ADVANCED ENERGY INDUSTRIES INC (Form: 8-K, Received: 08/04/2021 08:02:30)

Q3 2021

$340M +/- $15M

GAAP EPS from continuing operations

$0.52 +/- $0.20

Non-GAAP EPS

$0.80 +/- $0.20

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 4, 2021

A PICTURE CONTAINING LOGO

DESCRIPTION AUTOMATICALLY GENERATED

Advanced Energy Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware		000-26966		84-0846841
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)


1595 Wynkoop Street, Suite 800, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(970) 407-6626

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the

registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	AEIS	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

The information in this Form 8-K is furnished under “Item 2.02 Results of Operations and Financial Condition” and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

On August 4, 2021, Advanced Energy Industries, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2021. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits


Exhibit Number		Description

99.1		Press release dated August 4, 2021 by Advanced Energy Industries, Inc., reporting its financial results for the quarter ended June 30, 2021.

104		The cover page from Advanced Energy Industries, Inc. Current Report on Form 8-K, formatted in Inline XBRL

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




	/s/ Paul Oldham
Date: August 4, 2021	Paul Oldham
	Chief Financial Officer & Executive Vice President

Exhibit 99.1

Financial News Release

Advanced Energy Announces Second Quarter 2021 Results and $200 million Share Repurchase Authorization

●

Q2 revenue was $361 million, meeting the guidance midpoint and up 6% from last year

●

GAAP EPS from continuing operations was $0.92

●

Non-GAAP EPS was $1.25, at midpoint of guidance and above year-ago EPS of $1.18

●

Share repurchase authorization increased to $200 million

DENVER, Colo., August 4, 2021 - Advanced Energy Industries, Inc. (Nasdaq: AEIS), a global leader in highly engineered, precision power conversion, measurement, and control solutions, today announced financial results for the second quarter ended June 30, 2021.

“We achieved year-over-year revenue and earnings growth in Q2,” said Steve Kelley, president and CEO of Advanced Energy. “Although the near-term supply chain and operating environment remains challenging, demand continues to strengthen across all our markets, and we have solid visibility into 2022. We are winning with our highly-engineered, proprietary power solutions, positioning the company to deliver long-term profitable growth.”

Second Quarter Results

Sales were $361.3 million in the second quarter of 2021, compared with $351.6 million in the first quarter of 2021 and $339.9 million in the second quarter of 2020.

GAAP net income from continuing operations was $35.5 million or $0.92 per diluted share in the quarter, compared with $38.4 million or $0.99 per diluted share in the prior quarter, and $29.3 million or $0.76 per diluted share a year ago.

Non-GAAP net income was $48.1 million or $1.25 per diluted share in the second quarter of 2021. This compares with $49.7 million or $1.29 per diluted share in the first quarter of 2021, and $45.4 million or $1.18 per diluted share in the second quarter of 2020.

A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $33.8 million of operating cash flow from continuing operations during the quarter, made debt principal payments of $4.4 million, repurchased $6.5 million of common stock at $90.34 per share, paid $15.1 million for the acquisition of Tegam, Inc., and paid $3.9 million in a quarterly dividend.

New Share Repurchase Authorization

On July 29 the Board of Directors increased the company’s stock repurchase authorization to $200 million.

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 is available in the company’s 2020 Annual Report on Form 10-K.

Third Quarter 2021 Guidance

Based on the company’s current view, beliefs and assumptions, guidance for the third quarter of 2021 is within the following ranges.

Conference Call

Management will host a conference call today, August 4, 2021 at 8:30 a.m. Eastern Time to discuss Advanced Energy’s financial results. To register for the call please use this link (www.directeventreg.com/registration/event/3998884). A webcast will also be available on the company’s investors web page at ir.advancedenergy.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 applications for a wide range of industries including semiconductor equipment, industrial, manufacturing, telecommunications, data center computing and healthcare. 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 four decades to perfecting power for its global customers and is headquartered in Denver, 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. Beginning in the second quarter of 2020, Advanced Energy’s non-GAAP measures exclude non-cash unrealized foreign currency gains or losses that result from remeasurement to functional currency long-term obligations related to pension and operating lease liabilities as the remeasurement does not represent current economic exposure and is unrelated to our overall operating performance. These long-term obligations were acquired in connection with the Artesyn acquisition and the company previously used derivatives to hedge the exposure; however, the company has determined it will no longer hedge these non-economic exposures. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.

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, non-economic foreign currency remeasurements, and other cash 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, potential future growth and profitability, future business mix, expectations regarding future market trends, 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 risks and uncertainties related to the integration of Artesyn Embedded Power including the optimization and reduction of our global manufacturing sites; (e) the continuing spread of COVID-19 and its potential adverse impact on our product manufacturing, research and development, supply chain, services and administrative operations; (f) supply chain disruptions and component shortages that may impact the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (g) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (h) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (i) the accuracy of the company’s assumptions on which its financial statement projections are based; (j) the impact of product price changes, which may result from a variety of factors; (k) the timing of orders received from customers; (l) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (m) unanticipated changes to management’s estimates, reserves or allowances; (n) changes and adjustments to the tax expense and benefits related to the U.S. tax reform that was enacted in late 2017; and (o) the impact of political, economic and policy tensions and conflicts between China and the United States including, but not limited to, trade wars and export restrictions between the two countries, China’s national security law for Hong Kong, and China’s expansion of control over the South China Sea, any of which could negatively impact our customers’ and our presence, operations, and financial results. 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.advancedenergy.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,
	2021			2020			2021			2021			2020
Sales, net	$	361,311		$	339,880		$	351,620		$	712,931		$	655,336
Cost of sales		226,278			209,576			214,117			440,395			412,801
Gross profit		135,033			130,304			137,503			272,536			242,535
		37.4	%		38.3	%		39.1	%		38.2	%		37.0	%
Operating expenses:
Research and development		40,119			35,855			40,168			80,287			70,625
Selling, general, and administrative		48,110			48,174			46,731			94,841			94,165
Amortization of intangible assets		5,513			5,009			5,384			10,897			10,015
Restructuring expense		211			5,790			1,038			1,249			6,446
Total operating expenses		93,953			94,828			93,321			187,274			181,251
Operating income		41,080			35,476			44,182			85,262			61,284

Other income (expense), net		(3,662)			(1,587)			(507)			(4,169)			(5,097)
Income from continuing operations, before income taxes		37,418			33,889			43,675			81,093			56,187
Provision (benefit) for income taxes		1,876			4,610			5,284			7,160			8,510
Income from continuing operations		35,542			29,279			38,391			73,933			47,677
Income (loss) from discontinued operations, net of income taxes		(102)			(151)			310			208			(471)
Net income		35,440			29,128			38,701			74,141			47,206
Income from continuing operations attributable to noncontrolling interest		31			(16)			33			64			(1)
Net income attributable to Advanced Energy Industries, Inc.	$	35,409		$	29,144		$	38,668		$	74,077		$	47,207

Basic weighted-average common shares outstanding		38,389			38,294			38,328			38,359			38,326
Diluted weighted-average common shares outstanding		38,586			38,458			38,583			38,589			38,525

Earnings per share attributable to Advanced Energy Industries, Inc:

Continuing operations:
Basic earnings per share	$	0.93		$	0.77		$	1.00		$	1.93		$	1.24
Diluted earnings per share	$	0.92		$	0.76		$	0.99		$	1.91		$	1.24

Discontinued operations:
Basic earnings (loss) per share	$	—		$	—		$	0.01		$	0.01		$	(0.01)
Diluted earnings (loss) per share	$	—		$	—		$	0.01		$	0.01		$	(0.01)

Net income:
Basic earnings per share	$	0.92		$	0.76		$	1.01		$	1.93		$	1.23
Diluted earnings per share	$	0.92		$	0.76		$	1.00		$	1.92		$	1.23

ADVANCED ENERGY INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


	June 30,		December 31,
		2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	507,176	$	480,368
Marketable securities		2,828		2,654
Accounts and other receivable, net		243,353		235,178
Inventories		296,739		221,346
Income taxes receivable		15,075		4,804
Other current assets		38,815		35,899
Total current assets		1,103,986		980,249

Property and equipment, net		115,160		114,731
Operating lease right-of-use assets		101,419		103,858
Deposits and other assets		18,646		19,101
Goodwill and intangible assets, net		385,125		378,922
Deferred income tax assets		51,896		50,801
Total assets	$	1,776,232	$	1,647,662

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	206,723	$	125,224
Other accrued expenses		137,633		137,081
Current portion of long-term debt		17,500		17,500
Current portion of operating lease liabilities		15,540		16,592
Total current liabilities		377,396		296,397

Long-term debt		296,045		304,546
Non-current liabilities		226,185		231,379
Long-term liabilities		522,230		535,925

Total liabilities		899,626		832,322

Advanced Energy stockholders' equity		875,941		814,739
Noncontrolling interest		665		601
Total stockholders’ equity		876,606		815,340
Total liabilities and stockholders’ equity	$	1,776,232	$	1,647,662

ADVANCED ENERGY INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	74,141	$	47,206
Income (loss) from discontinued operations, net of income taxes		208		(471)
Income from continuing operations, net of income taxes		73,933		47,677

Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		25,744		23,196
Stock-based compensation expense		9,145		5,885
Provision for deferred income taxes		(1,663)		(1,439)
Discount on notes receivable		—		721
Loss on disposal of assets		446		231
Changes in operating assets and liabilities, net of assets acquired		(19,539)		(8,711)
Net cash from operating activities from continuing operations		88,066		67,560
Net cash from operating activities from discontinued operations		(377)		(586)
Net cash from operating activities		87,689		66,974

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities		—		(167)
Issuance of notes receivable		—		(1,000)
Proceeds from sale of property and equipment		29		69
Purchases of property and equipment		(14,232)		(13,391)
Acquisitions, net of cash acquired		(18,686)		—
Net cash from investing activities from continuing operations		(32,889)		(14,489)
Net cash from investing activities from discontinued operations		—		—
Net cash from investing activities		(32,889)		(14,489)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings		(8,750)		(8,750)
Dividend payments		(7,728)		—
Purchase and retirement of common stock		(6,503)		(7,248)
Net payments related to stock-based awards		(3,258)		(1,392)
Net cash from financing activities from continuing operations		(26,239)		(17,390)
Net cash from financing activities from discontinued operations		—		—
Net cash from in financing activities		(26,239)		(17,390)

EFFECT OF CURRENCY TRANSLATION ON CASH		(1,753)		(899)

NET CHANGE IN CASH AND CASH EQUIVALENTS		26,808		34,196
CASH AND CASH EQUIVALENTS, beginning of period		480,368		346,441
CASH AND CASH EQUIVALENTS, end of period		507,176		380,637
Less cash and cash equivalents from discontinued operations		—		—
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period	$	507,176	$	380,637

ADVANCED ENERGY INDUSTRIES, INC.

SUPPLEMENTAL INFORMATION (UNAUDITED)

(in thousands)


Net Sales by Product Line	Three Months Ended						Six Months Ended
	June 30,				March 31,		June 30,
	2021		2020		2021		2021		2020
Semiconductor Equipment	$	176,671	$	145,424	$	180,716	$	357,387	$	279,049
Industrial and Medical		83,197		70,886		78,415		161,612		132,865
Data Center Computing		69,458		83,316		59,154		128,612		169,499
Telecom and Networking		31,985		40,254		33,335		65,320		73,923
Total	$	361,311	$	339,880	$	351,620	$	712,931	$	655,336


Net Sales by Geographic Region	Three Months Ended						Six Months Ended
	June 30,				March 31,		June 30,
	2021		2020		2021		2021		2020
United States	$	139,525	$	119,808	$	131,598	$	271,123	$	236,505
North America (excluding United States)		26,112		29,952		26,247		52,359		77,586
Asia		148,803		170,753		149,591		298,394		281,728
Europe		44,491		19,048		40,422		84,913		58,184
Other Countries		2,380		319		3,762		6,142		1,333
Total	$	361,311	$	339,880	$	351,620	$	712,931	$	655,336

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,
	2021		2020		2021		2021		2020
Gross profit from continuing operations, as reported	$	135,033	$	130,304	$	137,503	$	272,536	$	242,535
Adjustments to gross profit:
Stock-based compensation		215		156		350		565		378
Facility expansion, relocation costs and other		1,997		970		1,838		3,835		2,513
Acquisition-related costs		84		215		8		92		5,356
Non-GAAP gross profit		137,329		131,645		139,699		277,028		250,782
Non-GAAP gross margin		38.0%		38.7%		39.7%		38.9%		38.3%

Operating expenses from continuing operations, as reported		93,953		94,828		93,321		187,274		181,251
Adjustments:
Amortization of intangible assets		(5,513)		(5,009)		(5,384)		(10,897)		(10,015)
Stock-based compensation		(3,229)		(2,681)		(5,351)		(8,580)		(5,507)
Acquisition-related costs		(2,328)		(2,978)		(2,028)		(4,356)		(5,383)
Facility expansion, relocation costs and other		(63)		(539)		(51)		(114)		(1,355)
Restructuring charges		(211)		(5,790)		(1,038)		(1,249)		(6,446)
Non-GAAP operating expenses		82,609		77,831		79,469		162,078		152,545
Non-GAAP operating income	$	54,720	$	53,814	$	60,230	$	114,950	$	98,237
Non-GAAP operating margin		15.1%		15.8%		17.1%		16.1%		15.0%


Reconciliation of Non-GAAP measure - income excluding certain items	Three Months Ended						Six Months Ended
	June 30,				March 31,		June 30,
	2021		2020		2021		2021		2020
Income from continuing operations, less non-controlling interest, net of income taxes	$	35,511	$	29,295	$	38,358	$	73,869	$	47,678
Adjustments:
Amortization of intangible assets		5,513		5,009		5,384		10,897		10,015
Acquisition-related costs		2,412		3,193		2,036		4,448		10,739
Facility expansion, relocation costs and other		2,060		1,509		1,889		3,949		3,868
Restructuring charges		211		5,790		1,038		1,249		6,446
Unrealized foreign currency (gain) loss		885		1,058		(2,202)		(1,317)		1,058
Acquisition-related and other costs included in other income (expense), net		899		—		87		986		—
Tax effect of Non-GAAP adjustments		(2,043)		(2,595)		(1,284)		(3,327)		(3,965)
Non-GAAP income, net of income taxes, excluding stock-based compensation		45,448		43,259		45,306		90,754		75,839
Stock-based compensation, net of taxes		2,636		2,170		4,362		6,998		4,533
Non-GAAP income, net of income taxes	$	48,084	$	45,429	$	49,668	$	97,752	$	80,372


Reconciliation of Non-GAAP measure - per share earnings excluding certain items	Three Months Ended						Six Months Ended
	June 30,				March 31,		June 30,
	2021		2020		2021		2021		2020
Diluted earnings per share from continuing operations, as reported	$	0.92	$	0.76	$	0.99	$	1.91	$	1.24
Add back (subtract):
Per share impact of Non-GAAP adjustments, net of tax		0.33		0.42		0.30		0.62		0.85
Non-GAAP per share earnings	$	1.25	$	1.18	$	1.29	$	2.53	$	2.09

Quarterly results may not sum to year to date due to rounding


Reconciliation of Q3 2021 Guidance
	Low End		High End

Revenue	$325 million		$355 million

Reconciliation of Non-GAAP earnings per share
GAAP earnings per share	$	0.32	$	0.72
Stock-based compensation		0.11		0.11
Amortization of intangible assets		0.13		0.13
Restructuring and other		0.08		0.08
Tax effects of excluded items		(0.04)		(0.04)
Non-GAAP earnings per share	$	0.60	$	1.00