Advanced Energy Announces Third Quarter 2017 Results

Oct 30, 2017 4:05 PM Eastern Standard Time

  • Q3 Revenue increased 39.5% y/y and 6.5% q/q to $176.6 million
  • Q3 GAAP EPS from continuing operations was $2.09
  • Q3 Non-GAAP EPS from continuing operations was $1.19
  • Completed Excelsys acquisition and $25M share repurchase

FORT COLLINS, Colo., Oct. 30, 2017 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq:AEIS), today announced financial results for the third quarter ended September 30, 2017. The company reported third quarter sales of $176.6 million. Third quarter GAAP income from continuing operations was $83.8 million, or $2.09 per diluted share. Non-GAAP income from continuing operations was $48.0 million, or $1.19 per diluted share.

“The growing importance of AE’s advanced power products drove our seventh quarter of strong results. Our Industrial business reached a five-year high, while semiconductors and service continued to benefit from multiple technology drivers, leading to total revenue growth of 40% over last year,” said Yuval Wasserman, president and CEO. “AE’s track record of outperformance, together with our continual investment in innovation to support our customers’ roadmaps and the expansion of our product portfolio through acquisitions, is unlocking strategic opportunities to create sustainable value for our customers and shareholders.”

Third Quarter Results

Sales were $176.6 million compared with $165.9 million in the second quarter of 2017 and $126.6 million in the third quarter of 2016.

GAAP income from continuing operations was $83.8 million or $2.09 per diluted share in the third quarter of 2017 compared with $45.9 million or $1.14 per diluted share in the prior quarter, and $29.0 million or $0.73 per diluted share in the third quarter of 2016. Third quarter 2017 GAAP income included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.

Non-GAAP income from continuing operations was $48.0 million or $1.19 per diluted share in the third quarter of 2017 compared with $49.2 million or $1.22 per diluted share in the prior quarter, and $30.8 million or $0.77 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $33.7 million of operating cash from continuing operations in the third 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 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.

Fourth Quarter 2017 Guidance

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

  Q4 2017
Revenues $172M - $182M
GAAP operating margins from continuing operations 28% - 30%
GAAP EPS from continuing operations $1.08 - $1.18
Non-GAAP operating margins from continuing operations 30% - 32%
Non-GAAP EPS from continuing operations $1.15 - $1.25

Third Quarter 2017 Conference Call

Management will host a conference call tomorrow morning, Tuesday, October 31, 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 96121678, 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 96121678. 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

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

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
Advanced Energy Industries, Inc.
(970) 232-8096
 Annie Leschin
Advanced Energy Industries, Inc.
(970) 407-6555

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 fourth quarter ending December 31, 2017 guidance, the company expects stock based compensation of $3 million and amortization of intangibles of $1 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, 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 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; 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 Copies may also be obtained from Advanced Energy's investor relations page at 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.

(in thousands, except per share data)
 Three Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2017 2016 2017 2017 2016
Product$152,363  $107,650  $143,288  $424,478  $294,695 
Service24,212  18,902  22,584  67,320  53,666 
Total sales176,575  126,552  165,872  491,798  348,361 
Cost of sales:         
Product72,146  49,835  66,491  198,754  137,984 
Service12,195  10,594  12,240  34,838  28,748 
Total cost of sales84,341  60,429  78,731  233,592  166,732 
Gross profit92,234  66,123  87,141  258,206  181,629 
 52.2% 52.2% 52.5% 52.5% 52.1%
Operating expenses:         
Research and development14,629  11,293  14,610  41,742  33,324 
Selling, general and administrative24,692  19,421  23,790  70,580  56,814 
Amortization of intangible assets1,240  1,048  974  3,176  3,180 
Total operating expenses40,561  31,762  39,374  115,498  93,318 
Operating income51,673  34,361  47,767  142,708  88,311 
Other (expense) income, net153  (55) (83) (3,138) 1,138 
Income from continuing operations before income taxes51,826  34,306  47,684  139,570  89,449 
Provision for income taxes(31,968) 5,268  1,811  (25,538) 12,937 
Income from continuing operations, net of income taxes83,794  29,038  45,873  165,108  76,512 
Income from discontinued operations, net of income taxes70  1,323  179  2,343  6,661 
Net income$83,864  $30,361  $46,052  $167,451  $83,173 
Basic weighted-average common shares outstanding39,786  39,681  39,849  39,787  39,723 
Diluted weighted-average common shares outstanding40,172  39,967  40,250  40,207  40,015 
Earnings per share:         
Continuing operations:         
Basic earnings per share$2.11  $0.73  $1.15  $4.15  $1.93 
Diluted earnings per share$2.09  $0.73  $1.14  $4.11  $1.91 
Discontinued operations:         
Basic earnings per share$0.00  $0.03  $0.00  $0.06  $0.17 
Diluted earnings per share$0.00  $0.03  $0.00  $0.06  $0.17 
Net income:         
Basic earnings per share$2.11  $0.77  $1.16  $4.21  $2.09 
Diluted earnings per share$2.09  $0.76  $1.14  $4.16  $2.08 

(in thousands)
 September 30, December 31,
 2017 2016
Current assets:   
Cash and cash equivalents$366,572  $281,953 
Marketable securities3,046  4,737 
Accounts receivable, net74,993  75,667 
Inventories, net73,520  55,770 
Income taxes receivable6,380  1,482 
Other current assets8,678  9,324 
Current assets of discontinued operations7,770  9,401 
Total current assets540,959  438,334 
Property and equipment, net15,736  13,337 
Deposits and other2,432  1,835 
Goodwill and intangibles, net87,944  70,196 
Deferred income tax assets58,590  32,197 
Non-current assets of discontinued operations15,630  15,630 
Total assets$721,291  $571,529 
Current liabilities:   
Accounts payable$41,275  $46,255 
Other accrued expenses40,054  35,372 
Current liabilities of discontinued operations9,667  13,419 
Total current liabilities90,996  95,046 
Non-current liabilities of continuing operations65,622  63,252 
Non-current liabilities of discontinued operations16,287  21,157 
Long-term liabilities81,909  84,409 
Total liabilities172,905  179,455 
Stockholders' equity548,386  392,074 
Total liabilities and stockholders' equity$721,291  $571,529 
December 31, 2016 amounts are derived from the December 31, 2016 audited Consolidated Financial Statements.

(in thousands)
 Nine Months Ended September 30,
 2017 2016
Net income$167,451  $83,173 
Income from discontinued operations, net of income taxes2,343  6,661 
Income from continuing operations, net of income taxes165,108  76,512 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization6,792  5,938 
Stock-based compensation expense10,707  4,299 
Provision for deferred income taxes(26,185)  
Loss on foreign exchange hedge3,489   
Net loss on disposal of assets106  259 
Changes in operating assets and liabilities, net of assets acquired(19,710) (4,343)
Net cash provided by operating activities from continuing operations140,307  82,665 
Net cash used in operating activities from discontinued operations(7,293) (4,538)
Net cash provided by operating activities133,014  78,127 
Purchases of marketable securities(86) (745)
Proceeds from sale of marketable securities1,883  7,161 
Acquisitions, net of cash acquired(17,347)  
Purchase of foreign exchange hedge(3,489)  
Purchases of property and equipment(5,646) (4,524)
Net cash (used in) provided by investing activities from continuing operations(24,685) 1,892 
Net cash used in investing activities from discontinued operations   
Net cash (used in) provided by investing activities(24,685) 1,892 
Purchase and retirement of common stock(24,998)  
Proceeds from exercise of stock options(1,904) 1,753 
Other financing activities2  (3)
Net cash (used in) provided by financing activities from continuing operations(26,900) 1,750 
Net cash used in financing activities from discontinued operations  (24)
Net cash (used in) provided by financing activities(26,900) 1,726 
CASH AND CASH EQUIVALENTS, beginning of period289,517  169,720 
CASH AND CASH EQUIVALENTS, end of period372,084  250,915 
Less cash and cash equivalents from discontinued operations5,512  6,623 

(in thousands)
Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2017 2016 2017 2017 2016
Gross Profit from continuing operations, as reported$92,234  $66,123  $87,141  $258,206  $181,629 
Operating expenses from continuing operations, as reported40,561  31,762  39,374  115,498  93,318 
Stock-based compensation(3,453) (1,301) (3,856) (10,707) (4,299)
Amortization of intangible assets(1,240) (1,048) (974) (3,176) (3,180)
Acquisition-related costs    (150) (150)  
Non-GAAP operating expenses from continuing operations35,868  29,413  34,394  101,465  85,839 
Non-GAAP operating income from continuing operations$56,366  $36,710  $52,747  $156,741  $95,790 

Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2017 2016 2017 2017 2016
Gross Profit from continuing operations, as reported52.2% 52.2% 52.5% 52.5% 52.1%
Operating expenses from continuing operations, as reported23.0  25.1  23.7  23.5  26.8 
Stock-based compensation(2.0) (1.1) (2.3) (2.3) (1.3)
Amortization of intangible assets(0.7) (0.8) (0.6) (0.6) (0.9)
Acquisition-related costs    (0.1)    
Non-GAAP operating expenses from continuing operations20.3  23.2  20.7  20.6  24.6 
Non-GAAP operating income from continuing operations31.9% 29.0% 31.8% 31.9% 27.5%

Reconciliation of Non-GAAP measure - income excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2017 2016 2017 2017 2016
Income from continuing operations, net of income taxes, as reported$83,794  $29,038  $45,873  $165,108  $76,512 
Stock-based compensation3,453  1,301  3,856  10,707  4,299 
Amortization of intangible assets1,240  1,048  974  3,176  3,180 
Loss on foreign exchange hedge      3,489   
Acquisition-related costs    150  150   
Incremental expense associated with start-up of the Asia regional headquarters1,133      1,133   
Nonrecurring tax benefit associated with inverter business(40,194)     (40,194)  
Tax effect of Non-GAAP adjustments(1,426) (608) (1,629) (4,451) (1,973)
Non-GAAP income from continuing operations, net of income taxes$48,000  $30,779  $49,224  $139,118  $82,018 

Reconciliation of Non-GAAP measure - per share earnings excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2017 2016 2017 2017 2016
Diluted earnings per share from continuing operations, as reported$2.09  $0.73  $1.14  $4.11  $1.91 
Add back:         
per share impact of Non-GAAP adjustments, net of tax(0.90) 0.04  0.08  (0.65) 0.14 
Non-GAAP per share earnings from continuing operations$1.19  $0.77  $1.22  $3.46  $2.05 

Reconciliation of Q4 2017 Guidance    
  Low End High End
Revenue $172 million $182 million
Reconciliation of Non-GAAP operating margin    
GAAP operating margin 28% 30%
Stock-based compensation 1% 1%
Amortization of intangible assets 1% 1%
Non-GAAP operating margin 30% 32%
Reconciliation of Non-GAAP earnings per share    
GAAP earnings per share $1.08  $1.18 
Stock-based compensation 0.07  0.07 
Amortization of intangible assets 0.04  0.04 
Tax effects of excluded items (0.04) (0.04)
Non-GAAP earnings per share $1.15  $1.25 

Source: Advanced Energy Industries, Inc.

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