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. I would now like to hand over to your speaker today, Edwin Mok, Vice of Strategic Marketing and Investor Relations.
Please go ahead.
Thank you, operator. Good morning, everyone. Welcome to the Advanced Energy 1st Quarter 2021 Earnings Conference Call. With me today are Lee, our President and CEO Paul Odom, our Executive Vice President and CFO I'm 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.
Advancedenergy.com. There, you'll also find the Q1 slide presentation. Before I begin, I would like to mention that Advanced Energy We'll be presenting at several investor conferences in the coming months. As events occur, we will make the 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 us. Long term targets presented today, including 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. Exclude 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, Heath Kelp.
Thank you, Edwin, and good morning, everyone. Thanks for joining the call today. 1st quarter revenue was $352,000,000 We had record sales into the semiconductor market, where we are benefiting from our leadership position in process power delivery systems. We entered the 2nd quarter with a record order backlog. Demand is increasing across all of our target markets, and we continue to win new design slots at an impressive rate 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 Q1 as we forecasted. Our Q2 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 we can 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 Q1 to address choke points in the supply chain will begin to have a positive impact in the Q3.
Now I'd like to provide additional color for each of our target markets. In the semiconductor market, we generated record revenues in the Q1, 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 etch and deposition processes. We've maintained our leadership position in the 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 And lower power consumption.
Over the past year, we have launched a series of next generation products into the market. Our latest high powered RF generators, our unique eMOS plasma system and our back stream RPF system are all highly differentiated and are currently being evaluated by our customers. We believe that these next generation products will drive market share gains for Advanced Energy in the coming years. In the Q1, we won multiple design slots at major OEMs for both etch and ALD Platforms. In addition to wins in process power, our traditional area of strength, We also secured wins for ARTIS and Branded Embedded Power Products.
To summarize, we expect that 2021 It will be a record year for sales into the semiconductor market. And we are bullish about 2022 and beyond, given our strong lineup of differentiated next generation products. Now we move to the 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 beginning to improve during the quarter.
Looking forward, we expect the industrial and medical markets This strengthened through the course of the year due to improving economic conditions as well as increased acceptance of our new products into a wide variety of applications. In the Q1, we confirmed that our Ascent MS platform It's been designed into multiple solar cell manufacturing applications. In addition, our Fyro A plus Power controller has been incorporated into a flat panel manufacturing application. Moving to the data center computing market, Revenues were down in the Q1 as expected due primarily to ongoing inventory digestion by specific hyperscale customers. Looking forward, we see increased demand in the 2nd quarter, followed by a strong uptick in demand in the second half of the year.
We continue to make good progress on new product qualifications and expect to add additional Tier 1 Hyperscale customers later this year. We won another board mounted 48 volt DC to DC design in the Q1 We continue to focus on 48 volt server opportunities. Now I'll shift to the telecom and networking market, Our first quarter revenue was down sequentially and roughly flat year on year. Our first quarter revenue reflected the full impact where we can differentiate. We are focused on 5 gs infrastructure and in the Q1 on 2 critical 5 gs design slots 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 In my 1st 60 days, I've also had the opportunity to meet a few of our largest customers Our customers have a genuine appreciation for Advanced Energy's technologies, products and services. We know the company well since our technical teams are closely together during new product development cycles. To grow our business, we will focus on continuously improving our customer value proposition. We need to deliver industry leading technologies and products 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 In conclusion, I am delighted to be part of the Advanced Energy team. We are targeting the right markets. We have a strong lineup of differentiated products and we have a great culture. We are 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 Q1 with revenue, profitability and cash flow up significantly year over year And above the midpoints of our guidance, overall customer demand was very strong, resulting in record backlog of over $400,000,000 giving us increased visibility of customer requirements over the next several quarters. We executed well to meet customer commitment, 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 revenue 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 continued to approach our long term target of
greater than
40%, partially offset by increased R and D investment to fuel future growth. Return on invested capital continues to be above 20% on solid profitability and working capital efficiency. 1st quarter revenue was $352,000,000 up nearly 12% year over year, But down 5% sequentially as we had anticipated. Semiconductor sales were $181,000,000 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 $78,000,000 but declined 16% sequentially, mostly due to supply constraints.
Data center computing revenue was $59,000,000 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 2 quarters of digestion. Telecom and networking revenue was $33,000,000 in the quarter, Essentially flat with last year and down 28% from Q4, reflecting a new baseline going forward as we streamline our portfolio 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 $79,500,000 up $2,500,000 from last quarter on higher R and D as we fund investments in multiple new growth opportunities. Operating margins for the quarter were 17.1%, Up 300 basis points from last year, reflecting improvements in gross margin and SG and A as a percent 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 $2,600,000 including $1,100,000 of interest expense and $1,200,000 of FX losses on settlement of year end position.
We expect other expense to be in the $1,500,000 to $2,000,000 range going forward. Our non GAAP tax expense was $7,900,000 or 13.8 percent, primarily on favorable discrete items. Looking forward, we expect the GAAP and non GAAP tax rate to remain in the 15% range. Non GAAP Earnings for the quarter were $1.29 per 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 Q1 with cash and marketable securities of $513,000,000 up $30,000,000 from Q4. Inventory increased by $26,000,000 and turns were 3.7 times. Accounts payable rose
to 163,000,000
With associated DPO of 68 days largely offsetting the increased level of inventory. Inventories and payables should remain at higher levels On our expectation for increased volume and as we pursue supply of critical components. Receivables We rose slightly to $237,000,000 and DSO was 61 days. Total days of net working capital were 96, up one day from last quarter. Operating cash flow from continuing operations was $54,300,000 Capital expenditures For the quarter were $8,800,000 and depreciation was $7,300,000 We continue to expect capital expenditures to be about 2% to 3% of sales for the year.
During the quarter, we repaid $4,400,000 of principal amortization on our debt, ending with a total bank debt of 318,000,000 and a net cash of $195,000,000 Our trailing 12 month gross debt leverage increased to 1.1 times. We did not repurchase any stock in Q1 and we paid $3,900,000 for our 1st quarterly dividend of $0.10 per share. Now let me turn to guidance. We expect demand to remain strong and increase sequentially across our markets, However, in the near term, industry wide supply constraints on specific components are limiting upside to our revenue. As a result, we are guiding Q2 revenue to be $360,000,000 plus or minus 15,000,000 We expect non GAAP gross margin to decline around 100 basis points sequentially on less favorable product mix And high return material and freight costs, which could last through the end
of the
year. Operating expenses are expected to be $81,000,000 to $82,000,000 As we continue to invest in R and 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 twenty twenty one and into twenty twenty two. Given the current Supply Chain environment, we expect second half revenue to grow 5% to 10% over the first half with upside as conditions improve. In conclusion, we are more excited than ever about the opportunities across our markets.
We are well positioned to continue to gain share and are seeing strong adoption of our new products. Operator?
Our First question is from Quinn Bolton with Needham and 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 the capacity constraints. And I guess as I look at the June quarter, you guys are Kind of $15,000,000 to maybe $20,000,000 light of the consensus expectations for the June quarter. Is that the level that $15,000,000 to $20,000,000 I mean is that the level of revenue you're leaving on the table because of capacity Trains or 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 quarter. Certainly, as we came into the year, we saw some supply constraints and we talked about that Having some impact in Q1 and I would say broadly speaking in sort of a similar impact in Q2. Now that demand is still there and
Okay. And I guess just looking at the numbers, if you're missing some demand in Q1 and Q2 and that shifts to the second It almost looks like what pushes from the first half and then 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
Again, we look forward to trying to give some color to the second half because, it It's a strong demand environment and it's really limited by availability of parts. So when we look to what moved forward, we think it's more like half Of that forecast to support if I think the move forward is better in this year. But look at it, if the parts situation improves, then we can see upside to the numbers. That's what we believe at this point we have line of sight to as we go forward in the next couple of quarters. And although the parts Shortage is a challenge in the near term.
It's our biggest tactical challenge, as Steve mentioned. We actually think that it bodes well. Broadly speaking, it underscores The strength of GenBank demand drivers, and the fact that this kind of industry wide challenge we think gives ultimately longer runway. Combining that with stronger demand throughout the year, we think that sets us up for not only growth in the second half, but continued growth in 'twenty
Great. The second question I had is, the VLSI market share data, I think, for PowerSub Systems 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 Dan would make a comment on that one. We did take a look at the report and we're very happy to see that AU is still the undisputed market leader in all the areas that we care about. So the areas are RF power, process power and semiconductor power. Those are things like RF generators, RF matching networks, DC power and remote plasma source power.
It also showed that we grew semiconductor revenues faster than market last year and certainly wasn't a surprise. We grew our revenues 52% in the semiconductor Vertical in 2020, so it's a great year for Advanced Energy. We're very optimistic moving forward. We've launched over the past year some highly differentiated products in conductor etch, dielectric etch, RPS, in addition, success cross selling artisan products into the semiconductor vertical. So We're very bullish on semiconductor moving forward.
Great. Thank you for that color.
Your next question is from Krish Bhankar with Cowen and Company. Your line is open.
Yes. Thanks for taking my question. I have 2 of them. First one, Paul, Steve, On this component tightening that's impacting the top line, is there any risk that you might lose share to your competition? Or do you think is that Issues prevalent across the industry that your comps are also seeing the same kind of component tightness.
Yes, I think if you look at across our portfolio, most of our portfolio is proprietary. So if you look at semiconductors, industrial medical, those are largely proprietary products. And So that's why we made the statement that most of the demand will shift into the second half, but we won't lose it. I think the only area where we risk losing Some share based on lack of availability of components is probably in data center computing. That business is more of a filter 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 large 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 it was being due to inventory dilution, but it started turning around in the March I'm just kind of curious what drove it? Is it just are you seeing like IT enterprise budgets simply?
Or what is the reason for the dilution getting done sooner than expected? And along the same path, did you quantify how much your hyperscale revenues
I'll address the general question and I'll let Paul address the more specific question. But I think we saw increased booking activity at the data center towards the end of the quarter and we anticipate a Continued pickup in Q2 and from what we see in our forecast today, the second half is going to be quite strong in data center. So that's what we're gearing up for.
Yes, we didn't break out this time the change in hyperscale, quarter over quarter, Chris, but we did see orders Start to come in strong towards the end of the quarter. That sort of gives us confidence that we've seen the bottom of That market from a digestion period and we expect to see growth over the course of the year and as you mentioned earlier, stronger growth as we go through the year. We as market went through a couple of quarters of digestion that is currently coming back now.
And your next question is from Mehdi Hosseini with SIG. 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 Deep better than expected and perhaps the shortfall was in the telecom and data center. And 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 sub components, so you were able to meet the demand and it was just this new market that you're trying to scale That the show just hampered your ability to hit the targets?
That's a good question, Mehdi. I think If you look across our markets, our higher volume markets had a larger impact from the supply chain perspective. And look, we have 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 part shortages there as well. So broadly speaking, our higher volume businesses are more impacted by the part shortages than the Fair Semi business or Couple of these Advanced Markets Quarter.
Sure. Okay. And then you highlighted OpEx increasing a little bit. Could we assume that maybe
OpEx It's up a
couple of 1,000,000 in the second half versus the first half. And then there could be continued increase in OpEx into 2022?
Yes. If you look at the numbers we've been investing in R and D, obviously, that's where all the growth is. You do have some annual costs They come in as the year goes on. So we'd expect to see OpEx up slightly from the Q2 levels over the year, but it should be very modest growth As we go forward after Q2.
Okay. Thank you.
Your next question is from Amanda Spurnatti with Citi. Your line is open. Good morning. Just touching in onto 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 see a reacceleration of growth?
Or do you expect that the digestion that you've been seeing the last two quarters It 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 see the growth from our current set of customers. As we bring on new customers, typically we start relatively low volumes and it ramps up over a period of months. So we have line of sight on the growth that's 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 Medical for obvious reasons. And we're definitely seeing bookings pick up in both areas and we think they'll strengthen every quarter this year. So we think those two markets, Industrial and Medical, We'll be coming back to life over the course of 2021.
Okay. Thank you. Your next question is from Scott Graham with Rosenblatt Securities. Your line is open.
Yes. Hey, good morning. Thanks for your time here and Steve, welcome. Could you maybe quantify the impact on sales of your portfolio changes In the Valcoma Networking segment, the revenues?
Yes, Scott. It's Paul. We haven't called that out specifically, but as you recall, we expect it to be down in Q1 and it was. And we also commented that this kind of forms kind of new baseline as we go forward. We'll see some growth from here.
There'll be some kind of Quarters could be a little higher, a little lower, but fundamentally, we think this sort of establishes a new baseline post those actions. Most of those actions really took effect in late 2020, It's had the effect of accelerating some business into 2020 and as we go forward, we 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, 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 list them worst to least if that's possible.
Sure. I'd be happy to comment on that. Obviously, the biggest issue we have is in semiconductor chips and microcontrollers, other ICs that we buy. 2nd would be ceramics, ceramic substrates and other forms of ceramic. Probably the 3rd or passive, some passive components are 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 can find them. We've signed a number of long term agreements with our key suppliers. We did that in Q1 as we saw lead times stretch.
And so we think that's going to start benefiting us In Q3, we've secured our position as preferred customer essentially at 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 the reason we're doing that is because there's a tendency for some of these scarce components to be delivered Yes, in a batch fashion towards the end of the quarter. So we want to be able to take advantage of that that requires some additional first capacity.
That's very helpful. Thank you. I guess the last question is around, so we're funding a little bit more R and 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 and A down a little bit 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, because I think as You said Paul that the second half sales guidance sort of up 5% to 10% sequentially as As a 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 and 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 hold or reduce SG and A over the last four or quarters even despite other kind of pressures that would normally increase SG and 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 SG and 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 and D, We think we'll drive future growth. We're committed to those. Some of the other headwinds we're seeing we think are transitory, they're going to last In a period of time and as we continue to execute our synergy plans, both In OpEx as well as the heavy lift that we have built complete by the end of the year in manufacturing, we think broadly speaking, We're back on our target model of growth kind of as we exit this year and coming internally next year.
That's great color. Thank you, Paul.
Yes.
Your next question is from Pavel Welcome to Raj with Raymond James. Your line is open.
Thanks for taking the question. 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, Wayne. I guess that would be a synergy, right, if we can come in and buy a smaller company and exercise our leverage in 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 that are 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 Thank you, KC.
I think the most interesting part for us is the additional investment in semiconductors. So 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 some of that can process power solutions.
So, yes, we're very enthusiastic about 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 beyond semiconductors at this point, but I hope you're correct.
Okay, fair enough.
Your next question is from Pernod Sushnetra 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 to different facilities that you have. And I know you haven't had that much opportunity to look at that, but Do you see there opportunities for further optimization or cost cuts that could drive margin expansion?
Yes. So basically, we have 3 centers of excellence in the company for manufacturing, one's in China, one's in Malaysia and one's in the Philippines. And we are 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 process. 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 good news is, if we 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 A bit more about your Industrial and Medical segments as to what you're seeing. In other words, your rich of the 2 sub segments, Industrial versus Medical, you're seeing faster Growth, any sense on revenue or any particular end market where you're seeing strong orders and
Yes, I'll make some general comments about Industrial Medical. The reason I like Those 2 markets so much is 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, our configurable products and then We tune them to the customer's needs 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 life cycle applications. And so once we get those items in, we'll continue to ship for many, many years. So we're going to continue to scour the market and look for more of those types of
Okay, great. Thank you.
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, Clint, what we said, Wes, is that as we execute our manufacturing consolidation, That we believe we could exit the year, sort of at that 40% or better range. That's still, I would say, broadly our goal, Certainly, with the logistics and some of the supply chain constraints, that's a headwind that we didn't see a quarter or 2 ago. Now we think that's transitory, it's not going to last and how long it does last is less clear. So look at we think that those headwinds are maybe 1 100 to 200 basis points. And I would say that more than even what we experienced last year with COVID.
We've got some Reimbursement and other things with COVID, this is supply chains are very full, the logistics channels are very full. So in the interim, we're going to face these headwinds, but as those size and as we 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, is it semi, is it data center, etcetera.
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.
Yes. The good news is we see strong growth in all sectors, quite frankly. So we see semiconductors team to stay in full speed ahead essentially. The customers we have in SMIC vectors are very bullish about demand in the second half into 2022. So our challenge there is just going to be keeping up with their demand.
Obviously, I've come in on data center. We see that coming back strong in the second half. Industrial Medical is going through a recovery phase and we think that's going to be very strong. I think the only market where we may not see as strong growth is probably telecom Networking, I think we'll stay steady there. Again, as we look for some 5 gs designs, we think most of that revenue will probably come in 2022 and 23rd Street.
Okay. That's very helpful color. Thank you.
There are no further questions at this time. I turn call back to Steve Kelly for closing remarks.
Well, thank you very much for joining us on the call today. We see increasing demand across all of our target markets for the rest of 2021. And although supply issues are limiting our upside in the 2nd quarter, we see increased Commitments from our suppliers in the second half, if I hope that we can enter the year at a very high velocity. Thank you very much.
This concludes
today's conference. You may now