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Advanced Energy Announces First Quarter 2019 Results

May 06, 2019 4:05 PM Eastern Standard Time

  • Q1 Revenue was $140.7 million
  • Q1 GAAP EPS from continuing operations was $0.40
  • Q1 Non-GAAP EPS was $0.58

FORT COLLINS, Colo., May 06, 2019 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the first quarter ended March 31, 2019.

“While 2019 is a shaping up to be a challenging year for the semiconductor market, Advanced Energy delivered solid profitability while continuing to execute on our strategy. Mixed semi demand profiles signal the early stage of market stabilization, and we believe the long-term drivers for wafer fab equipment growth remain intact setting up the potential for a recovery in 2020," said Yuval Wasserman, president and CEO. "We continue to invest in technology development with our customers and are focused on capitalizing on the many growth opportunities across our served markets."

First Quarter Results

Sales were $140.7 million in the first quarter of 2019 compared with $154.2 million in the fourth quarter of 2018 and $195.6 million in the first quarter of 2018.

GAAP net income from continuing operations was $15.4 million or $0.40 per diluted share, compared with $19.2 million or $0.50 per diluted share in the prior quarter, and $46.4 million or $1.16 per diluted share in the first quarter of 2018.

Non-GAAP net income was $22.4 million or $0.58 per diluted share in the first quarter of 2019, which included a $4.4 million discrete tax benefit. This compares with $28.0 million or $0.73 per diluted share in the fourth quarter of 2018, and $53.4 million or $1.34 per diluted share in the first quarter of 2018. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $6.9 million of operating cash from continuing operations in the 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 all purposes. Further financial detail regarding the amounts related to the discontinued inverter business are available in the company’s 2018 Annual Report on Form 10-K.

Second Quarter 2019 Guidance

Based on the company's current view, beliefs and assumptions, its guidance for the second quarter of 2019 is within the following ranges.

  Q2 2019
Revenues $130M - $140M
GAAP EPS from continuing operations $0.10 - $0.25
Non-GAAP EPS $0.25 - $0.40

Conference Call

Management will host a conference call tomorrow morning, Tuesday, May 7, 2019 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 5981809, which has been reserved for this call. A webcast will also be available on the company’s Investor Relations web page at 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 discontinued operations, and non-recurring items such as acquisition-related costs and restructuring expenses. Additionally, the first 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 second quarter ending June 30, 2019, potential future growth and profitability, our future business mix, expectations regarding future market trends and the company’s future performance within specific markets 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 U.S. tax reform that was enacted in late 2017; and (m) the effects of recent U.S. government trade and export restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon the demand for our, and our customers', 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 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
 March 31, December 31,
 2019 2018 2018
Sales:     
Product$112,112  $171,209  $125,039 
Service28,631  24,408  29,122 
Total sales140,743  195,617  154,161 
Cost of sales:     
Product60,801  79,806  64,819 
Service14,202  12,166  14,154 
Total cost of sales75,003  91,972  78,973 
Gross profit65,740  103,645  75,188 
 46.7% 53.0% 48.8%
Operating expenses:           
Research and development21,289  17,637  20,725 
Selling, general and administrative29,014  28,648  29,241 
Amortization of intangible assets1,973  1,257  1,816 
Restructuring expense1,673  —  3,836 
Total operating expenses53,949  47,542  55,618 
Operating income11,791  56,103  19,570 
Other income (expense), net743  26  881 
Income from continuing operations before income taxes12,534  56,129  20,451 
Provision (benefit) for income taxes(2,853) 9,759  1,229 
Income from continuing operations, net of income taxes15,387  46,370  19,222 
Income (loss) from discontinued operations, net of income taxes(9) 140  188 
Net income15,378  46,510  19,410 
Income from continuing operations attributable to noncontrolling interest8  31  4 
Net income attributable to Advanced Energy Industries, Inc.$15,370  $46,479  $19,406 
      
Basic weighted-average common shares outstanding38,198  39,619  38,386 
Diluted weighted-average common shares outstanding38,426  39,995  38,595 
      
Earnings per share attributable to Advanced Energy Industries, Inc:  
      
Continuing operations:     
Basic earnings per share$0.40  $1.17  $0.50 
Diluted earnings per share$0.40  $1.16  $0.50 
      
Discontinued operations:     
Basic earnings per share$0.00  $0.00  $0.00 
Diluted earnings per share$0.00  $0.00  $0.00 
      
Net income:     
Basic earnings per share$0.40  $1.17  $0.51 
Diluted earnings per share$0.40  $1.16  $0.50 
            

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

 March 31, December 31,
 2019 2018
ASSETSUnaudited  
    
Current assets:   
Cash and cash equivalents$351,149  $349,301 
Marketable securities2,516  2,470 
Accounts and other receivable, net102,405  100,442 
Inventories, net99,070  97,987 
Income taxes receivable1,945  2,220 
Other current assets11,309  10,173 
Current assets of discontinued operations4,872  5,855 
Total current assets573,266  568,448 
    
Property and equipment, net31,058  31,269 
Operating lease right-of-use assets35,654  — 
    
Deposits and other assets9,378  6,874 
Goodwill and intangibles, net154,164  156,810 
Deferred income tax assets47,513  47,099 
Non-current assets of discontinued operations5,917  5,984 
Total assets$856,950  $816,484 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
Current liabilities:   
Accounts payable$44,028  $39,646 
Other accrued expenses56,470  65,377 
Current portion of operating lease liability7,298  — 
Current liabilities of discontinued operations4,254  5,286 
Total current liabilities112,050  110,309 
    
Non-current liabilities of continuing operations112,270  88,158 
Non-current liabilities of discontinued operations10,486  10,715 
Long-term liabilities122,756  98,873 
    
Total liabilities234,806  209,182 
    
Advanced Energy stockholders’ equity621,624  606,790 
Noncontrolling interest520  512 
Stockholders' equity622,144  607,302 
Total liabilities and stockholders' equity$856,950  $816,484 
        

December 31, 2018 amounts are derived from the December 31, 2018 audited Consolidated Financial Statements.


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

 Three Months Ended March 31,
 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$15,378  $46,510 
Income (loss) from discontinued operations, net of income taxes(9) 140 
Income from continuing operations, net of income taxes15,387  46,370 
    
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization4,181  2,861 
Stock-based compensation expense3,199  4,494 
Net loss on disposal of assets6  138 
Changes in operating assets and liabilities, net of assets acquired(15,269) (18,978)
Net cash provided by operating activities from continuing operations6,855  34,885 
Net cash used in operating activities from discontinued operations(1,409) (1,784)
Net cash provided by operating activities5,446  33,101 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Acquisitions, net of cash acquired—  (6,072)
Purchases of property and equipment(2,436) (3,923)
Net cash used in investing activities from continuing operations(2,436) (9,995)
Net cash used in investing activities from discontinued operations—  — 
Net cash used in investing activities(2,436) (9,995)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Purchase and retirement of common stock—  (12,750)
Net payments related to stock-based award activities(1,707) (4,032)
Net cash used in financing activities from continuing operations(1,707) (16,782)
Net cash used in financing activities from discontinued operations—  — 
Net cash used in financing activities(1,707) (16,782)
EFFECT OF CURRENCY TRANSLATION ON CASH(566) 167 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS737  6,491 
CASH AND CASH EQUIVALENTS, beginning of period354,552  415,037 
CASH AND CASH EQUIVALENTS, end of period355,289  421,528 
Less cash and cash equivalents from discontinued operations4,140  7,654 
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period$351,149  $413,874 
        

ADVANCED ENERGY INDUSTRIES, INC.
SELECTED OTHER DATA (UNAUDITED)
(in thousands)

Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended
 March 31, December 31,
 2019 2018 2018
Gross profit from continuing operations, as reported$65,740  $103,645  $75,188 
Adjustments to gross profit:     
Stock-based compensation233  351  166 
Facility expansion and relocation costs170  —  354 
Acquisition-related costs—  —  411 
Non-GAAP gross profit66,143  103,996  76,119 
      
Operating expenses from continuing operations, as reported53,949  47,542  55,618 
Adjustments:     
Amortization of intangible assets(1,973) (1,257) (1,816)
Stock-based compensation(2,966) (4,143) (2,077)
Acquisition-related costs(1,511) (350) (416)
Facility expansion and relocation costs(74) (476) — 
Restructuring charges(1,673) —  (3,836)
Non-GAAP operating expenses45,752  41,316  47,473 
Non-GAAP operating income$20,391  $62,680  $28,646 
            


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended
 March 31, December 31,
 2019 2018 2018
Gross profit from continuing operations, as reported 46.7%  53.0%  48.8%
Adjustments to gross profit:           
Stock-based compensation 0.2   0.2   0.1 
Facility expansion and relocation costs 0.1   —   0.2 
Acquisition-related costs —   —   0.3 
Non-GAAP gross profit 47.0   53.2   49.4 
            
Operating expenses from continuing operations, as reported 38.3   24.3   36.1 
Adjustments:           
Amortization of intangible assets (1.4)  (0.6)  (1.2)
Stock-based compensation (2.0)  (2.1)  (1.3)
Acquisition-related costs (1.1)  (0.2)  (0.3)
Facility expansion and relocation costs (0.1)  (0.2)  — 
Restructuring charges (1.2)  —   (2.5)
Non-GAAP operating expenses 32.5   21.2   30.8 
Non-GAAP operating income 14.5%  32.0%  18.6%
            


Reconciliation of Non-GAAP measure - income excluding certain itemsThree Months Ended
 March 31, December 31,
 2019 2018 2018
Income from continuing operations, less noncontrolling interest, net of income taxes$15,379  $46,339  $19,218 
Adjustments:     
Amortization of intangible assets1,973  1,257  1,816 
Acquisition-related costs1,511  350  827 
Facility expansion and relocation costs244  476  354 
Restructuring charges1,673  —  3,836 
Tax Cuts and Jobs Act Impact—  1,853  1,452 
Tax effect of Non-GAAP adjustments(851) (309) (1,198)
Non-GAAP income, net of income taxes, excluding stock-based compensation19,929  49,966  26,305 
Stock-based compensation, net of taxes2,463  3,460  1,705 
Non-GAAP income, net of income taxes$22,392  $53,426  $28,010 
            


Reconciliation of Non-GAAP measure - per share earnings excluding certain itemsThree Months Ended
 March 31, December 31,
 2019 2018 2018
Diluted earnings per share from continuing operations, as reported$0.40  $1.16  $0.50 
Add back:     
per share impact of Non-GAAP adjustments, net of tax0.18  0.18  0.23 
Non-GAAP per share earnings$0.58  $1.34  $0.73 
            


Reconciliation of Q2 2019 Guidance   
 Low End High End
    
Revenue$130 million $140 million
    
Reconciliation of Non-GAAP earnings per share   
GAAP earnings per share$0.10  $0.25 
Stock-based compensation0.06  0.06 
Amortization of intangible assets0.05  0.05 
Restructuring and other0.08  0.07 
Tax effects of excluded items(0.04) (0.03)
Non-GAAP earnings per share$0.25  $0.40 
        

 

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