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Advanced Energy Announces Third Quarter 2017 Results

  • Q3 Revenue increased 39.5% y/y and 6.5% q/q to $176.6 million
  • Q3 GAAP EPS from continuing operations was $2.09
  • Q3 Non-GAAP EPS from continuing operations was $1.19
  • Completed Excelsys acquisition and $25M share repurchase

FORT COLLINS, Colo., Oct. 30, 2017 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq:AEIS), today announced financial results for the third quarter ended September 30, 2017. The company reported third quarter sales of $176.6 million. Third quarter GAAP income from continuing operations was $83.8 million, or $2.09 per diluted share. Non-GAAP income from continuing operations was $48.0 million, or $1.19 per diluted share.

“The growing importance of AE’s advanced power products drove our seventh quarter of strong results. Our Industrial business reached a five-year high, while semiconductors and service continued to benefit from multiple technology drivers, leading to total revenue growth of 40% over last year,” said Yuval Wasserman, president and CEO. “AE’s track record of outperformance, together with our continual investment in innovation to support our customers’ roadmaps and the expansion of our product portfolio through acquisitions, is unlocking strategic opportunities to create sustainable value for our customers and shareholders.”

Third Quarter Results

Sales were $176.6 million compared with $165.9 million in the second quarter of 2017 and $126.6 million in the third quarter of 2016.

GAAP income from continuing operations was $83.8 million or $2.09 per diluted share in the third quarter of 2017 compared with $45.9 million or $1.14 per diluted share in the prior quarter, and $29.0 million or $0.73 per diluted share in the third quarter of 2016. Third quarter 2017 GAAP income included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.

Non-GAAP income from continuing operations was $48.0 million or $1.19 per diluted share in the third quarter of 2017 compared with $49.2 million or $1.22 per diluted share in the prior quarter, and $30.8 million or $0.77 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $33.7 million of operating cash from continuing operations in the third quarter.

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.

Fourth Quarter 2017 Guidance

Based on the company's current view, beliefs and assumptions, guidance for the fourth quarter of 2017 is within the following ranges:

    Q4 2017
     
Revenues   $172M - $182M
GAAP operating margins from continuing operations   28% - 30%
GAAP EPS from continuing operations   $1.08 - $1.18
Non-GAAP operating margins from continuing operations   30% - 32%
Non-GAAP EPS from continuing operations   $1.15 - $1.25

Third Quarter 2017 Conference Call

Management will host a conference call tomorrow morning, Tuesday, October 31, 2017 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 96121678, 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 96121678. 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 Liguori
Advanced Energy Industries, Inc.
(970) 232-8096
Tom.Liguori@aei.com
  Annie Leschin
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. For the fourth quarter ending December 31, 2017 guidance, the company expects stock based compensation of $3 million and amortization of intangibles of $1 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 fourth quarter ending December 31, 2017, 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; and (k) unanticipated changes to management's estimates, reserves or allowances. 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   Nine Months Ended
  September 30,   June 30,   September 30,
  2017   2016   2017   2017   2016
                   
Sales:                  
Product $ 152,363     $ 107,650     $ 143,288     $ 424,478     $ 294,695  
Service 24,212     18,902     22,584     67,320     53,666  
Total sales 176,575     126,552     165,872     491,798     348,361  
Cost of sales:                  
Product 72,146     49,835     66,491     198,754     137,984  
Service 12,195     10,594     12,240     34,838     28,748  
Total cost of sales 84,341     60,429     78,731     233,592     166,732  
Gross profit 92,234     66,123     87,141     258,206     181,629  
  52.2 %   52.2 %   52.5 %   52.5 %   52.1 %
Operating expenses:                  
Research and development 14,629     11,293     14,610     41,742     33,324  
Selling, general and administrative 24,692     19,421     23,790     70,580     56,814  
Amortization of intangible assets 1,240     1,048     974     3,176     3,180  
Total operating expenses 40,561     31,762     39,374     115,498     93,318  
Operating income 51,673     34,361     47,767     142,708     88,311  
Other (expense) income, net 153     (55 )   (83 )   (3,138 )   1,138  
Income from continuing operations before income taxes 51,826     34,306     47,684     139,570     89,449  
Provision for income taxes (31,968 )   5,268     1,811     (25,538 )   12,937  
Income from continuing operations, net of income taxes 83,794     29,038     45,873     165,108     76,512  
Income from discontinued operations, net of income taxes 70     1,323     179     2,343     6,661  
Net income $ 83,864     $ 30,361     $ 46,052     $ 167,451     $ 83,173  
                   
Basic weighted-average common shares outstanding 39,786     39,681     39,849     39,787     39,723  
Diluted weighted-average common shares outstanding 40,172     39,967     40,250     40,207     40,015  
                   
Earnings per share:                  
                   
Continuing operations:                  
Basic earnings per share $ 2.11     $ 0.73     $ 1.15     $ 4.15     $ 1.93  
Diluted earnings per share $ 2.09     $ 0.73     $ 1.14     $ 4.11     $ 1.91  
                   
Discontinued operations:                  
Basic earnings per share $ 0.00     $ 0.03     $ 0.00     $ 0.06     $ 0.17  
Diluted earnings per share $ 0.00     $ 0.03     $ 0.00     $ 0.06     $ 0.17  
                   
Net income:                  
Basic earnings per share $ 2.11     $ 0.77     $ 1.16     $ 4.21     $ 2.09  
Diluted earnings per share $ 2.09     $ 0.76     $ 1.14     $ 4.16     $ 2.08  
                                       


ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
       
  September 30,   December 31,
  2017   2016
ASSETS Unaudited    
       
Current assets:      
Cash and cash equivalents $ 366,572     $ 281,953  
Marketable securities 3,046     4,737  
Accounts receivable, net 74,993     75,667  
Inventories, net 73,520     55,770  
Income taxes receivable 6,380     1,482  
Other current assets 8,678     9,324  
Current assets of discontinued operations 7,770     9,401  
Total current assets 540,959     438,334  
       
Property and equipment, net 15,736     13,337  
       
Deposits and other 2,432     1,835  
Goodwill and intangibles, net 87,944     70,196  
Deferred income tax assets 58,590     32,197  
Non-current assets of discontinued operations 15,630     15,630  
Total assets $ 721,291     $ 571,529  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 41,275     $ 46,255  
Other accrued expenses 40,054     35,372  
Current liabilities of discontinued operations 9,667     13,419  
Total current liabilities 90,996     95,046  
       
Non-current liabilities of continuing operations 65,622     63,252  
Non-current liabilities of discontinued operations 16,287     21,157  
Long-term liabilities 81,909     84,409  
       
Total liabilities 172,905     179,455  
       
Stockholders' equity 548,386     392,074  
Total liabilities and stockholders' equity $ 721,291     $ 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)
   
  Nine Months Ended September 30,
  2017   2016
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 167,451     $ 83,173  
Income from discontinued operations, net of income taxes 2,343     6,661  
Income from continuing operations, net of income taxes 165,108     76,512  
       
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 6,792     5,938  
Stock-based compensation expense 10,707     4,299  
Provision for deferred income taxes (26,185 )    
Loss on foreign exchange hedge 3,489      
Net loss on disposal of assets 106     259  
Changes in operating assets and liabilities, net of assets acquired (19,710 )   (4,343 )
Net cash provided by operating activities from continuing operations 140,307     82,665  
Net cash used in operating activities from discontinued operations (7,293 )   (4,538 )
Net cash provided by operating activities 133,014     78,127  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of marketable securities (86 )   (745 )
Proceeds from sale of marketable securities 1,883     7,161  
Acquisitions, net of cash acquired (17,347 )    
Purchase of foreign exchange hedge (3,489 )    
Purchases of property and equipment (5,646 )   (4,524 )
Net cash (used in) provided by investing activities from continuing operations (24,685 )   1,892  
Net cash used in investing activities from discontinued operations      
Net cash (used in) provided by investing activities (24,685 )   1,892  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Purchase and retirement of common stock (24,998 )    
Proceeds from exercise of stock options (1,904 )   1,753  
Other financing activities 2     (3 )
Net cash (used in) provided by financing activities from continuing operations (26,900 )   1,750  
Net cash used in financing activities from discontinued operations     (24 )
Net cash (used in) provided by financing activities (26,900 )   1,726  
EFFECT OF CURRENCY TRANSLATION ON CASH 1,138     (550 )
INCREASE IN CASH AND CASH EQUIVALENTS 82,567     81,195  
CASH AND CASH EQUIVALENTS, beginning of period 289,517     169,720  
CASH AND CASH EQUIVALENTS, end of period 372,084     250,915  
Less cash and cash equivalents from discontinued operations 5,512     6,623  
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period $ 366,572     $ 244,292  
               


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   Nine Months Ended
  September 30,   June 30,   September 30,
  2017   2016   2017   2017   2016
                   
Gross Profit from continuing operations, as reported $ 92,234     $ 66,123     $ 87,141     $ 258,206     $ 181,629  
Operating expenses from continuing operations, as reported 40,561     31,762     39,374     115,498     93,318  
Adjustments:                  
Stock-based compensation (3,453 )   (1,301 )   (3,856 )   (10,707 )   (4,299 )
Amortization of intangible assets (1,240 )   (1,048 )   (974 )   (3,176 )   (3,180 )
Acquisition-related costs         (150 )   (150 )    
Non-GAAP operating expenses from continuing operations 35,868     29,413     34,394     101,465     85,839  
Non-GAAP operating income from continuing operations $ 56,366     $ 36,710     $ 52,747     $ 156,741     $ 95,790  


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2017   2016   2017   2017   2016
                   
Gross Profit from continuing operations, as reported 52.2 %   52.2 %   52.5 %   52.5 %   52.1 %
Operating expenses from continuing operations, as reported 23.0     25.1     23.7     23.5     26.8  
Adjustments:                  
Stock-based compensation (2.0 )   (1.1 )   (2.3 )   (2.3 )   (1.3 )
Amortization of intangible assets (0.7 )   (0.8 )   (0.6 )   (0.6 )   (0.9 )
Acquisition-related costs         (0.1 )        
Non-GAAP operating expenses from continuing operations 20.3     23.2     20.7     20.6     24.6  
Non-GAAP operating income from continuing operations 31.9 %   29.0 %   31.8 %   31.9 %   27.5 %


Reconciliation of Non-GAAP measure - income excluding certain items Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2017   2016   2017   2017   2016
                   
Income from continuing operations, net of income taxes, as reported $ 83,794     $ 29,038     $ 45,873     $ 165,108     $ 76,512  
Adjustments:                  
Stock-based compensation 3,453     1,301     3,856     10,707     4,299  
Amortization of intangible assets 1,240     1,048     974     3,176     3,180  
Loss on foreign exchange hedge             3,489      
Acquisition-related costs         150     150      
Incremental expense associated with start-up of the Asia regional headquarters 1,133             1,133      
Nonrecurring tax benefit associated with inverter business (40,194 )           (40,194 )    
Tax effect of Non-GAAP adjustments (1,426 )   (608 )   (1,629 )   (4,451 )   (1,973 )
Non-GAAP income from continuing operations, net of income taxes $ 48,000     $ 30,779     $ 49,224     $ 139,118     $ 82,018  


Reconciliation of Non-GAAP measure - per share earnings excluding certain items Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2017   2016   2017   2017   2016
                   
Diluted earnings per share from continuing operations, as reported $ 2.09     $ 0.73     $ 1.14     $ 4.11     $ 1.91  
Add back:                  
per share impact of Non-GAAP adjustments, net of tax (0.90 )   0.04     0.08     (0.65 )   0.14  
Non-GAAP per share earnings from continuing operations $ 1.19     $ 0.77     $ 1.22     $ 3.46     $ 2.05  


Reconciliation of Q4 2017 Guidance        
    Low End   High End
         
Revenue   $172 million   $182 million
         
Reconciliation of Non-GAAP operating margin        
GAAP operating margin   28 %   30 %
Stock-based compensation   1 %   1 %
Amortization of intangible assets   1 %   1 %
Non-GAAP operating margin   30 %   32 %
         
Reconciliation of Non-GAAP earnings per share        
GAAP earnings per share   $ 1.08     $ 1.18  
Stock-based compensation   0.07     0.07  
Amortization of intangible assets   0.04     0.04  
Tax effects of excluded items   (0.04 )   (0.04 )
Non-GAAP earnings per share   $ 1.15     $ 1.25  

Source: Advanced Energy Industries, Inc.