ADVANCED ENERGY INDUSTRIES INC Q1 FY2025 earnings call

• Delivered solid financial results in Q1 with revenue and earnings approaching high end of guidance. - Strength in data center computing and semiconductor, with industrial medical expected to see sequential revenue growth in Q2. - Multiple new products driving design wins into production, contributing to revenue growth and share gain. - Focus on R&D, in-house manufacturing, and best-in-class service; heavily investing in new product capabilities, factory consolidation, and digital platform. - Last China factory to close in June, expected to drive further gross margin improvement in H2. - Well-positioned to handle tariffs with favorable manufacturing footprint across Malaysia, Philippines, and Mexico, with most Mexico-to-US shipments USMCA compliant. - Updates on market segments: semiconductor demand solid, data center at record revenue, industrial medical seeing distribution order increase, telecom networking in line with expectations. - Success with new customer-friendly website and distributor microsites, e.g., Mouser Electronics saw 60% increase in page views from AE microsite.

Semiconductor: Revenue was $222 million, down 2% sequentially but up 23% year-over-year, contributing ~54.8% to total revenue. Data Center Computing: Record revenue of $96 million, up 9% sequentially and 130% year-over-year, contributing ~23.7% to total revenue. Industrial and Medical: Revenue was $64 million, down 16% sequentially and 23% year-over-year, contributing ~15.8% to total revenue. Telecom and Networking: Revenue was $22 million, down 5% sequentially and 2% year-over-year, contributing ~5.4% to total revenue.

• Expect Q2 revenue to be approximately $420 million ±$20 million, Q2 gross margin around 38%, Q2 operating expenses $99 million to $101 million, Q2 non-GAAP EPS $1.30 ±$0.25. - Full-year 2025 CapEx guidance increased to 5% to 6% of revenue. - Semiconductor expected to grow ~10% for the year. - Industrial and Medical expected to start recovering in Q2 but recovery rate tempered by economic uncertainty and tariffs.

• Tariff impact, particularly on industrial medical customers, with potential macroeconomic risk affecting longer-term projections. - Inventory digestion and lower turns orders in industrial medical leading to sequential revenue decline. - Potential delays in new product ramps due to customer inventory exhaustion and uncertainty around tariff implementation.

Q: Brian Chin asks about semi equipment market and outperformance.

A: Steve Kelley responds that WFE market is ~0%-5% up, and 10% growth projection is above market due to strength in leading edge processes, new products, and good content in leading edge logic and DRAM.

Q: Brian Chin follows up on new plasma process power products and tariffs.

A: Steve Kelley states most business goes to semi equipment and data center companies, ~80% of business in 2025, with industrial medical products mostly built in Mexico (USMCA compliant) and Philippines (17% tariff less than other Asia countries), well-positioned to limit tariff impact. On new products, shipments of 350 qualification units across advanced logic and DRAM.

Q: Scott Graham asks about gaining share in WFE power sleeve.

A: Steve Kelley says new products like eVerest, eVoS, NavX poised to gain share in conductor etch and expand into dielectric etch.

Q: Scott Graham asks about I&M segment recovery.

A: Steve Kelley discusses short-term correction due to supply chain recovery and demand, long-term potential with strong design win pipeline, and focus on I&M for acquisitions as market is fragmented.

Q: Robert Mertens asks about I&M market recovery and semi-cap risk.

A: Robert Mertens is told I&M recovery due to distributor inventory drawdown and order activity, semi-cap systems are strategic with high urgency for customers.

Q: Steve Barger asks about backlog margin and design win margins.

A: Paul Oldham says backlog not meaningful, new products and mix have higher margins than historical, moving towards 40% margins with factory consolidation, new product mix, and volume.

Q: Chris Grenga asks about Thailand facility and microsites.

A: Steve Kelley says Thailand facility on track, opening in 2026 tied to demand, microsites expected to turbocharge I&M business.

Q: Duksan Jang asks about tariffs indirect impact and 2026 margin drivers.

A: Steve Kelley says no indirect tariff impact seen, 2026 margin drivers include new product mix traction, volume, and internal cost improvements.

Q: Rob Mason asks about I&M segment distinction and design win ramps.

A: Steve Kelley says distinction between industrial and medical, design win pipeline at all-time high but not yet ramping production due to inventory exhaustion.

Q: Scott Graham asks about tariff impact on cost of sales and I&M decline destocking.

A: Steve Kelley says tariff impact contemplated in guidance, I&M decline due to inventory destocking and customer wait-and-see on tariffs.