Advanced Energy Industries Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Chin - Stifel - Analyst : Hi there. Good afternoon. Thanks -- congratulations and thanks for letting us ask a few questions. Maybe first question, thinking about sort of the first half versus second half last year commentary. I think that might put Semi equipment maybe in the vicinity of sort of 10% year-over-year growth. And I know you talked about the potential to outgrow WFE, I recall, from earlier in the prepared remarks. And so is that 10% year over year even with an acceleration in the back half, as you suggested, is that maybe the right frame of reference in terms of the outperformance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Brian Chin - Stifel - Analyst : Okay. Maybe just to drill down at one level, clearly some of your new design wins for eVoS and other next gen supplies and matches should layer in over time tied to future technology transitions and equipment platforms. But can you clarify or confirm whether some of your early designs are closely aligned with the NAND market where there clearly is some pick up and upgrade activity that's very edge and deposition focused. How do you see that contributing maybe to your equipment outlook this year?

Question: Brian Chin - Stifel - Analyst : Okay, got it. So maybe I could just ask one more question. It's actually kind of financial related. There's clearly been a lot of talk and reporting about broader weakness in Industrial. This isn't so much on your revenue side but actually in terms of gross margins. I think semicap companies tend to be classified as industrial markets for chip companies. And so do you actually feel pretty good about the cost point and availability of chips you buy and integrate into your power subsystems? Are there opportunities to actually lock in favorable pricing and supply that supports your gross margin expansion targets?

Question: Brian Chin - Stifel - Analyst : Okay, great. Thank you.

Question: Brian Chin - Stifel - Analyst : Okay. Thanks, Paul.

Question: Krish Sankar - TD Cowen & Co. - Analyst : Hi, thanks for taking my question. Steve, first on the traction you're seeing on eVoS and eVerest, I'm curious, like you said it's across all markets specifically on the edge side. Where are you seeing more traction, is it on the conductive edge or is it more on the dielectric edge you're seeing more traction? And then I will follow up.

Question: Krish Sankar - TD Cowen & Co. - Analyst : I mean, is one better than the other or they kind of similar between contact and dielectric? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Krish Sankar - TD Cowen & Co. - Analyst : Got you. And then a quick follow up. You kind of mentioned about strength in the second half and semis. I'm kind of curious what gives you the confidence? Is it more, yeah, I mean, I'm assuming you don't have the visibility but is it more just a design win traction pipeline or something else that's going on?

Question: Krish Sankar - TD Cowen & Co. - Analyst : Fair enough. Thanks for that. Thank you very much.

Question: Scott Graham - Seaport Research - Analyst : Hey, good afternoon. Congratulations on a terrific quarter. I wanted to understand your thinking around the share gains. You spelled out the whys, the three big products, and I'm just curious if you're thinking kind of like more second-half oriented which I think the entire market is on Semi. Would the share gains be more pronounced in the second half than the first as a result?

Question: Scott Graham - Seaport Research - Analyst : Yeah, I thought I said that I didn't -- yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Scott Graham - Seaport Research - Analyst : Understood, thank you. I've got two other questions, if I may, the industrial and medical, that's been, a very difficult business for you throughout the year and it didn't look like it improved that much in the fourth quarter. I mean, I think I asked this question last time: if you were to pull out, what your best guess was on the destocking aspect in both of those markets.

Question: Scott Graham - Seaport Research - Analyst : Okay. The -- just the last one, I hope you don't mind my sneaking in, is that you know we've been waiting on an acquisition in I&M for some time you went to. The debt markets, almost -- I guess it was like five quarters ago and I think you've been waiting on an opportunity as well. Is it that that those businesses just need more critical mass and I'm thinking that the answer to that is no because you're in so many different areas. But what is your perspective on that? Is it a critical mass thing because I know you're saying that you your peers are down 30% to 50%. I'm not seeing those numbers so I was just kind of wondering from that perspective, is it possibly also a critical mass thing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Scott Graham - Seaport Research - Analyst : It's great. Thanks a lot for your time.

Question: Jim Ricchiuti - Needham & Company - Analyst : Alright, thanks. Well, you may have mentioned this but on the sequential improvement in gross margin, were you able or did you attribute -- quantify how much of that came from the facilities, consolidation, actions or maybe you could just give us a sense as to how much of an impact that might have had. It sounds like it was mixed mainly, but.

Question: Jim Ricchiuti - Needham & Company - Analyst : Got it. And if I follow up just on the the two areas of the the non-Semi business that that I think that there's been focusing on, you guys do sound a little bit more optimistic about the continuing strength in Data Centers. Is that a fair way to characterize it? And in terms of your line of sight when you talk about demand remaining fairly robust through the year, is that -- how much of a change is that versus a few months ago? Based on what you're talking to customers.

Question: Jim Ricchiuti - Needham & Company - Analyst : Got it. That's helpful. Thank you.

Question: Rob Mason - Baird - Analyst : Just -- I wanted to, Steve, I mean, could you talk about any -- is there any distinction between what you're seeing in the Industrial versus Medical just in terms of the underlying demand. And the -- maybe the willingness or rate pace at which some of these design wins that you've locked down can start to move into production. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Rob Mason - Baird - Analyst : Yeah. As a follow up, I don't think this has come up yet, but it was just -- could you address your manufacturing footprint with respect to potential tariffs. You know, Mexico, and obviously you're exiting China, but in my understanding in -- within Mexico, a lot of those products don't necessarily ship directly to the US. They may go elsewhere; maybe stay within Mexico. But you know, to the extent your customers have, you know, to deal with that -- are you seeing any need to move where you ship and maybe where you produce or is that part of the conversation?

Question: Rob Mason - Baird - Analyst : Understood. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Joe Quatrochi - Wells Fargo - Analyst : Yeah, thanks for taking the questions. On the Semi side, just trying to understand the commentary for 2025. Your base case is kind of thinking that the WFE is relatively flat and you should outgrow that just given the new product launches in the second half, I guess, are you seeing customers at any sort of kind of additional inventory after kind of working down the for inventory over the last several quarters? And then I guess can you remind us on the new products that you're launching? Is there any sort of [ASP] dynamics that we should think about you know relative to the prior generation products?

Question: Joe Quatrochi - Wells Fargo - Analyst : Yeah, I'm just trying to understand, if you think about the growth drivers, the ASP dynamic for, egVoS, eVerest, et cetera just -- is that a higher ASP than the prior generation product to think about embedding that in the -- in your line of sight to revenue growth?

Question: Joe Quatrochi - Wells Fargo - Analyst : Okay. On the Industrial and Medical side I think last quarter you talked about normalizing channel late 4Q early this quarter. It sounds like maybe that's kind of pushed out. Is that the right way to think about it? And then what gives you confidence that we are at the bottom?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Thanks, good evening. Steve, thinking about getting to outgrowth or share gains. Back in October you talked about a 30% conversion rate from funnel to design wins. Does it feel like there's been any change in either the rate of additions to the funnel or maybe your win rate post-election or post-inauguration?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : So when you have a design win do you basically consider that in the bank and it's just timing until that does convert or do you ever have a design win go stale?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Got it. And Paul, when you were answering a Data Center question earlier, I think you said you expect full year revenue for the company to be up high single digits. So first, did I hear that correctly? And then if I did, when you think about that growth in the context of your own margin initiatives, how are you thinking about operating leverage for the year?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Got it. That's great. Well, and I guess to that point, I mean, you've always talked about incremental operating contribution margin in the, I think 40 to mid-40s, like, so you would expect the same?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Right, and if I can just think in a quick modeling question. From your comments it sounds like you expect another year-over-year decline for Industrial and Medical in 1Q but do you think revenue could be up sequentially from kind of the $78 million you've averaged over the last three quarters?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Okay thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call

Question: Unidentified Participant - - Analyst : Hi, this is Naish Smov asking on behalf of Mehdi Hosseini. Thank you for taking my questions. My first question is regarding OpEx. Can you offer some color on your OpEx growth for 2025 relative to your anticipated revenue growth for the year as well as against your 2024 OpEx? And second, is the pickup in your Semi-business reflecting an inventory refresh by your OEM customers or is it more a reflection of material growth across the OEMs in anticipation of their own revenue growth? And then I'll have a quick follow up.

Question: Unidentified Participant - - Analyst : Great. And then regarding, the Semi business, do you see that more -- do you see that reflecting more the inventory refresh from your OEMs or is that just more growth across OEMs anticipation of their own revenue growth? If any color there would be really appreciated.

Question: Unidentified Participant - - Analyst : Great, thank you. That's very helpful, And lastly, just any color you can offer on trends you're seeing within your networking business? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 9:30PM, AEIS.OQ - Q4 2024 Advanced Energy Industries Inc Earnings Call