Advanced Energy Reports Second Quarter 2024 Results

About this update from Advanced Energy Industries, Inc.

Revenue was $364.9 million , at the higher end of guidance GAAP EPS from continuing operations was $0.41 , above the mid-point of guidance Non-GAAP EPS was $0.85 , above the mid-point of guidance DENVER --(BUSINESS WIRE)-- Advanced Energy Industries, Inc. (Nasdaq: AEIS), a global leader in highly engineered, precision power conversion, measurement, and control solutions, today announced financial results for the second quarter ended June 30, 2024 . “Second quarter financial results exceeded expectations, with sequential revenue growth in three of our four markets,” said Steve Kelley , president and CEO of Advanced Energy. “We continue to work intensively with our customers to incorporate AE’s differentiated technologies into leading-edge systems. These efforts, together with the execution of our manufacturing consolidation plan, are expected to drive meaningful market share gains and profitability improvement as our markets recover.” Quarter Results Revenue was $364.9 million in the second quarter of 2024, compared with $327.5 million in the first quarter of 2024 and $415.5 million in the second quarter of 2023. GAAP net income from continuing operations was $15.6 million or $0.41 per diluted share in the quarter, compared with $5.8 million or $0.15 per diluted share in the prior quarter, and $27.5 million or $0.73 per diluted share a year ago. Non-GAAP net income was $32.0 million or $0.85 per diluted share in the second quarter of 2024. This compares with $21.9 million or $0.58 per diluted share in the first quarter of 2024, and $41.9 million or $1.11 per diluted share in the second quarter of 2023. Advanced Energy generated $6.9 million in cash flow from continuing operations during the quarter and paid $3.8 million in quarterly dividends. The company announced plans to take further actions related to its previously announced manufacturing consolidation initiatives. Advanced Energy expects to incur employment-related charges for severance, benefits expenses, payroll taxes, and facility exit costs. The majority of these charges are expected to be recognized during the third quarter of 2024. A reconciliation of GAAP and non-GAAP measures is provided in the tables below. Third Quarter 2024 Guidance Based on the Company’s current view, beliefs, and assumptions, guidance is within the following ranges: Q3 2024 Revenue $370 million +/- $20 million GAAP EPS from continuing operations ( $0.10 ) +/- $0.25 Non-GAAP EPS $0.90 +/- $0.25 Conference Call Management will host a conference call today, July 30, 2024 , at 4:30 p.m. Eastern Time to discuss the second quarter financial results. To participate in the live earnings conference call, please dial 877-407-0890 approximately ten minutes prior to the start of the meeting and an operator will connect you. International participants can dial +1-201-389-0918. A webcast will also be available on our investor web page at ir.advancedenergy.com in the Events & Presentations section. The archived webcast will be available approximately two hours following the end of the live event. About Advanced Energy Advanced Energy Industries, Inc. (Nasdaq: AEIS) is a global leader in the design and manufacture of highly engineered, precision power conversion, measurement and control solutions for mission-critical applications and processes. Advanced Energy’s power solutions enable customer innovation in complex applications for a wide range of industries including semiconductor equipment, industrial production, medical and life sciences, data center computing, networking, and telecommunications. With engineering know-how and responsive service and support for customers around the globe, the company builds collaborative partnerships to meet technology advances, propels growth of its customers and innovates the future of power. Advanced Energy has devoted four decades to perfecting power. It is headquartered in Denver, Colorado , USA. For more information, visit www.advancedenergy.com . Advanced Energy | Precision. Power. Performance. Trust. Non-GAAP Measures This release includes GAAP and non-GAAP income and per-share earnings data and other GAAP and non-GAAP financial information. The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, restructuring, asset impairments, and other charges, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. In addition, the tax effect also includes a discrete tax benefit associated with the release of a portion of our deferred tax asset valuation allowance. The non-GAAP measures included in this release are not prepared in accordance with, or an alternative for, similar measures calculated under generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that these non-GAAP measures provide useful information to management and investors to evaluate business performance without the impacts of certain non-cash charges, non-economic foreign currency remeasurements, and other cash charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, make business decisions, develop budgets, forecast future periods, assess trends, and evaluate financial impacts of various scenarios. In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. Additionally, we believe that these non-GAAP measures, in combination with its financial results calculated in accordance with GAAP, provide investors with additional perspective. To gain a complete picture of all effects on our financial results from any and all events, management does (and investors should) rely upon the GAAP measures as well, as the items excluded from non-GAAP measures may contribute to not accurately reflecting the underlying performance of the company’s continuing operations for the period in which they are incurred. Furthermore, the use of non-GAAP measures has limitations in that such measures do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Forward-Looking Statements This release and statements we make on the above announced conference call contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements in this report that are not historical information are forward-looking statements. For example, statements relating to our beliefs, expectations, and plans are forward-looking statements, as are statements that certain actions, conditions, or circumstances will continue. The inclusion of words such as "anticipate," "expect," "estimate," "can," "may," "might," "continue," "enables," "plan," "intend," "should," "could," "would," "likely," "potential," or "believe," and similar expressions and the negative versions thereof indicate forward-looking statements; however, not all forward-looking statements may contain such words or expressions. These forward-looking statements are based upon information available as of the date of this report and management’s current estimates, forecasts, and assumptions. Although we believe that our expectations reflected in or suggested by these forward-looking statements are reasonable, we may not achieve the results, performance, plans, or objectives expressed or implied by such forward-looking statements. Forward-looking statements involve risks and uncertainties, which are difficult to predict and many of which are beyond our control. Risks and uncertainties to which our forward-looking statements are subject include, but are not limited to: our ability to achieve design wins with new and existing customers; our ability to accurately forecast and meet customer demand; risks related to global economic conditions, including, but not limited to, the impact of escalating global conflicts on macroeconomic conditions, economic uncertainty, market volatility, rising interest rates, inflation, or recession; risks inherent in our international operations, including the effect of trade and export controls, political and geographical risks, fluctuations in currency exchange rates; concentration of our customer base; risks associated with breach of our information security measures; our loss of or inability to attract and retain key personnel; disruptions to our manufacturing operations or those of our customers or suppliers; risks associated with our manufacturing footprint optimization and movement of manufacturing locations for certain products; our ability to successfully identify, close, integrate and realize anticipated benefits from our acquisitions; quality issues or unanticipated costs in fulfilling our warranty obligations (including our discontinued solar inverter product line), and adequacy of our warranty reserves; our ability to enforce, protect and maintain our proprietary technology and intellectual property rights; our ability to achieve cost savings, profitability, and gross margin goals; changes to tax laws and regulations or our tax rates; changes in federal, state, local and foreign regulations, including with respect to privacy and data protection, and environmental regulation; the effect of our debt obligations and restrictive covenants on our ability to operate our business; customer price sensitivity; risks related to our unfunded pension obligations; restructuring and severance activities; legal matters, claims, and proceedings; our estimates of the fair value of intangible assets; and the potential impact of dilution related to our convertible debt, hedge, and warrant transactions. Actual results could differ materially and adversely from those expressed in any forward-looking statements, and readers are cautioned not to place undue reliance on forward-looking statements. Factors that could contribute to these differences or prove our forward-looking statements, by hindsight, to be overly optimistic or unachievable include, but are not limited to, the risks and uncertainties listed above and described in Advanced Energy’s Form 10-K, Forms 10-Q and other reports and statements filed with the Securities and Exchange Commission (the “SEC”). These reports and statements are available on the SEC’s website at www.sec.gov . Copies may also be obtained from Advanced Energy’s investor relations page at ir.advancedenergy.com or by contacting Advanced Energy’s investor relations at 970-407-6555. Forward-looking statements are made and based on information available to us on the date of this press release. Aspirational goals and targets discussed on the conference call or in the presentation materials should not be interpreted in any respect as guidance. We assume no obligation to update the information in this press release. ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2024 2024 2023 Revenue, net $ 364,947 $ 415,508 $ 327,475 $ 692,422 $ 840,548 Cost of revenue 237,206 268,428 214,646 451,852 538,357 Gross profit 127,741 147,080 112,829 240,570 302,191 Gross margin % 35.0 % 35.4 % 34.5 % 34.7 % 36.0 % Operating expenses: Research and development 52,335 51,413 49,836 102,171 103,023 Selling, general, and administrative 55,013 55,613 55,124 110,137 110,971 Amortization of intangible assets 6,800 7,075 6,947 13,747 14,137 Restructuring, asset impairments, and other charges 625 3,154 245 870 4,197 Total operating expenses 114,773 117,255 112,152 226,925 232,328 Operating income 12,968 29,825 677 13,645 69,863 Interest income 12,119 4,301 12,645 24,764 7,886 Interest expense (6,956 ) (2,858 ) (7,127 ) (14,083 ) (5,588 ) Other income (expense), net 638 982 1,379 2,017 (423 ) Income from continuing operations, before income tax 18,769 32,250 7,574 26,343 71,738 Income tax provision 3,165 4,795 1,787 4,952 12,531 Income from continuing operations 15,604 27,455 5,787 21,391 59,207 Loss from discontinued operations, net of income tax (575 ) (315 ) (571 ) (1,146 ) (1,146 ) Net income $ 15,029 $ 27,140 $ 5,216 $ 20,245 $ 58,061 Basic weighted-average common shares outstanding 37,474 37,573 37,359 37,417 37,524 Diluted weighted-average common shares outstanding 37,777 37,803 37,687 37,733 37,804 Earnings per share attributable to Advanced Energy Industries, Inc : Continuing operations: Basic earnings per share $ 0.42 $ 0.73 $ 0.15 $ 0.57 $ 1.58 Diluted earnings per share $ 0.41 $ 0.73 $ 0.15 $ 0.57 $ 1.57 Discontinued operations: Basic loss per share $ (0.02 ) $ (0.01 ) $ (0.02 ) $ (0.03 ) $ (0.03 ) Diluted loss per share $ (0.02 ) $ (0.01 ) $ (0.02 ) $ (0.03 ) $ (0.03 ) Net income: Basic earnings per share $ 0.40 $ 0.72 $ 0.14 $ 0.54 $ 1.55 Diluted earnings per share $ 0.40 $ 0.72 $ 0.14 $ 0.54 $ 1.54 ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) June 30 , December 31 , 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 986,148 $ 1,044,556 Accounts receivables, net 262,419 282,430 Inventories 383,141 336,137 Other current assets 46,131 48,771 Total current assets 1,677,839 1,711,894 Property and equipment, net 180,624 167,665 Operating lease right-of-use assets 103,522 95,432 Other assets 130,782 136,448 Goodwill and intangible assets, net 449,092 445,318 Total assets $ 2,541,859 $ 2,556,757 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 157,523 $ 141,850 Other accrued expenses 113,015 156,254 Current portion of long-term debt 20,000 20,000 Current portion of operating lease liabilities 16,299 17,744 Total current liabilities 306,837 335,848 Long-term debt 887,309 895,679 Other long-term liabilities 182,637 181,048 Long-term liabilities 1,069,946 1,076,727 Total liabilities 1,376,783 1,412,575 Total stockholders' equity 1,165,076 1,144,182 Total liabilities and stockholders’ equity $ 2,541,859 $ 2,556,757 ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands) Six Months Ended June 30 , 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 20,245 $ 58,061 Less: loss from discontinued operations, net of income tax (1,146 ) (1,146 ) Income from continuing operations, net of income tax 21,391 59,207 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 33,918 32,966 Stock-based compensation 22,389 14,738 Amortization of debt issuance costs and debt discount 1,630 254 Deferred income tax benefit (42 ) (786 ) Loss (gain) on disposal and sale of assets (16 ) 192 Unrealized gain on investment (567 ) — Changes in operating assets and liabilities, net of assets acquired (63,830 ) (51,067 ) Net cash from operating activities from continuing operations 14,873 55,504 Net cash from operating activities from discontinued operations (876 ) (3,090 ) Net cash from operating activities 13,997 52,414 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of long-term investments (2,401 ) (3,128 ) Purchases of property and equipment (31,406 ) (33,623 ) Acquisitions, net of cash acquired (13,762 ) — Net cash from investing activities (47,569 ) (36,751 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term borrowings (10,000 ) (10,000 ) Dividend payments (7,658 ) (7,592 ) Net payments related to stock-based awards (5,500 ) (1,384 ) Net cash from financing activities (23,158 ) (18,976 ) EFFECT OF CURRENCY TRANSLATION ON CASH (1,678 ) (253 ) NET CHANGE IN CASH AND CASH EQUIVALENTS (58,408 ) (3,566 ) CASH AND CASH EQUIVALENTS, beginning of period 1,044,556 458,818 CASH AND CASH EQUIVALENTS, end of period $ 986,148 $ 455,252 ADVANCED ENERGY INDUSTRIES, INC. SUPPLEMENTAL INFORMATION (UNAUDITED) (in thousands) Net Revenue by Market Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2024 2024 2023 Semiconductor Equipment $ 188,321 $ 173,177 $ 179,903 $ 368,224 $ 367,386 Industrial and Medical 79,104 127,603 83,418 162,522 250,623 Data Center Computing 72,964 59,076 41,902 114,866 118,735 Telecom and Networking 24,558 55,652 22,252 46,810 103,804 Total $ 364,947 $ 415,508 $ 327,475 $ 692,422 $ 840,548 Net Revenue by Geographic Region Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2024 2024 2023 North America $ 172,794 $ 171,516 $ 134,079 $ 306,873 $ 352,458 Asia 151,955 186,498 151,943 303,898 365,681 Europe 39,813 56,213 40,553 80,366 118,779 Other 385 1,281 900 1,285 3,630 Total $ 364,947 $ 415,508 $ 327,475 $ 692,422 $ 840,548 ADVANCED ENERGY INDUSTRIES, INC. SELECTED OTHER DATA (UNAUDITED) (in thousands) Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2024 2024 2023 Gross profit from continuing operations, as reported $ 127,741 $ 147,080 $ 112,829 $ 240,570 $ 302,191 Adjustments to gross profit: Stock-based compensation 1,056 589 829 1,885 972 Facility expansion, relocation costs and other 161 60 1,308 1,469 1,017 Acquisition-related costs (57 ) 97 44 (13 ) 150 Non-GAAP gross profit 128,901 147,826 115,010 243,911 304,330 Non-GAAP gross margin 35.3 % 35.6 % 35.1 % 35.2 % 36.2 % Operating expenses from continuing operations, as reported 114,773 117,255 112,152 226,925 232,328 Adjustments: Amortization of intangible assets (6,800 ) (7,075 ) (6,947 ) (13,747 ) (14,137 ) Stock-based compensation (10,328 ) (7,348 ) (10,176 ) (20,504 ) (13,766 ) Acquisition-related costs (1,934 ) (1,165 ) (1,266 ) (3,200 ) (2,043 ) Restructuring, asset impairments, and other charges (625 ) (3,154 ) (245 ) (870 ) (4,197 ) Non-GAAP operating expenses 95,086 98,513 93,518 188,604 198,185 Non-GAAP operating income $ 33,815 $ 49,313 $ 21,492 $ 55,307 $ 106,145 Non-GAAP operating margin 9.3 % 11.9 % 6.6 % 8.0 % 12.6 % Reconciliation of Non-GAAP measure - income excluding certain items Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2023 2024 2023 Income from continuing operations, less non-controlling interest, net of income tax $ 15,604 $ 27,455 $ 5,787 $ 21,391 $ 59,207 Adjustments: Amortization of intangible assets 6,800 7,075 6,947 13,747 14,137 Acquisition-related costs 1,877 1,262 1,310 3,187 2,193 Facility expansion, relocation costs, and other 161 60 1,308 1,469 1,017 Restructuring, asset impairments, and other charges 625 3,154 245 870 4,197 Unrealized foreign currency loss (gain) (1,545 ) (2,266 ) (1,757 ) (3,302 ) (1,213 ) Tax effect of non-GAAP adjustments, including certain discrete tax benefits (498 ) (1,051 ) (622 ) (1,120 ) (2,172 ) Non-GAAP income, net of income tax, excluding stock-based compensation 23,024 35,689 13,218 36,242 77,366 Stock-based compensation, net of tax 8,993 6,191 8,694 17,687 11,495 Non-GAAP income, net of income tax $ 32,017 $ 41,880 $ 21,912 $ 53,929 $ 88,861 ADVANCED ENERGY INDUSTRIES, INC. SELECTED OTHER DATA (UNAUDITED) Reconciliation of non-GAAP measure - per share earnings excluding certain items Three Months Ended Six Months Ended June 30 , March 31 , June 30 , 2024 2023 2024 2024 2023 Diluted earnings per share from continuing operations, as reported $ 0.41 $ 0.73 $ 0.15 $ 0.57 $ 1.57 Add back: Per share impact of non-GAAP adjustments, net of tax 0.44 0.38 0.43 0.86 0.78 Non-GAAP earnings per share $ 0.85 $ 1.11 $ 0.58 $ 1.43 $ 2.35 Reconciliation of Q3 2024 Guidance Low End High End Revenue $350 million $390 million Reconciliation of non-GAAP earnings per share GAAP earnings per share $ (0.35 ) $ 0.15 Stock-based compensation 0.28 0.28 Amortization of intangible assets 0.19 0.19 Restructuring, asset impairments, and other charges 0.77 0.77 Tax effects of excluded items (0.24 ) (0.24 ) Non-GAAP earnings per share $ 0.65 $ 1.15 View source version on businesswire.com : https://www.businesswire.com/news/home/20240730102829/en/ Andrew Huang Advanced Energy Industries, Inc. 970-407-6555 [email protected] Source: Advanced Energy Industries, Inc.

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