Advanced Energy Industries, Inc. · NASDAQ:AEIS
Advanced Energy Industries — Investor Day (December 2020)
58 slides from Advanced Energy Industries's investor day presentation, Dec 14, 2020
Slide 1: Advanced Energy 2020 Investor Briefing
Advanced Energy (AEIS) 2020 Investor Briefing DECEMBER 14, 2020 1
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT The company’s guidance with respect to anticipated financial results, potential future growth and profitability, future business mix, expectations regarding future market trends, future performance within specific markets and other statements herein that are not historical info
Slide 3: Presenter and Agenda
PRESENTER AND AGENDA Yuval Wasserman Paul Oldham Dana Huth Edwin Mok President and Executive Vice President Vice President, Strategic Chief Revenue Officer Chief Executive Officer and Chief Financial Officer Marketing and Investor Relations Presenter Topic Yuval Wasserman A Best-in-Class Industrial
Slide 4: A Best-in-Class Industrial Growth Enterprise
A Best-in-Class Industrial Growth Enterprise YUVAL WASSERMAN | PRESIDENT AND CEO 4
Slide 5: Powering the 4th Industrial Revolution
Key Messages POWERING THE 4TH INDUSTRIAL REVOLUTION PURE PLAY POWER LEADER OUTPERFORMING MARKETS Strategic focus on power ensuring Track record of growing share, content sustainable advantages and scale and increasing SAM 4TH INDUSTRIAL REVOLUTION ACCELERATING EARNINGS Data economy and digitization
Slide 6: We Are the Pure Play Power Leader
Key Messages WE ARE THE PURE PLAY POWER LEADER AE provides precision power conversion and control solutions for a wide range of SEMICONDUCTOR INDUSTRIAL & DATA CENTER TELECOM & technologies and EQUIPMENT MEDICAL COMPUTING NETWORKING applications Process Custom Server Radio Power Power Power Power Gr
Slide 7: Our Leadership Drives Solid Performance
Key Messages OUR LEADERSHIP DRIVES SOLID PERFORMANCE Large & Diversified Growing Market Last 4 Quarters Reported Results $9.0B Combined SAM $1.38 billion $218 million REVENUE NON-GAAP OP PROFIT(1) 129% YoY Growth 144% YoY Growth Delta Electronics #1 or #2 Advanced Energy in All Four Markets Mean Wel
Slide 8: Updated 3-Year Aspirational Goals
Key Messages UPDATED 3-YEAR ASPIRATIONAL GOALS(1) Generate & Deploy Cash Grow & Diversify Last Year’s New Aspirational Goal Goals Revenue : $1.50B $1.65B Non-GAAP EPS(2) : $6.50 $7.50 ROIC(3) : 23% 23% (1) Please note that hypothetical scenarios regarding revenue growth, EBITDA, EPS, (GAAP or non-GA
Slide 9: 5G: A Catalyst Across Our Verticals
Secular Drivers 5G: A CATALYST ACROSS OUR VERTICALS 5G SEMICONDUCTOR EQUIPMENT • Leading-edge foundry/logic for creating 5G smartphone SoC • High density memory needed in mobile devices • RF devices drive upgrades and retrofits DATA CENTER COMPUTING • Mobile Edge Computing • Cloud service providers
Slide 10: Artificial Intelligence: Transforming Our Markets
Secular Drivers ARTIFICIAL INTELLIGENCE: TRANSFORMING OUR MARKETS • Increased demand for AI • Accelerating adoption of leading-edge capacity process automation • New memory architectures • Enabling new medical advancement • High Performance Computing • High-speed connectivity for seamless data trans
Slide 11: Industrial IoT: Enabling Smart Manufacturing
Secular Drivers INDUSTRIAL IOT: ENABLING SMART MANUFACTURING Data Center Computing High Speed Connectivity Cloud & Edge computing Enabling data connection for analytics and automation and an autonomous factory IoT Semiconductor Industrial Production At the heart of enabling Smart manufacturing IoT c
Slide 12: 4th Industrial Revolution Drives Growth Across Our 4 Verticals
Secular Drivers 4TH INDUSTRIAL REVOLUTION DRIVES GROWTH ACROSS OUR 4 VERTICALS KEY TECHNOLOGIES BEHIND THE 4TH INDUSTRIAL REVOLUTION 5G SEMICONDUCTOR EQUIPMENT INDUSTRIAL & MEDICAL AI DRIVING GROWTH ACROSS OUR 4 VERTICALS IoT DATA CENTER TELECOM & COMPUTING NETWORKING Copyright © 2020 Advanced Energ
Slide 13: 4 Key Areas for Growth
Growth Strategies 4 KEY AREAS FOR GROWTH AE TARGETED GROWTH STRATEGIES GROW SHARE Across Mission Critical, Precision Power Verticals Semiconductor: Hyperscale: Extending Our From Fast Follower Leadership to Market Leader Invest in INNOVATION and Technology Leadership Leverage Strong Financials and I
Slide 14: Semi: Extending Our Leadership
Growth Strategies SEMI: EXTENDING OUR LEADERSHIP Track Record: Outgrowing the market and Undisputed leadership in RF: our competitors Most advanced matching and integration ~2X RF Power Market Share vs. Next Competitor(1) • RF Match a fast-growing product category • Industry-leading capabilities in
Slide 15: Hyperscale: From Fast Follower to Market Leader
Growth Strategies HYPERSCALE: FROM FAST FOLLOWER TO MARKET LEADER Growth Targets >4X AE Hyperscale Revenue Growth vs. Market Growth(1) >2X AE Data Center Computing Annual Revenue from 2017 to 2023(2) (1) Hyperscale market growth rates are internal estimates based on forecast by companies, Morgan Sta
Slide 16: Industrial & Medical: Enabling Smart Applications
Growth Strategies INDUSTRIAL & MEDICAL: ENABLING SMART APPLICATIONS PRECISION THERMAL POWER SUPPLIES HORTICULTURE SYSTEMS PROCESSING FOR MEDICAL Thyro-A+ iHPS+iTS CoolX 3000 System New products enabling our customers to deliver on the promise of Industry 4.0 Copyright © 2020 Advanced Energy 16
Slide 17: Inorganic Growth: Leveraging Scale to Grow Scope
Growth Strategies INORGANIC GROWTH: LEVERAGING SCALE TO GROW SCOPE Successful Acquisition Criteria Expanding reach, served Enables cross selling Synergistic with Technical leadership or Pure Play Power market or portfolio across our verticals current operations differentiated products TrackRecord Tr
Slide 18: ESG Initiatives Across Our Business and Products
Value Creation ESG INITIATIVES ARE INCORPORATED ACROSS OUR BUSINESS AND OUR PRODUCTS ENVRIONMENTAL SOCIAL GOVERNANCE • Energy efficient products • Empowering our community • Supply chain human rights • Energy efficient operations • Scholarships and • Employee development • Recycling educational impr
Slide 19: Long-Term Vision
Value Creation LONG-TERM VISION NEW 3-YEAR LONG TERM LAST 12-MONTH ASPIRATIONAL VISION RESULTS GOALS (6-8 YEARS) Revenue $1.38B $1.65B $2.50B Non-GAAP EPS(1) $4.62 $7.50 $12.00 ROIC(2) 20% 23% 20% (1) Non-GAAP financial measures can be found at the back of this presentation (2) ROIC calculated as No
Slide 20: Realizing Growth Potential
Realizing Growth Potential DANA HUTH | CHIEF REVENUE OFFICER 20
Slide 21: Topics Today
Introduction TOPICS TODAY DATA CENTER HYPERSCALE INDUSTRIAL & MEDICAL Copyright © 2020 Advanced Energy 21
Slide 22: Strong Secular Growth in Data Center Market
Hyperscale STRONG SECULAR GROWTH IN DATA CENTER MARKET ACCELERATED ADOPTION OF CLOUD GROWING INVESTMENTS IN HYPERSCALE COMPUTING AND INTERNET USAGE DATA CENTER INFRASTRUCTURE ($ in billions) Cloud Service Provider Market(1) ($ in billions) Hyperscale CAPEX(2) $500 $140 IaaS CaaS $120 $400 PaaS SaaS
Slide 23: A Hyperscale Evolution for Rack-Scale Infrastructure Owner
Hyperscale A HYPERSCALE EVOLUTION FOR RACK-SCALE INFRASTRUCTURE OWNER TRADITIONAL SERVERS CUSTOM SERVERS OPTIMIZED SYSTEM LEVEL SOLUTION TO IN ENTERPRISE FOR APPLICATIONS MAXIMIZE ENERGY SAVINGS MANY SUPPLIERS SOME SUPPLIERS TOP SUPPLIERS STANDARD CUSTOM CUSTOM POWER IN-SERVER POWER SUPPLY POWER SUP
Slide 24: Increased Importance of Total Cost of Ownership
Hyperscale INCREASED IMPORTANCE OF TOTAL COST OF OWNERSHIP DATA CENTER TOTAL COST OF OWNERSHIP CAPEX OPEX • Total rack level design for cost optimization • Electricity is the biggest driver of operating costs DRIVERS OF • Reduced hardware redundancy without compromise • Maximizing energy efficiency
Slide 25: 48V Server Accelerates Adoption of Power Shelf
Hyperscale 48V SERVER ACCELERATES ADOPTION OF POWER SHELF DEPLOYMENT BENEFITS • Improves server power efficiency • Reduces copper and power distribution costs NOW 2023 • Reduces TCO 12v 12v 48v 12v CATALYST 12v 12v 48v 12v • 48V accelerates adoption by Tier-I and Tier-II hyperscalers • Infrastructur
Slide 26: Power Content Growing in Data Center Rack
Hyperscale POWER CONTENT GROWING IN DATA CENTER RACK INCREASED POWER WITH GROWING RACK DENSITY POWER SUPPLY CONTENT ADVANCED MPU ROADMAP(1) IN DATA CENTER MORE 2X IN AI RACKS Sapphire Average Rack Density(2) Ice Rapids (kW) Cooper Lake 300W 9.0 Cascade Lake 270W Lake 250W 206W >2X 8.0 +26% Power con
Slide 27: AE Technology Leadership Enables Strong Competitive Advantages
Hyperscale AE TECHNOLOGY LEADERSHIP ENABLES STRONG COMPETITIVE ADVANTAGES INDUSTRY-LEADING POWER POWER DENSITY SYSTEM LEVEL SOLUTIONS CONVERSION EFFICIENCY LEADERSHIP WITH ADVANCED CAPABILITIES Communication, Peak Conversion Efficiency Monitoring & Control 98% Competitor X PSU PSU PSU 96% Best Compe
Slide 28: Growing Substantially Faster Than the Market
Hyperscale GROWING SUBSTANTIALLY FASTER THAN THE MARKET FROM FAST FOLLOWER TO LEADER GROWTH TARGETS ($ in billions) Hyperscale CAPEX(1) $140 2X AE Targeted SAM CAGR vs. Server Power Supply Market (2) $120 $100 $80 40-50% AE Hyperscale CAGR Target from 2017 to 2023 Total Hyperscale $60 CAPEX $40 Add
Slide 29: Industrial and Medical: 4th Industrial Revolution for Smart Applications
Industrial and Medical INDUSTRIAL AND MEDICAL: 4TH INDUSTRIAL REVOLUTION FOR SMART APPLICATIONS FAVORABLE MARKET GROWTH TREND Industry 4.0 Market(1) ($ in billions) $150 $100 $50 $0 2016 2019 2022 2024 • Industry 4.0 related investments expected to (1) grow at a 16.9% 2019-24 CAGR • Digital transfor
Slide 30: AE's Industrial & Medical Exposure
Industrial and Medical AE’S INDUSTRIAL & MEDICAL EXPOSURE Medical Medical 22% 22% Growth profile: High Single-Digit % CAGR; High mix, low volume General Industrial 37% General Diagnostic Growth profile: GDP+ Ex: MRI, CT Scan, Analytical Instruments Industrial Cleantech to outperform Therapeutic 37%
Slide 31: Advanced Power Solutions Enable Smart Everything
Industrial and Medical ADVANCED POWER SOLUTIONS ENABLE “SMART EVERYTHING” ADVANCED MATERIALS SMART MANUFACTURING HORTICULTURE SYSTEMS PROCESSING • Proven flexible digital platform • Patented system-level solution • Advanced power solutions enabling with software higher performance and lower costs •
Slide 32: Configurable Leadership Drives Growth
Industrial and Medical CONFIGURABLE LEADERSHIP DRIVES GROWTH CONFIGURABLE POWER ENABING CUSTOMER STRONG LEADERSHIP SUPPLIES INNOVATION POSITION 35% A $140M SAM and Growing(1) • Configurable is a highly flexible platform using existing off • Accelerates time to market by enabling our customer to quic
Slide 33: AE Go To Market Strategy
Go To Market AE GO TO MARKET STRATEGY Account Types Engagement Model Increased Level • Strategic global customers of Customization • Served directly by AE with extensive engagement and Value Key throughout organization Accounts • AE viewed as a strategic supplier and trusted advisor • Focused set of
Slide 34: Leveraging Global Channel to Drive Growth
Go To Market LEVERAGING GLOBAL CHANNEL TO DRIVE GROWTH Growing Channel Sales • Less fragmented and more OPTIMIZING strategic GLOBAL • Drives scale in coverage and CHANNEL increases efficiency TRUSTED • Become more relevant to our SUPPLIER TO partners by investing in them OUR PARNERS • Grow with our
Slide 35: Initial Cross Selling Success Stories
Cross Selling INITIAL CROSS SELLING SUCCESS STORIES INDUSTRIAL SEMICONDUCTOR & MEDICAL EQUIPMENT Configurable Multi-Output AC-DC iHP High Power Configurable Wide range of Industrial equipment design win: Semiconductor equipment design win: opportunities • Multi-output configurable solution for auxil
Slide 36: Realizing Growth Potential
Summary REALIZING GROWTH POTENTIAL • Focused on key growth trends within Data Center Computing and Industrial & Medical markets • Lead with technology and differentiated solutions to address the fastest growing parts of the markets • Proven winning strategies and optimized channel • Positioned to gr
Slide 37: Delivering Long-term Shareholder Value
Delivering Long-term Shareholder Value PAUL OLDHAM | EVP AND CFO 37
Slide 38: Platform for Earnings Growth and Top Tier ROIC
Introduction PLATFORM FOR EARNINGS GROWTH AND TOP TIER ROIC • Record financial results & increased revenue diversity • Accelerated earnings growth with 2020E EPS(1) up 2X from last year • Synergies and accretion well ahead of target • Balance sheet and cash flow enable growth and shareholder return
Slide 39: Delivering Record Financial Performance
39 Performance DELIVERING RECORD FINANCIAL PERFORMANCE REVENUE GROSS PROFIT NON-GAAP OP INCOME NON-GAAP EPS CASH FLOW ($ in millions) ($ in millions) ($ in millions) ($ per share) ($ in millions) $70 $140 $60 $1.50 $300 $60 $120 $50 $100 $40 $1.00 $200 $40 $80 $30 $60 $100 $20 $0.50 $20 $40 $20 $10
Slide 40: Diversified Performance Across Markets
Performance DIVERSIFIED PERFORMANCE ACROSS MARKETS SEMICONDUCTOR INDUSTRIAL & MEDICAL DATA CENTER COMPUTING TELECOM & NETWORKING EQUIPMENT ($ in millions) ($ in millions) ($ in millions) ($ in millions) $160 $160 $160 $160 $140 $140 $140 $140 $120 $120 $120 $120 $100 $100 $100 $100 $80 $80 $80 $80 $
Slide 41: Artesyn Integration Ahead of Schedule
Performance ARTESYN INTEGRATION AHEAD OF SCHEDULE Ahead of Plan to deliver synergies and long-term model ACHIEVED >$30M ACHIEVED >$1.00 PER ANNUALIZED SYNERGIES SHARE ACCRETION >$40 >$1.50 >$30 >$1.00 AE Distribution Operating & Channel Model Initial Achieved Target Initial Achieved Target FULLY INT
Slide 42: Diversified Revenue Mitigates Cyclicality
Diversification DIVERSIFIED REVENUE MITIGATES CYCLICALITY • Broader end market exposure • More than subsystems Diversified Revenue Base • Cycles do not move in tandem • Larger industrial / medical exposure tied AE 2018 AE 2020 to secular / macro factors Reduced Cyclically While Still Capturing the U
Slide 43: Moving Beyond Semi Equipment Subsystems to Industrial Growth Peers
Diversification MOVING BEYOND SEMI EQUIPMENT SUBSYSTEMS TO INDUSTRIAL GROWTH PEERS TRADITIONAL SEMICAP PEERS NEW INDUSTRIAL GROWTH PEERS AMAT BRKS COSEL AME FTV ACLS ENTG DELTA APH KN KLAC ICHR LITE-ON BDC LFUS LRCX MKSI VERTIV CFX TDY ONTO UCTT XPP EMR TEL Semiconductor Semiconductor equipment Glob
Slide 44: Top-Tiered Performance vs. Industrial Growth Comps
Diversification TOP-TIERED PERFORMANCE VS. INDUSTRIAL GROWTH COMPS Gross Margin Adjusted Operating Margin 51.6% 23.1% 19.5% 19.0% 42.8% 41.8% Target 39.8% 38.4% 18.1% Target 36.8% 36.0% 35.3% 34.5% 34.3% 15.7% 15.1% 14.7% 14.2% 31.0% 30.7% 13.9% 12.0% 7.6% 5.8% Cash to Cash Days Return on Invested C
Slide 45: Targeting Growth Above Our Markets
Platform for growth TARGETING GROWTH ABOVE OUR MARKETS SAM GROWTH AE REVENUE CAGR GROWTH PROFILE TARGETS DRIVERS Faster than Extend our >1.2X WFE CAGR $2.2B $2.1B WFE Leadership 2X Server Add >$100M Annual Win in TAM Growth Revenue by 2023 Hyperscale Combined SAM $9.0 billion Smart GDP+ >2X GDP CAGR
Slide 46: Portfolio Optimization Accelerates Earnings Growth
Platform for growth PORTFOLIO OPTIMIZATION ACCELERATES EARNINGS GROWTH OPTIMIZING PORTFOLIO TO PORTFOLIO NET EFFECTS OF ACHIEVE HIGHER PROFITABILITY OPTIMIZATION EXAMPLE OPTIMIZATION Original Original Revenue Optimized Gross Margins Optimized 2.9x 2.1X 8-9% 5-6% Move distribution of product to highe
Slide 47: Accelerate Earnings Growth
Platform for growth ACCELERATE EARNINGS GROWTH $7.50 +$0.20-$0.25 New Aspirational Non-GAAP +$1.15-$1.25 Portfolio EPS Goal(2) Optimization +$1.20-$1.30 AE Growth Strategies +$0.20-$0.25 Market Growth $4.62 Remaining Synergies Target >50% earnings growth LTM NON- >2X revenue growth rate GAAP EPS(1)
Slide 48: Updated 3-Year Aspirational Goals
Platform for growth UPDATED 3-YEAR ASPIRATIONAL GOALS FROM 2019 ANALYST EVENT 2020 UPDATE ORIGINAL PLAN OLD LAST NEW AT ARTESYN ASPIRATIONAL 12-MONTH ASPIRATIONAL CLOSE(1) GOALS RESULTS GOALS Revenue ($M) $1,240 $1,500 $1,383 $1,650 N.G. Gross Margins(2) 34-36% 40-41% 38.1% 41% N.G. Operating Margin
Slide 49: Long-Term Financial Framework
Long-term Vision LONG-TERM FINANCIAL FRAMEWORK 3-YEAR LONG-TERM ASPIRATIONAL ORGANIC FINANCIAL GOALS FRAMEWORK Revenue $1,650 5-6% Net CAGR Non-GAAP OPEX at ½ rev. CAGR 21% Operating Margins 35-45% incr. margins Non-GAAP EPS $7.50 >2.0X revenue CAGR ROIC 23% Maintain >20% Copyright © 2020 Advanced E
Slide 50: Long-Term Financial Framework + Inorganic Growth
Long-term Vision LONG-TERM FINANCIAL FRAMEWORK + INORGANIC GROWTH 3-YEAR LONG-TERM INORGANIC ASPIRATIONAL ORGANIC FINANCIAL GROWTH GOALS FRAMEWORK ASSUMPTIONS Revenue $1,650 5-6% Net CAGR Add ~$500M Non-GAAP OPEX at ½ rev. CAGR >10% acquired 21% Operating Margins 35-45% incr. margins margins Accreti
Slide 51: Long-Term Vision
Long-term Vision LONG-TERM VISION 3-YEAR LONG-TERM INORGANIC LONG-TERM ASPIRATIONAL ORGANIC FINANCIAL GROWTH VISION GOALS FRAMEWORK ASSUMPTIONS (6-8 YEARS) Revenue $1,650 5-6% Net CAGR Add ~$500M $2,500 Non-GAAP OPEX at ½ rev. CAGR >10% acquired 21% 21% Operating Margins 35-45% incr. margins margins
Slide 52: Updated Capital Allocation Plan
Capital Allocation UPDATED CAPITAL ALLOCATION PLAN Allocation of Free Cash Flow • M&A Engine with a disciplined process Capital Allocation Track Record • Building a solid funnel 2014 to Q3’20 Total • Maintain gross debt leverage at 1.0- 1.5x, and comfortable raising to 2.5X Total Acquisitions • Ampl
Slide 53: Announcing Initiation of Quarterly Dividend
Capital Allocation ANNOUNCING INITIATION OF QUARTERLY DIVIDEND FCF allocated to Capital Return to Shareholders INITATION OF NEW DIVIDEND PROGRAM Dividend Starting in Q1 2021 Quarterly dividend of $0.10/share* • Financial strength and scale supports an ongoing dividend Buybacks • Supported by strong
Slide 54: Powering the 4th Industrial Revolution
Key Messages POWERING THE 4TH INDUSTRIAL REVOLUTION PURE PLAY POWER LEADER OUTPERFORMING MARKETS Strategic focus on power ensuring Track record of growing share, content sustainable advantages and scale and increasing SAM 4TH INDUSTRIAL REVOLUTION ACCELERATING EARNINGS Data economy and digitization
Slide 55: Q&A Session
Yuval Wasserman Paul Oldham Dana Huth Edwin Mok President and Executive Vice President Vice President, Strategic Chief Revenue Officer Chief Executive Officer and Chief Financial Officer Marketing and Investor Relations Q&A SESSION Copyright © 2020 Advanced Energy 55
Slide 56: Non-GAAP Measures
NON-GAAP MEASURES Advanced Energy’s non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets, and unrealized foreign exchange gain or loss on long-term facility lease and pension obligations, as well as discontinued operatio
Slide 57: Non-GAAP Reconciliation – Last 4 Quarters
NON-GAAP RECONCILIATION – LAST 4 QUARTERS Reconciliation of Non-GAAP measure - FOUR QUARTERS ENDED Reconciliation of Non-GAAP measure - operating income excluding certain items expenses and operating income, excluding FOUR QUARTERS ENDED September 30, certain items 2020 2019 September 30, Income fro
Slide 58: Non-GAAP Reconciliation – Past Four Years
NON-GAAP RECONCILIATION – PAST FOUR YEARS Twelve months ended December 31, 2016 2017 2018 2019 Revenue $ 483.7 $ 671.0 $ 718.9 $ 788.9 GAAP Operating Income $ 126.9 $ 200.8 $ 171.6 $ 54.4 Add back: Restructuring Charges - - 4.2 5.0 Acquisition-related Costs - 0.2 2.3 20.3 Stock-based Compensation 6.
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