. that supply like in the supply given But, sole something with a cap are are chain in these I I charity would to the pass ability equipment-related. are along trying the costs, semi think I struggling protect I

chain of know supply you like in you trying probably pricing pass terms to should of that I of here you're to not you're the there costs increased board. along across medium some feels these those be it where costs? these some along that in But a can raise negotiations So, facing? are pass ready

Steve Kelley

these of the our burden shipping we and how the we share increased the could point on I parts think and costs, cost. have continuing think both it's a dialogue customers good cost I with

customers, because can't we So, I forward, sharing think bear and hopefully, the alone. you'll it's I more see, a moving difficult cost think environment our with

Paul Oldham

Yes.

actions the think and we've the we mean, I timing. and seen that Quinn, learned take of quarter, difficult in I part more think, more is we've that of last become timing. part that’s just But in did on too early front just year. I so so, things

Quinn Bolton

Got lag a Understood. effect.

Okay. Thank you.

Operator

now the call will to concludes turn Q&A This session. back Steve our I Kelley. over

Steve Kelley

joining thanks today. for Okay, us

and of executing front We are are us opportunities in strategy. the about excited growth on our

a While to earnings beyond. book we but us that weeks. sets our this we in the and near-term, and in coming demand with many coupled look you supply believe are for We deliver Thank talking growth to revenue well solid strong order the in XXXX products, you. record constrained by forward to of

Operator

This conference for you concludes today's participating. call. Thank

You may disconnect. now