Advanced Energy Industries (AEIS) 1 May 242024 Q1 Earnings call transcript

Welcome to Advanced Energy First Quarter 2024 Earnings Conference Call. With me today are Steve Kelley, our President and CEO; and Paul Oldham, our Executive Vice President, CFO.

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

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

On compensation, are on detailed amortization, and restructuring impairment financial financial acquisition-related a from non-GAAP unrealized results specified. and non-GAAP found GAAP be press charges gains between A unless costs, reconciliation otherwise Excluded our or foreign results today's non-GAAP call, can presented basis are losses. today's exchange store and measures in release.

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

afternoon, We and first challenging Edwin. for joining everyone, had Good a the call. quarter. Thanks, thanks

other revenue weaker that chain towards which After semiconductor of We believe constraints was forecasted. shortfall developed markets distributors. resolved was pockets Although stronger at in was revenue of our than supply were largely than XXXX. due to expected, and inventory, end OEMs our the revenue

Although deliver we and issues, achieve target we margin magnitude. expected guidance our gross able its correction, were range. still we an within to our inventory earnings Despite these underestimated

outlook encouraging. is for XXXX more the Our remainder of

sequentially, second data expect we the to mostly revenue the In strength by in center rebound quarter, market. computing driven

data to the We center improves, as semiconductor computing the half continues in revenue grow also and of market expect strengthen. gradually to begins industrial second the the normalize year medical to market

invest continue R&D. we Although spending, to in we carefully are controlling

We new our are and moving speed customers. full ahead, bringing to products technologies

Our expect improve. gains and market to we design make been share pipeline as stronger, win meaningful conditions never has

loading qualifications. advantage we plan, front, product transfers are and consolidation manufacturing taking On speed of [ lower factory to our ] the executing

the of gross manufacturing expect margin as benefit P&L. flow to beginning to lower We through second our efforts half in costs start XXXX these

inventory demand. factory as this are parts environment staffing dynamic strategic maintaining a quickly as upside piece to well remain appropriate to need in to so year, do operating are that, To nimble, able we respond We we levels.

plan of we inventory finished take addition, build to some goods to advantage In capacity. manufacturing open

color our on some Now each I'll markets. of provide

better growth helped by First semiconductor value-added revenue was slightly quarter services. than expected, in

design and On that first eVoS plasma report front, we power eVerest the major I'm have our next-generation for wins to both products. the secured win pleased

of expect major wins, which we to share course years. this drive the believe in Over will year, more the design announce we gains coming

eVerest We have customers have and already another that eVoS systems more we requested systems. shipped before year-end. XX than XXX ship And

of more customers demand new effort the We up efficiently into much of these level are extraordinary leading-edge to for operate nodes. at lot our enable which putting a with keeping technologies

eVerest products. The has development cycle modular architecture of time dramatically derivative shortened the for

accelerate Our productive, enabling introduction engineering customers to systems. teams etch become more and next-generation the our deposition have of

took For technologies and power, modular our work bring solutions approach, control both eVoS to voltage, around world a best-in-class closely and advanced eVerest, make broad the high to RF development products reality. leveraging low a Advanced of customers. these Energy together portfolio we from our to teams

supply Design quarter product including focused electrosurgery warehouse chain Medical customers Medical, Industrial now in differentiation. in robust. After with years of is Design been wins major inventory have was innovation medical first to X extremely revenue shortages, activity corrections. squarely by where and Moving quarter broad-based imaging, and Industrial wins on dealing impacted first automation. our are

and In capital and density. defense, power platform March, lasers applications large charging efficiency high-power Target we launched and industrial our best-in-class features equipment. stations, which Evergreen fast aerospace include

Medical sales includes e-commerce Industrial new products and which focused new teams by Our platform, capability. are digital our now supported

customers and with to closely works team modify meet our products engineering quick-turn standard customize application needs. our to specific addition, In

expectation program to of year. due later where a Moving was on revenue to hyperscale pushout data single the quarters center quarter first the below into computing of the slightly

enterprise in AI hyperscale second forecasting driven rebound share significant investments are quarter revenue. increased gains by servers. a and AI in We our

revenue networking sequentially. high Reduced decreased constrained investment infrastructure and levels Telecom inventory revenue. and

to challenging expect throughout XXXX. We persist market these conditions

let summarize our outlook. me Now

for be will data the drive growth. revenue expect in sequential to revenue our In demand the quarter, quarter first trough year. the the second computing expected center We we surge

move unchanged are call. from largely driving second quarterly design into and the win the last based at gradually products our new half, will outlook our is in is our technologies growth. we the This and an activity conditions As markets all-time high. remains earnings medical semiconductor, on industrial expectation, and sequential our Customers improve, embracing

design share target these gains that our market expect in wins We drive markets. will

Our confidence XX% as on manufacturing our above move consolidation margins giving track, us is gross plan recover. markets in ability to

balance strong inorganic sheet, for sense. financial a which with make to continue opportunities, growth look we Finally, strategic and

Looking acquisitions will forward, manufacturing, potential long-term investments and believe with we that the making accelerate and are coupled growth. R&D we medium- profitable our in

now will financial provide information. Paul more detailed

Thank you, and afternoon, Steve, everyone. good

to First of we meet within steps and environment Despite XX% markets. control our our share our to target lower ] our which quarter guidance. margin revenue per operating driven us quarter-over-quarter, declined us the allowed was a gross took challenging execution expenses healthy earnings by $X.XX, nonsemiconductor demand [ product mix solid in enabled to and deliver volumes,

The for the increase same bookings improvement, believe levels some our the of the year. trough revenue rebound. this higher slightly year by declined supports on line signs customer QX revenue of X/X was end with outlook market QX telecom ahead At expectations. Based our revenue reduced QX environment of at in from which the expect more Semiconductor second will the higher-than-expected and consecutive we of last networking over remainder of early of and in destocking business target the modestly was than time, and a was to demand Backlog of our in first sequential quarter be inventory customers. our revenue. was characterized and the quarter

semiconductor X% financial year-over-year. down growth review our with more detail. let's our Now guidance and million $XXX better sequential results in were Revenue services. in the in X% Results sequentially slightly market than was

both million, half. Revenue We in the down first this last lead from ] the higher-than-expected revenues channel XX% second of impact around continue was the to shorter and market distributors. from and expect at rebalancing of medical our in than OEMs with half quarter industrial XX% the and The year. QX inventory times and inventory [ increased throughout last levels $XX resulted level stronger

expect remain this half. We begin normalize level the until to around second revenues inventories in to

million XX% revenue Data XX% sequentially $XX and center down computing year-over-year. is

we year. had expected into lower also Although out program revenue we a single this hyperscale the quarter, remainder push of saw the

starting multiple we second However, AI based increased on the meaningfully programs, quarter. by in in recent order revenues investments rates, driven expect rebound to across

and $XX million, the following customers revenue to networking and declined XXXX replenished in chain crisis. XX% and inventories XX% Telecom which over sequentially strong a very year-over-year following supply

lower our and to due in weakening the destocking. than expectations markets, impact increasing in inventory both telecom further the demand even However, was networking QX of

We market of expect persist the year. end the to conditions these through

XX.X%, volume product basis points XXX points actions are due down quarter from was favorable quarter First expectations basis we gross despite from year. to to Results last the our and with XX last mix line lower were margin taking in cost. and lower

expect at be ongoing volumes higher favorable we QX less consolidation second We similar but costs. to higher and mix. activities, reduced our gross increase half, manufacturing the a margins gross material driven continue In volumes, margins expect by on to to

we target. despite the $XX.X million of down is and more which X% QX environment. ] reduced that than down expenses from consecutive inflationary opeperating our [ XXXX quarter Operating was below spending, quarter from the fifth were last QX

and activities spending discretionary the to on We while platform controlling new focus to investing continue throughout support year. will product

income was our Other than income EBITDA million, million interest depreciation higher guidance, end $XX million. at quarter, interest Operating for adjusted $XX and was $X with was was of million the our consistent $XX QX. high expense, with income the

until quarter other our against income million outstanding of swap expect We to around per loan in the this expires $X term remain year. September instrument

to geographic target of mix non-GAAP was QX, rate and higher For due XX% timing than tax our our profits. XX.X%, of

the the XX% the in XX% tax balance rate of expect We year. range to to for the remain

previous share quarter in was year-ago to compared First the $X.XX EPS quarters. and $X.XX per both

sheet. cash to from investments investments payments, Timing cash at flow. the year and operations Receivables Cash $X quarter on to XX was revenue was by increased declined higher QX. was or days lower slightly XXX in continuing flow XX QX. previous Total DSO lower ] $XX the inventory from days inventory [ and resulting end of million million and balance Overall, our the days to first XX with impacted net in incentive $X.XX of strategic X.X% of on $XXX million. up Turning QX revenue in billion million. inventory $XX of increased in cash sequentially, DPO days.

the During CapEx. quarter, million in first we invested $XX.X

that will continue approximately XXXX sales. We to expect X% of be CapEx

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

now our Turning guidance. to

from primarily trough second QX in a computing. revenue [ a expect center We rig to by quarter ] rebound data driven

be inventories. to we and levels medical expect networking their to the and semiconductor markets to and at continue flat quarter, We similar and balance to revenues expect industrial as customers telecom be first approximately

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

in at gross and margin We QX remain volumes levels on improved offset mix. less by expect favorable costs, higher around to QX

operating to the product scale to to investments investments company. support expect new and $X R&D We increased expenses sequentially due $X million increase QX to million to primarily launches

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

Overall, to we near-term want Despite the sequentially important set lower we QX. market view few in it given invest long-term priorities Q&A, points. revenues improve QX, with while a for dynamics. opening up continue a managing highlight in to the prudently Before results I of expect to and

grew largely had half as revenue by previously across improvement. and projected, we addition, incremental timing expect In the we market of several second driven programs

and believe on the pull for products differentiated with this strong technologies. are our Looking year, we highly beyond customer focused markets we right

and As a growth as market markets expect deliver gains result, strong share to we recover.

will previous earnings Second, for with believe we line largely our to continue in the be projections. year

our gross profitability. plan to our and We are margins improve executing

half of reaching improves. to to the expand year XX% year, of by of XX.X% the the to We in gross expect end continue second the our as target margins revenue

drive while [ in quarters grow operating over manage and products to addition, cost modestly new next the ] we our to structure as expenses future In growth. scale investing buyback several

of revenue recover. this as recovers our to prior the higher on are than margin Beyond to over million to quarterly believe year, gross our as track XX% and earnings deliver goal achieve range markets peak mid-$XXX we we

have we make strong sheet to and a execute balance acquisitions strategic that positioned well Finally, and sense. are financial

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

you. Thank

Wells a question line first Instructions]. from We question-and-answer of will be And the session. [Operator conducting from comes now Joe Quatrochi Fargo. the

semiconductor. broadly kind ex maybe first, Maybe of just speaking,

inventory than sounds more a it understand, bit like to trying expected. destocking Just was

can forward? of we're as talk move level point end reaching finding So through confidence you visibility the of or some about an And year? of it of gives what destocking you just inventory the that kind your we

I'll make a is this few comments. Joe, Yes, Steve.

There a and networking and areas the main right. In forecasted. You're the little of QX, end than was we the happened significant was and networking of second what destocking QX. bit we Medical. telecom One of more a that X are was also originally saw shift inventory was weakness. there's built at year. demand basically, And we lot the then Telecom a up in Industrial think

telecom year. so networking And come and to the market back expect this we don't

So is Telecom Medical and years issues. a focus us during the real that because big Medical. on the customers few little more there What with the lot a are they that customers. somewhat for the it's Industrial a is difficult suffered bit Industrial supply as group more chain makes Medical, is many And Industrial networking X most unique over just customers. and last

late. So late issues most 'XX. supply they've from chain early recovered Probably recovered people 'XX,

procurement. over quarter the case those And year. of mentality years in a lead just sudden, shift very first all what saw this sublime in were of to time X encountered a in long customers then so just the contraction a in times, And you past

And pockets of these inventory. so really what that's caused

customer Some sometimes end the are of many distribution, their those those but and customers. at are of at in

level it's to exact why the difficult Medical. more And in that's of track Industrial so inventory

our a customers, this and in already customers. QX side, QX move distributors and year. good is medical seen from discussions QX trends medical. orders we start on normalize some news or see resales we're based the to seeing signs either we're also We to in with QX direct to with think The as analyzing Industrial, going on that's encouraging and recovery starting as on we've recovery, into

we 'XX. the Medical, in saw of As Industrial QX we correction look back, QX. start

this the in we're so of of QX That's today. that this think year. QX we'll be And out why third quarter correction of we in or

revenue strong as it. driving increasing been rebound And a hyperscale talk and about in That's on you investment Can color. you market. Because quite for computing participated has you driving that? what's the servers obviously, maybe has AI the guys haven't a guys And quarters others investments. helpful that there. in several AI obviously, as in center talking, follow-up, you much as Got sequentially, mentioned data growth are

Is gains? that just component share Can market availability to pulls it that? are your Is related in. talk you it customer more, about that changing? spending what's So you just specific other customers something

happy Yes, a had data after to need the infrastructure. happened the what to. they I'd And with brick-and-mortar. had first secure NVIDIA things then and They customers complete to build to be go in focus Yes. them. was, think chips We our had to [ modules, supplies center primarily other power on Then data they they can ] centers.

I market share to So regards in our data with we're okay think the center.

of X metrics actually and important to fact, compared Xx to important reliability, with is The density racks. selling those very are conventional conventional Reliability power extremely consume important factors to become these much power In very servers. because based we're AI servers. are servers because density. the efficiency these differentiating efficiency on costly And artificial racks power more and intelligence and X

position. So we in good a think we're

thing other execution. is our us that's helping The

some So that to some attributes. technical our addition customers. provides think we've able requirements been differentiation execute to We near-term in from our on

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

Thanks.

some For metric? on design the by comment activity at amount about design by year-over-year starts basis? or where And of other is dollar quantify that measuring all-time a can in an or are you high, is, activity you being

you Yes, our in part dollar just to Will the some design our of value Steve. funnel Medical of for XX%, at give Industrial be XXXX, increased When funnel, win merit. we the business. look happy figures

the in we're significant. I our making we've we them another on platforms. more. want customers means shipped they look end to opening wins. about our are those the semiconductor that demand for have to looked our fact very platforms It initial talked before more of I shipped already metrics design business, the have platforms those and part eVoS XX eVerest XXX progress of the of units and with year focused And As of The major that at the this and is our

that not customers' user seeing is end And these units also into laboratories so are ]. going into labs [ what we're but just our for

there's process, created ], [ [ And X-nanometer to for now tool and the it's record ] so of NAND. to in super or be being next the a as nerve race which included also or most memory the whether right is the process DRAM advanced

I semiconductor design really this shape we're year. we're share based on that And see our currently major increase So in there. think we'll on in good wins that market working

ready Yes. manufacturing came for That and to if is for it super that? encouraging. eVoS Are you high-volume eVerest

Yes, it's a great question.

also products will is of The high we and that that I factory manufacturing introducing sites some calls, the our quarter have So Thailand. and mentioned X eVoS be eVoS, second for And in building come Malaysia third in And previous will eVerest. plasma one eVerest online next power in of will the process we There'll of we're today a Penang. products. in in in first we're running the products. year. be there have

think I shape. in So we're good

And I seen eVoS mature pronounced normal, given We year. and the we've eVerest. than very think strong for this could be insights more [ demand the X ] solid have ramp

for second or want or Got model predict the call but what you're my rebound, my rebound of not follow-up. in follow-up is noticed XQ parse confidence you words know the it's talk the end your the I revenue and today? which then you I based middle far can I just a about to it. trough, when the high low, guide Can leaning flat. XQ hard closely, see would really to too more on maybe towards low from whether don't I you and And

center is is So for Well, orders. burned, our basically say QX right? surge seen the once What I side in relatively conservative. in the would we've data guidance think shy, I twice

basically hard working as can ] we disclose this orders we're quarter. [ as So

pretty that's So with. very I for basically modeling is think low flat, the secure. of to we're business, And the begin rest which

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

your $XXX real bouncing -- $XX I million, So kind quarters to The on to like you're come can around X a a just you the Or semi really within customers other better are trying you of now. went through? I'm of rebound wonder going revenues we've you there were starts million, do cyclical kind million through range this but help understand the you this range downturn almost understand cyclical to flowing your in? get is, question that had semi destocking. like, I revenues been and for have question for minus the $XX NAND, is think vectors driver CapEx drive revenues semi true a than been

that's has think part TAM Yes. the in of the big equipment. over of a lagging I bigger Krishna, right? been I drivers semiconductor year been think logic, edge past the one

fortunate demand XX for the part a of has been suffering last been there. And been months. DRAM, be NAND we've the also to that. So Obviously, we've low

see what as we begin moving the logic. and for back forward, things second think then NAND for we're to comes see in half, I Krish, we edge accelerate some So is recovery also to expect online. expecting XXXX And lagging in DRAM manufacturing mild

current So that for on years. that's top for the demand the processes. Then been we've layer on and for memory logic we leading-edge outlook producing eVoS of and our products eVerest

going we is So be for good very think year XXXX us. a to

follow-up a edge that. have more When expect for rebound? Steve like question do you semi and lagging Paul just And after to I X

Did Okay. it's I'll very take go ahead and say. difficult question. that to

lagging have a difficult I I there's been think And is back. China for come things it's way And the lagging edge. when while. in think to think trough the non-China edge for going that's and we predict about non-China edge, lagging to

we're So see mode. wait to and going

reasonably still develops have see similar it's that And strong. what how from The to in China. quarters. on is the China customers coming our demand in seen based think I we've we'll

the been question, then Got follow-up in margin of And for Paul. the in this XX% stuck gross minus. it. the quick has plus or it. range Kind a Got

ever In is is about the any headwind do premium rates to million predominantly factory talking be and cost of getting tailwind, That obviously, captured? this rebound that past, or You're exit gross spoke $XXX basis XXX you cutting see XXX, manufacturing expect revenues a for quarter? to but exiting higher going premiums a 'XX points volume-driven about the did also, year. down fell pricing. Is margin calendar through. you -- a volumes you the being become And

Yes.

So good questions.

pretty able think we're a mix, I And we starting were of the be had say On of margin, we to some at defend cost that in we -- the down that's first XX% some margins manufacturing think the gross Q. actions. the on revenue. good is, I'd but also thing pleased And our in range function the see gross we're of benefit sort that will same to of of

It's end see Two, as big back the on to and was of have the of starting the to the we we million as the products year, moving we that's $XXX mix We're from consolidation site up of benefit the But shifts see is, of our transition. to towards we site. roughly where one first the back revenues second a build look which to changing kind we means of activity. come another, first, products think, can before. it thing, take site I the to more out manufacturing before are

start see really latter to so to this And of part year. come benefits of in the we that the

a the say, improvement. points basis, of XXX I on basis That's just worth general

model, probably we higher as about last of XXX that million volume comes And that. of mentioned basis another quarter, is in You're right, at is our $XXX getting revenue. points

had within which by So track that same end $XXX to said the on the million of see quarter means, we we think projections generally, we're year. range the we last we

a we've through. is lot last has the come material of already The the that seen benefit And piece cost.

wash running basis back As we quarter. X news next was And points margin. if X down XXX into you the the trending or points or expect you quarters, recall, of through bad down in been that is basis so. to XX to gross go largely that That's

largely parts back starts think getting So fits have I of terms always there. We a these here material premiums and the or normal with range. is cost into in some the

think that's I So normal. back getting to

our manufacturing to of time, down recovery in volumes. And over improvements. then longer improvements, coming period our cost it's Now a portfolio

in to products, talked in our Industrial eVerest, with Steve's eVoS, Medical margins. should contribute wins new Our seeing about, all better both and semi design those we're

and AI center data that's comment, also I'll we've a capabilities that is, of that see the on. X been mentioned, as really the as make demands focused market that by driven other lot we investment the recovering, Steve

focus As are where that. you more differentiation we've a recall, willing for had selective our value there to strategy customers pay to and

market better because be margins than So that much They're the as where as the while they strong in of of aren't part we used focused. others. to

as And as I us well. we go also so forward helping think that's

James And the the from Company. Ricchiuti & of comes line next Needham question with

more about revenues. what you the to beginning of Paul, it if to market's be and are increasing of will recovery? think see support OpEx, sounds you markets these and about A guys we as look Do out OpEx the half second R&D to kind general, question see in you the higher required -- OpEx like spend. recover. But just need a

Yes.

a think guided to I Jim, that, is we higher million QX. about think $X that in way to to $X million good

as up, based volumes -- think costs. some see of a little bit we'll variable I pick

products to getting accelerate continue qualified. efforts these on We our new

similar in reasonable increase couple about a quarters. to probably of next each the of it's think So

market. actions help else some all Now new mitigate the we maybe I earlier these growth because as about think get that's out we've talked near-term into spending lower, we and the and taken of everything to products

to we probably QX kind a way that's QX. gave the So about similar of in relative guidance increase in QX think to and the

whether you presume, Got activity on coming, -- from seeing Can that with to Is the customers? some little you the design bit starting Is first. it. split the want fair mainly commentary wanted back of may design to X, existing Steve, talk Medical to that from Industrial provided say? Medical I wins you I a you're in to about markets. go win

medical. with start Yes, Jim, I'll

ago, medical I Power customers that set couple of we correct. a our think medical years a complemented When of of set had customers. SL you're they purchased

been these we've the for X cross-pollinating So of sets the between past years doing X products customers. is what

set customers and a to got And I smaller think big well-defined through then [ distribution. go medical offices relatively has ] of a of lot

So [ yes, Advanced to most SL via are either established through the Power ] design Energy that Advanced or Power. brought of SL coming big wins customers Energy

Yes. As industrial. I look at industrial. -- in

a broad a different, So of very, because is right, bit very set it's little industrial customers.

what we've a let's we've differently So done there, done things past, X.X say, the over number years. of

of The first world medical roughly industrial force half is products to Industrial we sales the only Medical dedicated selling our to around customers.

So this has really been a big design factor behind funnel. the win increase in the

The makes Energy products developed much receive us. second is quickly to we customers a from website, byproducts to for it easier new which specify and Advanced very from

customer. So a if business much I company to think an Medical do with we're Industrial you're friendlier

The is And does or team third take the application. this of they [ engineering specific increased based customer on the tailor will thing is we've team. to requests, our products ] they And our quick-turn size those products. done standard we've what customize

very typically increase XX% in And spin-offs from see X could do tent. custom the weeks and quickly, a is products. standard development products we And roughly between those those we so X

market And player a this in leading more we our so share, Medical. much ability a Industrial of lot a and forward activity look to optimism Industrial become all as Medical about significant to is

the where question, half second your X semi. is I just may. question or ago color. improvement -- it. a in ]? today, And say from would But Got versus you Helpful less And months sit optimistic about [ if on last broad the you this

the about it's same. say I'd

in single-digit perhaps the support have a half. high today increase we a in first forecast half percentage, semiconductor I that XX% to second revenue think

saw So I think that's the that same ago. quarter a we about

So of year. really, nothing it to half changed this second has when the comes

with and changed based next is first at eVerest, what's activity and of right of customers and wins that's us our seeing design review success think intensity I our year, for on now. the our eVoS

Seaport the comes line next from Graham question with Scott the Research. of And

the better [ outlook. Steve, you the you up hard, on you I have and have the sound rent data I exposure did guys a most wanted in was a the others gross held seeing quarter of the better and really that number seeing you question of declines been the center you because well and as center know in I ask ] ago. cover sound data companies but revenue a not business you're quarters, than lot a margin about to fact, a little of couple that that kind I us cases, in, last know of ] there of data think much more color conversion way, perhaps declines that for going kind you let's on I and or the it there you equipment sake, optimistic that of contrary. orders would sound to couple the quarters goes else? [ something of say, the the you power walked through [ that that some ]. last you Because destocking involved August obviously happened understand want centers about to was try what forward. back just to was do,

Yes. Yes, Scott.

these for commitment the build it and centers procurement where can't a of AI-enabled modules data and high-bandwidth the strategy memory. sequential was GPU without you of just think part a I chips

were So and come those I to able to supplies. companies they to think advanced Energy power once able were allocations, our secure right? customers Advanced Then like purchase

So it. think part of that's I

back the is over this first, last quarters of cyclical I look a I it, is X X market. or think second as part

If you way look the pretty roaring tend much back it they this a go -- and that's into XX is inventory over schedule. they mode the years, lot on back. digestion to it's last an and they And buy come then

we data cycles see we based went on So quarters the would last from to through. center expect demand the strong X for X X next to

that chain customers by impacted dealing inventory factor were years. is, supply these the some the were were the with they past third think as also issues few And well. in I I'm issues there sure

the not you there, the looking of What on of and announcement sheet, are back. how liquidity for the closing? more the medical what's I just deal your or closing deal is outlook of couple ] balance industrial of you're that debt is just quarters pipe optimism now there. look? right you timing for year, a of that the touch And this wanted does to that essentially markets maybe it on sluggish [ did sort a And a

Yes.

So maybe I'll chime in here.

a fortunate we a I generate September. we successful and that in as that had think cash deal convertible we're in company

we're $X in on sitting cash. So over billion

we're company. make a doesn't said, That do deal not going sense to for that the

we're did that integrate sense we for deal makes for make still company looking strategic quickly financial so gross the average our a margin. And sense that the and for company, up can

working months. we'll the it, still what coming on we're in So develops see and

is a guess businesses X is your months more to those question was optimism than barrier. higher? thicker of may is that it little ago? a the weakness your be pipeline I Or point, in my bit And a deal

pipeline We've think the our potential decide always a relationships be slightly to had line we're move. our Well, in that when so with a deal to -- there and been target they it's companies practice make good time it's may has develop pipeline I thicker.

That of to I be really so there's think always where and issues most valuations said, that's end these I to think going discussions up.

a figure value what's both parties. You to out for fair have

Instructions]. [Operator

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

that strongly. strongest booking quarter. if just more for What break were trends your indicated the you a were the You positive could wondering during bookings? down areas I was little

particularly And saw market it's having And are of we I've and Yes, I one come it's that increased only and confidence of ] it mids talked those right And that about quite that's [ as come us our when to both interesting networking. the sort exception of telecom bookings Mark, bit we challenged soft typically things it's represents backlog down, a part mentioned, to inventory well our all Steve indicators bookings, because now do business. think that with But as publicized. conditions. is we pretty well gives of now expanded back. frankly, as of given starting and think market of across

terms through how backlog it your terms more a in does of current improving as type Is linear front-end, backlog, similar seeing? recently you've profile? of is in Just it -- of wondering of what sales? what the terms been And back-end terms it flows margin what in in or about

Yes.

made because about margin our mainly a I of think maybe earlier is the the portfolio. the improving I profile bit, similar, of strength comments

think same. characterization think is the of I part is, that I still second the the

X to XX more have to come weeks. You have normalized lead of times recognize to now down levels our

is we're for again of starting So that loaded. issues. backlog is that front second part in confidence their the seeing year, backlog that, Steve particularly, to work say, in us I'll of the inventory least gives maybe as the the mentioned medical, through which at filling half pretty, market more But

And the TD is question Cowen. from with follow-up a Sankar Krish next

is on on I But but hyperscaler a took I quick opportunity, don't want everything, you have ]. AI years there's renewed a renewed defocused, clearly, just when on AI. to management of focus hyperscaler. a remember with had the I questions. [ there's IMM and a use X term over focus few power One on like focus ago the for less don't

think you I'm Because of do So that that. was the one the [ But peers, you Do on game point? been matters you your fact extremely issue? a winning you a price past, defocus you. now. for from the an is just that the Or there's AI lagging like think given sensitive of for like kind kind very product end questions defocus of you about years quality think has the that at really hyperscale compared any few that I it's curious, ] some of in to understand day, last that of the the at is of do in hyperscale price and hurting not servers

Question, Krish.

made The gross a because heavily products from fast Medical invest in basically ago a few Let me up semiconductor were decisions to as just Industrial share we as those we margin average years standpoint. grow market could all and recap. us

center data and there. business And side, few and keep wanted it. bottom it different that then that of we the a is and strategy, a we ago, articulated executed on to improve the on we've we years So have that

we good impacting data performance. be. we the line we're in is over news our But margin And a average deal years any the quarter, without degree. gross on X margin performance business much like probably and in because of a we're still past process corporate surge to bottom we're with the center. never significant the not of happy gross improved seeing can will It's being that type today this So now the with

very the we're So happy with business.

that teams differentiated And start focusing engineering opportunities. ago part was on years move to of our more X

less it's into I So differentiated revenue some think those seeing opportunities what are us, of now for And developing so opportunities is helpful, us. commodity of very different right? focus paying And which large-scale off of is focus. more a we're for a and

Got another just How know range. a give of you didn't to I million is it's like the -- quick that it. it. $XXX much Paul. selling? Got And then for the follow-up look number, but backlog following million in $XXX

little commented XX% a and proportion that same it's I'd about from about would -- Industrial it's the Medical represent It's we've last I maybe as than quarter, Krish. before say down is so combined say semi backlog. higher been. semi the the And that, slightly of Yes.

So changed much. think I those don't pretty proportions have

question Miller next is with a from And Mark our follow-up Benchmark.

your nice on Could interest just you what's increase. wondering describe a in had there? income I'm

Yes.

As the where effectively accounts quite our in that market, that And we've that money money Mark, we've investing very been X The note. fall. yields do X.X% is get able you invest money been to we cash from places, that able we good did we it. raised news globally we to very been quite can short-term at raise things. convert so in about last on One, the we've at coupon. at know, good concentrate successful And cash

generating And so we're interest expense now. than income right actually interest more

core from that that swap interest. a the our in term September. under amount about paying loan still Now we're in will And also we're benefited is wherein of only that fact [ off ] for percent one a X/X come agreement

lower start think than than to expense a but expense higher still little I have in come income interest you'll income So but we today. have see interest more and balance, we'll

in interest the you expect quarter? expense lower second somewhat So

] [ happens September. to More income. at second This when like I'll the half. first second look total Otherwise, quarter you similar very quarter other look in

but in half. second lower the Okay,

Okay.

at this And gentlemen, also no question-and-answer that today's and ladies And time, questions. session. teleconference. concludes concludes there And that are further the

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