Good day and thank you for standing by. Welcome to the Advanced Energy Industries First Quarter 2021 Conference 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. Please go ahead..

Thank you, Operator. Good morning everyone. Welcome to Advanced Energy's first quarter 2021 earnings conference call. With me today are Steve Kelley, our President and CEO; Paul Oldham, our Executive Vice President and CFO; and Brian Smith, our Director of Investor Relations.

If you have not seen our earnings press release, you can find it on our website at ir.advanced-energy.com. There you also find a Q1 slide presentation. Before I begin, I would like to mention that Advanced Energy will be presenting at several investor conferences in the coming months. As events occur, we will make that announcement.

Let me remind you that today's call contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially and are not guarantees of future performance. Information concerning these risks and uncertainties is in our SEC filings.

All forward-looking statements are based on management's estimates as of today, May 5, 2021, and the company assumes no obligation to update them. Long-term targets presented today include our aspirational goals and long-term vision goals should not be interpreted as guidance.

On today's call, our financial results will be presented on a non-GAAP financial basis, unless otherwise specified. Excluded from our non-GAAP results, are amortization, stock compensation, integration and transition costs, unrealized foreign exchange gains or losses, and restructuring items.

A detailed reconciliation between GAAP and non-GAAP measures can be found in today's press release. With that, let me pass the call to our President and CEO, Steve Kelley..

Thank you, Edwin, and good morning, everyone. Thanks for joining the call today. First quarter revenue was $352 million. We had record sales into the semiconductor market, where we are benefiting from our leadership position in process power delivery systems. We entered the second quarter with a record order backlog.

Demand is increasing across all of our target markets and we continue to win new design products in an impressive way, as customers adopt our industry-leading products. In the short-term, our most pressing tactical challenge continues to be dealing with constraints in the supply chain, particularly shortages of certain integrated circuits.

These constraints limited our upside in the first quarter as we forecasted. Our second quarter guidance also incorporates the impact of these constraints. However, given the proprietary nature of most of our products, we believe that nearly all of the demand which continue to satisfy in the second quarter will shift into the second half of the year.

Also, we expect that the actions that we took in the first quarter to address short points in the supply chain will begin to have a positive impact in the third quarter. Now I'd like to provide additional color for each of our target markets.

In the semiconductor market, we generated record revenues in the first quarter, growing 35% year-on-year and 9% sequentially. This strong growth was driven by higher demand for our process power delivery systems, a key enabling technology for Advanced Edge and deposition processes.

We've maintained our leadership position in process power market by working closely with our customers and by continuously innovating. Advanced Energy's technology and products enable our customers to improve yields, increase throughput, reduce costs, and lower power consumption.

Over the past year, we have launched a series of next-generation products into the market. Our latest high power RF generators our unique eVos process [ph] system and our MAXstream RPS system are all highly differentiated and are currently being evaluated by our customers.

We believe that these next-generation products provide market share gains for Advanced Energy in the coming years. In the first quarter, we won multiple designs at major OEMs with both etch and ALD platforms. In addition to wins in process power, our traditional area of strength. We also secured wins for Artesyn branded embedded power products.

To summarize, we expect that 2021 will be a record year for sales into the semiconductor market and we're bullish about 2022 and beyond given our strong line-up of differentiated next-generation products. Now moving to industrial and medical markets, where our revenue was up 27% year-on-year.

In industrial applications, we saw strength in flat panel display, battery production, carbon fiber manufacturing, and horticulture. In medical, demand for diagnostic and life science applications begin to improve during the quarter.

Looking forward, we expect the industrial and medical markets to strengthen through the course of the year due to improving economic conditions, as well as increased acceptance of our new products into a wide range of applications.

In the first quarter, we confirmed that our Ascent MS platform has been designed into multiple solar cell manufacturing applications. In addition, our Thyro-A+ power controller has been incorporated into a flat panel manufacturing application.

Moving to the data center computing market, revenues were down in the first quarter as expected, due primarily to ongoing inventory digestion by specific hyperscale customers. Looking forward, we see increased demand in the second quarter followed by a strong uptick in demand in the second half of the year.

We continue to make good progress in new product qualifications and expect to have additional Tier-1 hyperscale customers later this year. We won another board-mounted 48 volt DC-to-DC design in the first quarter and continue to focus on 48 volt server opportunities.

Now I'll shift to the telecom and network market, where first quarter revenue was down sequentially to roughly flat year-on-year. Our first quarter revenue reflected the full impact of portfolio actions we executed in late 2020. Moving forward, we expect to grow revenue by targeting higher end applications where we can differentiate.

We're focused on 5G infrastructure and in the first quarter on two critical 5G design class at a leading telecom OEM. In closing, I'd like to share some personal observations. Since joining Advanced Energy in March, I visited most of our North American manufacturing and development sites and spoken face-to-face with many members of the team.

My general takeaways from those initial meetings are first, we have a high-level of employee engagement. And second, we have some excellent engineers and scientists at Advanced Energy who foster a culture of technical excellence. In my first 60 days, I've also had the opportunity to meet the two of our largest customers and channel partners.

Our customers have a genuine appreciation for Advanced Energy's technologies, products and services. They know the company well, since our technical teams work closely together during new product development cycles. To grow our business, we'll focus on continuously improving our customer value proposition.

We need to deliver industry-leading technologies and products in a timely fashion with best-in-class quality, reliability and service levels. We have a strong balance sheet and will deploy capital where it makes strategic and financial sense for the company.

The power supply industry is highly fragmented, and we think that supplier consolidation will benefit both Advanced Energy and our customers. In conclusion, I'm delighted to be part of the Advanced Energy team. We're targeting the right markets. We have a strong lineup of differentiated products, and we have a great culture.

We're focused on accelerating revenue and earnings growth and are on track to meet or exceed our aspirational goals and longer-term financial targets. Paul, will now review our financial results and provide detailed guidance..

Thank you, Steve, and good morning everyone. We delivered solid financial results in the first quarter with revenue, profitability and cash flow up significantly year-over-year and above the midpoint of our guidance.

Overall, customer demand was very strong; resulting in record backlog of over $400 million giving us increased visibility to customer requirements over the next several quarters.

We executed well to meet customer commitment but industry-wide supply constraints limited upside in the quarter and will be the pacing factor in our revenue outlook in the near-term. As Steve mentioned, semiconductor revenues set another record driven by both customer demand and share gains for our full-suite of semi power solutions.

Overall earnings grew 42% year-over-year, as gross margins continue to approach our long-term target of greater than 40%, partially offset by increased R&D investments to fuel future growth. Return on invested capital continues to be above 20% on solid profitability and working capital efficiency.

First quarter revenue was $352 million, up nearly 12% year-over-year, but down 5% sequentially as we had anticipated. Semiconductor sales were $181 million, up 35% from last year, and up 9% over last quarter, as our operations team was able to respond to strengthening customer demand.

Revenue from our industrial and medical markets grew 27% from a year-ago to $78 million, but declined 60% sequentially, mostly due to supply constraints. Data Center Computing revenue was $59 million, down 31% from the very strong quarter a year-ago, and 9% sequentially.

However, demand for our products started to recover, with several customers placing orders late in the quarter, signaling a return to growth in demand after just two quarters of digestion.

Telecom and networking revenue was $33 million in the quarter; essentially flat with last year and down 28% from Q4, reflecting a new baseline going forward as we streamline our portfolios focused on higher value applications. Non-GAAP gross margin for the quarter was 39.7%, up 190 basis points from a year-ago on higher sales and realized synergies.

Gross margins were 20 basis points higher sequentially, primarily due to improved product mix, partially offset by lower volume and some added supply chain costs. We expect the logistics and supply chain costs to continue to be a headwind to gross margin in the near-term.

Non-GAAP operating expenses were $79.5 million, up $2.5 million from last quarter on higher R&D as we fund investments in multiple new growth opportunities. Operating margins for the quarter was 17.1%, up 300 basis points from last year, reflecting improvements in gross margin, and SG&A as a percentage of sales.

While we expect OpEx to increase modestly going forward, operating margins should expand in the second half as revenue growth accelerates. Non-GAAP other expense was $2.6 million, including $1.1 million in interest expense and $1.2 million of FX losses on settlements of year-end position.

We expect other expenses to be in the $1.5 million to $2 million range going forward. Our non-GAAP tax expense was $7.9 million or 13.8% primarily unfavorable discrete item. Looking forward, we expect the GAAP and non-GAAP tax rates to remain in the 15% range.

Non-GAAP earnings for the quarter were $1.29 share, up 42% from $0.91 a year-ago, but down from last quarter due to lower revenue. Turning now to the balance sheet. We ended the first quarter with cash and marketable securities of $513 million, up $30 million from Q4. Inventory increased by $26 million and turns were 3.7 times.

Accounts payable rose to $163 million, with associated DPO of 68 days, largely offsetting the increased level of inventory. Inventories and payables should remain at a higher level on our expectation for increased volume and as we pursue supply of critical components. Receivables grow slightly to $237 million and DSO was 61 days.

Total days of networking capital were 96 up one day from last quarter. Operating cash flow from continuing operations was $54.3 million. Capital expenditures for the quarter were $8.8 million and depreciation was $7.3 million. We continue to expect capital expenditures to be about 2% to 3% of sales for the year.

During the quarter, we repaid $4.4 million of principal amortization on our debt, ending with total bank debt of $380 million and a net cash of $195 million. Our trailing 12-months gross debt leverage increased to 1.1 times. We did not repurchase any stock in Q1 and we paid $3.9 million for our first quarterly dividend of $0.10 per share.

Now let me turn to guidance. We expect demand to remain strong and increase sequentially across our market driven by growing investment in semiconductor, improving macroeconomic conditions and strengthening orders in hyperscale. However, in the near-term, industry-wide supply constraints on specific components are limiting upside to our revenue.

As a result, we're guiding Q2 revenue to be $360 million plus or minus $15 million. We expect non-GAAP gross margins to decline around 100 basis points sequentially, on less favorable product mix, and higher near-term material and break-top, which could last through the end of the year.

Operating expenses are expected to be $81 million to $82 million as we continue to invest in R&D, and see natural increase in annual costs, partially offset by synergy actions. As a result, we expect non-GAAP earnings to be $1.25 per share, plus or minus $0.15.

Looking beyond Q2, we believe demand will remain strong in the second half of 2021 and into 2022. Given the current supply chain environment, we expect second half revenue to grow 5% to 10% over the first half, with upside if conditions improve. In conclusion, we're more excited than ever about the opportunities across our markets.

We're well positioned to continue to gain share and have seen strong adoption of our new products. We remain focused on executing our strategy to accelerate revenue and earnings growth over time. With that, let's take your questions.

Operator?.

[Operator Instructions]. Our first question is from Quinn Bolton with Needham & Company. Your line is open..

Hey guys, just trying to look through the numbers. Obviously, it sounds like you're seeing some limited upside on revenue due to capacity constraints. And I guess as I look at the June quarter, you guys are kind of $15 million to maybe $20 million light of the consensus expectations for the June quarter.

Is that the level that $15 million to $20 million, I mean, is that the level of revenue you're leaving on the table because of capacity constraints.

Are there other factors going on?.

Yes, it’s a really good question, Quinn. It's hard to quantify exactly, certainly, we are seeing strengthening demand. And our outlook is really based on what we believe we can get parts for and get out of the factory in quarter. Certainly as we came into the year, we saw some supply constraints, we talked about that having some impact in Q1.

And I would say broadly speaking and sort of a similar impact in Q2. Now that demand is still there and when those parts become available, but it'll take a couple of quarters, probably to catch it up..

Okay. And just looking at the numbers if you're missing some demand in Q1 and Q2, and that's just the second half. It almost looks like what pushes in the first half and in the second half could easily support 5% to 10% growth.

And so I guess I'm just having difficulties reconciling that the forecast especially if some of the demand is shifting into the second half?.

Again, we look forward and try to get some color in the second half because, it is the strong demand environment, and it's really limited by the availability of parts. So when we looked at what was before, we think it's more like half of that forecast is supported by things that move forward and better in this year.

But looking if the parts situation improves, then we could see upsides to the numbers. That's what we believe, at this point we find the site to as we look forward to the next couple of quarters. And you know, although the parts shortage is a challenge in the near-term is something as practical challenge as Steve mentioned.

We actually think that it bodes well, broadly speaking, it underscores the strength of the underlying demand drivers. And the fact that this kind of industry-wide challenge has been ultimately longer runway, combining that with stronger demand throughout the year, we think that sets us up for growth in the second half and continued growth in 2022..

Great.

The second question I had is the VLSI market share data, I think for power subsystems was out recently, can you talk about just how you guys performed in 2020 in terms of market share in the RF Power segment?.

Yes, this is Steve. I thought I'll make a comment on that one. We did take a look at the report and we're very happy to see that being still the undisputed market leader in all the areas that we care about. So the areas are RF Power, Process power and Semiconductor power.

If you move to things like RF generators, RF matching networks, DC power and remote devices horsepower. It also show that we grew some revenues expenses in the market last year. And so wasn't surprised, we grew our revenues 52%, the semiconductor vertical in 2020, so was a great year for Advanced Energy.

We're very optimistic moving forward, we've launched over the past year, some highly differentiated products, in fact, around foundry edge, RPS, in addition to extensive cross-selling our recent products into the semiconductor vertical. So we're very bullish on semiconductor moving forward..

Your next question is from Krish Sankar with Cowen & Co. Your line is open..

Yes, thank you for taking my question. I have two of them, first one Paul or Steve on this component tightness that's impacting the top-line.

Is there any risk that you might lose share to your competition? Or do you think is that issue prevalent across industry that you're comfortable to seeing the same kind of component tightness?.

Yes, I think if you look across our portfolio, most of our portfolio is proprietary. So if you look at semiconductors, industrial and medical, those are largely proprietary products, so that's why we made the statement that looks like demand will shift into the second half, so we won't lose it.

I think the only area where we risk losing some share based on lack of availability is probably in data center computing, that business is more of a built-to-print business. And so if we can't catch-up in that area in Q3, we may lose a little bit of share there.

But in larger part, speaking for the company as a whole, there's very little business that we think will disappear..

Got it, got it. Thanks Steve.

And then as a follow-up, you spoke about data center computing, kind of, a regular inventory digestion but it started turning around in the March quarter, I'm just kind of curious what drove it, is it just are you seeing like IT and enterprise budgets improving? Or what are the reasons for the digestion in getting done sooner than expected and along the same path; did you quantify how much your hyperscale revenues grew in the March quarter?.

I'll address the general question; I'll let Paul address the more specific question.

But I think we saw increased booking activities, the data center towards the end of the quarter, and we anticipate continued pickup in Q2, and from what we've seen in our forecast today, the second half is going to be quite strong the data center, that's what we're gearing up for..

Yes. We didn't break out this time to change in hyperscale quarter-over-quarter Krish, but we did see orders start to come in strong towards the end of the quarter. That sort of gives us confidence that seeing the bottom of that market from a digestion period.

And we expect to see growth over the course of the year and as Steve mentioned earlier stronger growth as we go through the year. So that market went through a couple of quarters of digestion and employment coming back now..

And your next question is from Mehdi Hosseini with SFG. Your line is open..

Yes, thanks for taking my question. When I look at the revenue mix by the end market, it seems to me that semis and industrial actually did better than expected and perhaps the shortfall was in the telecom and data center. I'm just trying to reconcile the shortages with end market.

Would it be fair to say that perhaps in the semis, you had appropriate inventory of subcomponents, so you were able to meet the demand and it was just this new market that you're trying to scale that the shortages hampered your ability to set the targets?.

That's a good question, Mehdi. I think, you look across our markets our higher volume markets had a larger impact from a supply chain perspective. And look, we had some spot outages everywhere. But on balance, we were able to respond to increasing demand during the quarter in semi, even while we had some power shortages there as well.

So broadly speaking, our higher volume businesses are more impacted by the power shortages than our semi business for couple of the advanced markets..

Sure, okay. And then you highlighted the OpEx increasing little bit.

Could we assume that maybe OpEx is up a couple of million in the second half versus the first half and then there could be continued increasing OpEx into 2022?.

Yes, if you look at the numbers, we've been investing in R&D, obviously, that's where all the growth and then you do have some annual costs that come in as the year goes on. So you'd expect to see OpEx up slightly from Q2 levels over the year, but it should be very modest growth as we go forward after Q2..

Your next question is from Amanda Scarnati with Citi. Your line is open..

Good morning.

Just touching in on to the data center side of the business, you talked about the expectation to add some more hyperscale customers throughout 2021? Do you need to add those customers in order to start to feel the acceleration of growth? Or do you expect that the digestion that you've been seeing, the last two quarters should roll-off and you can see some growth outside of adding new customers throughout the year?.

Yes, Amanda, I think the growth is a separate issue, because we view the growth from our current set of customers. As we bring our new customer, typically, we start relatively low volumes, and it ramps up over a period of months. So we wanted to size on the growth coming from our existing customers..

And then on the industrial and medical side, obviously, last year was pretty strong with some of the additions related to COVID on the medical side, could we see a step-up in year-over-year growth on the industrial side, specifically on the industrial side, and not the medical side of the business this year?.

Yes, I think 2020 was a down year for industrial and medical, for obvious reasons. And we've definitely seen both things pick up in both areas. And we think they'll strengthen every quarter this year. So we think those two markets industrial and medical will be coming back to life with of course to 2021..

Your next question is from Scott Graham with Rosenblatt Securities. Your line is open..

Yes, good morning. Thanks for your time here and, Steve, welcome.

Could you maybe quantify the impact on sales of your portfolio changes in the common networking segment, the revenues?.

Yes, Scott it's Paul. We haven't called that out specifically. But if you recall, we expect it to be down in Q1 and it was and we also commented that this kind of forms of a new baseline, as we go-forward, we'll see some growth from here, there'll be some kind of quarters could do a little higher, a little lower.

But fundamentally, this sort of establishes a new baseline, post those actions, most of those actions really took effect in late 2020, we expect accelerating some business into 2020, and as we go-forward and think this is a reasonable baseline level..

Okay, thank you. I was also hoping for a little bit more color on the -- on some of the supply shortages logistics issues, and what have you, certainly everyone is feeling it. So we understand that.

Could you kind of tell us which segments are being sort of affected maybe sort of listen, worst to least, if that's possible?.

Sure. We'd happy to comment on that. Obviously, the biggest issue we have is in semiconductor chips, microcontrollers, other ICs that we buy. Second would be ceramics, ceramic substrates and other forms of ceramic. Probably the third is opaque some opaque components are in short supply. And so we're spending a lot of time with our key suppliers.

We have almost the entire management team involved in expedite calls every week that includes me. We're going out and bringing on new second sources where we could find them. We signed number of long-term agreements with our key suppliers. We did that in Q1 this is our lead time stretch. So we think that's going to start benefiting us in Q3.

And we've secured our position as a preferred customer essentially, for most of our key suppliers. We're also taking some actions in our factories. We're building some buffer capacity, assembly and test capacity.

And we're doing those because there's a tendency with some of these fierce components to be delivered in a vast fashion towards the end of the quarter, so we won't be able to take advantage of that that requires some additional capacity..

That's very helpful. Thank you.

I guess the last question is around, so we're something a little bit more R&D, we have these supply chain issues, if you will, we have higher materials and I guess I was just wondering, maybe, is there going to be a renewed focus on managing SG&A down a little bit to prop up the earnings while we're going through this sort of transition period into the second half.

And frankly, also in the second half business, I think, as you've said before, that the second half sales guidance were sort of up 5% to 10% sequentially, as the previous question pointed out was kind of what I think we were all expecting anyway. So this does look like it moves maybe into 2022.

So how do we handle SG&A during this sort of these next three quarters to try to keep earnings propped up?.

That's a good question. As you look from the numbers, we've pretty much been able to wholly reduce SG&A over the last four, five quarters, even despite other time pressures, that would normally increase SG&A. So we expect to continue to do that. We continue to want to drive a lot of leverage.

And in fact, we expect to see the SG&A as a percentage go down over the course of the year. So that is something that we're working on. Clearly, our investments in R&D, we think will drive future growth. We're committed to those, some of the other headwinds, we're seeing the deeper transitory [indiscernible] in a period of time.

And as we continue to execute our synergy plan, both in OpEx as well as the heavy list that we have both completed by the end of the year and then factoring. We've been broadly speaking; we're back on our target model growth we kind of exit this year and going into next year..

Your next question is from Pavel Molchanov with Raymond James. Your line is open..

Thanks for taking the questions.

In the context of the industry-wide supply tightness, I'm curious if that broadens the potential target list for acquisitions, given that some of the smaller players, especially in the industrial vertical, might be suffering particularly in this current climate?.

I really haven't thought about that way. But I guess that would be a synergy, right if we can come in and buy a smaller company and exercise our leverage on the supply chain. But just a general comment, we continue to be opportunistic, we continue to look for companies to acquire.

And so, I think you'll see us stay active in that area, looking for companies with a strong technology, strong technical teams, sticky products that tend to be proprietary. And we'll be looking for companies that are particularly exposed to semiconductor, industrial and medical opportunities..

More kind of thematically, is there anything in the Biden infrastructure proposal that would be directly relevant, impactful to your business that you see?.

I think the most interesting part for us is the additional investment in semiconductors, so that you see that happening, basically trying to establish a stronger U.S. manufacturing base. And if that happens, and obviously that creates even more demand for semiconductor process power solutions, so we are very enthusiastic on that part..

Right.

And maybe some of the industrial verticals, you've sold into metallurgy and sort of glass and other things that could benefit from a more active industrial policy?.

Yes, I'm not really familiar with the details of the semiconductor at this point. But I hope you're correct..

[Operator Instructions]. Your next question is from Paretosh Misra with Berenberg. Your line is open..

Good morning, and thanks for taking my question. Steve, as you look at the cost structure at Advanced Energy, especially your manufacturing footprint, the different facilities that you have. And I know, you haven't had that much opportunity to look at that.

But do you see there are opportunities for further optimization or cost cuts that could drive a margin expansion?.

Yes. So basically, we have three centers of excellence in the company's manufacturing one is in China, one is in Malaysia and one is in the Philippines. And we're in the process of consolidating our Chinese factories into one location. So we'll be exiting Shenzhen by the end of this year. I think you're probably familiar with that project.

I think, moving forward, we're very comfortable, having China, Malaysia and Philippines in place, and our approach there will be to try to fully utilize each of those factories and the businesses to get to that point we have the ability to expand our operations in each of those sites. So I think we're pretty well positioned..

Understood, thanks for that. And maybe as a follow-up, if you could talk a bit more about your industrial and medical segments as to what you're seeing.

In other words, which of the two sub segments industrial versus medical, you're seeing faster growth, any sense on revenue or do you have any particular end-market where you're seeing strong orders and strong revenue growth?.

Yes, I’ll make some general comments about industry and medical. The reason I like those two markets so much, they tend to be smaller and medium sized companies, smaller and medium sized opportunities. But each opportunity typically wants something a little bit different.

So we take -- we start with our standard products or configurable products, and then we tune them to the customers need. And that creates a very good relationship between AE and the customer; it creates a very sticky product situation. So typically, these applications are very long lifecycle applications.

And so once we get designed in to the shipper, many, many years, so we're going to continue to discover the market and look for more of those types of opportunities..

Your next question is from Weston Twigg with KeyBanc Capital Markets. Your line is open..

Hey, thanks for taking my question. First, I just wanted to start with gross margin. Last quarter, I think you said it would exceed 40% for the year, you're guiding it down a little for Q2, and you didn't mention that again. So I just wanted to get your thoughts on gross margin in the back half of the year.

And if you still think you can hit that 40% target exiting the year?.

Yes, I think as we always said, as we execute our manufacturing consolidation, that we believe we could exit the year, sort of at that 40% or better range. Still, I think broadly our goal, but certainly like logistics and kind of supply chain constraints that's -- that's a headwind that we didn't see a quarter or two ago.

We think that's transitory something like that and how long it's been like that, it's hard [ph] to do. So look, we think that those headwinds are maybe 100 to 200 basis points.

And I'd say that more than even what we experienced last year with COVID, [indiscernible] reimbursement and other things with COVID, with some, the supply chains are very full, the logistics channels are very full. So in the interim, we're going to face these headwinds at both sides.

And we did close our, finish our manufacturing consolidation, we feel confident we'll be able to be on that target model..

Okay, yes, that makes sense.

And then just when you talk about revenue growth in second half, can you help us understand, which are the stronger growth segments relative to the first half because semi as a data center, et cetera if you could help us understand which ones are growing a little faster in the second half and driving that upside that would be helpful..

The good news is we've seen strong growth in all sectors quite frankly. So we see semiconductors, just the impulse to the head essentially. The customers we have in semi sectors are very bullish about the demand in the second half into 2022. So our challenge there is just going to be keeping up with their demand.

Obviously, I will comment on data center, we see that coming back strongly in the second half. Industrial and medical is going through a recovery phase and we think that's going to be very strong. I think the only market we may not see best growth is probably telecom and networking. I think we'll stay steady there.

Again as we look for some 5G designs, we think most of that revenue probably come in 2022..

We have no further questions at this time. I'll turn the call back to Steve Kelley for closing remarks..

Well, thank you very much for attending the call today. We see increasing demand across all of our target markets for the rest of 2021. And although supply issues are limiting outside the second quarter, we see increased commitments from our suppliers in the second half, with high hopes that we could exit the year at very high velocity.

Thank you very much..

This concludes today's conference. You may now disconnect..