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  Tom Liguori
Advanced Energy Industries, Inc.
970.407.6570
Tom.liguori@aei.com
Annie Leschin
Advanced Energy Industries, Inc.
970.407.6555
ir@aei.com
 
Advanced Energy Announces Third Quarter Results

  • Revenue increased 6.6% sequentially
  • GAAP EPS from continuing operations was $0.73
  • Non-GAAP EPS from continuing operations was $0.77
  • Ended the quarter with $249.8 million in cash and marketable securities

FORT COLLINS, Colo., Oct. 31, 2016Advanced Energy Industries, Inc. (Nasdaq:AEIS) today announced financial results for the third quarter ended September 30, 2016. The company reported third quarter sales of $126.6 million. Third quarter GAAP income from continuing operations was $29.0 million, or $0.73 per diluted share. Non-GAAP income from continuing operations was $30.8 million, or $0.77 per diluted share.

“After a third straight quarter of compelling top and bottom line performance driven by strength in semiconductors, flat panel display and services, 2016 is shaping up to be an impressive year for AE,” said Yuval Wasserman, president and CEO of Advanced Energy. “Our leading precision power products and services continue to be chosen by our customers to support their move to next-generation technologies such as 3DNAND and 10nm Logic. With our semiconductor business showing no signs of slowing and the diversity of our Industrial applications growing, we are getting closer to our near-term aspirational goals.”

Third Quarter Results                              

Sales were $126.6 million compared with $118.8 million in the second quarter of 2016 and $109.8 million in the third quarter of 2015.

GAAP income from continuing operations was $29.0 million or $0.73 per diluted share in the third quarter of 2016 compared to $27.3 million or $0.68 per diluted share in the second quarter, and $23.3 million or $0.56 per diluted share in the third quarter of 2015.

Non-GAAP income from continuing operations was $30.8 million or $0.77 per diluted share in the third quarter of 2016 compared to $29.2 million or $0.73 per diluted share in the second quarter, and $24.9 million or $0.60 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company ended the quarter with $249.8 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 2015 Annual Report on Form 10-K.

Fourth Quarter 2016 Guidance        

Based on the company's current view, beliefs and assumptions, guidance for the fourth quarter of 2016 is within the following ranges:

    Q4 2016
Revenues   $124M - $134M
GAAP operating margins from continuing operations   26% - 29%
GAAP EPS from continuing operations   $0.70 - $0.80
Non-GAAP operating margins from continuing operations   28% - 30%
Non-GAAP EPS from continuing operations   $0.75 - $0.85
     

Third Quarter 2016 Conference Call

Management will host a conference call tomorrow morning, Tuesday, November 1, 2016, at 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 93755134, 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 93755134. 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.

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, amortization of intangible assets and restructuring costs, as well as acquisition related costs and other non-recurring items. For the fourth quarter ending December 31, 2016 guidance, the company expects stock based compensation of $1.3 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 fourth quarter ending December 31, 2016, 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 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   Nine Months Ended
  September 30,   June 30,   September 30,
  2016   2015   2016   2016   2015
                   
Sales:                  
Product $ 107,650     $ 94,238     $ 100,752     $ 294,695     $ 279,270  
Service 18,902     15,518     18,013     53,666     48,650  
Total sales 126,552     109,756     118,765     348,361     327,920  
Cost of sales:                  
Product 49,835     43,770     47,334     137,984     129,840  
Service 10,594     7,448     9,385     28,748     23,894  
Total cost of sales 60,429     51,218     56,719     166,732     153,734  
Gross profit 66,123     58,538     62,046     181,629     174,186  
  52.2 %   53.3 %   52.2 %   52.1 %   53.1 %
Operating expenses:                  
Research and development 11,293     10,370     11,266     33,324     30,114  
Selling, general and administrative 19,421     16,585     19,377     56,814     49,976  
Amortization of intangible assets 1,048     1,098     1,074     3,180     3,298  
Restructuring benefit     317             315  
Total operating expenses 31,762     28,370     31,717     93,318     83,703  
Operating Income 34,361     30,168     30,329     88,311     90,483  
Other income, net (55 )   (722 )   836     1,138     447  
Income from continuing operations before income taxes 34,306     29,446     31,165     89,449     90,930  
Provision for income taxes 5,268     6,133     3,911     12,937     18,938  
Income from continuing operations, net of income taxes 29,038     23,313     27,254     76,512     71,992  
Income (loss) from discontinued operations, net of income taxes 1,323     (6,881 )   3,277     6,661     (266,743 )
Net income (loss) $ 30,361     $ 16,432     $ 30,531     $ 83,173     $ (194,751 )
                   
Basic weighted-average common shares outstanding 39,681     41,027     39,672     39,723     40,905  
Diluted weighted-average common shares outstanding 39,967     41,319     39,969     40,015     40,905  
                   
Earnings per share:                  
                   
Continuing operations:                  
Basic earnings per share $ 0.73     $ 0.57     $ 0.69     $ 1.93     $ 1.76  
Diluted earnings per share $ 0.73     $ 0.56     $ 0.68     $ 1.91     $ 1.76  
                   
Discontinued operations:                  
Basic earnings (loss) per share $ 0.03     $ (0.17 )   $ 0.08     $ 0.17     $ (6.52 )
Diluted earnings (loss) per share $ 0.03     $ (0.17 )   $ 0.08     $ 0.17     $ (6.52 )
                   
Net income:                  
Basic earnings (loss) per share $ 0.77     $ 0.40     $ 0.77     $ 2.09     $ (4.76 )
Diluted earnings (loss) per share $ 0.76     $ 0.40     $ 0.76     $ 2.08     $ (4.76 )
                                       

 

       
ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
       
  September 30,   December 31,
  2016   2015
ASSETS Unaudited    
       
Current assets:      
Cash and cash equivalents $ 244,292     $ 158,443  
Marketable securities 5,538     11,986  
Accounts receivable, net 69,410     54,959  
Inventories, net 56,025     52,573  
Deferred income tax assets 6,044     6,004  
Income taxes receivable 7,902     9,040  
Other current assets 8,166     7,868  
Current assets of discontinued operations 23,491     41,902  
Total current assets 420,868     342,775  
       
Property and equipment, net 11,988     9,645  
       
Deposits and other 1,673     1,729  
Goodwill and intangibles, net 73,796     76,870  
Deferred income tax assets 30,184     30,398  
Non-current assets of discontinued operations 163     1,271  
Total assets $ 538,672     $ 462,688  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 37,180     $ 27,246  
Other accrued expenses 41,070     40,357  
Current liabilities of discontinued operations 17,232     36,481  
Total current liabilities 95,482     104,084  
       
Non-current liabilities of continuing operations 63,041     67,722  
Non-current liabilities of discontinued operations 25,362     27,302  
Long-term liabilities 88,403     95,024  
       
Total liabilities 183,885     199,108  
       
Stockholders' equity 354,787     263,580  
Total liabilities and stockholders' equity $ 538,672     $ 462,688  

December 31, 2015 amounts are derived from the December 31, 2015 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   Nine Months Ended
    September 30,   June 30,   September 30,
    2016   2015   2016   2016   2015
                     
Gross Profit from continuing operations, as reported   $ 66,123     $ 58,538     $ 62,046     $ 181,629     $ 174,186  
Operating expenses from continuing operations, as reported   31,762     28,370     31,717     93,318     83,703  
Adjustments:                    
Restructuring charges       (317 )           (314 )
Stock-based compensation   (1,301 )   (733 )   (1,569 )   (4,299 )   (1,913 )
Amortization of intangible assets   (1,048 )   (1,098 )   (1,074 )   (3,180 )   (3,298 )
Non-GAAP operating expenses from continuing operations   29,413     26,222     29,074     85,839     78,178  
Non-GAAP operating income from continuing operations   $ 36,710     $ 32,316     $ 32,972     $ 95,790     $ 96,008  
                                         
         
Reconciliation of Non-GAAP measure - income excluding certain items   Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
    2016   2015   2016   2016   2015
                     
Income from continuing operations, net of income taxes, as reported   $ 29,038     $ 23,313     $ 27,254     $ 76,512     $ 71,992  
Adjustments:                    
Restructuring charges       317             314  
Stock-based compensation   1,301     733     1,569     4,299     1,913  
Amortization of intangible assets   1,048     1,098     1,074     3,180     3,298  
Tax effect of Non-GAAP adjustments   (608 )   (512 )   (711 )   (1,973 )   (1,184 )
Non-GAAP income from continuing operations, net of income taxes   $ 30,779     $ 24,949     $ 29,186     $ 82,018     $ 76,333  
                                         
         
Reconciliation of Non-GAAP measure - per share earnings excluding certain items   Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
    2016   2015   2016   2016   2015
                     
Diluted earnings per share from continuing operations, as reported   $ 0.73     $ 0.56     $ 0.68     $ 1.91     $ 1.76  
Add back:                    
per share impact of Non-GAAP adjustments, net of tax   0.04     0.04     0.05     0.14     0.11  
Non-GAAP per share earnings from continuing operations   $ 0.77     $ 0.60     $ 0.73     $ 2.05     $ 1.87  

 

Reconciliation of Q4 2016 Guidance          
    Low End     High End
           
Revenue   $124 million     $134 million
           
Reconciliation of Non-GAAP operating margin          
GAAP operating margin   26 %     29 %
Stock-based compensation   1 %     1 %
Amortization of intangible assets   1 %     -  
Non-GAAP operating margin   28 %     30 %
           
Reconciliation of Non-GAAP earnings per share          
GAAP earnings per share   $ 0.70       $ 0.80  
Stock-based compensation   0.04       0.04  
Amortization of intangible assets   0.03       0.03  
Tax effects of excluded items   (0.02 )     (0.02 )
Non-GAAP earnings per share   $ 0.75       $ 0.85