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Advanced Energy Announces Second Quarter 2018 Results

Jul 30, 2018 4:10 PM Eastern Standard Time

  • Q2 Revenue increased 18.2% y/y to $196.0 million
  • Q2 GAAP EPS from continuing operations was $1.17
  • Q2 Non-GAAP EPS from continuing operations was $1.25

FORT COLLINS, Colo., July 30, 2018 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq:AEIS), today announced financial results for the second quarter ended June 30, 2018.

“Our diversification strategy enabled us to maintain revenues at record levels this quarter as our Industrial and Service businesses reached new highs offsetting near-term delays in semiconductor memory spending,” said Yuval Wasserman, president and CEO. “Although we expect 2H revenues to be impacted by the timing of semiconductor investments, we remain confident in the multiple drivers of the semi market in the long term. In addition, as we continue to expand into adjacent and new markets, and grow content in Semiconductor, we are further positioning AE for sustainable, profitable growth.”

Second Quarter Results

Sales were $196.0 million in the second quarter of 2018 compared with $195.6 million in the first quarter of 2018 and $165.9 million in the second quarter of 2017.

GAAP income from continuing operations was $46.4 million or $1.17 per diluted share in the second quarter of 2018 compared with $46.4 million or $1.16 per diluted share in the first quarter of 2018, and $45.9 million or $1.14 per diluted share in the second quarter of 2017.

Non-GAAP income from continuing operations was $49.4 million or $1.25 per diluted share in the second quarter of 2018. This compared with $53.4 million or $1.34 per diluted share in the first quarter of 2018, and $49.2 million or $1.22 per diluted share in the second quarter of 2017. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $53.0 million of operating cash from continuing operations in the second quarter of 2018. During the quarter the company repurchased approximately 407 thousand shares for $25.3 million dollars.

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.

Third Quarter 2018 Guidance

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

 Q3 2018
Revenues$160M - $170M
GAAP operating margins from continuing operations25.2% - 27.2%
GAAP EPS from continuing operations$0.86 - $1.00
Non-GAAP operating margins from continuing operations27.5% - 29.5%
Non-GAAP EPS from continuing operations$0.93 - $1.07

Second Quarter 2018 Conference Call

Management will host a conference call tomorrow morning, Tuesday, July 31, 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 4559567, 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 4559567. 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, visit: 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:

Paul Oldham
Advanced Energy Industries, Inc.
(970) 407-6615
paul.oldham@aei.com 		Rhonda Bennetto
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. Additionally, the second quarter non-GAAP results exclude estimated income tax expense associated with U.S. tax reform. For the third quarter ending September 30, 2018 guidance, the company expects stock-based compensation of $2.5 million and amortization of intangibles of $1.3 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, 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 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 EndedSix Months Ended
 June 30, March 31,June 30,
 2018 2017 201820182017
Sales:         
Product$169,235  $143,288  $171,209  $340,444  $272,115 
Service26,797  22,584  24,408  51,205  43,108 
Total sales196,032  165,872  195,617  391,649  315,223 
Cost of sales:         
Product80,953  66,491  79,806  160,759  126,608 
Service13,844  12,240  12,166  26,010  22,643 
Total cost of sales94,797  78,731  91,972  186,769  149,251 
Gross profit101,235  87,141  103,645  204,880  165,972 
 51.6% 52.5% 53.0% 52.3% 52.7%
Operating expenses:         
Research and development19,195  14,610  17,637  36,832  27,113 
Selling, general and administrative24,758  23,790  28,648  53,406  45,888 
Amortization of intangible assets1,264  974  1,257  2,521  1,936 
Total operating expenses45,217  39,374  47,542  92,759  74,937 
Operating income56,018  47,767  56,103  112,121  91,035 
Other income (expense), net(485) (83) 26  (459) (3,291)
Income from continuing operations before income taxes55,533  47,684  56,129  111,662  87,744 
Provision for income taxes9,133  1,811  9,759  18,892  6,430 
Income from continuing operations, net of income taxes46,400  45,873  46,370  92,770  81,314 
Income from discontinued operations, net of income taxes5  179  140  145  2,273 
Net income46,405  46,052  46,510  92,915  83,587 
Income from continuing operations attributable to noncontrolling interest44  —  31  75  — 
Net income attributable to Advanced Energy Industries, Inc.$46,361  $46,052  $46,479  $92,840  $83,587 
          
Basic weighted-average common shares outstanding39,349  39,849  39,619  39,484  39,793 
Diluted weighted-average common shares outstanding39,603  40,250  39,995  39,807  40,212 
          
Earnings per share attributable to Advanced Energy Industries, Inc:      
          
Continuing operations:         
Basic earnings per share$1.18  $1.15  $1.17  $2.35  $2.04 
Diluted earnings per share$1.17  $1.14  $1.16  $2.33  $2.02 
          
Discontinued operations:         
Basic earnings per share$0.00  $0.00  $0.00  $0.00  $0.06 
Diluted earnings per share$0.00  $0.00  $0.00  $0.00  $0.06 
          
Net income:         
Basic earnings per share$1.18  $1.16  $1.17  $2.35  $2.10 
Diluted earnings per share$1.17  $1.14  $1.16  $2.33  $2.08 
                    

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

 June 30, December 31,
 2018 2017
ASSETSUnaudited  
    
Current assets:   
  Cash and cash equivalents$432,999  $407,283 
  Marketable securities3,146  3,104 
  Accounts and other receivable, net106,302  87,429 
  Inventories, net109,834  78,450 
  Income taxes receivable3,290  1,295 
  Other current assets7,263  8,129 
Current assets of discontinued operations7,979  9,535 
Total current assets670,813  595,225 
    
Property and equipment, net24,148  17,795 
    
Deposits and other assets3,670  3,051 
Goodwill and intangibles, net86,928  87,311 
Deferred income tax assets38,419  18,841 
Non-current assets of discontinued operations11,080  11,085 
Total assets$835,058  $733,308 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
Current liabilities:   
  Accounts payable$58,028  $48,177 
  Other accrued expenses67,823  50,092 
Current liabilities of discontinued operations6,478  7,850 
Total current liabilities132,329  106,119 
    
Non-current liabilities of continuing operations94,475  91,271 
Non-current liabilities of discontinued operations12,738  15,277 
Long-term liabilities107,213  106,548 
    
Total liabilities239,542  212,667 
    
Advanced Energy stockholders’ equity595,010  520,641 
Noncontrolling interest506  — 
Stockholders' equity595,516  520,641 
Total liabilities and stockholders' equity$835,058  $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)

 Six Months Ended June 30,
 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$92,915  $83,587 
Income from discontinued operations, net of income taxes145  2,273 
Income from continuing operations, net of income taxes92,770  81,314 
    
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization5,917  4,219 
Stock-based compensation expense6,437  7,254 
Provision for deferred income taxes(96) — 
Loss on foreign exchange hedge—  3,489 
Net loss on disposal of assets158  65 
Changes in operating assets and liabilities, net of assets acquired(17,282) 10,272 
Net cash provided by operating activities from continuing operations87,904  106,613 
Net cash used in operating activities from discontinued operations(2,450) (6,396)
Net cash provided by operating activities85,454  100,217 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of marketable securities(91) (19)
Proceeds from sale of marketable securities4  723 
Restricted Cash—  (17,732)
Acquisitions, net of cash acquired(9,072) — 
Purchase of foreign exchange hedge—  (3,489)
Purchases of property and equipment(9,426) (3,408)
Net cash used in investing activities from continuing operations(18,585) (23,925)
Net cash used in investing activities from discontinued operations—  — 
Net cash used in investing activities(18,585) (23,925)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Purchase and retirement of common stock(38,059) — 
Net payments related to stock-based award activities(2,576) (1,874)
Net cash used in financing activities from continuing operations(40,635) (1,874)
Net cash used in financing activities from discontinued operations—  — 
Net cash used in financing activities(40,635) (1,874)
EFFECT OF CURRENCY TRANSLATION ON CASH(1,160) 1,216 
INCREASE IN CASH AND CASH EQUIVALENTS25,074  75,634 
CASH AND CASH EQUIVALENTS, beginning of period415,037  289,517 
CASH AND CASH EQUIVALENTS, end of period440,111  365,151 
Less cash and cash equivalents from discontinued operations7,112  6,214 
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period$432,999  $358,937 
        

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 Six Months Ended
 June 30, March 31, June 30,
 2018 2017 2018 2018 2017
Gross profit from continuing operations, as reported$101,235  $87,141  $103,645  $204,880  $165,972 
Adjustments to gross profit:         
Stock-based compensation149  379  351  500  714 
Facility expansion and relocation costs249  —  —  249  — 
Non-GAAP gross profit from continuing operations101,633  87,520  103,996  205,629  166,686 
          
Operating expenses from continuing operations, as reported45,217  39,374  47,542  92,759  74,937 
Adjustments:         
Stock-based compensation(1,794) (3,477) (4,143) (5,937) (6,540)
Amortization of intangible assets(1,264) (974) (1,257) (2,521) (1,936)
Acquisition-related costs(255) (150) (350) (605) (150)
Facility expansion and relocation costs(13) —  (476) (489) — 
Non-GAAP operating expenses from continuing operations41,891  34,773  41,316  83,207  66,311 
Non-GAAP operating income from continuing operations$59,742  $52,747  $62,680  $122,422  $100,375 


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended Six Months Ended
 June 30, March 31, June 30,
 2018 2017 2018 2018 2017
Gross profit from continuing operations, as reported51.6% 52.5% 53.0% 52.3% 52.7%
Adjustments to gross profit:         
Stock-based compensation0.1  0.3  0.2  0.1  0.2 
Facility expansion and relocation costs0.1  —  —  0.1  — 
Non-GAAP gross profit from continuing operations51.8  52.8  53.2  52.5  52.9 
          
Operating expenses from continuing operations, as reported23.1  23.7  24.3  23.7  23.8 
Adjustments:         
Stock-based compensation(1.1) (2.0) (2.1) (1.6) (2.1)
Amortization of intangible assets(0.6) (0.6) (0.6) (0.6) (0.6)
Acquisition-related costs(0.1) (0.1) (0.2) (0.2) — 
Facility expansion and relocation costs—  —  (0.2) (0.1) — 
Non-GAAP operating expenses from continuing operations21.3  21.0  21.2  21.2  21.1 
Non-GAAP operating income from continuing operations30.5% 31.8% 32.0% 31.3% 31.8%


Reconciliation of Non-GAAP measure - income excluding certain itemsThree Months Ended Six Months Ended
 June 30, March 31, June 30,
 2018 2017 2018 2018 2017
Income from continuing operations, less noncontrolling interest, net of income taxes$46,356  $45,873  $46,339  $92,695  $81,314 
Adjustments:         
Stock-based compensation1,943  3,856  4,494  6,437  7,254 
Amortization of intangible assets1,264  974  1,257  2,521  1,936 
Loss on foreign exchange hedge—  —  —  —  3,489 
Acquisition-related costs255  150  350  605  150 
Facility expansion and relocation costs262  —  476  738  — 
Tax Cuts and Jobs Act Impact—  —  1,853  1,853  — 
Tax effect of Non-GAAP adjustments(704) (1,629) (1,343) (2,047) (3,025)
Non-GAAP income from continuing operations, net of income taxes$49,376  $49,224  $53,426  $102,802  $91,118 


Reconciliation of Non-GAAP measure - per share earnings excluding certain itemsThree Months Ended Six Months Ended
 June 30, March 31, June 30,
 2018 2017 2018 2018 2017
Diluted earnings per share from continuing operations, as reported$1.17  $1.14  $1.16  $2.33  $2.02 
Add back:         
per share impact of Non-GAAP adjustments, net of tax0.08  0.08  0.18  0.25  0.25 
Non-GAAP per share earnings from continuing operations$1.25  $1.22  $1.34  $2.58  $2.27 


Reconciliation of Q3 2018 Guidance   
 Low End High End
    
Revenue$160 million $170 million
    
Reconciliation of Non-GAAP operating margin   
GAAP operating margin25.2% 27.2%
Stock-based compensation1.5% 1.6%
Amortization of intangible assets0.8% 0.7%
Non-GAAP operating margin27.5% 29.5%
    
Reconciliation of Non-GAAP earnings per share   
GAAP earnings per share$0.86  $1.00 
Stock-based compensation0.06  0.06 
Amortization of intangible assets0.03  0.03 
Tax effects of excluded items(0.02) (0.02)
Non-GAAP earnings per share$0.93  $1.07 

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Source: Advanced Energy Industries, Inc.

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