News Release

Advanced Energy Announces Third Quarter 2018 Results

Oct 29, 2018
  • Q3 Revenue was $173.1 million
  • Q3 GAAP EPS from continuing operations was $0.90
  • Q3 Non-GAAP EPS from continuing operations was $1.05

FORT COLLINS, Colo., Oct. 29, 2018 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the third quarter ended September 30, 2018.

“As expected, near-term delays in capital spending by some semiconductor manufacturers impacted our revenues from semiconductor markets,” said Yuval Wasserman, president and CEO. “However, revenues from our Industrial markets reached another record high, reflecting the benefits of our diversified growth strategy, including our acquisition of LumaSense Technologies. We expect our fourth quarter to be impacted by the continued pause in semiconductor capital spending and by seasonally lower activity in our Industrial markets. However, we believe the long-term drivers in both markets to be intact. In addition, our customer focus and commitment to innovation should allow us to grow faster than the market.”

Third Quarter Results

Sales were $173.1 million in the third quarter of 2018 compared with $196.0 million in the second quarter of 2018 and $176.6 million in the third quarter of 2017.  The acquisition of LumaSense contributed $5.6 million in revenue in the third quarter.

GAAP income from continuing operations was $35.2 million or $0.90 per diluted share in the third quarter of 2018 compared with $46.4 million or $1.17 per diluted share in the second quarter of 2018, and $83.8 million or $2.09 per diluted share in the third quarter of 2017. Third quarter 2017 results included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.

Non-GAAP income from continuing operations was $41.2 million or $1.05 per diluted share in the third quarter of 2018, including approximately $0.01 per diluted share from LumaSense. This compared with $49.4 million or $1.25 per diluted share in the second quarter of 2018, and $48.0 million or $1.19 per diluted share in the third quarter of 2017. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $30.6 million of operating cash from continuing operations in the third quarter of 2018. During the quarter the company repurchased approximately 533 thousand shares for $31.0 million.

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 all purposes. Further financial detail regarding the amounts related to the discontinued inverter business are available in the company’s 2017 Annual Report on Form 10-K.

Fourth Quarter 2018 Guidance

Based on the company's current view, beliefs and assumptions, its guidance for the fourth 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.

  Q4 2018
Revenues $150M – $160M
GAAP operating margins from continuing operations 12.8% - 17.5%
GAAP EPS from continuing operations $0.48 - $0.66
Non-GAAP operating margins from continuing operations 20.0% - 22.0%
Non-GAAP EPS from continuing operations $0.70 - $0.80

Third Quarter 2018 Conference Call

Management will host a conference call tomorrow morning, Tuesday, October 30, 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 8489318, 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 8489318. 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 the design and manufacturing of highly engineered, precision power conversion, measurement and control solutions for mission-critical applications and processes. AE’s power solutions enable customer innovation in complex semiconductor and industrial manufacturing applications. With engineering know-how and responsive service and support around the globe, the company builds collaborative partnerships to meet technology advances, propel growth for its customers and innovate the future of power. Advanced Energy has devoted more than three decades to perfecting power for its global customers and is headquartered in Fort Collins, Colorado, USA. For more information, visit www.advancedenergy.com.

Advanced Energy | Precision. Power. Performance.

For more information, contact:

Brian Smith
Advanced Energy
(970) 407-6555
brian.smith@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 and restructuring expenses. Additionally, the third quarter non-GAAP results exclude estimated income tax expense associated with U.S. tax reform. 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, 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; (l) changes and adjustments to the tax expense and benefits related to the recently enacted U.S. tax reform; and (m) the effects of recent U.S. government trade restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon demand for our products and services and the U.S. economy. 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,
  2018   2017   2018   2018   2017
Sales:                  
Product $ 144,843     $ 152,363     $ 169,235     $ 485,287     $ 424,478  
Service 28,239     24,212     26,797     79,444     67,320  
Total sales 173,082     176,575     196,032     564,731     491,798  
Cost of sales:                  
Product 73,019     72,146     80,953     233,778     198,754  
Service 14,524     12,195     13,844     40,534     34,838  
Total cost of sales 87,543     84,341     94,797     274,312     233,592  
Gross profit 85,539     92,234     101,235     290,419     258,206  
  49.4 %   52.2 %   51.6 %   51.4 %   52.5 %
Operating expenses:                  
Research and development 18,451     14,629     19,195     55,283     41,742  
Selling, general and administrative 25,386     24,692     24,758     78,792     70,580  
Amortization of intangible assets 1,437     1,240     1,264     3,958     3,176  
Restructuring expense 403             403      
Total operating expenses 45,677     40,561     45,217     138,436     115,498  
Operating income 39,862     51,673     56,018     151,983     142,708  
Other income (expense), net 401     153     (485 )   (58 )   (3,138 )
Income from continuing operations before income taxes 40,263     51,826     55,533     151,925     139,570  
Provision (benefit) for income taxes 5,106     (31,968 )   9,133     23,998     (25,538 )
Income from continuing operations, net of income taxes 35,157     83,794     46,400     127,927     165,108  
Income (loss) from discontinued operations, net of income taxes (371 )   70     5     (226 )   2,343  
Net income 34,786     83,864     46,405     127,701     167,451  
Income from continuing operations attributable to noncontrolling interest 7         44     82      
Net income attributable to Advanced Energy Industries, Inc. $ 34,779     $ 83,864     $ 46,361     $ 127,619     $ 167,451  
                   
Basic weighted-average common shares outstanding 38,970     39,786     39,349     39,309     39,787  
Diluted weighted-average common shares outstanding 39,195     40,172     39,603     39,594     40,207  
                   
Earnings per share attributable to Advanced Energy Industries, Inc:            
                   
Continuing operations:                  
Basic earnings per share $ 0.90     $ 2.11     $ 1.18     $ 3.25     $ 4.15  
Diluted earnings per share $ 0.90     $ 2.09     $ 1.17     $ 3.23     $ 4.11  
                   
Discontinued operations:                  
Basic earnings per share $ (0.01 )   $ 0.00     $ 0.00     $ (0.01 )   $ 0.06  
Diluted earnings per share $ (0.01 )   $ 0.00     $ 0.00     $ (0.01 )   $ 0.06  
                   
Net income:                  
Basic earnings per share $ 0.89     $ 2.11     $ 1.18     $ 3.25     $ 4.21  
Diluted earnings per share $ 0.89     $ 2.09     $ 1.17     $ 3.23     $ 4.16  
                                       

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  September 30,   December 31,
  2018   2017
ASSETS Unaudited    
       
Current assets:      
Cash and cash equivalents $ 338,673     $ 407,283  
Marketable securities 3,058     3,104  
Accounts and other receivable, net 110,440     87,429  
Inventories, net 110,327     78,450  
Income taxes receivable 4,229     1,295  
Other current assets 9,777     8,129  
Current assets of discontinued operations 8,273     9,535  
Total current assets 584,777     595,225  
       
Property and equipment, net 30,174     17,795  
       
Deposits and other assets 5,608     3,051  
Goodwill and intangibles, net 157,884     87,311  
Deferred income tax assets 44,112     18,841  
Non-current assets of discontinued operations 11,077     11,085  
Total assets $ 833,632     $ 733,308  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 45,620     $ 48,177  
Other accrued expenses 73,081     50,092  
Current liabilities of discontinued operations 5,895     7,850  
Total current liabilities 124,596     106,119  
       
Non-current liabilities of continuing operations 97,894     91,271  
Non-current liabilities of discontinued operations 11,567     15,277  
Long-term liabilities 109,461     106,548  
       
Total liabilities 234,057     212,667  
       
Advanced Energy stockholders’ equity 599,062     520,641  
Noncontrolling interest 513      
Stockholders' equity 599,575     520,641  
Total liabilities and stockholders' equity $ 833,632     $ 733,308  
       

December 31, 2017 amounts are derived from the December 31, 2017 audited Consolidated Financial Statements.

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

  Nine Months Ended September 30,
  2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 127,701     $ 167,451  
Income from discontinued operations, net of income taxes (226 )   2,343  
Income from continuing operations, net of income taxes 127,927     165,108  
       
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 9,488     6,792  
Stock-based compensation expense 7,461     10,707  
Provision for deferred income taxes     (26,185 )
Loss on foreign exchange hedge     3,489  
Net loss on disposal of assets 167     106  
Changes in operating assets and liabilities, net of assets acquired (26,560 )   (19,710 )
Net cash provided by operating activities from continuing operations 118,483     140,307  
Net cash used in operating activities from discontinued operations (4,550 )   (7,293 )
Net cash provided by operating activities 113,933     133,014  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of marketable securities (93 )   (86 )
Proceeds from sale of marketable securities 6     1,883  
Acquisitions, net of cash acquired (93,801 )   (17,347 )
Purchase of foreign exchange hedge     (3,489 )
Purchases of property and equipment (16,586 )   (5,646 )
Net cash used in investing activities from continuing operations (110,474 )   (24,685 )
Net cash used in investing activities from discontinued operations      
Net cash used in investing activities (110,474 )   (24,685 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Purchase and retirement of common stock (69,021 )   (24,998 )
Net payments related to stock-based award activities (2,636 )   (1,902 )
Net cash used in financing activities from continuing operations (71,657 )   (26,900 )
Net cash used in financing activities from discontinued operations      
Net cash used in financing activities (71,657 )   (26,900 )
EFFECT OF CURRENCY TRANSLATION ON CASH (722 )   1,138  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (68,920 )   82,567  
CASH AND CASH EQUIVALENTS, beginning of period 415,037     289,517  
CASH AND CASH EQUIVALENTS, end of period 346,117     372,084  
Less cash and cash equivalents from discontinued operations 7,444     5,512  
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period $ 338,673     $ 366,572  
               

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,
  2018   2017   2018   2018   2017
Gross profit from continuing operations, as reported $ 85,539     $ 92,234     $ 101,235     $ 290,419     $ 258,206  
Adjustments to gross profit:                  
Stock-based compensation 76     334     149     576     1,048  
Facility transition and relocation costs 725         249     974      
Acquisition-related costs 158             158      
Non-GAAP gross profit from continuing operations 86,498     92,568     101,633     292,127     259,254  
                   
Operating expenses from continuing operations, as reported 45,677     40,561     45,217     138,436     115,498  
Adjustments:                  
Amortization of intangible assets (1,437 )   (1,240 )   (1,264 )   (3,958 )   (3,176 )
Stock-based compensation (948 )   (3,119 )   (1,794 )   (6,885 )   (9,659 )
Acquisition-related costs (705 )       (255 )   (1,310 )   (150 )
Facility expansion and relocation costs (29 )       (13 )   (518 )    
Restructuring charges (403 )           (403 )    
Non-GAAP operating expenses from continuing operations 42,155     36,202     41,891     125,362     102,513  
Non-GAAP operating income from continuing operations $ 44,343     $ 56,366     $ 59,742     $ 166,765     $ 156,741  


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,
  2018   2017   2018   2018   2017
Gross profit from continuing operations, as reported 49.4 %   52.2 %   51.6 %   51.4 %   52.5 %
Adjustments to gross profit:                  
Stock-based compensation     0.2     0.1     0.1     0.2  
Facility transition and relocation costs 0.5         0.1     0.2      
Acquisition-related costs 0.1                  
Non-GAAP gross profit from continuing operations 50.0     52.4     51.8     51.7     52.7  
                   
Operating expenses from continuing operations, as reported 26.4     23.0     23.1     24.5     23.5  
Adjustments:                  
Amortization of intangible assets (0.8 )   (0.7 )   (0.6 )   (0.7 )   (0.6 )
Stock-based compensation (0.6 )   (1.8 )   (1.1 )   (1.2 )   (2.1 )
Acquisition-related costs (0.4 )       (0.1 )   (0.2 )    
Facility expansion and relocation costs             (0.1 )    
Restructuring charges (0.2 )           (0.1 )    
Non-GAAP operating expenses from continuing operations 24.4     20.5     21.3     22.2     20.8  
Non-GAAP operating income from continuing operations 25.6 %   31.9 %   30.5 %   29.5 %   31.9 %


Reconciliation of Non-GAAP measure - income excluding certain items Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2018   2017   2018   2018   2017
Income from continuing operations, less noncontrolling interest, net of income taxes $ 35,150     $ 83,794     $ 46,356     $ 127,845     $ 165,108  
Adjustments:                  
Amortization of intangible assets 1,437     1,240     1,264     3,958     3,176  
Stock-based compensation 1,024     3,453     1,943     7,461     10,707  
Acquisition-related costs 863         255     1,468     150  
Facility expansion and relocation costs 754         262     1,492      
Restructuring charges 403             403      
Nonrecurring tax (benefit) expense associated with inverter business     (40,194 )           (40,194 )
Loss on foreign exchange hedge                 3,489  
Incremental expense associated with start-up of the Asia regional headquarters     1,133             1,133  
Tax Cuts and Jobs Act Impact 2,398             4,251      
Tax effect of Non-GAAP adjustments (843 )   (1,426 )   (704 )   (2,890 )   (4,451 )
Non-GAAP income from continuing operations, net of income taxes $ 41,186     $ 48,000     $ 49,376     $ 143,988     $ 139,118  


Reconciliation of Non-GAAP measure - per share earnings excluding certain items Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2018   2017   2018   2018   2017
Diluted earnings per share from continuing operations, as reported $ 0.90     $ 2.09     $ 1.17     $ 3.23     $ 4.11  
Add back:                  
per share impact of Non-GAAP adjustments, net of tax 0.15     (0.90 )   0.08     0.41     (0.65 )
Non-GAAP per share earnings from continuing operations $ 1.05     $ 1.19     $ 1.25     $ 3.64     $ 3.46  


Reconciliation of Q4 2018 Guidance      
  Low End   High End
       
Revenue $150 million   $160 million
       
Reconciliation of Non-GAAP operating margin      
GAAP operating margin 12.8 %   17.5 %
Stock-based compensation 1.5 %   1.3 %
Amortization of intangible assets 1.3 %   1.1 %
Restructuring and other 4.4 %   2.1 %
Non-GAAP operating margin 20.0 %   22.0 %
       
Reconciliation of Non-GAAP earnings per share      
GAAP earnings per share $ 0.48     $ 0.66  
Stock-based compensation 0.06     0.05  
Amortization of intangible assets 0.05     0.05  
Restructuring and other 0.17     0.08  
Tax effects of excluded items (0.06 )   (0.04 )
Non-GAAP earnings per share $ 0.70     $ 0.80  

Advanced Energy Industries, Inc. Logo

Source: Advanced Energy Industries, Inc.

Adv Energy - Tookits