News Release

Advanced Energy Announces Fourth Quarter and Full Year 2017 Results

Jan 30, 2018
  • Q4 Revenue increased 32.4% y/y and 1.5% q/q to $179.2 million
  • Q4 GAAP loss per share from continuing operations was $0.73 (due to tax expense related to U.S. tax reform)
  • Q4 Non-GAAP EPS from continuing operations was $1.31

FORT COLLINS, Colo., Jan. 30, 2018 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq:AEIS), today announced financial results for the fourth quarter and full year ended December 31, 2017. The company reported fourth quarter sales of $179.2 million. Fourth quarter GAAP loss from continuing operations was $29.0 million, or $0.73 per share. Non-GAAP income from continuing operations was $52.4 million, or $1.31 per diluted share.

“Capped off by a strong fourth quarter in our semiconductor business, 2017 was a record-breaking year across the board as revenue and non-GAAP earnings grew to their highest levels in the company’s history,” said Yuval Wasserman, president and CEO of Advanced Energy. “Key to maintaining our market-leading position and continually outpacing the markets we serve is our ongoing innovation and technology leadership. We continued to demonstrate the sustainability of our model, allowing us to achieve our strategic and aspirational goals.”

Fourth Quarter Results

Sales were $179.2 million in the fourth quarter of 2017 compared with $176.6 million in the third quarter of 2017 and $135.3 million in the fourth quarter of 2016.

GAAP loss from continuing operations was $29.0 million or $0.73 per share in the fourth quarter of 2017 compared with income from continuing operations of $83.8 million or $2.09 per diluted share in the prior quarter, and income from continuing operations of $40.4 million or $1.01 per diluted share in the fourth quarter of 2016. The fourth quarter 2017 results were impacted by one-time tax expenses of $6.4 million associated with the write-down of solar inverter business and $72.9 million associated with the recently enacted U.S. tax reform, which the company will continue to evaluate during the measurement period.

Non-GAAP income from continuing operations was $52.4 million or $1.31 per diluted share in the fourth quarter of 2017, including $0.03 of favorable items. This compares with $48.0 million or $1.19 per diluted share in the prior quarter, and $42.6 million or $1.06 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $49.6 million of operating cash from continuing operations in the fourth quarter of 2017.

Full Year 2017

Sales were $671.0 million in 2017 compared with $483.7 million in 2016, an increase of 39%.

GAAP income from continuing operations was $136.1 million or $3.39 per diluted share in 2017 compared with $116.9 million or $2.92 per diluted share in 2016. Full year 2017 results were impacted by a one-time tax benefit of $33.8 million associated with the write-down of the solar inverter business and a one-time tax expense of $72.9 million associated with the recently enacted U.S. tax reform, which the company will continue to evaluate during the measurement period.

Non-GAAP income from continuing operations was $191.5 million or $4.77 per diluted share in 2017 compared with $124.6 million or $3.11 per diluted share in 2016. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $190.0 million in cash from continuing operations and ended the year with $410.4 million in cash and marketable securities.

Discontinued Operations

The company’s financial statements for all periods presented reflect results for the continuing precision power business, with the discontinued inverter business included in discontinued operations for both the balance sheet and income statement. Further financial detail regarding the amounts related to the discontinued inverter business are available in the company’s 2016 Annual Report on Form 10-K.

First Quarter 2018 Guidance

Based on the company's current view, beliefs and assumptions, guidance for the first quarter of 2018 is within the following ranges and does not incorporate any potential adjustments during the measurement period associated with U.S. tax reform.

     
    Q1 2018
     
Revenues   $183M - $193M
GAAP operating margins from continuing operations   30.0% - 32.0%
GAAP EPS from continuing operations   $1.19 - $1.29
Non-GAAP operating margins from continuing operations   32.0% - 34.0%
Non-GAAP EPS from continuing operations   $1.27 - $1.37
     

Fourth Quarter 2017 Conference Call

Management will host a conference call tomorrow morning, Wednesday, January 31, 2018 at 6:30 a.m. Mountain Time/ 8:30 a.m. Eastern Time to discuss Advanced Energy's financial results. Domestic callers may access this conference call by dialing 855-232-8958. International callers may access the call by dialing 315-625-6980. Participants will need to provide the operator with the Conference ID Number 5097049, which has been reserved for this call. For a replay of this teleconference, please call 855-859-2056 or 404-537-3406 and enter Conference ID Number 5097049. The replay will be available for one week following the conference call. A webcast will also be available on the company’s Investor Relations web page at http://ir.advanced-energy.com.

About Advanced Energy

Advanced Energy (NASDAQ:AEIS) is a global leader in innovative power and control technologies for high-growth, precision power solutions for thin films processes and industrial applications. Advanced Energy is headquartered in Fort Collins, Colorado, with dedicated support and service locations around the world. For more information, go to www.advanced-energy.com.

Advanced Energy and the Advanced Energy logo are trademarks of Advanced Energy Industries, Inc. or one of its Affiliates in the United States and elsewhere.

For more information, contact:

Tom McGimpsey
Advanced Energy Industries, Inc.
(970) 407-6326
tom.mcgimpsey@aei.com 
Annie Leschin/Rhonda Bennetto
Advanced Energy Industries, Inc.
(970) 407-6555
ir@aei.com 

Non-GAAP Measures

This release includes GAAP and non-GAAP income and per-share earnings data and other GAAP and non-GAAP financial information. Advanced Energy’s non-GAAP measures exclude the impact of non-cash related charges such as stock based compensation and amortization of intangible assets, as well as non-recurring items such as acquisition-related costs. Additionally, the fourth quarter and full year 2017  results exclude estimated income tax expense associated with U.S. tax reform. For the first quarter ending March 31, 2018 guidance, the company expects stock based compensation of $2.7 million and amortization of intangibles of $1.5 million. The non-GAAP measures included in this release are not 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. Advanced Energy believes that these non-GAAP measures provide useful information to management and investors to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of the company’s usual operations. The company uses 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, the company believes that these non-GAAP measures, in combination with its financial results calculated in accordance with GAAP, provide investors with additional perspective. While some of the excluded items may be incurred and reflected in the company’s GAAP financial results in the foreseeable future, the company believes that the items excluded from certain non-GAAP measures do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred. The use of non-GAAP measures has limitations in that such measures do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP, and these measures should only be used to evaluate the company’s results of operations in conjunction with the corresponding GAAP measures. Please refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Forward-Looking Statements

The company’s guidance with respect to anticipated financial results for the first quarter ending March 31, 2018, potential future growth and profitability, our future business mix, expectations regarding future market trends and the company’s future performance within specific markets (e.g., statements regarding anticipated semiconductor and industrial market growth) and other statements herein or made on the above-announced conference call that are not historical information are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: (a) the effects of global macroeconomic conditions upon demand for our products and services; (b) the volatility and cyclicality of the industries the company serves, particularly the semiconductor industry; (c) delays in capital spending by end-users in our served markets; (d) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (e) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (f) the accuracy of the company's assumptions on which its financial statement projections are based; (g) the impact of product price changes, which may result from a variety of factors; (h) the timing of orders received from customers; (i) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (j) the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (k) unanticipated changes to management's estimates, reserves or allowances; and (l) changes and adjustments to the tax expense and benefits related to the recently enacted U.S. tax reform. These and other risks are 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 http://ir.advanced-energy.com or by contacting Advanced Energy's investor relations at 970-407-6555. Forward-looking statements are made and based on information available to the company 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. The company assumes 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   Twelve Months Ended
  December 31,   September 30,   December 31,
  2017   2016   2017   2017   2016
                   
Sales:                  
Product $ 154,172     $ 115,885     $ 152,363     $ 578,650     $ 410,580    
Service 25,042     19,458     24,212     92,362     73,124    
Total sales 179,214     135,343     176,575     671,012     483,704    
Cost of sales:                  
Product 68,833     54,710     72,146     267,587     192,694    
Service 12,206     9,115     12,195     47,044     37,863    
Total cost of sales 81,039     63,825     84,341     314,631     230,557    
Gross profit 98,175     71,518     92,234     356,381     253,147    
  54.8 %   52.8 %   52.2 %   53.1 %   52.3 %  
Operating expenses:                  
Research and development 16,257     11,121     14,629     57,999     44,445    
Selling, general and administrative 22,682     20,864     24,692     93,262     77,678    
Amortization of intangible assets 1,174     987     1,240     4,350     4,167    
Total operating expenses 40,113     32,972     40,561     155,611     126,290    
Operating income 58,062     38,546     51,673     200,770     126,857    
Other (expense) income, net 559     81     153     (2,579 )   1,219    
Income from continuing operations before income taxes 58,621     38,627     51,826     198,191     128,076    
Provision for income taxes 87,628     (1,809 )   (31,968 )   62,090     11,128    
Income (loss) from continuing operations, net of income taxes (29,007 )   40,436     83,794     136,101     116,948    
Income (loss) from discontinued operations, net of income taxes (583 )   3,845     70     1,760     10,506    
Net income (loss) $ (29,590 )   $ 44,281     $ 83,864     $ 137,861     $ 127,454    
                   
Basic weighted-average common shares outstanding 39,642     39,699     39,786     39,754     39,720    
Diluted weighted-average common shares outstanding 40,051     40,029     40,172     40,176     40,031    
                   
Earnings per share:                  
                   
Continuing operations:                  
Basic earnings (loss) per share $ (0.73 )   $ 1.02     $ 2.11     $ 3.42     $ 2.94    
Diluted earnings (loss) per share $ (0.73 )   $ 1.01     $ 2.09     $ 3.39     $ 2.92    
                   
Discontinued operations:                  
Basic earnings (loss) per share $ (0.01 )   $ 0.10     $ 0.00     $ 0.04     $ 0.26    
Diluted earnings (loss) per share $ (0.01 )   $ 0.10     $ 0.00     $ 0.04     $ 0.26    
                   
Net income:                  
Basic earnings (loss) per share $ (0.75 )   $ 1.12     $ 2.11     $ 3.47     $ 3.21    
Diluted earnings (loss) per share $ (0.75 )   $ 1.11     $ 2.09     $ 3.43     $ 3.18    
                                         


 
ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  December 31,   December 31,
  2017   2016
ASSETS Unaudited    
       
Current assets:      
  Cash and cash equivalents $ 407,283     $ 281,953  
  Marketable securities 3,104     4,737  
  Accounts receivable, net 87,429     75,667  
  Inventories, net 78,450     55,770  
  Income taxes receivable 1,295     1,482  
  Other current assets 8,129     9,324  
Current assets of discontinued operations 9,535     9,401  
Total current assets 595,225     438,334  
       
Property and equipment, net 17,795     13,337  
       
Deposits and other 3,051     1,835  
Goodwill and intangibles, net 87,311     70,196  
Deferred income tax assets 18,841     32,197  
Non-current assets of discontinued operations 11,085     15,630  
Total assets $ 733,308     $ 571,529  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
  Accounts payable $ 48,177     $ 46,255  
  Other accrued expenses 50,092     35,372  
Current liabilities of discontinued operations 7,850     13,419  
Total current liabilities 106,119     95,046  
       
Non-current liabilities of continuing operations 91,271     63,252  
Non-current liabilities of discontinued operations 15,277     21,157  
Long-term liabilities 106,548     84,409  
       
Total liabilities 212,667     179,455  
       
Stockholders' equity 520,641     392,074  
Total liabilities and stockholders' equity $ 733,308     $ 571,529  
       

December 31, 2016 amounts are derived from the December 31, 2016 audited Consolidated Financial Statements.


 
ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
 
  Twelve Months Ended December 31,
  2017   2016
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 137,861     $ 127,454  
Income from discontinued operations, net of income taxes 1,760     10,506  
Income from continuing operations, net of income taxes 136,101     116,948  
       
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 9,424     7,813  
Stock-based compensation expense 12,549     6,332  
Provision for deferred income taxes 28,765     3,570  
Loss on foreign exchange hedge 3,489      
Net loss on disposal of assets 122     319  
Changes in operating assets and liabilities, net of assets acquired (494 )   (7,838 )
Net cash provided by operating activities from continuing operations 189,956     127,144  
Net cash used in operating activities from discontinued operations (7,255 )   (7,857 )
Net cash provided by operating activities 182,701     119,287  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of marketable securities (107 )   (763 )
Proceeds from sale of marketable securities 1,903     7,884  
Acquisitions, net of cash acquired (17,347 )    
Purchase of foreign exchange hedge (3,489 )    
Purchases of property and equipment (9,042 )   (6,821 )
Net cash (used in) provided by investing activities from continuing operations (28,082 )   300  
Net cash used in investing activities from discontinued operations      
Net cash (used in) provided by investing activities (28,082 )   300  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Purchase and retirement of common stock (29,993 )    
Net (payments) proceeds related to stock-based award activities (1,315 )   2,175  
Other financing activities 1     (4 )
Net cash (used in) provided by financing activities from continuing operations (31,307 )   2,171  
Net cash used in financing activities from discontinued operations     (29 )
Net cash (used in) provided by financing activities (31,307 )   2,142  
EFFECT OF CURRENCY TRANSLATION ON CASH 2,208     (1,932 )
INCREASE IN CASH AND CASH EQUIVALENTS 125,520     119,797  
CASH AND CASH EQUIVALENTS, beginning of period 289,517     169,720  
CASH AND CASH EQUIVALENTS, end of period 415,037     289,517  
Less cash and cash equivalents from discontinued operations 7,754     7,564  
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period $ 407,283     $ 281,953  
               


 
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   Twelve Months Ended
  December 31,   September 30,   December 31,
  2017   2016   2017   2017   2016
                   
Gross Profit from continuing operations, as reported $ 98,175     $ 71,518     $ 92,234     $ 356,381     $ 253,147  
Operating expenses from continuing operations, as reported 40,113     32,972     40,561     155,611     126,290  
Adjustments:                  
Stock-based compensation (1,842 )   (2,033 )   (3,453 )   (12,549 )   (6,332 )
Amortization of intangible assets (1,174 )   (987 )   (1,240 )   (4,350 )   (4,167 )
Acquisition-related costs             (150 )    
Non-GAAP operating expenses from continuing operations 37,097     29,952     35,868     138,562     115,791  
Non-GAAP operating income from continuing operations $ 61,078     $ 41,566     $ 56,366     $ 217,819     $ 137,356  


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2017   2016   2017   2017   2016
                   
Gross Profit from continuing operations, as reported 54.8 %   52.8 %   52.2 %   53.1 %   52.3 %
Operating expenses from continuing operations, as reported 22.4     24.4     23.0     23.2     26.1  
Adjustments:                  
Stock-based compensation (1.0 )   (1.6 )   (2.0 )   (2.0 )   (1.3 )
Amortization of intangible assets (0.7 )   (0.7 )   (0.7 )   (0.6 )   (0.9 )
Acquisition-related costs                  
Non-GAAP operating expenses from continuing operations 20.7     22.1     20.3     20.6     23.9  
Non-GAAP operating income from continuing operations 34.1 %   30.7 %   31.9 %   32.5 %   28.4 %


Reconciliation of Non-GAAP measure - income excluding certain items Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2017   2016   2017   2017   2016
                   
Income (loss) from continuing operations, net of income taxes, as reported $ (29,007 )   $ 40,436     $ 83,794     $ 136,101     $ 116,948  
Adjustments:                  
Stock-based compensation 1,842     2,033     3,453     12,549     6,332  
Amortization of intangible assets 1,174     987     1,240     4,350     4,167  
Loss on foreign exchange hedge             3,489      
Acquisition-related costs             150      
Incremental expense associated with start-up of the Asia regional headquarters         1,133     1,133      
Nonrecurring tax (benefit) expense associated with inverter business 6,357         (40,194 )   (33,837 )    
Tax Cuts and Jobs Act Impact 72,867             72,867      
Tax effect of Non-GAAP adjustments (813 )   (881 )   (1,426 )   (5,264 )   (2,854 )
Non-GAAP income from continuing operations, net of income taxes $ 52,420     $ 42,575     $ 48,000     $ 191,538     $ 124,593  


Reconciliation of Non-GAAP measure - per share earnings excluding certain items Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2017   2016   2017   2017   2016
                   
Diluted earnings (loss) per share from continuing operations, as reported $ (0.73 )   $ 1.01     $ 2.09     $ 3.39     $ 2.92  
Add back:                  
per share impact of Non-GAAP adjustments, net of tax 2.04     0.05     (0.90 )   1.38     0.19  
Non-GAAP per share earnings from continuing operations $ 1.31     $ 1.06     $ 1.19     $ 4.77     $ 3.11  


Reconciliation of Q1 2018 Guidance        
    Low End   High End
         
Revenue   $183 million   $193 million
         
Reconciliation of Non-GAAP operating margin        
GAAP operating margin   30 %   32 %
Stock-based compensation   1 %   1 %
Amortization of intangible assets   1 %   1 %
Non-GAAP operating margin   32 %   34 %
         
Reconciliation of Non-GAAP earnings per share        
GAAP earnings per share   $ 1.19     $ 1.29  
Stock-based compensation   0.07     0.07  
Amortization of intangible assets   0.04     0.04  
Tax effects of excluded items   (0.03 )   (0.03 )
Non-GAAP earnings per share   $ 1.27     $ 1.37  

 

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