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Advanced Energy Announces Second Quarter 2017 Results
  • Q2 Revenue increased 40% y/y and 11% q/q to $165.9 million
  • Q2 GAAP EPS from continuing operations was $1.14
  • Q2 Non-GAAP EPS from continuing operations was $1.22

FORT COLLINS, Colo., July 31, 2017 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq:AEIS), today announced financial results for the second quarter ended June 30, 2017. The company reported second quarter sales of $165.9 million. Second quarter GAAP income from continuing operations was $45.9 million, or $1.14 per diluted share. Non-GAAP income from continuing operations was $49.2 million, or $1.22 per diluted share.

“Building on our continuous innovation, early stage engagement with customers and operational excellence led to outstanding results this quarter,” said Yuval Wasserman, president and CEO. “The complexity of advanced processing technologies is driving increased power content, fueling our record semiconductor growth. Our industrial business continues to grow, aided by new applications and the expansion of our addressable market. With strong cash generation, we are executing on our acquisition strategy and making headway on our aspirational goals.”

Second Quarter Results

Sales were $165.9 million compared with $149.4 million in the first quarter of 2017 and $118.8 million in the second quarter of 2016.

GAAP income from continuing operations was $45.9 million or $1.14 per diluted share in the second quarter of 2017 compared with $35.4 million or $0.88 per diluted share in the prior quarter, and $27.3 million or $0.68 per diluted share in the second quarter of 2016.

Non-GAAP income from continuing operations was $49.2 million or $1.22 per diluted share in the second quarter of 2017 compared with $41.9 million or $1.04 per diluted share in the prior quarter, and $29.2 million or $0.73 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $64.0 million of operating cash from continuing operations.

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.

Third Quarter 2017 Guidance

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

    Q3 2017
     
Revenues   $160M - $170M
GAAP operating margins from continuing operations   27% - 29%
GAAP EPS from continuing operations   $1.02 - $1.12
Non-GAAP operating margins from continuing operations   30% - 32%
Non-GAAP EPS from continuing operations   $1.10 - $1.20

Second Quarter 2017 Conference Call

Management will host a conference call tomorrow morning, Tuesday, August 1, 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 42118693, 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 42118693. 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   Annie Leschin
Advanced Energy Industries, Inc.   Advanced Energy Industries, Inc.
(970) 232-8096   (970) 407-6555
Tom.Liguori@aei.com    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 third quarter ending September 30, 2017 guidance, the company expects stock based compensation of $3.3 million and amortization of intangibles of $1.0 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 third quarter ending September 30, 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 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   Six Months Ended
  June 30,   March 31,   June 30,
  2017   2016   2017   2017   2016
                   
Sales:                  
Product $ 143,288     $ 100,752     $ 128,827     $ 272,115     $ 187,045  
Service 22,584     18,013     20,524     43,108     34,764  
Total sales 165,872     118,765     149,351     315,223     221,809  
Cost of sales:                  
Product 66,491     47,334     60,117     126,608     88,149  
Service 12,240     9,385     10,403     22,643     18,154  
Total cost of sales 78,731     56,719     70,520     149,251     106,303  
Gross profit 87,141     62,046     78,831     165,972     115,506  
  52.5 %   52.2 %   52.8 %   52.7 %   52.1 %
Operating expenses:                  
Research and development 14,610     11,266     12,503     27,113     22,031  
Selling, general and administrative 23,790     19,377     22,098     45,888     37,393  
Amortization of intangible assets 974     1,074     962     1,936     2,132  
Total operating expenses 39,374     31,717     35,563     74,937     61,556  
Operating income 47,767     30,329     43,268     91,035     53,950  
Other (expense) income, net (83 )   836     (3,208 )   (3,291 )   1,193  
Income from continuing operations before income taxes 47,684     31,165     40,060     87,744     55,143  
Provision for income taxes 1,811     3,911     4,619     6,430     7,669  
Income from continuing operations, net of income taxes 45,873     27,254     35,441     81,314     47,474  
Income from discontinued operations, net of income taxes 179     3,277     2,094     2,273     5,338  
Net income $ 46,052     $ 30,531     $ 37,535     $ 83,587     $ 52,812  
                   
Basic weighted-average common shares outstanding 39,849     39,672     39,738     39,793     39,750  
Diluted weighted-average common shares outstanding 40,250     39,969     40,179     40,212     40,046  
                   
Earnings per share:                  
                   
Continuing operations:                  
Basic earnings per share $ 1.15     $ 0.69     $ 0.89     $ 2.04     $ 1.19  
Diluted earnings per share $ 1.14     $ 0.68     $ 0.88     $ 2.02     $ 1.19  
                   
Discontinued operations:                  
Basic earnings per share $ 0.00     $ 0.08     $ 0.05     $ 0.06     $ 0.13  
Diluted earnings per share $ 0.00     $ 0.08     $ 0.05     $ 0.06     $ 0.13  
                   
Net income:                  
Basic earnings per share $ 1.16     $ 0.77     $ 0.94     $ 2.10     $ 1.33  
Diluted earnings per share $ 1.14     $ 0.76     $ 0.93     $ 2.08     $ 1.32  
                                       

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

    June 30,   December 31,
    2017   2016
ASSETS   Unaudited    
         
Current assets:        
Cash and cash equivalents   $ 358,937     $ 281,953  
Restricted cash   17,732      
Marketable securities   4,096     4,737  
Accounts receivable, net   60,791     75,667  
Inventories, net   75,557     55,770  
Income taxes receivable   2,047     1,482  
Other current assets   9,930     9,324  
Current assets of discontinued operations   8,058     9,401  
Total current assets   537,148     438,334  
         
Property and equipment, net   14,537     13,337  
         
Deposits and other   2,046     1,835  
Goodwill and intangibles, net   71,405     70,196  
Deferred income tax assets   32,328     32,197  
Non-current assets of discontinued operations   15,631     15,630  
Total assets   $ 673,095     $ 571,529  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
Accounts payable   $ 49,430     $ 46,255  
Other accrued expenses   45,815     35,372  
Current liabilities of discontinued operations   9,185     13,419  
Total current liabilities   104,430     95,046  
         
Non-current liabilities of continuing operations   65,037     63,252  
Non-current liabilities of discontinued operations   18,240     21,157  
Long-term liabilities   83,277     84,409  
         
Total liabilities   187,707     179,455  
         
Stockholders' equity   485,388     392,074  
Total liabilities and stockholders' equity   $ 673,095     $ 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)

    Six Months Ended June 30,
    2017   2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 83,587     $ 52,812  
Income from discontinued operations, net of income taxes   2,273     5,338  
Income from continuing operations, net of income taxes   81,314     47,474  
         
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   4,219     4,045  
Stock-based compensation expense   7,254     2,998  
Loss on foreign exchange hedge   3,489      
Net loss on disposal of assets   65     213  
Changes in operating assets and liabilities, net of assets acquired   10,272     (6,646 )
Net cash provided by operating activities from continuing operations   106,613     48,084  
Net cash used in operating activities from discontinued operations   (6,396 )   (4,563 )
Net cash provided by operating activities   100,217     43,521  
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of marketable securities   (19 )   (745 )
Proceeds from sale of marketable securities   723     6,921  
Restricted Cash   (17,732 )    
Purchase of foreign exchange hedge   (3,489 )    
Purchases of property and equipment   (3,408 )   (2,865 )
Net cash (used in) provided by investing activities from continuing operations   (23,925 )   3,311  
Net cash used in investing activities from discontinued operations        
Net cash (used in) provided by investing activities   (23,925 )   3,311  
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from exercise of stock options   (1,877 )   1,621  
Other financing activities   3     (2 )
Net cash (used in) provided by financing activities from continuing operations   (1,874 )   1,619  
Net cash used in financing activities from discontinued operations       (24 )
Net cash (used in) provided by financing activities   (1,874 )   1,595  
EFFECT OF CURRENCY TRANSLATION ON CASH   1,216     (729 )
INCREASE IN CASH AND CASH EQUIVALENTS   75,634     47,698  
CASH AND CASH EQUIVALENTS, beginning of period   289,517     169,720  
CASH AND CASH EQUIVALENTS, end of period   365,151     217,418  
Less cash and cash equivalents from discontinued operations   6,214     8,145  
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period   $ 358,937     $ 209,273  
                 

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

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,
    2017   2016   2017   2017   2016
                     
Gross Profit from continuing operations, as reported   $ 87,141     $ 62,046     $ 78,831     $ 165,972     $ 115,506  
Operating expenses from continuing operations, as reported   39,374     31,717     35,563     74,937     61,556  
Adjustments:                    
Stock-based compensation   (3,856 )   (1,569 )   (3,398 )   (7,254 )   (2,998 )
Amortization of intangible assets   (974 )   (1,074 )   (962 )   (1,936 )   (2,132 )
Acquisition-related costs   (150 )           (150 )    
Non-GAAP operating expenses from continuing operations   34,394     29,074     31,203     65,597     56,426  
Non-GAAP operating income from continuing operations   $ 52,747     $ 32,972     $ 47,628     $ 100,375     $ 59,080  


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,
    2017   2016   2017   2017   2016
                     
Gross Profit from continuing operations, as reported   52.5 %   52.2 %   52.8 %   52.7 %   52.1 %
Operating expenses from continuing operations, as reported   23.7     26.7     23.8     23.8     27.8  
Adjustments:                    
Stock-based compensation   (2.3 )   (1.4 )   (2.3 )   (2.3 )   (1.3 )
Amortization of intangible assets   (0.6 )   (0.9 )   (0.6 )   (0.6 )   (1.0 )
Acquisition-related costs   (0.1 )                
Non-GAAP operating expenses from continuing operations   20.7     24.4     20.9     20.9     25.5  
Non-GAAP operating income from continuing operations   31.8 %   27.8 %   31.9 %   31.8 %   26.6 %


Reconciliation of Non-GAAP measure - income excluding certain items   Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,
    2017   2016   2017   2017   2016
                     
Income from continuing operations, net of income taxes, as reported   $ 45,873     $ 27,254     $ 35,441     $ 81,314     $ 47,474  
Adjustments:                    
Stock-based compensation   3,856     1,569     3,398     7,254     2,998  
Amortization of intangible assets   974     1,074     962     1,936     2,132  
Loss on foreign exchange hedge           3,489     3,489      
Acquisition-related costs   150             150      
Tax effect of Non-GAAP adjustments   (1,629 )   (711 )   (1,396 )   (3,025 )   (1,366 )
Non-GAAP income from continuing operations, net of income taxes   $ 49,224     $ 29,186     $ 41,894     $ 91,118     $ 51,238  


Reconciliation of Non-GAAP measure - per share earnings excluding certain items   Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,
    2017   2016   2017   2017   2016
                     
Diluted earnings per share from continuing operations, as reported   $ 1.14     $ 0.68     $ 0.88     $ 2.02     $ 1.19  
Add back:                    
per share impact of Non-GAAP adjustments, net of tax   0.08     0.05     0.16     0.25     0.09  
Non-GAAP per share earnings from continuing operations   $ 1.22     $ 0.73     $ 1.04     $ 2.27     $ 1.28  


Reconciliation of Q3 2017 Guidance        
    Low End   High End
         
Revenue   $160 million   $170 million
         
Reconciliation of Non-GAAP operating margin        
GAAP operating margin   27 %   29 %
Stock-based compensation   2 %   2 %
Amortization of intangible assets   1 %   1 %
Non-GAAP operating margin   30 %   32 %
         
Reconciliation of Non-GAAP earnings per share        
GAAP earnings per share   $ 1.02     $ 1.12  
Stock-based compensation   0.08     0.08  
Amortization of intangible assets   0.03     0.03  
Tax effects of excluded items   (0.03 )   (0.03 )
Non-GAAP earnings per share   $ 1.10     $ 1.20  
                 

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Advanced Energy Industries, Inc.