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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the fiscal year ended December 31, 2023 |
| | or |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |

Commission file number: 000-26966

ADVANCED ENERGY INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

| | |
| Delaware | 84-0846841 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| 1595 Wynkoop Street, Suite 800, Denver, Colorado | 80202 |
| (Address of principal executive offices) | (Zip Code) |

Registrant's telephone number, including area code: (970) 407-6626

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 |

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes ☐ No ☑

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

| Large accelerated filer ☑ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | 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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to section 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant was $4,171,070,526 as of June 30, 2023, based upon the price at which such common stock was last sold on such date.

As of February 10, 2023, there were 37,468,514 As of February 8, 2024, there were 37,324,800 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this annual report on Form 10-K incorporates information by reference from the registrant's definitive proxy statement for its 2024 annual meeting of stockholders (to be filed with the Commission under Regulation 14A no later than 120 days after the end of the registrant's fiscal year ended December 31, 2023).

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ADVANCED ENERGY INDUSTRIES, INC.

FORM 10-K

TABLE OF CONTENTS

| 8 | | | |
| | | | |
| | PART I | | 4 |
| | | | |
| ITEM 1. | BUSINESS | | 4 |
| | | | |
| ITEM 1A. | RISK FACTORS | | 11 |
| | | | |
| ITEM 1B. | UNRESOLVED STAFF COMMENTS | | 25 |
| | | | |
| ITEM 1C. | CYBERSECURITY | | 25 |
| | | | |
| ITEM 2. | PROPERTIES | | 26 |
| | | | |
| ITEM 3. | LEGAL PROCEEDINGS | | 27 |
| | | | |
| ITEM 4. | MINE SAFETY DISCLOSURES | | 27 |
| | | | |
| | PART II | | 28 |
| | | | |
| ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | | 28 |
| | | | |
| ITEM 6. | RESERVED | | 29 |
| | | | |
| ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | | 30 |
| | | | |
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | | 42 |
| | | | |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | 44 |
| | | | |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | | 87 |
| | | | |
| ITEM 9A. | CONTROLS AND PROCEDURES | | 87 |
| | | | |
| ITEM 9B. | OTHER INFORMATION | | 88 |
| | | | |
| ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | | 88 |
| | | | |
| | PART III | | 88 |
| | | | |
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | | 88 |
| | | | |
| ITEM 11. | EXECUTIVE COMPENSATION | | 88 |
| | | | |
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | | 89 |
| | | | |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | | 89 |
| | | | |
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES | | 89 |
| | | | |
| | PART IV | | 89 |
| | | | |
| ITEM 15. | EXHIBIT AND FINANCIAL STATEMENT SCHEDULES | | 89 |
| | | | |
| ITEM 16. | FORM 10-K SUMMARY | | 94 |
| | | | |
| | SIGNATURES | | 95 |

2

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Special Note Regarding Forward-Looking Statements

This annual report on Form 10-K contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements in this report that are not historical information are forward-looking statements. For example, statements relating to our beliefs, expectations and plans are forward-looking statements, as are statements that certain actions, conditions, or circumstances will continue. The inclusion of words such as "anticipate," "expect," "estimate," "can," "may," "might," "continue," "enable," "plan," "intend," "should," "could," "would," "will," "likely," "potential," or "believe," as well as statements that events or circumstances "will" occur or continue, indicate "believe," and similar expressions and the negative versions thereof indicate forward-looking statements; however, not all forward-looking statements may contain such words or expressions. These forward-looking statements are based upon information available as of the date of this report and management's current estimates, forecasts, and assumptions. Although we believe that our expectations reflected in or suggested by these forward-looking statements are reasonable, we may not achieve the results, performance, plans, or objectives expressed or implied by such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and many of which are beyond our control,
and/or beyond our control, including but not limited to:
Risks and uncertainties to:which our forward-looking statements are subject include:

| | ● | macroeconomic risks, including supply chain cost increases and other inflationary pressures, recession, changes in financial markets, economic volatility and cyclicality, higher interest rates, labor shortages, foreign currency fluctuations and pricing controls; |
| | ● | volatility and business fluctuations in the industries in which we compete; |
| | ● | political and geographical risks, including trade and export controls, war, terrorism, international disputes and geopolitical tensions, natural disasters, public health issues, and industrial accidents; |
| | ● | sufficiency and availability of components and materials; |
| | ● | our level of and ability to manage backlog orders; |
| | ● | our ability to achieve design wins with new and existing customers; |
| | ● | our ability to develop new products expeditiously and be successful in the design win process with our customers; |
| | ● | our ability to accurately forecast and meet customer demand; |
| | ● | the ability to stay on the leading edge of innovation, and obtain and defend necessary intellectual property protections; |
| | ● | risks related to global economic conditions, including but not limited to economic uncertainty, market volatility, rising interest rates, inflation, or recession; |
| | ● | the ability to protect our trade secrets and confidential information from misappropriation or infringement; |
| | ● | risks inherent in our international operations, including the effect of trade and export controls, political and geographical risks, fluctuations in currency exchange rates; |
| | ● | customer price sensitivity; |
| | ● | concentration of our customer base; |
| | ● | risks associated with breach of our information security measures; |
| | ● | market acceptance of and demand for, our products; |
| | ● | our loss of or inability to attract and retain key personnel; |
| | ● | the fair value of our assets and financial instruments; |
| | ● | disruptions to our manufacturing operations or those of our customers or suppliers; |
| | ● | research and development expenses; |
| | ● | risks associated with our manufacturing footprint optimization and movement of manufacturing locations for certain products; |
| | ● | selling, general, and administrative expenses; |
| | ● | our ability to successfully identify, close, integrate and realize anticipated benefits from our acquisitions; |
| | ● | sufficiency and availability of capital resources; |
| | ● | quality issues or unanticipated costs in fulfilling our warranty obligations (including our discontinued solar inverter product line), and adequacy of our warranty reserves; |
| | ● | our ability to obtain equity or debt financing on favorable terms; |

3

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enforce, protect and maintain our proprietary technology and intellectual property rights; |
| | ● | our production and operations strategy; |
| | ● | our ability to achieve cost savings and profitability or gross margin goals; |
| | ● | changes to tax laws and regulations or our tax rates; |
| | ● | changes in federal, state, local and foreign regulations, including with respect to privacy and data protection, and environmental regulation; |
| | ● | our other commitments and contingent liabilities; |
| | ● | effect of our debt obligations and restrictive covenants on our ability to operate our business; |
| | ● | adequacy of our reserve for excess and obsolete inventory; |
| | ● | risks related to our unfunded pension obligations; |
| | ● | adequacy of our warranty reserves; |
| | ● | restructuring and severance activities; |
| | ● | adequacy of reserves for bad debt, sales returns, and other reserves or impairments; |
| | ● | legal matters, claims and proceedings; |

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| | ● | our estimates of the fair value of intangible assets; and |
| | ● | restructuring activities and expenses; |
| | ● | unanticipated costs in fulfilling our warranty obligations for solar inverters; |
| | ● | the integration of our acquisitions; |
| | ● | the potential impact of dilution related to our convertible debt, hedge, and warrant transactions. |
| | ● | industry and market trends; |
| | ● | our acquisition, divestiture, and joint venture activities; and |
| | ● | cost fluctuations and pressures, including prices of components, commodities and raw materials, and costs of labor, transportation, energy, pension, and healthcare. |

Actual results could differ materially and adversely from those expressed in any forward-looking statements, Neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements and readers are cautioned not to place undue reliance on forward-looking statements. Factors that could contribute to these differences or prove our forward-looking statements, by hindsight, to be overly optimistic or unachievable include, but are not limited to, the risks and uncertainties listed above and described in Part I, Item 1A "Risk Factors." Other factors might also contribute to the differences between our forward-looking statements and our actual results. We assume no obligation to update any forward-looking statement or provide the reasons why our actual results might differ.

Market and Industry Data

The market and industry information used in this annual report on Form 10-K are based on independent industry publications, customers, trade or business organizations, reports by market research firms and other published statistical information from third parties, as well as information is based on management's good faith estimates, which we derive from our review of internal information and independent sources. Although we believe these independent sources to be reliable, we have not independently verified the accuracy or completeness of the information.

PART I

Unless the context otherwise requires, as used in this Form 10-K, references to "Advanced Energy," "the Company," "we," "us" or "our" refer to Advanced Energy Industries, Inc. and its consolidated subsidiaries.

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ITEM 1. BUSINESS

Overview

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

Our plasma power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products are used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets. Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.

Advanced Energy is organized on a global, functional basis and operates in the single segment of power electronics conversion products. Within this segment, our products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.

We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995. Our executive offices are located at 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202, and our telephone number is 970-407-6555.

Recent Acquisitions

On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power Electronics Corporation ("SL Power"), which is based in Calabasas, California. This acquisition added complementary products to Advanced Energy's medical power offerings and extends our presence in several advanced industrial markets.

On June 1, 2021, we acquired 100% of the issued and outstanding shares of capital stock of TEGAM, Inc. ("TEGAM"), which is based in Geneva, Ohio. This acquisition added metrology and calibration instrumentation to Advanced Energy's radio frequency ("RF") process power solutions in our Semiconductor Equipment and Industrial and Medical markets.

For additional information, see Note 2. Acquisitions in Part II, Item 8 "Financial Statements and Supplementary Data."

Products and Services

PRODUCTS

Our precision power products and solutions are designed to enable new process technologies, improve productivity, lower the cost of ownership, and provide critical power capabilities for our customers. These products are designed to meet our customers' demanding requirements in efficiency, flexibility, performance, and reliability. The majority of Advanced Energy's products are capable of meeting various customer requirements. We also provide repair and maintenance services for our products.

We principally serve global original equipment manufacturers ("OEM") and end customers in a wide range of semiconductor and industrial technology applications with a broad range of advanced and embedded power products.

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Our plasma power solutions include RF power supplies, RF matching networks, RF instrumentation, direct current ("DC") power systems, pulsed DC power systems, low frequency alternating current ("AC") power systems, and remote plasma sources for reactive gas applications. These solutions are used in a wide range of thin film processes across multiple semiconductor applications, including plasma-based dry etch, dry strip, atomic layer etch, atomic layer deposition, chemical vapor deposition, physical vapor deposition, electro-chemical deposition, and ion implantation. In addition, these solutions are used in the processing of advanced materials in adjacent industries such as flat panel display, solar cell manufacturing, architectural glass coating, thin film coating, optical coating, and hard coatings.
Our plasma power products offer solutions to enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. We have a broad portfolio of high and low voltage power products used


Our power control modules and thermal instrumentation products are used in semiconductor and industrial markets, in which time-temperature cycles affect material properties, productivity, and yield. These products are used in processes such as etch deposition, thermal processing, epitaxy and crystal growing. They are also used in many industrial production applications for chemical processing, the manufacturing of metal, carbon fiber, and glass, as well as numerous other industrial power applications.

Our RF, micro-ohm, and temperature metrology instruments and calibration systems are used to make critical measurements and calibrate customer hardware with speed and high accuracy in a wide range of applications, such as semiconductor manufacturing, medical, aerospace, and food processing industries.

Our embedded power products are designed to maximize energy conversion efficiency, minimize physical sizes, and to meet a variety of standards, such as International Electrotechnical Commission ("IEC") 60601-1 for medical equipment, or IEC 60950-1 for information technology equipment. Our lower power RF power supplies are designed into surgical equipment for a range of therapeutic applications. Our low-voltage AC-DC and DC-DC power supply products maximize performance, lower energy costs, and minimize the form factor. These products target mission critical applications across a variety of industrial technology applications such as medical equipment, data center servers and storage systems.
equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets. Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.


Our high and lower voltage DC-DC products are designed to meet the demanding requirements of OEMs worldwide. Our DC-DC solutions and custom-built power conversion products offer high and low voltage topology, ranging from benchtop and rackmount systems to micro-size printed circuit board mount modules. The high voltage power systems target applications including semiconductor equipment, electrostatic clamping of substrates, scientific instrumentation mass spectrometry, and x-ray systems for industrial and analytical applications. The low voltage board mounted power solutions are designed for a wide range of industrial applications. Our programmable DC power supplies provide accurate power delivery and measurement for use in a wide range of test, measurement, and scientific research applications.

PowerInsight, Our big data analytics solution, transforms the data acquired from our power delivery systems into useable insights, through a combination of enhanced data sets and advanced analytics. These capabilities allow our customers to maximize performance, reduce costs and improve yield in their manufacturing processes.

GLOBAL SUPPORT

Our service group offers warranty and after-market repair services, in the regions in which we operate, providing us providing our customers with preventive maintenance opportunities Our customers continue to pursue low cost of ownership of their capital equipment. and are increasingly sensitive to the costs of system downtime. We meet these requirements by offering comprehensive local to support a lower cost of ownership and higher utilization for their capital equipment. We offer comprehensive repair service and customer support through our worldwide support organization in the United States, ("U.S."), China, Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and the United Kingdom. Support services include warranty and non-warranty repair services, calibration, upgrades, and refurbishments of our products.

End Markets

Our products compete in markets for high tech applications using capital equipment. the majority of our markets are not generally subject to significant seasonality; however, these markets are cyclical due to changes in customers. manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for
Advanced Energy generates revenue from the sale of a broad range of advanced and embedded power products and services to global original equipment manufacturers ("OEM") and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to customize our solutions to meet the unique requirements of a wide range of critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:


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customers products inventory levels relative to demand, and access to affordable capital. Other factors, such as global economic and market conditions and technological advances in the applications. we serve can also have an impact on our financial results, both positively and negatively. for more information related to the markets in which we compete and the current environment in those markets, see Business Environment and Trends in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."


Semiconductor Equipment Market

The semiconductor equipment market supports and enables the long-term growing need for more semiconductor production capacity and new process technologies While the semiconductor and semiconductor equipment industries are inherently cyclical, over the long-term, integrated circuits content is growing across many industries driven by increased demand for processing, storing, and transmitting the growing amount of data. To meet the growing demand, the chip industry continues to invest in production capacity for both leading-edge and trailing-edge nodes logic devices, the latest memory devices, back-end test, and advanced wafer-level packaging. The industry's transition to advanced technology nodes and to increased layers in memory devices require an increased number of to meet expanding demand for semiconductors across many applications driven by megatrends such as artificial intelligence, Internet of Things (IoT) and automobile electrification.

Advanced Energy is a critical technology leader in the industry and provides one of the broadest portfolios of power conversion and related products, including plasma power, high-voltage power, embedded power, and adjacent sensing solutions. Our plasma power solutions are used to create plasma-based etch and deposition processes, and transition to advanced technology nodes typically require higher content of our advanced power solutions per tool. As etching and deposition processes become more challenging due to shrinking device geometry and increasing aspect ratios in advanced 3D devices, more advanced RF and DC plasma generation technologies are needed. We strive to provide a broad range of best-in-class, industry-leading RF and DC power solutions. Beyond etch and deposition processes, growing complexity at advanced nodes also drives a higher number of other process steps across the wafer fab, including inspection, metrology, thermal, ion implantation, and semiconductor test and assembly, where Advanced Energy is actively participating as a critical technology provider. In addition, our global support services group offers comprehensive local repair service, upgrade, and retrofit offerings to extend the useable life of our customers' capital equipment for additional technology generations. Our strategy in the Semiconductor Equipment market is to defend Our other semiconductor market products are incorporated in a wide range of applications including ion implant, inspection, metrology, thermal, epitaxy, and back-end test and packaging.

Our strategy is to strengthen
our proprietary positions in our core applications by capturing new design and product generations, growing our market position in applications where we have lower market share, such as remote plasma source, and dielectric etch, and leveraging our product portfolio in areas including embedded power, high voltage power systems, and critical sensing and controls to grow our market share and content at our original OEM customers.with leading market share, such as conductor etch and deposition, grow our market position in targeted applications with lower market share, such as dielectric etch and remote plasma source, and leverage our broad product portfolio to expand our content at our OEM customers.

Industrial and Medical Market

Advanced Energy serves The Industrial and Medical market with mission-critical power components that deliver high reliability, precise, low noise or differentiated power to the equipment they serve.The growth in the industrial and medical market is fueled by continued investment in complex manufacturing processes, or automation, increased adoption of smart power, sensing, and control solutions across many industrial applications, new investments in clean and sustainable technologies, and growing investment in medical devices and life science equipment.Our customers in the Industrial and Medical market are primarily global and regional original equipment manufacturers, incorporating our advanced power embedded power. and measurement products into a wide variety of equipment used in increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life sciences equipment.

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power. In addition, our sensing, control, and instrumentation products complement our power solutions. Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode applications. Examples of products sold into the Industrial and Medical market include high voltage and low voltage power supplies used in applications such as medical devices, scientific instrumentation and industrial equipment, power control modules and thermal instrumentation products for material fabrication, production process control and many precision industrial sensing applications. Our strategy in the Industrial and Medical We serve our broad customer base through both our direct sales force and indirect sales channels including independent sales representatives, channel partners, and distributors.

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Our strategy in the
market is to expand our product offerings and channel reach, leveraging common platforms, providing platform derivatives, and offering customizations to further penetrate a broader set of applications.

Data Center Computing Market

Advanced Energy serves The Data Center Computing Market with industry leading power conversion products and technologies, which we sell to OEMs and original design manufacturers ("ODMs") of data center server and storage systems, as well as cloud service providers and their partners. is driven by the growing adoption of cloud computing, as the market shifts market demand for server and storage equipment has shifted from traditional enterprise on-premises computing to the data center. driving investments In data center infrastructure. Beyond the cloud, demand for edge computing is also growing, driven by the need for faster processing, lower latency, and higher data security at edge applications. in
In addition, the rapid growth of artificial intelligence and machine learning are driving increased demand for substantially higher power in servers and racks, which has increased the importance of power efficiency and power density and accelerated the transition
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addition, the data center industry has begun transitioning from 12 Volt to 48 Volt infrastructure in data center server racks.to improve overall power efficiency.

Advanced Energy benefits from these trends by being an industry leader in providing high-efficiency, 48 Volt server power solutions to the data center industry. Further, the rapid growth and adoption of artificial intelligence and machine learning are driving accelerated demand for server and storage racks with increased power density and higher efficiency, which complements Advanced Energy's strengths. With a growing presence at both cloud service providers and industry-leading data center server and storage vendors, Our strategy in the Data Center and Computing as one of the leading providers of high-efficiency, high-density, 48 Volt server power conversion solutions and technologies. Our products are designed into data center server and storage systems, as well as used by cloud service providers and their partners in their custom designed server racks and power shelves.

Our strategy in the
market is to penetrate selected customers and applications based on our differentiated capabilities and competitive strengths in power density, efficiency, and controls.

Telecom and Networking Market

Our customers in the Telecom and Networking market include many leading vendors of wireless infrastructure equipment, Telecommunication equipment and computer Networking The wireless telecom market continues to evolve with more advanced mobile standards, 5G wireless technology promises to drive substantial growth opportunities for the telecom industry as it enables new advanced applications such as autonomous vehicles and virtual/augmented reality. Telecom service providers are investing in 5G infrastructure, and this trend is expected to drive demand for our products into the Telecom and Networking market. In datacom, demand is driven by networking investments by telecom Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, and enterprises upgrading their communication networks,networks, as well as cloud service providers and data centers investing in their networks for increased bandwidth.

Advanced Energy serves this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment. Our solutions are often customized with unique features such as ruggedization for mobile radio in the field.

Our strategy in the Telecom and Networking market is to optimize our portfolio of power conversion products to more differentiated applications, and to focus on 5G infrastructure applications.

Customers

Our products are sold worldwide to OEMs, integrators, distributors, and directly to end users.

During the year ended December 31, 2022 and 2021, our ten largest customers, in the aggregate, accounted for over half of our total revenue.
2023, Applied Materials, Inc. accounted for 22% of our total revenue.
During the year ended December 31, 2022, Applied Materials, Inc. and Lam Research Corporation accounted for 20% and 14%, respectively, of our total revenue. compared to 20% and 10%, respectively, of our total revenue during the prior year.

We expect that the sale of products to our largest customers will continue to account for a significant percentage of our revenue for the foreseeable future. The loss of a large customer could have a material adverse effect on our results of operations.

For more information related to our expectations for the markets we serve, see Business Environment and Trends in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." For a discussion of our backlog, see Results of Continuing Operations in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Marketing, Sales, and Distribution

We sell our products through direct and indirect sales channels. Our sales operations are primarily located in the U.S., China, the United Kingdom, Germany, Israel, Japan, South Korea, India, Singapore, Philippines, Hong Kong, Ireland, and Taiwan, China, Germany, Hong Kong, India, Ireland, Israel, Japan, South Korea, Philippines, Singapore, Taiwan, the United Kingdom, and United States.

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In addition to a direct sales force, we have independent sales representatives, channel partners and distributors that support our selling efforts. We maintain customer service offices at many of the locations listed above, as well as other sites near our customers' locations. We believe that customer service and technical support are important competitive factors and are essential to building and maintaining close, long-term relationships with our customers.

In October 2022, additional restrictions were announced by the U.S. Commerce Department related to the export of semiconductor equipment for advanced computing chips that have had a negative impact on our semiconductor distribution channels.

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Refer to Note 3. Revenue in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding our revenue by geographic area. See Part I, Item 1A "Risk Factors" for a discussion of certain risks related to our sales and marketing operations.

Manufacturing

The manufacturing of our products is primarily performed at our sites in the Philippines, Malaysia, and China. In addition, We We manufacture our products primarily in the Philippines, Malaysia, Mexico, and China. We also perform limited specialty manufacturing for some of our products in the U.S., the United Kingdom, and Europe. See Part I, Item 1A, "Risk Factors" for a discussion of certain risks related to our manufacturing operations.In 2023, we announced that we would be expanding our presence in our Mexico factory and beginning construction of a new factory located near Bangkok, Thailand as part of our multi-year factory optimization and consolidation plans.

Our manufacturing requires raw materials, mainly a wide variety of mechanical and electrical components, which are often made to our specifications. We use numerous companies, including contract manufacturers, to supply parts for the manufacture and support of our products. Although we make reasonable efforts to ensure that parts are available from multiple qualified suppliers and at the lowest possible cost, some key parts may only be obtained from a sole supplier or a limited group of suppliers. Global supply chain constraints have impacted the availability of materials, parts, and subcomponents needed for production. In some cases, We paid premiums or expedite fees to obtain critical parts to meet urgent customer needs. In some of those instances, we passed the additional costs along to our customers. We expect the related supply chain challenges will continue into 2023. However, we seek to reduce costs, lower the risks of production and service interruptions, and mitigate key parts shortages by
We address supply challenges and reduce the associated risks to production by endeavoring to select and qualify alternate suppliers for key parts, maintain appropriate inventories of critical components, and competitively source parts through electronic bidding tools to find the lowest possible total cost.
| | ● | selecting and qualifying alternate suppliers where practical for key parts, using rigorous technical and commercial evaluation of suppliers' products and business processes including testing their components, performance, quality, and reliability on our power conversion products used in our customers' and their customers' processes. The qualification process for our process power products, particularly as it pertains to semiconductor customers, follows semiconductor industry standard practices, such as "copy exact;" |
| | ● | monitoring the financial condition and overall performance of key suppliers from stable geographies; |
| | ● | procuring alternate parts from commercial, widely available nodes and processes; |
| | ● | maintaining appropriate inventories of key parts, including making last time purchases of key parts when notified by suppliers that they are ending the supply of those parts; |
| | ● | qualifying new parts where possible and in geographies that reduce costs without degradation in quality; and |

| | ● | locating certain manufacturing operations.in areas that are closer to suppliers and customers. |
See Part I, Item 1A, "Risk Factors" for a discussion of certain risks related to our manufacturing operations.

Intellectual Property

We seek patent Protection for inventions governing new products or technologies as part of Our ongoing research and development We currently hold 350 U.S. issued patents and 416 foreign issued patents and we have 568 Protection of our technology assets through intellectual property rights is important for our competitive position. We believe that continued research and development of technologically advanced solutions and applications is critical for us to compete effectively in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products. Our investments in research and development enable us to create intellectual property, including patents, know-how and trade secrets. We hold numerous U.S. and foreign patents and have multiple patent applications pending in the U.S., Europe, and Asia.

See Part I, Item 1A, "Risk Factors" for a discussion of certain risks related to our reliance on our intellectual property.
a substantial majority of our patents are related to our process power products and solutions business. Generally, our efforts to obtain international patents have been concentrated in the industrialized countries within Europe and Asia because there are other manufacturers and developers of power conversion and control systems in those countries, as well as customers for those systems for which our intellectual property.applies. In addition to patents, we possess other intellectual property, including trademarks, know-how, trade secrets, and copyrights. We leverage our proprietary technology and trade secrets to deliver on our strategy of selling differentiated products for our most important customer solutions. During 2022 we strengthened our trade secret and confidential information protection measures including by disabling USB drives on company-issued laptops, increasing the frequency of internal data loss protection searches, and we brought lawsuits against two former employees who misappropriated confidential data.

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Competition

The markets we serve are highly competitive and characterized by rapid technological development and changing customer requirements. We face a wide variety of competitors, and no single company dominates any of our markets. Significant competitive factors in our markets include product performance, compatibility with adjacent products, price, quality, reliability, meeting customer demand, and level of customer service and support.

We encounter substantial competition from foreign and domestic companies for each of our product lines. Some of our competitors have greater financial and other resources than we do. Other competitors are smaller than we are but may be well established in specific product niches. Overall, our Industrial and Medical competitors tend to be smaller, and in other product markets we encounter mostly larger competitors. Competitors in each of our market verticals include, but are not limited to, the following:

| | | | |
| Semiconductor Equipment | Industrial and Medical | Data Center Computing | Telecom and Networking |
| COMET Holding AG. | Cosel Co., Ltd. | Acbel Polytech Inc. | Acbel Polytech Inc. |
| | | | |
| Daihen Corp. | Delta Electronics, Inc. | Delta Electronics, Inc. | Delta Electronics, Inc. |
| | | | |
| MKS Instruments, Inc. | MEAN WELL Enterprises | Flex Ltd. | Lite-On Technology Corp. |
| | | | |
| TRUMPF Hüttinger GmbH + Co. KG | TDK-Lambda Americas Inc. | Lite-On Technology Corp. | |
| | | | |
| | TRUMPF Hüttinger GmbH + Co. KG | | |
| | | | |
| | XP Power Ltd. | | |

Research and Development

We perform research and development to develop products to address new or emerging applications, technological advances to provide higher performance, lower cost, or other attributes that we may expect to appeal to current or potential customers. We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue.

The following table summarizes research and development expenses and the percentage of these expenses as compared to total revenue (in thousands):

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Research and development Expenses | | $ | 191,020 | | $ | 161,831 | | $ | 143,961 |
| Research and development | | $ | 202,439 | | $ | 191,020 | | $ | 161,831 |
| % of Sales | | | 10.4% | | | 11.1% | | | 10.2% |
| % of Revenue | | | 12.2% | | | 10.4% | | | 11.1% |

Human Capital

Our people are our strength, and we are committed to sustaining a culture grounded in our core values: innovation, integrity, empowerment, partnership, accountability, and execution. These core values are the foundation of how we operate.

We have a globally diverse workforce with approximately 10,000 employees as of December 31, 2023. Our employees are located across the globe in more than 20 countries and are comprised of approximately 55% male and 45% female employees. Our employees are not represented by unions, except for statutory organization rights applicable to our employees in China, Germany, and Mexico.

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Diversity, Equity, and Inclusion

We are committed to creating an inclusive work environment where all of our employees feel respected, valued, and empowered. We are also committed to expanding gender diversity. In 2022, our Board of Directors had three female members, and we added two females to our executive leadership team. In addition, remain committed to expanding our diversity through targeted hiring and development initiatives. Through a combination of internal promotion and external hiring, we doubled the number of females represented at the vice president promotions and external hiring, we continue to see increases in the number of female employees represented at the director and above level, as compared with 2021.

We
2022. We also have an active Corporate Diversity & Inclusion Steering Committee to further increase our commitment to diversity and equity. We offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Diversity Scholarship to support and develop emerging talent and promote greater ethnic, racial and gender diversity in STEM.gender, ethnic and racial diversity. We have an active Women's Leadership Forum that is focused on career development and internal networking.

Health and Safety

We are committed to providing a safe work environment for our employees and have a global team that is responsible for health and safety related activities including hazard and risk identification. We also strive to follow the standards of the Responsible Business Alliance Code of Conduct at selected manufacturing sites, which promotes labor, health, and safety, environmental, and ethics best practices.

Employee Engagement

We believe that our continued success depends, in part, on our ability to attract and retain qualified personnel. In 2022, we conducted our biennial confidential employee survey on topics relating to confidence in company leadership, ethical conduct, career growth opportunities, and suggestions on how we can make our company a great place to work. Over 85% of employees participated In the 2022 survey, and we achieved higher scores across most dimensions compared to the 2020 survey with high employee engagement reported by over 85% of our employees. results of the survey were shared with our employees, our In 2023 we communicated the results of the employee survey with our employees, leaders, executive team, and our Board of Directors. We continue to invest in improving our employee experience through strategies targeted at improving communication, providing internal career development opportunities, and simplifying our internal business processes.to help us make further improvements in 2023.

Total Rewards

We provide market-competitive compensation and benefits to our employees to attract and retain a talented, highly engaged workforce. Our compensation programs are focused on equitable and fair pay practices, including market-based base pay, an annual pay-for-performance incentive that over 40% of our non-manufacturing employees participate in, and compensation. Additionally, we offer a discounted employee stock purchase plan.

Learning and Development

We seek to create growth and development opportunities to support our employees in reaching their full potential and offer internal and external learning and development opportunities. We also perform internal talent reviews and succession planning. In 2023, Advanced Energy continued our 10-week leadership essential training program for our people leaders across all corporate levels. providing the opportunity for employees to develop and enhance the essential competencies needed to empower, engage, and inspire high-performing teams. We also have an internship program designed to help develop our talent pipeline.and perform internal talent reviews and succession planning to ensure we have a strong workforce for the future. We also have internship and graduate development programs designed to develop a talent pipeline.

Community Involvement

We have an active Community Investment Steering Committee and offer each employee eight hours of paid time off to employees paid time off to participate in company-organized initiatives and volunteer with a non-profit organization of their choice. Our Educational Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals.

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We also offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Scholarship in the United States to support and develop emerging talent in STEM.

Environmental Matters

We are subject to federal, state, and local environmental laws and regulations, as well as the environmental laws and regulations of the foreign federal and local jurisdictions in which we have manufacturing and service facilities. We believe we are in material compliance with all such laws and regulations.

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Available Information

Our website address is www.advancedenergy.com. We make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after filing such reports with, or furnishing them to, the Securities and Exchange Commission ("SEC"). Such reports are also available at www.sec.gov. Information contained on our website is not incorporated by reference in, or otherwise part of, this annual report on Form 10-K nor any of our other filings with the SEC.

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ITEM 1A. RISK FACTORS

Our business, financial condition, operating results, and cash flows can be impacted by a number of factors, including, but not limited to, those set forth below, any of which could cause our results to be adversely impacted and could adversely impact our results and result in a decline in the value or loss of an investment in our common stock. Other factors may also exist that we cannot anticipate or that we currently do not consider to be material based on information that is currently available. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows and future results. Such risks and uncertainties may also impact the accuracy of forward-looking statements included in this Form 10-K and other reports we file with the Securities and Exchange Commission.

Business and Industry Risks

The industries in which we compete are subject to volatile and unpredictable fluctuation or cycles.

As a supplier to the global semiconductor equipment, telecommunication, networking, data center computing, industrial, and medical industries, we are subject to business fluctuations, the timing, length, and volatility of which can be difficult to predict. We are also impacted by sudden changes in customers' manufacturing capacity requirements and spending, which depend in part on technology transitions, capacity utilization, demand for customers' products, inventory levels relative to demand, and access to affordable capital. These changes have affected the timing and amount of customers' purchases and investments in technology, and continue to affect our orders, net revenue, operating expenses, and net income. In addition, several of the markets in which we compete are highly cyclical and experience downturns characterized by diminished product demand, production overcapacity, high inventory levels, and price erosion, which has caused, and in the future could cause, our revenue and gross margin to decline, adversely impacting our results of operations. It is difficult to predict the timing, length, and severity of such fluctuations and downturns, and we may not be able to respond adequately or quickly to the changes in demand.

To meet rapidly changing demand in each of the industries we serve, we must effectively manage our resources and production capacity. During periods of decreasing demand for our products, we must be able to appropriately align our cost structure with prevailing market conditions, effectively manage our supply chain, and motivate and retain key employees. During periods of increasing demand, we must have enough manufacturing capacity and inventory to fulfill customer orders, effectively manage our supply chain, and attract, retain, and motivate enough qualified individuals. If we are not able to timely and appropriately adapt to changes in our business environment or to accurately assess where we are positioned within a business cycle, our business, financial condition, or results of operations may be materially and adversely affected.

For example, the semiconductor industry and the enterprise service and storage market are currently experiencing cyclical downturns, which have adversely impacted demand for our products. If the length, severity, and/or volatility of these downturns exceeds our expectations, if we fail to achieve further growth in our other markets, or if we are unable to sufficiently respond to reduced demand in these markets, our results of operations could be adversely impacted.

We must achieve design wins to retain our existing customers and to obtain new customers, although design wins achieved may not necessarily result in substantial revenue or gross profit.

Driven by continuing technology migration and changing customer demand, the markets we serve are constantly changing in terms of advancement in applications, core technology, and competitive pressures. New products designed for capital equipment manufacturers typically have a lifespan of many years. Increasingly, we are required to accelerate our investment in research and development to meet the time-to-market, performance, and technology adoption cycle needs of our customers simply to compete for design wins. Given such up-front investments we make to

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develop, evaluate, and qualify products in the design win process, our success and future growth depend on our products being designed into our customers' new generations of equipment as they develop new technologies and applications. We must work with these manufacturers early in their design cycles to modify, enhance, and upgrade our products or design new products that meet the requirements of their new systems. The design win process is highly competitive, the design windows may be narrow, and there is no assurance we will succeed with new design wins for our existing

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customers or new customers' next generations of equipment. If existing or new customers do not choose our designs or we cannot agree to pricing, volumes, and other key commercial terms with these customers, our market share may decline, potential revenues related to the lifespan of our customers' products may not be realized, and our business, financial condition, and results of operations could be materially and adversely impacted.

Supply chain disruptions, manufacturing interruptions or delays, or the
Further, our ability to generate revenue or gross profit from design wins is in part or wholly dependent upon the success of our customers' solutions.

Failure to accurately forecast customer demand, supply chain disruptions, or manufacturing interruptions or delays could affect our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.

We place orders with many of our suppliers based on our customers' quarterly forecasts and our annual forecasts. These forecasts are based on our customers' and our expectations as to demand for our products and our customers' forecasts. As the quarter and the year progress, such demand can change rapidly or we may realize that our customers' expectations were overly optimistic or pessimistic, especially when industry or general economic conditions change.

Our sales are primarily made on a purchase order basis, or are pulled from "just in time" bins or hubs by our customers, and we generally have no long-term purchase commitments from our customers, which is typical in the industries we serve. As a result, we are limited in our ability to predict the level of future revenue or commitments from our current customers, which may diminish our ability to allocate labor, materials, and equipment in the manufacturing process effectively. In addition, we may purchase inventory in anticipation of sales that do not materialize, resulting in excess and obsolete inventory write-offs. Customers may delay delivery of products or cancel orders prior to shipment and may not be subject to cancellation penalties. Delays in delivery schedules and/or customer changes to backlog orders during any particular period could cause a decrease in revenue and have a material adverse effect on our business and results of operations. Orders with our suppliers cannot always be amended in response to changing demand conditions. In addition, to assure availability of certain components or to obtain priority pricing, we have entered into contracts with some of our suppliers that require us to purchase a specified number of components and subassemblies each quarter, even if we are not able to use such components or subassemblies. Moreover, we have obligations to some of our customers to hold a minimum amount of finished goods in inventory to fulfill just in time orders, regardless of whether the customers expect to place such orders. We currently have firm purchase commitments and agreements with various suppliers to ensure the availability of components. If demand for our products exceeds our customers' and our forecasts, we may not be able to timely obtain enough raw materials, parts, components, or subassemblies, on favorable terms or at all, to fulfill the excess demand. Furthermore, some of our products have lengthy lifecycles and are subject to supplier parts obsolescence, and sole-sourced parts can create challenges in terms of purchasing parts on reasonable terms and lead-times. These situations may lead to customers cancelling orders prior to shipment causing a decrease in revenue, which may have a material adverse effect on our business and results of operations.

Beginning In 2021 and continuing into 2023, In recent years, there has been a shortage of critical components caused by a variety of factors, including increased demand for electronic components used in a wide variety of industries, the pandemic-driven rise in consumer demand for technology goods, logistics-related disruptions in shipping, capacity limitations at some suppliers, and labor shortages. and other factors. These supply constraints led to longer lead times in procuring materials and subcomponents and, in some cases, meaningfully higher costs for the subcomponents. It is not clear how long global supply constraint conditions will continue, how quickly the Supply chain will recover, the extent to which our mitigating actions will be successful, or to what extent we can recover our higher costs As such, our forward-looking projections of Supply chain performance and lead times generally improved in 2023 and the negative impact from component shortages and higher material costs will likely subside in 2024; however, our revenues, earnings, and cash flow may be adversely impacted if any of these situations continue for longer than we expect or further deteriorate.these conditions continue longer than expected or once again deteriorate.

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COVID-19 could continue to affect our business, workforce, supply chain, results of operations, financial condition and/or cash flows.
We are exposed to risks associated with worldwide financial markets and the global economy.


The COVID-19 pandemic has adversely impacted our ability (a) to manufacture, test, service and ship our products, (b) to get required materials and sub-assemblies to build and service our products and (c) to staff labor and management for manufacturing, research and development, supply chain, service, and administrative operations.

COVID-19 continues to impact the global supply chain causing disruptions such as higher input costs through material premiums, expedite fees, price increases, and higher logistic costs. The pandemic has also resulted in economic volatility in many countries, which could adversely impact future customer purchases of our products. The COVID-19 situation continues to evolve and to the extent that it adversely affects our business financial condition, operating results, and cash flows, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section. Other impacts may arise that we are not aware of currently.


Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, rising inflation and interest rates, economic recession, national debt, and fiscal or monetary concerns, could materially adversely impact our operating results and financial condition. Disruptions in the global economy or financial markets, higher interest rates and market volatility could have an adverse impact on our access to and cost of capital. Additionally, tightening of credit markets, turmoil in the financial markets, and a weakening global economy have in the past contributed and could again contribute to slowdowns in the industries in which we operate and adversely impact the global demand for our products. Some of our key markets ultimately depend on a combination of consumer and business spending. Economic uncertainty exacerbates negative trends in consumer and business spending and may cause our


Our results of operations could be affected by natural or other disasters in the locations in which we or our customers or suppliers operate.

We have manufacturing and other operations in locations subject to natural disasters such as severe weather and geological events including earthquakes or tsunamis that could disrupt operations. In addition, our suppliers and customers are also subject to natural and other disaster risk exposure. A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our operations, or the operations of our customers or suppliers, may materially adversely affect our business, results of operations, or financial condition.

If our information security measures are breached or fail and a customer's or our data is improperly obtained or unauthorized access to our information technology systems occurs, we may incur significant legal and financial exposure and liabilities.

As part of our day-to-day business, we store our data and certain data about our customers in our global information technology system. We and our third-party providers have experienced, and expect to continue to experience, cybersecurity or confidential information theft incidents, some of which may be successful. We continue to devote significant resources to network security, data encryption, network redundancy, and other measures to protect our systems and data from unauthorized external access or internal misuse, and we may be required to expend greater resources in the future, especially in the face of continuously evolving and increasingly sophisticated cybersecurity threats and privacy and data protection laws. Unauthorized access to our data or inability to access our data (e.g. through ransomware or denial of service), including any regarding our technology or customers, could expose us to a risk of loss of this information, loss of business, litigation, and possible liability. These security measures may be breached by intentional misconduct by computer hackers, employee error, employee malfeasance, or otherwise. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords, or other information to gain access to our customers' data or our data, including our intellectual property and other confidential business information, or our information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any security breach or theft of any kind of confidential information including trade secrets could result in a loss of confidence by our customers, damage our reputation, disrupt our business lead to legal liability, and adversely impact ourfuture sales.

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Business Risks

We continue to evolve our manufacturing footprint and where our product lines are manufactured.
customers to delay, cancel, or refrain from placing orders. Difficulties or increased costs in obtaining capital and uncertain market conditions may also lead to customer liquidity constraints, a reduction of revenue, and greater instances of nonpayment or other failures to perform their obligations. Adverse or uncertain economic conditions may similarly affect our key suppliers, which could affect their ability to deliver parts and result in delays for our products. Further, these conditions and uncertainty about future economic conditions could also make it challenging for us to forecast our operating results and evaluate the risks that may affect our business, financial condition, and results of operations.


Our manufacturing facilities are located globally, and the majority of our products are manufactured in a select few key facilities. Most facilities are under operating leases and interruptions in operations could be caused by early termination of existing leases by landlords or failure by landlords to renew existing leases upon expiration, including the possibility that suitable operating locations may not be available in proximity to existing facilities, which could result in labor or supply chain risks. Natural disasters, uncontrollable occurrences, or other operational issues at any of our manufacturing facilities could significantly reduce or disrupt our productivity at such site and could prevent us from meeting our customers' requirements in a timely manner, or at all. Additionally, we continue to evaluate our manufacturing facilities and may decide to conduct optimization and consolidation initiatives, which may or may not be successful.

If we are unable to maintain our pricing strategy or adjust our business strategy successfully for some of our product lines to reflect our customers' price sensitivity, our business and financial condition could be harmed.

Our business strategy for many of our product lines is focused on product performance and technology innovation to provide enhanced efficiencies and productivity. Our customers continually exert pressure on us to reduce our prices and extend payment terms and we may be required to enter into long term reduced pricing agreements, extended payment terms, exclusivity arrangements, and other unfavorable contract terms. with our largest customers to remain competitive. In addition, we compete in markets in which customers may dual or multi-source their power. We believe some of our Asia-based competitors benefit from local governmental funding incentives and purchasing preferences from end-user customers in their respective countries. If competition against any of our product lines should come to focus solely on price rather than on product performance and technology innovation, we would need to adjust our business strategy, product offerings, and product costs accordingly, and if we are unable to do so, our business, financial condition, and results of operations could be materially and adversely affected. Conversely, in 2022, we increased prices and implemented surcharges across many of our products to reflect our higher supply chain costs. Although these price changes were generally been accepted by our customers, we did experience some loss of business. Throughout 2023, we returned to the normal course of business with respect to our pricing strategy; however, any future widespread price increases could make our products less competitive in the market over time and could have an adverse effect on our results of operations.

A significant portion of our revenue and accounts receivable are concentrated among a few customers.

Consistent with prior years, In 2022, two customers each Consistent with prior years, a limited number of customers accounted for a significant portion of our business. In 2023, one customer represented over 10% of our total revenue, and our ten largest customers, in the aggregate, accounted for over half of our total revenue. At December 31, 2023, the same customer accounted for over 10% of our total accounts receivable.

A significant decline in sales from these or our other large customers, or our inability to collect on these sales,
A significant decline in revenue from this or our other large customers, the loss of this or another large customer, or any inability to collect from large customers could materially and adversely impact our business, results of operations, and financial condition.

We expect that revenue from a few large customers will continue to account for a significant percentage of our total revenue in future periods; however, we generally do not have long-term purchase commitments. If our largest customers do not place orders, or if they substantially reduce, delay, or cancel orders, we may not be able to replace their business on a timely basis or at all. As a result, our future success depends on our ability to maintain and strengthen our existing customer relationships, build new customer relationships, and diversify our customer base.

If our information security measures are breached, disrupted, or fail, we may incur significant legal and financial exposure and liabilities.

As part of our day-to-day business, we process, transmit and store our own confidential data and certain data about our customers and employees in our global information technology system. We are subject to ongoing data security threats, including phishing attempts, denial of service attacks, ransomware, viruses, and other malware, employee error or malfeasance, theft, natural disasters, and hardware or software malfunctions, any one of which could compromise our data security, cause the loss of critical data, or disrupt operations, which could materially adversely affect our business and results of operations. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords, or other information to gain access to our customers' data or our data or our information technology systems. We and our third party providers have experienced, and expect to continue to experience, cybersecurity events or confidential information theft incidents, some of which could be devastating. We continue to devote significant resources to network security, data encryption, network redundancy, and other measures to protect our systems and data from unauthorized external access or internal misuse,

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and we may be required to expend greater resources in the future for cybersecurity protection, compliance, and remediation, especially in the face of continuously evolving and increasingly sophisticated cybersecurity threats and privacy and data protection laws.

Despite our implementation of cybersecurity measures, there is no assurance that our actions will be sufficient to prevent future threats and incidents. Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. A cybersecurity event or other breach, disruption, or failure of our information and operational systems, could:

| | ● | result in the disclosure, misuse, corruption, or loss of our or our customers' data, confidential business information, or intellectual property, including trade secrets; |
| | ● | damage our reputation; |
| | ● | lead to a loss of confidence by our current and potential customers; |
| | ● | adversely impact our future revenue; |
| | ● | disrupt our business; |
| | ● | divert management attention; and |
| | ● | expose us to significant remediation costs, legal liability, and litigation risk. |

In addition, our business could be adversely affected to the extent we fail to appropriately manage, expand, and update our information technology infrastructure.

The loss of and inability to attract and retain key personnel could significantly harm our results of operations and competitive position.

Our success depends to a significant degree upon the continuing contributions of our management, technical, marketing, and sales employees. We may not be successful in retaining our employees or attracting and retaining additional skilled personnel as required. If we are unable to attract, retain, and motivate qualified employees and leaders, we may be unable to fully capitalize on current and new market opportunities, which could adversely impact our business and results of operations. Our success in hiring and retaining employees depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, our reputation, culture and working environment, competition for talent and the availability of qualified employees, the readiness for and availability of career development opportunities, and our ability to offer a challenging and rewarding work environment. We have experienced, and may continue to experience, increasing costs to attract and retain needed talent, driven by macroeconomic conditions and a highly competitive labor market.We must develop succession plans capable of maintaining continuity during the inevitable unpredictability of

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employee retention. If our succession plans do not operate effectively, our business could be adversely affected. In addition, the loss or retirement of key employees presents particular challenges to the extent it involves the departure of employees with the departing employee had particularly valuable knowledge or experiences. This requires us to identify and train existing or new employees to perform necessary functions, which we may be unable to do, or which could result in unexpected costs, reduced productivity, or difficulties with respect to internal processes and controls.

The market price of our common stock has fluctuated and may continue to fluctuate for reasons over which we have no control.
If we fail to have succession plans in place or our succession plans do not operate effectively, we may not be able to maintain continuity and our business could be adversely affected.


The stock market has from time to time experienced, and is likely to continue to experience, extreme price and volume fluctuations. Prices of securities of technology companies are especially volatile and have often fluctuated for reasons that are unrelated to their operating performance. in the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs and a diversion of management's attention and resources.


Our manufacturing footprint is consolidated, which brings risks.

Our manufacturing facilities are located globally, and the majority of our products are manufactured in a select few key facilities. Most facilities are under operating leases, and interruptions in operations could be caused by early termination of existing leases by landlords or failure by landlords to renew existing leases upon expiration, including the possibility that suitable operating locations may not be available in proximity to existing facilities, which could result in labor or supply chain risks. Additionally, we have restructuring plans in place to optimize and consolidate our manufacturing operations and improve operating efficiencies, and we continue to evaluate our manufacturing facilities


we may not pay dividends on our common stock.



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Holders of our common stock are only entitled to receive dividends when and If they are declared by our Board of Directors. Our credit facility restricts our ability to pay dividends on our capital stock under certain circumstances. Although we have declared cash dividends on our common stock since 2021, we are not required to do so, and we may reduce or eliminate our cash dividend in the future. This could adversely affect the market price of our common stock. For information on our Credit Facility, see Note 21. Credit Facility and Note 8. Derivative Financial Instruments in Part II, Item 8 "Financial Statements and Supplementary Data."
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and may decide to conduct additional optimization and consolidation initiatives. These plans and any future initiatives may or may not be successful in achieving our intended results. If the expected costs and charges are greater than anticipated, the estimated cost savings are lower than anticipated, or we experience a loss of continuity or inefficiency during transitional periods, our business and results of operations may be adversely affected.

Disruptions to our manufacturing operations or the operations of our customers or suppliers, due to natural or other disasters, uncontrollable events or other issues could affect our results of operations.

Certain of our manufacturing and other operations are in locations subject to natural disasters, such as severe weather and geological events, including earthquakes or tsunamis, that could disrupt operations. Natural disasters, uncontrollable occurrences, or other operational issues at any of our manufacturing facilities could significantly reduce or disrupt our productivity at such site and could prevent us from meeting our customers' requirements in a timely manner, or at all. In addition, our suppliers and customers are also subject to natural and other disaster risk exposure. A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our operations or the operations of our customers or suppliers, may materially adversely affect our business, results of operations, or financial condition.
our operating results are subject to fluctuations, and if we fail to meet the expectations of securities analysts or investors, our share price may decrease significantly

our annual and quarterly results may vary significantly depending on various factors, many of which are beyond our control. Because our operating expenses are based on anticipated revenue levels, our sales cycle for development work is relatively long, and a high percentage of our expenses are fixed for the short term, A small variation in the timing of recognition of revenue can cause significant variations in operating results from period to period. If our earnings do not meet the expectations of securities analysts or investors, the price of our stock could decline.


Our long-term success and results of operations depend on our ability to successfully identify, close, integrate, and realize the anticipated benefits from our acquisitions and strategic investments.

As part of our business strategy, we have and will likely continue to acquire companies or businesses and make investments to further our business. Risks associated with these transactions are many, including the following which could adversely affect our financial results:

| | ● | the inability to complete proposed transactions timely or at all; due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing
| | ● | the inability to source or complete transactions timely or at all; |
| | ● | any obligation to pay a termination fee or undergo litigation resulting from failed deals; |
| | ● | the failure to perform adequate due diligence on target companies; |
| | ● | the failure to realize expected revenues, gross and operating margins, net income, and other returns from acquired businesses; |
| | ● | the inability to successfully integrate product and/or service offerings to realize all anticipated benefits from business combinations; |
| | ● | a failure to perform adequate due diligence with respect to business combination and investment transactions and our ability to evaluate the results, is dependent upon the completeness and accuracy of statements and disclosures made or actions taken by third parties and their representatives; |
| | ● | the inability to integrate acquired business into our existing enterprise resource planning and other global information technology systems to realize productivity improvement and cost efficiencies; |
| | ● | we have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination |

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| | | and investment transaction becomes impaired, we may be required to incur additional material charges related to impairment of those assets; |
| | ● | deterioration in our effective tax rate; |
| | ● | a failure to retain and motivate key employees of acquired businesses; |
| | ● | an inability to integrate with our existing enterprise resource planning ("ERP") and other global information technology systems to realize productivity improvement and cost efficiencies; |
| | ● | our ability to diligence and maintain appropriate business processes, procedures, and internal controls at the acquired business; |
| | ● | the risk of litigation or claims associated with a proposed or completed transaction; and |
| | ● | unknown, underestimated, undisclosed or undetected commitments or liabilities or non-compliance by acquired business with laws, regulations, or policies. |

During The year ended December 31, 2022, we acquired SL Power, and we are continuing to integrate SL Power with our business. Integrating SL Power's operations with ours requires significant management attention, effort, and expenditures, and We may not be able to achieve the longer-term integration or other business goals in an effective, complete, timely or cost-efficient manner.
Our products may suffer from defects or errors leading to increased costs, damages, or warranty claims.

Our products use complex system designs and components that may contain errors or defects. The manufacture of these products often involves a highly complex and precise process and the utilization of specially qualified components. The production of many of our products also requires highly skilled labor. As a result of the technical

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complexity of these products, design defects, skilled labor turnover, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective or nonconforming materials or components by us or our suppliers could adversely affect our manufacturing quality and product reliability. To the extent our products are defective or fail, we might be required to repair, redesign, replace, or recall those products, pay damages (including liquidated damages) or fulfill warranty claims, and we could suffer significant expenses as well as harm to our reputation. Furthermore, some of our products are used in medical device applications where malfunction of the device could result in serious injury. We accrue a warranty reserve for estimated costs to provide warranty services, including the cost of technical support, product repairs, and product replacement for units that cannot be repaired. Our estimate of costs to fulfill our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty accrual will increase, resulting in decreased gross profit.

Our legacy inverter products may suffer higher than anticipated litigation, damage, or warranty claims.

Our legacy inverter products (of which we discontinued the manufacture, engineering, and sale in December 2015 and which are reflected as discontinued operations in this filing) contain components that may contain errors or defects and were sold with original product warranties ranging from one to ten years with an option to purchase additional warranty coverage for up to 20 years. If any of our products are defective or fail because of their design, we might be required to repair, redesign, or recall those products or to pay damages (including liquidated damages) or warranty claims, and we could suffer significant harm to our reputation. We have experienced claims from customers and suppliers and are involved in litigation related to the legacy inverter product line. We review such claims and vigorously defend against such lawsuits in the ordinary course of our business. We cannot assure that any such claims or litigation will not have a material adverse effect on our business or financial statements. Our involvement in such litigation could result in significant expense to us and divert the efforts of our technical and management personnel. We also accrue a warranty reserve for estimated costs to provide warranty services including the cost of technical support, product repairs, and product replacement for units that cannot be repaired. Our estimate of costs to fulfill our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty accrual will increase, resulting in additional expenses in our Consolidated Statements of Operations in future periods. We plan to continue supporting inverter customers with service maintenance and repair operations. This includes performing service to fulfill obligations under existing service maintenance contracts. There is no certainty that these contracts can be performed profitably, and our business could be adversely affected by higher than anticipated product failure rates, loss of critical service technician skills, an inability to obtain service parts, customer demands and disputes, and the cost of repair parts, among other factors.

The emergence of pandemics, epidemics, or widespread outbreaks of infectious disease could affect our business, workforce, supply chain, results of operations, financial condition, and/or cash flows.

The COVID-19 pandemic adversely impacted our ability (a) to manufacture, test, service and ship our products, (b) to get required materials and sub-assemblies to build and service our products, and (c) to staff labor and management for manufacturing, research and development, supply chain, service, and administrative operations. If there are any future public health crises, including pandemics, epidemics, or widespread outbreaks of infectious disease, may impact our business, financial condition and results of operations will depend on many factors beyond our control, which are highly uncertain and difficult to accurately predict.

International Operations Risks

We are subject to risks inherent in international operations.

We are a global organization. We have employees in more than 20 countries, our manufacturing facilities are located across the globe (mainly in the Asia-Pacific region), and revenue from customers outside the United States represented 64% of our total revenue during the year ended December 31, 2023.

Given the global nature of our business, we have both domestic and international concentrations of cash and

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investments. The value of our cash, cash equivalents, and marketable securities can be adversely affected by liquidity, credit deterioration, inflation, foreign currency exchange rate fluctuations, financial results, economic risk, political risk, sovereign risk, or other factors.

Sales to customers outside the United States represented 61% of our total revenue during the year ended December 31, 2022. Refer to Note 3. Revenue in Part II, Item 8 "Financial Statements and Supplementary Data" for additional information regarding our revenue by geographic area

We are a global organization with an expanding presence in international locations.

Additionally, our success producing goods internationally and competing in international markets is subject to our ability to manage various operational risks and difficulties, including, but not limited to:

| | ● | our ability to effectively manage our employees at remote locations who are operating in different business environments from the United States; |
| | ● | our ability to develop and maintain relationships with suppliers and other local businesses; |
| | ● | interruptions to our and/or our suppliers' supply chain; |
| | ● | compliance with product safety requirements and standards that are different from those of the United States; |
| | ● | variations and changes in laws applicable to our operations in different jurisdictions, including enforceability of contract rights; |
| | ● | ineffective or inadequate legal and physical protection of intellectual property rights in certain countries; |
| | ● | global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations for certain exports to China and any retaliatory measures; |
| | ● | delays or restrictions on personnel travel and in shipping materials or finished products between and within countries; |
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| | ● | political instability, natural disasters, health epidemics, disruptions in financial markets, and deterioration of economic conditions; |
| | ● | our ability to maintain appropriate business processes, procedures, and internal controls, and comply with environmental, health and safety, anti-corruption, and other regulatory requirements; |
| | ● | customs regulations including customs audits in various countries that occur from time to time; |
| | ● | the ability to provide enough levels of technical support in different locations; |
| | ● | our ability to obtain business licenses that may be needed in international locations to support expanded operations; |
| | ● | timely collecting accounts receivable from foreign customers, including significant balances in accounts receivable from foreign customers; and |
| | ● | changes in tariffs, income tax, value added tax, and foreign currency exchange rates; and |
Our debt obligations and the restrictive covenants in the agreements governing our debt could limit our ability to operate our business or pursue our business strategies, could adversely affect our business, financial condition, results of operations, and cash flows, and could significantly reduce stockholder benefits from a change of control event.
| | ● | laws and regulations regarding privacy, data use and processing, data privacy and protection, cybersecurity, and network security. |

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Our debt obligations could make us more vulnerable to general adverse economic and industry conditions and could limit our flexibility in planning for, or reacting to changes in our business and the industries in which we operate, thereby placing us at a disadvantage to our competitors that have less debt. we may enter into additional debt obligations at any time.
Our operations in the Asia Pacific region, including China, are subject to significant political and economic uncertainties over which we have little or no control and we may be unable to alter our business practice in time to avoid reductions in revenues.


Our debt obligations impose financial covenants on us and our subsidiaries that require us to maintain a certain leverage ratio. The financial covenants place certain restrictions on our business that may affect our ability to execute our business strategy successfully or take other actions that we believe would be in the best interests of our Company. These include limitations or restrictions, among other things, on our ability and the ability of our subsidiaries to

| | ● | incur additional indebtedness; |
| | ● | pay dividends or make distributions on our capital stock or certain other restricted payments or investments; |
| | ● | conduct stock buybacks; |
| | ● | make domestic and foreign investments and extend credit; |
| | ● | engage in transactions with affiliates; |

| | ● | transfer and sell assets; |
| | ● | effect A consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all our assets; and |
A significant portion of our operations and supply chain outside the United States are located in the Asia Pacific region, including China, which exposes us to risks, such as exchange controls and currency restrictions, changes in local economic conditions, changes in customs regulations and tariffs, changes in tax policies, changes in local laws and regulations, possible retaliatory government actions, potential inability to enforce intellectual property protection or contracts terms, and changes in U.S. policy regarding overseas manufacturing and export controls. The U.S. and China regularly have significant disagreements over geopolitical, trade, and economic issues. Any escalating political controversies between the U.S. and China, whether or not directly related to our business, could
| | ● | create liens on our assets to secure debt. |

Any breach of the covenants or other event of default could cause a default on our debt obligations, which could result in our credit facility being immediately due and payable, and such default may also constitute a default of our other obligations. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. If we are unable to repay, refinance, or restructure our indebtedness as required, or amend the covenants contained in these agreements, the lenders can exercise all rights and remedies available under our debt obligations or applicable laws or equity. There can be no assurance that we will have sufficient financial resources or be able to arrange financing to repay any borrowings at such time.

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We are exposed to risks associated with worldwide financial markets and the global economy.

Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, rising inflation and interest rates, economic recession, national debt, or fiscal or monetary concerns, could materially adversely impact our operating results. Tightening of credit markets, turmoil in the financial markets, and a weakening global economy have in the past and could again contribute to slowdowns in the industries in which we operate and adversely impact the global demand for our products. Some of our key markets depend largely on consumer spending. Economic uncertainty exacerbates negative trends in consumer and business spending and may cause our customers to push out, cancel, or refrain from placing orders.

Difficulties or increased costs in obtaining capital and uncertain market conditions may also lead to a reduction of sales and greater instances of nonpayment. These conditions may similarly affect our key suppliers, which could affect their ability to deliver parts and result in delays for our products. Further, these conditions and uncertainty about future economic conditions including inflation, interest rates, The transition away from the London Interbank Offered Rate and transition to the Secured Overnight Financing Rate, availability of capital markets, consumer spending rates, energy availability and costs and the effects of government initiatives to manage economic conditions could make it challenging for us to forecast our operating results and evaluate the risks that may affect our business, financial condition, and results of operations.

Our legacy inverter products may suffer higher than anticipated litigation, damage, or warranty claims.

Our legacy inverter products (of which we discontinued the manufacture, engineering, and sale in December 2015 and which are reflected as discontinued operations in this filing) contain components that may contain errors or defects and were sold with original product warranties ranging from one to ten years with an option to purchase additional warranty coverage for up to 20 years. If any of our products are defective or fail because of their design, we might be required to repair, redesign, or recall those products or to pay damages (including liquidated damages) or warranty claims, and we could suffer significant harm to our reputation. We are experiencing claims from customers and suppliers and are involved in litigation related to the legacy inverter product line. We review such claims and vigorously defend against such lawsuits in the ordinary course of our business, We cannot assure that any such claims or litigation will not have a material adverse effect on our operations, business, results of operations, and financial condition. Additionally, the Chinese government exercises substantial control over the Chinese economy, and our operations and supply chain in China may be subject to various government and regulatory interference. Policy changes, preferential treatment of local companies, or the imposition of new, stricter regulations or interpretations of existing regulations could require changes to our operating activities, increase our costs, or limit our ability to sell products in China. We continuously evaluate the risk of operations in China, including manufacturing and supply chain, and the potential financial impact to our operations. business, or financial statements. Our involvement in such litigation could result in significant expense to us and divert the efforts of our technical and management personnel. We also accrue a warranty reserve for estimated costs to provide warranty services including the cost of technical support, product repairs, and product replacement for units that cannot be repaired. our estimate of costs to fulfill our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty accrual will increase, resulting in additional expenses in the line "Income (loss) from discontinued operations, net of income taxes" on our Consolidated Statement of Operations in future periods. We plan to continue supporting inverter customers with service maintenance and repair operations. This includes performing service to fulfill obligations under existing service maintenance contracts. There is no certainty that these can be performed profitably, and they could be adversely affected by higher than anticipated product failure rates, loss of critical service technician skills, an inability to obtain service parts, customer demands and disputes and the cost of repair parts, among other factors.

Our products may suffer from defects or errors leading to increased costs, damages, or warranty claims.

Our products use complex system designs and components that may contain errors or defects, particularly when we incorporate new, technology into our products or release new versions. Further, the manufacture of these products often involves a highly complex and precise process and the utilization of specially qualified components that conform to stringent specifications. Many of our products also require highly skilled labor. As a result of the technical complexity of these products, design defects, skilled labor turnover, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective or nonconforming materials by us or our suppliers could adversely affect our manufacturing yields and product reliability. If any of our products are defective or fail, we might be required to repair, redesign, or recall those products, pay damages (including liquidated damages) or warranty claims, and we could suffer significant harm to our reputation. Furthermore, some of our products are used in medical device applications where malfunction of the device could result in serious injury. We accrue a warranty reserve for estimated costs to provide warranty services,

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including the cost of technical support, product repairs, and product replacement for units that cannot be repaired. Our estimate of costs to fulfill our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty accrual will increase, resulting in decreased gross profit.

Unfavorable currency exchange rate fluctuations may lead to lower operating margins, or may cause us to raise prices, which could result in reduced revenue.

Currency exchange rate fluctuations could have an adverse effect on our revenue and results of operations, and we could experience losses with respect to forward exchange contracts into which we may enter. Unfavorable currency fluctuations could significantly increase the labor and other costs incurred in the operation of our international facilities and the cost of raw materials, parts, components, and subassemblies that we source there, which could materially and adversely affect our results of operations. These increased costs could require us to increase prices to foreign customers, which could result in lower net revenue from such customers. Alternatively, if we do not adjust the prices for our products in response to unfavorable currency fluctuations, our results of operations could be materially and adversely affected. In addition, we have large, long-term liabilities, such as local lease and pension liabilities in Asia and Europe creating more significant exposure to fluctuations in the value of the Philippine Peso, Chinese Yuan, British Pound, Euro, Hong Kong Dollar, and New Taiwan Dollar. numerous currencies. We do not attempt to hedge these exposures given the long-term nature of the underlying liabilities and the non-cash nature of the foreign exchange gain or loss.

The Chinese government is continually pressured by its trading partners to allow its currency to float in a manner like other major currencies. Any change in the value of the Chinese Yuan could significantly increase the labor and other costs incurred in the operation of our China facilities and the cost of raw materials, parts, components, and subassemblies that we source there, which could materially and adversely affect our results of operations.
Regulatory, Legal, Tax, and Compliance Related Risks

Our operations in the Asia Pacific region, including China, are subject to significant political and economic uncertainties over which we have little or no control and we may be unable to alter our business, practice in time to avoid reductions in revenues.
Continued restrictive global trade regulatory environment, coupled with increasingly complex rules have adversely impacted and could further impact our business, and could erode the competitiveness of our products compared to local and global competitors.


A significant portion of our operations and supply chain outside the United States are located in the Asia Pacific region, including China, which exposes us to risks, such as exchange controls and currency restrictions, changes in local economic conditions, changes in customs regulations and tariffs, changes in tax policies, changes in laws and regulations, possible retaliatory government actions, potential inability to enforce intellectual property protection or contracts terms, and recent changes in U.S. policy regarding overseas manufacturing and export controls. The U.S. and China regularly have significant disagreements over geopolitical, trade and economic issues. Any escalating political controversies between the U.S. and China, whether or not directly related to our business, could have a material adverse effect on our operations, business, results of operations, and financial condition. We continuously evaluate the risk of operations in China, including manufacturing and supply chain, and the potential financial impact to our operations


Trade controls are a primary tool leveraged by U.S. government when trying to achieve international policy objectives, and we continue to see this in newly imposed regulations and increased enforcement of existing regulations. As a global company, we are subject to the rules of the U.S. and other government authorities, and we should expect continued activity in both the promulgation and enforcement of global trade regulations.



Return on investments or interest rate declines on plan investments could result in additional unfunded pension obligations for our pension plan.

We currently have unfunded obligations to our pension plans. The extent of future contributions to the pension plan depends heavily on market factors such As the discount rate used to calculate our future obligations and the actual return on plan assets which enable future payments. we estimate future contributions to the plan using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions. Additionally, a material deterioration in the funded status of the plan could increase pension expenses and reduce our profitability. See Note 17. Employee Retirement Plans and Postretirement Benefits in Part II, Item 8 "Financial Statements and Supplementary Data" contained herein.

Our intangible assets may become impaired.

we periodically review the carrying value of our goodwill and the estimated useful lives of our intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value, or for intangible assets, a revised useful life. the events and circumstances include significant changes in the business climate, legal factors, operating performance indicators, and competition. Any impairment or revised useful life could have a


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material and adverse effect on our financial position and results of operations and could harm the trading price of our common stock.

Regulatory, Legal, Tax, and Compliance Related Risks

Significant developments stemming from recent U.S. government actions with respect to trade policies and export regulations.including export license requirements, tariffs, and trade sanctions have adversely impacted and could further adversely impact our business.
Since October 2022, we have been particularly affected by U.S. government-imposed export regulations on U.S. semiconductor and supercomputing technology sold in China, and related parts and services. In October 2023, the U.S. government introduced another round of final interim rules. These rules are not yet final, and additional restrictions could be imposed. The rules impose extensive restrictions and compliance obligations, and Chinese customers may replace us with competitors who are not subject to U.S. export rules.


U.S. government actions are imposing greater restrictions and economic disincentives on international trade. Recently, the government has amended and expanded export regulations regarding sales to companies on the U.S. Entity List preventing sales of U.S. foreign direct product, and in October 2022, placed unilateral export controls on the export, reexport, and transfer of technology sold in China, for certain advanced computing and semiconductor manufacturing equipment and related parts and services. the implementation and interpretation of These rules is ongoing and evolving and creates challenges in managing our operations and international sales and increases our exposure to foreign competitors The U.S. government may promulgate additional export controls or license requirements that will further limit our ability to sell products and services to non-U.S. customers, including China Additionally, the U.S. Department of Defense continues to issue lists of companies it has determined to be owned or controlled by China's People's Liberation Army on which sanctions could be levied by executive order, and the Department of Commerce continues to expand the list of designated military end users from China and Russia for whom export licenses are now required. in addition, the US Government has previously initiated the imposition of additional tariffs on certain foreign goods, including steel and aluminum, semiconductor manufacturing equipment and spare parts thereof and has also announced the imposition of import license requirements on aluminum articles.



Maintaining China business may be dependent at least in part on obtaining export licenses. Obtaining export licenses may be difficult, costly, and time-consuming, and there is no assurance we will be issued licenses in time to meet customer requirements or at all.

China has passed numerous regulations, including the Export Control Law of the People's Republic of China, effective December 1, 2020, the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures promulgated on January 9, 2021, and the Anti-Foreign Sanctions Law of the People's Republic of China, released on July 24, 2021. These laws provide China with the framework to ban exports to specific foreign entities on its Control List, block application of foreign laws, impose its own sanctions on entities and countries and provides a counterweight to the U.S. government's restrictions through provisions for retaliatory action and extraterritorial jurisdiction. The potential imposition of retaliatory measures could adversely impact demand for our products, prohibit our ability to sell products or purchase necessary components, and could adversely affect our business

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Other current or future regulatory changes could materially and adversely affect our business as well, such as additional tariffs; additions or updates to various restricted party lists; further restrictions on selling products to entities in certain countries whose actions or functions are intended to support policies contrary to U.S. national security; new customs rules or requirements. Additionally, with increasing geopolitical risks, we might experience customers or governments of our customers promoting their own domestic businesses and competitors.

Changes in U.S. trade policy could result in one or more U.S. trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those countries. As indicated above, these measures could also result in increased costs for goods imported into the U.S. This in turn could require us to increase prices to our customers which may reduce demand, or if we are unable to increase prices, result in lowering our margin on goods and services sold. to the extent that trade tariffs and other restrictions imposed by the U.S. increase the price of semiconductor equipment and related parts imported into the U.S., the cost of our materials may be adversely affected and the demand from customers for products and services may be diminished, which could adversely affect our revenues and profitability.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs, trade sanctions, or policies has the potential to further adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition, and results of operations.
The implementation and interpretation of these complex rules and other regulatory actions taken by the U.S. and other governments is uncertain and evolving, trending towards continued increasing restrictions, and this is both deleterious to our business and challenging for us to manage our operations and forecast our operating results.


Changes in U.S. social, political, regulatory, and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any negative sentiments towards the United States as a result of such changes, could adversely affect our business In addition, negative sentiments towards the United States among non-U.S. customers and among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively.

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We are highly dependent on our intellectual property.

Our success depends significantly on our proprietary technology. We attempt to protect our intellectual property rights through a variety of methods including trade secrets, patents, and non-disclosure agreements; however, we might not be able to protect our technology, and customers or competitors might be able to develop similar technology independently. Infringement, misappropriation, and unlawful use of our intellectual property rights, and resulting unauthorized manufacture or sale of equipment using our IP rights, could result in lost revenue. Monitoring and detecting any unauthorized use of intellectual property is difficult and costly and we cannot be certain that the protective measures we have implemented will completely prevent theft or misuse. If we are unable to protect our intellectual property successfully, our business, financial condition, and results of operations could be materially and adversely affected.

Patents, trademarks, and trade secret protection may not be adequate to deter infringement or misappropriation of our patents, trademarks, trade secrets and similar proprietary rights. In addition, proprietary rights. For example, patents issued to us may be challenged, invalidated, or circumvented. The loss or expiration of any of our key patents could lead to a significant loss of sales of certain of our products and could materially affect our future operating results. The process of seeking patent protection can be time consuming and expensive and patents may not be issued for currently pending or future applications. Moreover, our existing patents or any new patents that may be issued may not be sufficient in scope or strength to provide meaningful protection or any commercial advantage to us. We may initiate claims, enforcement actions or litigation against third parties for infringement of our proprietary rights, which claims could result in costly litigation, the diversion of our technical and management personnel, and the assertion of counterclaims by defendants.

In addition, the laws of some foreign countries might not afford our intellectual property the same protections as do the laws of the United States. Our intellectual property is not protected by patents in several countries in which we do business, and we have limited or no patent protection in other countries, including China. Consequently, manufacturing our products in China may subject us to an increased risk that unauthorized parties may attempt to copy our products or otherwise obtain or use our intellectual property. Generally, our efforts to obtain international patents have been concentrated in the European Union and certain industrialized countries in Asia, Korea, Japan, and Taiwan.

Third parties may also assert claims against us and our products. Claims that our products infringe the rights of others, whether or not meritorious, can be expensive and time-consuming to defend and resolve, and may divert the efforts and attention of management and personnel. The inability to obtain rights to use third party intellectual property on commercially reasonable terms could also have an adverse impact on our business. In addition, we may face claims based on the theft or unauthorized use or disclosure of third party trade secrets and other confidential business information. Any such incidents and claims could severely harm our business and reputation, result in significant expenses, harm our competitive position, and prevent us from selling certain products, all of which could have a material and adverse impact on our business and results of operations.

Our supply chain is subject to regulatory risk.

Requirements applicable to our supply chain include rules aimed at promoting transparency as well as rules that restrict sourcing from certain locations or suppliers. For example, rules aimed at extinguishing forced labor require extensive efforts to map supply chains effectively and efficiently beyond tier 1 suppliers for any involvement in human rights abuses. Goods suspected of being manufactured with forced labor could be blocked from importation into the

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U.S., which could impact revenue. Another possible risk is foreign governments that restrict our access to supply; for example, if China were to further restrict export of rare earth minerals, our suppliers' ability to obtain such supply may be constrained and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost.

We are, and expect to continue to be, involved in litigation. Legal proceedings are costly and could have a material adverse effect on our commercial relationships, business, financial condition, and operating results.

We may be involved in legal proceedings, litigation, enforcement actions, or claims regarding product performance, product warranty, product certification, product liability, patent infringement, misappropriation of trade secrets, other intellectual property rights, antitrust, environmental regulations, securities, contracts, unfair competition, employment, workplace safety, and other matters. Legal proceedings, enforcement actions and claims, whether with or without merit, and associated internal investigations, may be time-consuming and expensive to prosecute, defend or conduct; divert management's attention and other resources; inhibit our ability to sell our products or services; prevent us from using our technology; result in adverse judgments for damages, injunctive relief, penalties, and fines; and

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adversely affect our business. We can provide no assurance of the outcome of these legal proceedings, enforcement actions or claims or that the insurance we maintain will be adequate to cover them.

Changes in tax laws, tax rates, or mix of earnings in tax jurisdictions in which we do business, could impact our future tax liabilities and related corporate profitability.

We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions by their nature are complex and may be subject to significant change due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. As both domestic and foreign governments contemplate or make changes in tax law to raise more revenues, our results could be adversely affected. Further, there are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be adversely affected by earnings being lower than anticipated in jurisdictions where we have lower statutory rates and earnings higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies and changes to our existing businesses, acquisitions (including integrations) and investments, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations, including fundamental changes to the tax laws applicable to corporate multinationals. The U.S., many countries in the European Union, and several other countries are actively considering changes in this regard.

Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that could harm our financial condition and operating results. For example, various jurisdictions around the world have enacted or are considering revenue-based taxes such as digital services taxes and other targeted taxes, which could lead to inconsistent and potentially overlapping international tax regimes. The Organization for Economic Cooperation and Development is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. These changes could increase our effective tax rate and cash tax payments could increase in future years, create additional compliance burdens, and/or require changes to our tax compliance processes.

Increased governmental action on income tax regulations could adversely impact our business.

International governments have heightened their review and scrutiny of multinational businesses like ours, which could increase our compliance costs and future tax liability to those governments. As governments continue to look for ways to increase their revenue streams, they could increase audits of companies to accelerate the recovery of monies perceived as owed to them under current or past regulations. As we are subject to examination by tax authorities in every jurisdiction where we do business, an unfavorable audit outcome could adversely affect us.

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Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes, regulations, and interpretations of research and development capitalization and tax credit regulations, foreign-derived intangible income ("FDII"), global intangible low-tax income ("GILTI") and base erosion and anti-abuse tax ("BEAT") laws; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attribute prescribed in the accounting guidance for uncertainty in income taxes. The Organization for Economic Co-operation and Development ("OECD"), an international association comprised of 36 countries, including the U.S., has made changes to numerous long-standing tax principles. There can be no assurance that these changes, once adopted by countries, will not have an adverse impact on our provision for income taxes. Further, because of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are the subject of regular examination of our income tax returns by tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our operating results and financial condition.

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Our business is subject to complex and evolving U.S. and international laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or declines in customer growth or engagement, or otherwise harm our business.

Regulatory authorities around the world have implemented or are considering several legislative and regulatory proposals concerning data protection. including measures to ensure that encryption of users' data does not hinder law enforcement agencies' access to that data. In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe, China and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. Violation of any of these rules could result in fines or orders requiring that we change our data practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

We are subject to numerous governmental regulations.

We are subject to federal, state, local and foreign regulations, including environmental regulations and regulations relating to the design and operation of our products and control systems and regulations governing the import, export and customs duties related to our products. We might incur significant costs as we seek to ensure that our products meet safety and emissions standards, many of which vary across the states and countries in which our products are used. In the past, we have invested significant resources to redesign our products to comply with these directives. In addition, through recent acquisitions, we expanded our presence in the medical market to include more highly regulated applications and added a medical-certified manufacturing center to our operating footprint. We may encounter increased costs to maintain compliance with the quality systems and other regulations and requirements that apply to the acquired business. Compliance with future regulations, directives, and standards could require us to modify or redesign some products, make capital expenditures, or incur substantial costs. Also, we may incur significant costs in complying with the numerous imports, exports, and customs regulations as we seek to sell our products internationally. If we do not comply with current or future regulations, directives, and standards:

| | ● | we could be subject to fines and penalties; |
| | ● | our production or shipments could be suspended; and |

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| | ● | we could be prohibited from offering particular products in specified markets. |

If we were unable to comply with current or future regulations, directives and standards, our business, financial condition, and results of operations could be materially and adversely affected.

We are subject to risks associated with environmental, health, and safety regulations.

We are subject to environmental, health, and safety regulations in connection with our global business operations, such as regulations related to the development, manufacture, sale, shipping, and use of our products; handling, discharge, recycling and disposal of hazardous materials used in our products or in producing our products; the operation of our facilities; and the use of our real property. The failure or inability to comply with existing or future environmental, health and safety regulations could result in significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipping, or use of certain of our products; limitations on the operation of our facilities or ability to use our real property; and a decrease in the value of our real property. We could also be required to alter our manufacturing, operations, and product design, and incur substantial expenses in order to comply with environmental, health and safety regulations. Any failure to comply with these regulations could subject us to significant costs and liabilities that could adversely affect our business, financial condition, and results of operations.

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Our failure to maintain appropriate environmental, social, and governance ("ESG") practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results.

Governments, customers, investors, and employees are enhancing their focus on ESG practices and disclosures, and expectations in this area are rapidly evolving and increasing. Failure to adequately maintain appropriate ESG practices that meet diverse stakeholder expectations may result in an inability to attract customers, the loss of business, diluted market valuation, and an inability to attract and retain top talent. Maintaining possibly unlawful ESG programs could expose us to litigation threat. In addition, standards and processes for measuring and reporting carbon emissions and other sustainability metrics may change over time, resulting in inconsistent data, or could result in significant revisions to our sustainability commitments or our ability to achieve them. Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related goals could adversely impact our reputation or performance. As governments impose greenhouse gas emission reporting requirements and other ESG-related laws, we are subject to at least some of these rules and concomitant regulatory risk exposure. ESG compliance and reporting could be costly, and we could be at a disadvantage compared to companies that do not have similar reporting requirements.

Commercial and Financial Related Risks

Our debt obligations and the restrictive covenants in certain of the agreements governing our debt could limit our ability to operate our business or pursue our business strategies, could adversely affect our business, financial condition, results of operations, and cash flows, and could significantly reduce stockholder benefits from a change of control event.

Our debt obligations could make us more vulnerable to general adverse economic and industry conditions and could limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, thereby placing us at a disadvantage to our competitors that have less debt. We may enter into additional debt obligations at any time.

Our credit agreement, dated as of September 10, 2019, as amended, imposes financial covenants on us and our subsidiaries that require us to maintain a certain leverage ratio. The financial covenants place certain restrictions on our business that may affect our ability to execute our business strategy successfully or take other actions that we believe would be in the best interests of our Company. These include limitations or restrictions, among other things, on our ability and the ability of our subsidiaries to:

| | ● | incur additional indebtedness; |

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| | ● | pay dividends or make distributions on our capital stock or certain other restricted payments or investments; |
| | ● | conduct stock buybacks; |
| | ● | make domestic and foreign investments and extend credit; |
| | ● | engage in transactions with affiliates; |
| | ● | transfer and sell assets; |
| | ● | effect a consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all our assets; and |
| | ● | create liens on our assets to secure debt. |

Any breach of the covenants or other event of default could cause a default on our credit agreement, which could result in the entire outstanding balance being immediately due and payable. Such breach or default may also constitute a default of our 2.50% convertible senior notes ("Convertible Notes"), which could also result in the entire outstanding balance being immediately due and payable. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. If we are unable to repay, refinance, or restructure our indebtedness as required, or amend the covenants contained in these agreements, the lenders can exercise all rights and remedies available under our debt obligations or applicable laws or equity. There can be no assurance that we will have sufficient financial resources or be able to arrange financing to repay any borrowings at such time.

Return on investments or interest rate declines on plan investments could result in additional unfunded pension obligations for our pension plan.

We currently have unfunded obligations to our pension plans. The extent of future contributions to the pension plan depends heavily on market factors such as the discount rate used to calculate our future obligations and the actual return on plan assets which enable future payments. We estimate future contributions to the plan using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions. Additionally, a material deterioration in the funded status of the plan could increase pension expenses and reduce our profitability. See Note 15. Employee Retirement Plans and Postretirement Benefits in Part II, Item 8 "Financial Statements and Supplementary Data" contained herein.

Our intangible assets may become impaired.

We periodically review the carrying value of our goodwill and the estimated useful lives of our intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value, or for intangible assets, a revised useful life. The events and circumstances include significant changes in the business climate, legal factors, operating performance indicators, and competition. Any impairment or revised useful life could have a material and adverse effect on our financial position and results of operations and could harm the trading price of our common stock.

The conditional conversion features of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.

In the event any of the conditional conversion features of the Convertible Notes are triggered, holders will be entitled to convert at any time during specified periods at their option. If one or more holders elect to convert, we would be required to settle any converted principal amount of such Convertible Notes through payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as current rather than long-term liability, which would result in a material reduction of our net working capital.

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Conversion of the Convertible Notes may dilute the ownership interest of our stockholders and the existence of the Convertible Notes may depress the price of our common stock.

The conversion of some or all of the Convertible Notes may dilute the ownership interests of our stockholders. Upon conversion, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock with respect to the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. If we elect to settle the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in shares of our common stock or a combination of cash and shares of our common stock, that action will dilute the ownership interest of our stockholders. Additionally, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion could be used to satisfy short positions, and the anticipated conversion into shares of our common stock could depress the price of our common stock.

The hedges and warrants in our own common stock may adversely affect the common stock's trading price.

In September 2023, we entered into hedge and warrant transactions on our own common stock. These contracts are expected to reduce the potential dilution to our common stock upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount. The warrants could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the exercise price.

In addition, the counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and sell our common stock prior to the maturity of the Convertible Notes (and are likely to do in connection with any conversion or redemption). This activity could cause fluctuations in the market price of our common stock.

We are subject to counterparty default risk with respect to the Note Hedges.

The counterparties are financial institutions, and we are subject to the risk that any or all of them might default. Our exposure is not secured by any collateral. If a counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor. Our exposure will depend on many factors but, generally, an increase in our exposure will correlate to an increase in the market price and in the volatility of our common stock. In addition, upon a default by a counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the counterparties.

Risks Relating to Ownership of Our Common Stock

The market price of our common stock has fluctuated and may continue to fluctuate for reasons over which we have no control.

The stock market has from time to time experienced, and is likely to continue to experience, extreme price and volume fluctuations. Prices of securities of technology companies are especially volatile and have often fluctuated for reasons that are unrelated to their operating performance. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs and a diversion of management's attention and resources.

We may not pay dividends on our common stock.

Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of Directors. Our Credit Agreement (as defined in Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data") restricts our ability to pay dividends on our capital stock under certain circumstances. Although

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we have declared cash dividends on our common stock since 2021, we are not required to do so, and we may reduce or eliminate our cash dividend in the future. This could adversely affect the market price of our common stock. For information on our Credit Agreement, see Note 18. Long-Term Debt and Note 7. Derivative Financial Instruments in Part II, Item 8 "Financial Statements and Supplementary Data."

Our operating results are subject to fluctuations, and if we fail to meet the expectations of securities analysts or investors, our share price may decrease significantly.

Our annual and quarterly results may vary significantly depending on various factors, many of which are beyond our control. Because our operating expenses are based on anticipated revenue levels, our revenue cycle for development work is relatively long, and a high percentage of our expenses are fixed for the short term, a small variation in the timing of recognition of revenue can cause significant variations in operating results from period to period. If our earnings do not meet the expectations of securities analysts or investors, the price of our stock could decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Cybersecurity Risk Management and Assessment

Advanced Energy understands the importance of managing risks from cybersecurity threats and maintains a comprehensive cybersecurity program developed with reference to the National Institute of Standards and Technology ("NIST") cybersecurity framework. Our cybersecurity program includes administrative, organizational, technical, and physical safeguards reasonably designed to protect the confidentiality, integrity, and availability of our data. We devote significant resources to network, operations, and product security, data encryption, business continuity/disaster recovery, vulnerability management, event monitoring and incident response, and other measures to protect our systems and data from unauthorized external access or internal misuse, including, but not limited to, the following:

| | ● | Operational Security. Access to our systems is restricted to those who require access in accordance with the principle of least privilege. We also conduct background checks for our employees where permitted by local law, require signed confidentiality agreements and acceptable use agreements, and follow termination/access removal processes. |
| | ● | Employee Training. We provide all employees with annual training on information security, data protection, and relevant company policies so that they are empowered to identify cybersecurity risks and take action. To further enhance awareness and responsiveness to potential threats, we also conduct regular phishing simulations and email communications on cybersecurity trends awareness throughout the year. |
| | ● | Third Party Assessment. We engage independent third party consultants to review the effectiveness and maturity of our cybersecurity program. |
| | ● | Incident Response Plan. We maintain an incident response plan to respond to and mitigate the effects of an information security incident. The plan provides for the formation of a multi-functional incident response team led by the Chief Information Officer ("CIO") and comprised of IT, legal, corporate communications, internal audit, and operational personnel. |
| | ● | Global Recovery. We have developed global cyber and disaster recovery processes for our information technology systems and critical information assets to preserve business continuity in the event of a cybersecurity incident. |
| | ● | Third Parties. We have an assessment and audit process for third party vendors. Prior to granting vendor access to our systems or data, we conduct pre-engagement diligence to ensure that each of our third party vendors involved in processing sensitive data have reasonable cybersecurity processes and procedures in place. We also have contractual provisions with key vendors for prompt notification of material cybersecurity incidents. |

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| | ● | Insurance. We maintain cyber insurance coverage to mitigate the risk of losses from a cybersecurity incident. |
| | ● | Risk Monitoring. Management and our Board monitor cybersecurity and data protection developments, including new or forthcoming changes to the legislative and regulatory landscape as well as Advanced Energy's cybersecurity processes, investments, and actions as described below. |

Cybersecurity risk is a component of Advanced Energy's broader risk management program and managed at the highest levels of the company, starting with Advanced Energy's CIO, who meets with the Chief Executive Officer and other members of executive management regularly to discuss issues, assess risks, and coordinate company-wide cybersecurity initiatives. Our CIO leads a dedicated cybersecurity technical team that manages, monitors, and enforces compliance with the cybersecurity program.

Although we have experienced non-material information security incidents from time to time in the past, in the last three years, we have not experienced any material cybersecurity incidents, nor has any incident had a material impact on our operations or financial condition. For a discussion of how risks from cybersecurity threats are reasonably likely to affect us, including our business strategy, results of operations, or financial condition, please see "If our information security measures are breached or fail and a customer's or our data is improperly obtained or unauthorized access to our information technology systems occurs, we may incur significant legal and financial exposure and liabilities." under the heading Part I, Item 1A "Risk Factors".

Cybersecurity Governance

Pursuant to its charter, the Audit and Finance Committee of our Board of Directors is principally responsible for oversight of managements' actions to monitor and control cybersecurity risk exposure. The CIO routinely reports to the Audit and Finance Committee on enterprise cybersecurity matters, including, as appropriate, information security strategy, policies, and procedures, status of cybersecurity initiatives, results of third party assessments, emerging cybersecurity threats and risks, steps taken to mitigate such threats and risks, and cybersecurity developments and trends. The Audit and Finance Committee reports to the full Board and, if warranted, coordinates with the Board to address material risks. In addition, the full Board receives a cybersecurity briefing from the CIO annually.

As discussed above, our cybersecurity risk management and strategy are led by our CIO, who has extensive leadership experience with enterprise information technology in the manufacturing and telecom industries, where he has held various executive roles in which he developed and executed IT strategy, including cybersecurity programs, helped achieve and maintain Sarbanes-Oxley compliance, and brought companies into compliance with ISO 27001, among other things.

ITEM 2. PROPERTIES

Information concerning our principal properties is set forth below:

| | | | | |
| Location | | Principal Activity | | Ownership |
| Denver, Colorado | | Corporate headquarters, general and administrative | | Leased |
| Fort Collins, Colorado | | Research and development, distribution, sales, and service | | Leased |
| Penang, Malaysia | | Manufacturing and distribution | | Leased |
| Rosario, Philippines | | Manufacturing | | Owned |
| Santa Rosa, Philippines | | Manufacturing | | Leased |
| Shenzhen, China | | Manufacturing, distribution, service, and research and development | | Leased |
| Zhongshan, China | | Manufacturing | | Leased |
| Mexicali, Mexico | | Manufacturing | | Leased |
| Mexicali, Mexico | | Manufacturing, | | Leased |
| Littlehampton, United Kingdom | | Manufacturing, distribution, sales, service, and research and development | | Leased |
| Lockport, New York | | Manufacturing, distribution, service, and research and development | | Leased |
| Singapore, Singapore | | Global operations headquarters (sales, service, and research and development) | | Leased |
| Quezon, Philippines | | Engineering, research and development, administration, and support | | Leased |
| Taipei, Taiwan | | Sales, distribution, and service | | Leased |
| Hong Kong, Hong Kong | | Distribution and general and administrative | | Leased |

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In addition to the above principal properties, we have several other facilities throughout the U.S., North America, Europe, and Asia. We consider the properties that we own or lease as adequate to meet our current and future requirements. We regularly assess the size, capability, and location of our global infrastructure and periodically make adjustments based on these assessments.At the end of 2022, we ceased operations in our Shenzhen, China facility and completed the transfer of production activity to our manufacturing operations in Penang, Malaysia. The Shenzhen, China facility is expected to close in early 2023.

ITEM 3. LEGAL PROCEEDINGS

We are involved in disputes and legal actions arising in the normal course of our business. Although it is not possible to predict the outcome of these matters, we believe that the results of these proceedings will not have a material adverse effect on our financial condition, results of operations, or liquidity. For further information see Note 17. Commitments and Contingencies in Part II, Item 8 "Financial Statements and Supplementary Data."

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Dividends

Our common stock is listed on the NASDAQ Global Select Market under the symbol "AEIS." On January 31, 2024, the number of common stockholders of record was 236. This does not include stockholders whose shares are held in "street name" through brokers or other nominees.

Dividend Policy

In March 2021, the Board of Directors (the "Board") declared the first quarterly cash dividend since our inception as a public company. In each of the four quarters in 2023, we paid quarterly cash dividends of $0.10 per share, totaling $15.2 million for the full year. We currently anticipate that a quarterly cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Purchases of Equity Securities by the Issuer

The following table summarizes actions by our Board of Directors in relation To the stock repurchase program:
To repurchase shares of our common stock, we periodically enter into stock repurchase agreements, open market transactions, and/or other transactions in accordance applicable federal securities laws. Before repurchasing our shares, we consider the market price of our common stock, the nature of other investment opportunities, available liquidity, cash flows from operations, general business and economic conditions, and other relevant factors.


| | | |
| Date | | Action |
| September 2015 | | Authorized a program to repurchase up to $150.0 million of our common stock, |
| | | |
| May 2018 | | Approved a $50.0 million increase in the repurchase program |
| | | |
| December 2019 | | Authorized the removal of the expiration date and increased the balance available for the repurchase program by $25.1 million |
| | | |

| July 2021 | | approved an increase to the repurchase program. which authorized the Company to repurchase up to $200.0 million with no time limitation |
During the past three years, our Board approved several increases to the stock repurchase program. Most recently, the Board approved a $40.0 million increase to the program specifically for a $40.1 million stock repurchase that occurred concurrently with the September 12, 2023 issuance of the Convertible Notes.
| | | |
| July 2022 | | Approved an increase to the repurchase program from its remaining authorization of $102.4 million to repurchase up to $200.0 million with no time limitation |

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To execute the repurchase of shares of our common stock, we periodically enter into stock repurchase agreements.


The following table summarizes stock repurchases during the year ended December 31, 2023:

| | | | | | | | | | | | | |
| Month | | Total | | Average | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum |
| | | Number of | | Price Paid | | | | Dollar |
| | | Shares | | Per Share | | | | Value of |
| | | Purchased | | | | | | Shares that |
| | | | | | | | | May Yet be |
| | | | | | | | | Purchased |
| | | | | | | | | Under the |
| | | | | | | | | Plans or |
| | | | | | | | | Programs |
| |
| | | (in thousands, except price per share data) |
| January | | | 82 | | $ | 80.02 | | | 82 | | $ | 121,783 |
| February | | | - | | $ | - | | | - | | $ | 121,783 |
| March | | | - | | $ | - | | | - | | $ | 121,783 |
| First quarter | | | 82 | | $ | 80.02 | | | 82 | | | |
| | | | | | | | | | | | | |
| April | | | - | | $ | - | | | - | | $ | 121,783 |
| May | | | 103 | | $ | 76.23 | | | 103 | | $ | 113,969 |
| June | | | 127 | | $ | 72.42 | | | 127 | | $ | 104,765 |
| Second quarter | | | 230 | | $ | 74.12 | | | 230 | | | |
| | | | | | | | | | | | | |
| July | | | 34 | | $ | 69.39 | | | 34 | | $ | 200,000 |
| August | | | - | | $ | - | | | - | | $ | 200,000 |
| September | | | - | | $ | - | | | - | | $ | 200,000 |
| September | | | 378 | | $ | 105.74 | | | 378 | | | |
| Third quarter | | | 34 | | $ | 69.39 | | | 34 | | | |
| | | | | | | | | | | | | |
| October | | | 10 | | $ | 69.16 | | | 10 | | $ | 199,320 |
| November | | | - | | $ | - | | | - | | $ | 199,320 |
| Total | | | 378 | | $ | 105.74 | | | 378 | | $ | 199,192 |

| December | | | - | | $ | - | | | - | | $ | 199,320 |
| fourth quarter | | | 10 | | $ | 69.16 | | | 10 | | | |
We did not repurchase any shares during the fourth quarter of 2023. The maximum dollar value of shares that may yet be purchased under share repurchase program does not have a time limit.

| | | | | | | | | | | | | |
| Total | | | 356 | | $ | 74.90 | | | 356 | | $ | 199,320 |

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Performance Graph

The performance graph below shows the five-year cumulative total stockholder return on our common stock in comparison to certain other indices during the period from December 31, 2018 through December 31, 2023. The comparison assumes $100 invested on December 31, 2018 in Advanced Energy common stock and in each of the indices and assumes reinvestment of dividends, if any. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance.

| | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 |
| Advanced Energy Industries, Inc. | $ | 100.00 | | $ | 63.62 | | $ | 105.51 | | $ | 143.70 | | $ | 135.52 | | $ | 128.26 |165.85 | | $ | 225.88 | | $ | 213.02 | | $ | 201.60 | | $ | 257.03 |
| NASDAQ Composite | $ | 100.00 | | $ | 96.12 | | $ | 129.97 | | $ | 186.69 | | $ | 226.63 | | $ | 151.61 |136.73 | | $ | 198.33 | | $ | 242.38 | | $ | 163.58 | | $ | 236.70 |
| Dow Jones US Electrical Components & Equipment | $ | 100.00 | | $ | 86.48 | | $ | 105.18 | | $ | 124.75 | | $ | 154.36 | | $ | 125.51 |123.68 | | $ | 149.34 | | $ | 187.20 | | $ | 154.45 | | $ | 197.36 |
| S&P 1000 | $ | 100.00 | | $ | 88.33 | | $ | 108.70 | | $ | 120.84 | | $ | 149.60 | | $ | 126.61 |125.11 | | $ | 141.32 | | $ | 177.08 | | $ | 152.22 | | $ | 177.01 |

Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this annual report on Form 10-K.

ITEM 6. RESERVED

Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements set forth below under this caption constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" in this annual report on Form 10-K for additional factors relating to such statements and see "Risk Factors" in Part I, Item 1A for a discussion of certain risks applicable to our business, financial condition, and results of operations.

The following section discusses our results of operations for 2023 and 2022 and year-to-year comparisons between those periods.Discussions of 2020 and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K and can be found within Part II, Item 7 "Management's Discussion and Analysis for Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2021.

Company Overview

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

Our plasma power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products are used in a wide range of applications, such as We are organized on a global, functional basis and operate as a single segment of power electronics conversion products. Within this segment, our products are sold into the Semiconductor Equipment, Industrial production, medical and life science equipment, Data centers Computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of Power, and temperature for multiple industrial markets. Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.and Medical, Data Center Computing, and Telecom and Networking markets.

On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power, which is based in Calabasas, California. The results of operations of SL Power are included in our consolidated results from the acquisition date forward. This acquisition added complementary products to Advanced Energy's medical power offerings and extends our presence in several advanced industrial markets. See Note 2. Acquisitions


Critical Accounting Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make judgments, assumptions, and estimates that affect the amounts reported. Note 1. Summary of Operations and Significant Accounting Policies and Estimates
in Part II, Item 8 "Financial Statements and Supplementary Data."describes the significant accounting policies used in the preparation of our consolidated financial statements. The accounting positions described below are significantly affected by critical accounting estimates. Such accounting positions require significant judgments, assumptions, and estimates to be used in the preparation of the consolidated financial statements, actual results could differ materially from the amounts reported based on variability in factors affecting these statements.

Business Environment and Trends

2023 Summary Results and Key Activities

We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. Fair values of assets acquired, and liabilities assumed are based upon available information and may involve engaging an independent third party to perform an appraisal. Estimating fair values can be complex and subject to significant business judgment. We must also identify and include in the allocation all acquired tangible and intangible assets that meet certain criteria, including assets that were not previously recorded by the acquired entity. The estimates most commonly involve intangible assets. The excess of the purchase price over the net fair value of acquired assets and assumed liabilities is recorded as goodwill, which is not amortized but instead is evaluated for impairment at least annually. Pursuant to U.S. GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination.
For the year ended December 31, 2023, our revenue was $1,655.8 million, representing a decline of 10.3% as compared to 2022. The decline was attributable to lower revenue from our Semiconductor Equipment and Data Center Computing markets, both of which experienced a reduced demand environment starting in the fourth quarter 2022 and continued into 2023. These declines were partially offset by higher revenues in the Industrial and Medical and Telecom and Networking markets, as improved supply of critical components during 2023 enabled us to fulfill demand and reduce backlog for our products. For more details on the trends in our end markets, see "End Markets Summary and Trends" elsewhere in this Item 7.


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Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. We record a provision for income taxes For the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We calculate tax expense consistent with intraperiod tax allocation methodology resulting in an allocation of current year tax expense/benefit between continuing operations and discontinued operations. We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.


In 2023, we reported higher operating expenses of $478.7 million, primarily attributable to $27.0 million of charges related to our restructuring initiatives which are focused on optimizing manufacturing, support operations and to a lesser extent a general workforce reduction to align to our revenue levels. These actions should largely be complete in 2024 and are expected to enable a more efficient and cost-effective operating structure.


We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of These matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results. The provision for income taxes includes the effects of any reserves that we believe are appropriate, as well as the related net interest and penalties. For more details see Note 5. Income Taxes in Part II, Item 8 "Financial Statements and Supplementary Data."


Although we experienced a challenging demand environment related to our revenue, we achieved $212.9 million cash flow from continuing operating activities as we managed our working capital and core spending levels, resulting in a $25.4 million increase in cash flow from operating activities compared to 2022.


Inventories

Inventories are valued at the lower of cost (using the first-in, first-out method) or net realizable value. General market conditions, as well as our design activities can cause certain products to become obsolete and we adjust our inventory carrying value for estimated excess and obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. The determination of projected end-user demand requires the use of estimates and assumptions related to projected unit sales for each product. Demand for our products can fluctuate significantly. a significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand.

Defined Benefit Pension Plans

Accounting for pension plans requires that we make assumptions that involve considerable judgment which are significant inputs in the actuarial models that measure our net pension obligations and ultimately impact our earnings. These include the discount rate, long-term expected rate of return on assets, compensation trends, inflation considerations, health care cost trends and other assumptions, as well as determining the fair value of assets in our funded plans. Specifically, the discount rates, as well as the expected rates of return on assets and plan asset fair value determination, are important assumptions used in determining the plans' funded status and annual net periodic pension and benefit costs. We evaluate these critical assumptions at least annually on a plan and country-specific basis. We also, with the help of actuaries, periodically evaluate other assumptions involving demographic factors, such as retirement age, mortality, and turnover, and update them to reflect our experience and expectations for the future. We believe the accounting estimates related to our pension plans are critical accounting estimates because they are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our net pension and postretirement benefit obligations and related expenses.
On September 12, 2023, we completed a private, unregistered offering of $575.0 million aggregate principal amount 2.50% convertible senior notes ("Convertible Notes") and received net proceeds of approximately $561.1 million after the discount for the initial purchasers' fees. We intend to use the net proceeds to fund future growth, which

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may include strategic acquisitions, opportunistically repay existing outstanding indebtedness, repurchase our common stock, or general corporate purposes. See Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data" and Liquidity and Capital Resources below.

Advanced Energy is organized on a global, functional basis and operates in the single segment for power electronics conversion products. Within this segment, our products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.


Concurrent with the Convertible Notes issuance, we repurchased 0.4 million shares of common stock for $40.1 million and entered into hedge and warrant contracts with respect to our common stock (see Note 5. Stockholders' Equity and Earnings Per Share and Note 18. Long-Term Debt


In April 2022, we acquired SL Power. See Note 2. Acquisitions in Part II, Item 8 "Financial Statements and Supplementary Data").This acquisition added complementary products to Advanced Energy's medical power offerings and extends our presence in several advanced industrial markets.

End Markets Summary and Trends

As further described below, the demand environment in each of our markets is impacted by macroeconomic conditions, various market trends, customer buying patterns, design wins, macroeconomic and other factors. During 2022, growth in all four of our markets was strong driven by investment in new technology, capacity, and macroeconomic recovery. However, we were limited in our ability to fulfill this demand due to supply chain shortages for critical integrated circuits, resulting in longer lead times for our products. These supply constraints have led to longer lead times in procuring materials and subcomponents and, in some cases, meaningfully higher costs for the subcomponents. We have implemented measures to improve the supply of critical materials and components and to mitigate the impact of these higher input costs, and these actions have enabled us to better meet customer demand. However, it is not clear how long global supply constraint conditions will continue, how quickly the supply chain will recover, the extent to which our mitigating actions will be successful, or to what extent we can recover our higher costs. One result of the supply chain constraints is that our backlog throughout the first three quarters of the year remained above backlog at the end of 2021. Backlog declined at the end of 2022 to $875.3 million, a decrease as compared to $1,093.0 million at the end of the third quarter of 2022, driven by approximately 40% of sequential decline from China-based semiconductor customers' orders as a result of U.S. export controls introduced in October 2022, and the remainder from lower demand and changes in ordering patterns from our semiconductor customers as we improved our lead times. Despite the decline at the end of 2022, backlog remains high compared to previous years. and other factors. Entering 2024, although we are experiencing a lower demand environment, we continue to believe that the long-term market growth drivers support our long-term strategy, research and development efforts, and capital investments. However, in the short-term it is unclear how the macroeconomic conditions, including higher interest rates impacting end customer's capital investment and potential macroeconomic weakness, will affect our customer demand and revenue.


COVID related disruptions did materially impact our liquidity, ability to access capital, ability to comply with our debt covenants or the fair value of our assets in 2022.

SEMICONDUCTOR EQUIPMENT MARKET

The Semiconductor Equipment market is driven by the long-term growing need for more semiconductor production capacity and new process technologies. While the semiconductor and semiconductor equipment industries are inherently cyclical, over the long-term, integrated circuits content is growing across many industries driven by increased demand for processing, storing, and transmitting the growing amount of data. To meet the growing demand, the chip industry continues to invest in production capacity for both leading-edge and trailing-edge nodes logic devices, the latest memory devices, back-end test, and advanced wafer-level packaging. The industry's transition to advanced technology nodes and to increased layers in memory devices require an increased number of plasma-based etch and deposition process tools and higher content of our advanced power solutions per tool. As etching and deposition processes become more challenging due to shrinking device geometry and increasing aspect ratios in advanced 3D devices, more advanced RF and DC plasma generation technologies are needed. We strive to provide a broad range of best-in-class, industry-leading RF and DC power solutions. Beyond etch and deposition processes, growing complexity at advanced nodes also drives a higher number of other process steps across the wafer fab, including inspection, metrology, thermal, ion implantation, and semiconductor test and assembly, where Advanced Energy is actively participating as a critical technology provider. In addition, our global support services group offers comprehensive local repair service, upgrade, and retrofit offerings to extend the useable life of our customers' capital equipment for additional technology generations. Our strategy in the Semiconductor Equipment market is to defend our proprietary positions in our core applications by capturing new design and product generations, growing our market position in applications where we have lower market share, such as remote plasma source and dielectric etch, and leveraging our product portfolio in areas including embedded power, high voltage power systems, and critical sensing and controls to grow our market share and content at our original OEM customers.

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The Semiconductor Equipment market continued to experience demand growth driven by investments in both leading and trailing edge semiconductor capacity throughout the first three quarters of 2022. Advanced Energy participated in the market growth while overcoming supply chain challenges and delivered record revenue.from the Semiconductor Equipment Marketin 2022. Starting

Semiconductor Equipment Market

Beginning in the fourth quarter of 2022, the Semiconductor Equipment market entered a downturn due to a combination of unfavorable market entered a cyclical downturn due to changing macroeconomic conditions, overcapacity in the market for memory devices, prolonged weakness in demand for consumer electronics, general semiconductor inventory consumption resulting in falling manufacturing utilization, and new U.S. general semiconductor inventory digestion resulting in falling fab utilization, and reduced fab expansion plans, and new export restrictions to China for certain semiconductor equipment.

During 2023, these factors continued to impact our revenue, but we were able to partially offset the market weakness by growing revenues in areas such as high voltage and service. Entering 2024, we expect the factors driving the market downturn to continue in the near-term. As mentioned above, these factors adversely impacted our demand, backlog, and revenue, in the fourth quarter of 2022 and are expected to continue in 2023. we believe the long-term growth drivers for demand growth in this market will eventually resume, due to the need to invest in new fab resume, due to the need for more manufacturing capacity to support growing demand for semiconductor devices in a wide range of applications, the continued transition to next generation processing nodes, increased complexity of advanced processes requiring more complex and innovative power solutions, and the regionalization of some semiconductor capacity. and the related capital equipment.

Industrial and Medical Market

Advanced Energy serves the Industrial and Medical market with mission-critical power components that deliver high reliability, precise, low noise or differentiated power to the equipment they serve. Growth in the Industrial and Medical market is driven by investment in complex manufacturing processes or automation, increased adoption of smart power, sensing, and control solutions across many industrial applications, new investments in clean and sustainable technologies, and growing investment in medical devices and life science equipment. Our customers We delivered record revenue in the Industrial and Medical market are primarily global and regional original equipment manufacturers, incorporating our advanced power, embedded power, and measurement products into a wide variety of equipment used in applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode applications. Examples of products sold into The Industrial and Medical market include high voltage and low voltage power supplies used in applications such as medical devices, scientific instrumentation and industrial equipment, power control modules and thermal instrumentation products for material fabrication, production process control and many precision industrial sensing applications. Our strategy in the Industrial and Medical market is to expand our product offerings and channel reach, leveraging common platforms, derivatives, and customizations to further penetrate a broader set of applications.in 2023. The year started with strong demand driven by customer investments in production capacity. In addition, increased supply of critical components allowed us to fulfill the higher level of customer demand and drove the record quarterly revenues in both the first and second quarter of 2023.

During 2022, we saw increased demand in the Industrial and Medical market as our customers increased investments in their production capacity. and the medical technology industry recovered from the pandemic-related slowdown. Although overall customer demand increased supply constraints of critical components limited our ability to fulfill product shipments at the level of customer demand and resulted in increased backlog. Going into 2023, we expect product delivery and revenue levels will depend on the level of customers' demand and on resolving supply chain constraints. It is not clear how long these supply chain constraints will persist or on what timeline our supply chain will recover.

DATA CENTER COMPUTING MARKET

Advanced Energy serves the Data Center Computing market with industry leading power conversion products and technologies, which we sell to OEMs and original design manufacturers ("ODMs") of data center server and storage systems, as well as cloud service providers and their partners. Driven by the growing adoption of cloud computing, market demand for server and storage equipment has shifted from traditional enterprise on-premises computing to the data center, driving investments in data center infrastructure. Beyond the cloud, demand for edge computing is also growing, driven by the need for faster processing, lower latency, and higher data security at edge applications. In addition, the data center industry has begun transitioning from 12 Volt to 48 Volt infrastructure in data center server racks to improve overall power efficiency. Advanced Energy benefits from these trends by being an industry leader in providing high-efficiency 48 Volt server power solutions to the data center industry. Further, the rapid growth and adoption of artificial intelligence and machine learning are driving accelerated demand for server and storage racks with increased power density and higher efficiency, which complements Advanced Energy's strengths. With a growing presence at both cloud service providers and industry-leading data center server and storage vendors, our strategy in the
However, in the second half of 2023 we began to see lower demand in this market largely driven by macroeconomic factors, including higher interest rates, which has adversely impacted end customer's capital investment. Entering 2024, we expect weaker macroeconomics condition to continue to impact our revenue in the near-term.

Data Center and Computing Marketis to penetrate selected customers and applications based on our differentiated capability and competitive strengths in power density, efficiency, and controls.

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Customer demand for our products rose during 2022 with continued demand for cloud and network applications. In addition, we were able to secure additional critical components compared to the prior year, allowing us to deliver higher revenue As compared to revenue levels exiting 2022, in the first half of 2023, we saw reduced revenues in the Data Center Computing market Despite the improved performance, the supply of the critical components remains highly constrained, impacting our ability to fulfill product shipments at the level of customer demand. Although we expect lower overall demand in 2023 as cloud and enterprise customers slow investments to digest capacity investments. we continue to be supply constrained and our performance will be partially dependent on our ability to secure critical components and customers' timing of new programs. it is not clear how long these supply chain constraints will persist or how quickly our supply chain will recover.due to slowing demand in the enterprise server and storage market as customers delayed investments. Increased demand for high end computing applications, such as artificial intelligence, from some of our customers led to increased revenue in the second half of 2023. These investments can have disparate cycles, and it is not clear how quickly our enterprise server and storage customers will return to their historical level of investments.

Telecom and Networking Market

Our customers in the Telecom and Networking market include many leading vendors of wireless infrastructure equipment, telecommunication equipment and computer networking. The wireless telecom market continues to evolve with more advanced mobile standards. 5G wireless technology promises to drive substantial growth opportunities for the telecom industry as it enables new advanced applications such as autonomous vehicles and virtual/augmented reality. Telecom service providers are investing in 5G infrastructure, and this trend is expected to drive demand for our products into During the period, substantially improved supply of critical components allowed us to largely fulfill outstanding demand from the prior year and drove strong revenue growth in the Telecom and Networking market In datacom, demand is driven by networking investments by telecom service providers and enterprises upgrading their networks, as well as cloud service providers and data centers investing in their networks for increased bandwidth. Our strategy in the Telecom and Networking market is tooptimize our portfolio of products to more differentiated applications, and to focus on 5G infrastructure applications.as compared to

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Revenues in the Telecom and Networking market increased in 2022. compared to the same period in the prior year due to increased customer demand and our ability to secure additional critical components. we expect demand to remain stable in this market in 2023, but supply chain constraints continue to prevent us from fulfilling product shipments at the level of customer demand. It is not clear how long these supply shortages will persist or how quickly our supply chain will recover.
2022. However, leading companies in this market have reported end user weakness, and we expect and plan for a slower demand environment in 2024.


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Results of Continuing Operations

The analysis presented below is organized to provide the information we believe will be helpful for understanding of our historical performance and relevant trends going forward and should be read in conjunction with our consolidated financial statements, including the notes thereto, in Part II, Item 8 "Financial Statements and Supplementary Data" of this annual report on Form 10-K. Also included in the following analysis are measures that are not in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). A reconciliation of the non-GAAP measures to U.S. GAAP is provided below.

The following table sets forth certain data derived from The following table summarizes our Consolidated Statements of Operations and as a percentage of revenue (in thousands):

| | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | 2023 | | | 2022 | |
| Revenue | | | $ | 1,845,422 | | $ | 1,455,954 | |
| Gross profit | | | | 675,506 || | 532,322 | |
| Operating expenses | | | | 442,411 | | | 380,641 | |
1,655,810 | | 100.0 | % | | $ | 1,845,422 | | 100.0 | % |
| Gross profit | | | 592,398 | | 35.8 | | | | 675,506 | | 36.6 | |

| Operating income from continuing operations | | | | 233,095 | | | 151,681 | |
| Operating expenses | | | 478,704 | | 28.9 | | | | 442,411 | | 24.0 | |
| Other income (expense), net | | | | 8,646 | | | (2,970) | |
| Operating income from continuing operations before income taxes | | | | 241,741 | | | 148,711 | |
| Provision for income taxes | | | | 39,850 | | | 14,004 | |
| | | 113,694 | | 6.9 | | | | 233,095 | | 12.6 | |
| income from continuing operations | | | $ | 201,891 | | $ | 134,707 | |
| Interest income | | | 27,092 | | 1.6 | | | | 4,147 | | 0.2 | |


The following table sets forth the percentage of sales represented by certain items reflected in our Consolidated Statements of Operations:

| | | | | | | | | |
| | | | Year Ended December 31, | |

| | | | 2022 | | 2021 | |
| Sales | | | | 100.0 | % | | 100.0 | % |

| Interest expense | | | (16,566) | | (1.0) | | | | (7,325) | | (0.4) | |
| Gross profit | | | | 36.6 | | | 36.6 | |
| Other income (expense), net | | | (1,759) | | (0.1) | | | | 11,824 | | 0.6 | |
| Operating expenses | | | | 24.0 | | | 26.1 | |
| Operating Income from continuing operations, | | | | 12.6 | | | 10.4 | |
| Other income (expense), net | | | | 0.5 | | | (0.2) | |
before income tax | | | 122,461 | | 7.4 | | | | 241,741 | | 13.1 | |
| Income from continuing operations, before income taxes | | | | 13.1 | | | 10.2 | |
| Provision for income taxes |
| Income tax provision (benefit) | | | (8,288) | | (0.5) | | | | 39,850 | | | 2.2 | | | 1.0 | |
| Income from continuing operations | | $ | 130,749 | | 7.9 | % | | $ | 201,891 | | 10.9 | % |

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Revenue

The following tables summarize net revenue and percentages of revenue by markets (in thousands):

| | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change 2023 v. 2022 | |
| | | 2023 | | | 2022 | | | Dollar | | Percent | |
| Semiconductor Equipment | | $ | 930,809 | | $ | 710,174 | | | $ | 220,635 | | 31.1 | % |743,794 | | 44.9 | % | | $ | 930,809 | | 50.5 | % | | $ | (187,015) | | (20.1) | % |
| Industrial and Medical | | | 426,763 | | | 341,176 | | | | 85,587 | | 25.1 | |474,449 | | 28.7 | | | | 426,763 | | 23.1 | | | | 47,686 | | 11.2 | |
| Data Center Computing | | | 327,466 | | | 270,924 | | | | 56,542 | | 20.9 | |
| Data Center Computing | | | 249,874 | | 15.1 | | | | 327,466 | | 17.7 | | | | (77,592) | | (23.7) | |
| Telecom and Networking | | | 160,384 | | | 133,680 | | | | 26,704 | | 20.0 | |187,693 | | 11.3 | | | | 160,384 | | 8.7 | | | | 27,309 | | 17.0 | |
| Total | | $ | 1,845,422 | | $ | 1,455,954 | | | $ | 389,468 | | 26.8 | % |
| Total | | $ | 1,655,810 | | 100.0 | % | | $ | 1,845,422 | | 100.0 | % | | $ | (189,612) | | (10.3) | % |

Total revenue decreased from the same period in the prior year due to market downturns in the Semiconductor Equipment and Data Center Computing markets, which were partially offset by revenue increases in the Industrial and Medical and the Telecom and Networking markets driven by improved supply of certain components.

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Backlog

Backlog represents outstanding orders for products we expect to deliver within the next 12 months. As of December 31, 2023, our backlog was $406.8 million, which represents a decrease of $468.5 million or 53.5% compared to the $875.3 million balance as of December 31, 2022. Backlog levels have historically averaged less than one quarter of revenue. However, during the supply chain shortages backlog increased substantially due to long lead times.

Backlog at the end of 2023 returned to a normalized level and decreased from the end of 2022 primarily due to shorter lead times of our products, allowing some of our customers to substantially reduce placing orders for products that we have resumed stocking in customer-specific hubs or for targeted delivery beyond six months.

Backlog at any particular date is not necessarily indicative of actual revenue which may be generated for any succeeding period. In addition, there is uncertainty of the timing of when backlog can convert into revenue, and our customers can cancel, change, or delay product purchase commitments with little or no notice.

Revenue by Market

| | | | | | | | | | | |
| |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Semiconductor Equipment | | | | 50.5 | % | | 48.8 | % |
| Semiconductor Equipment | | $ | 743,794 | | $ | 930,809 | | $ | (187,015) | | (20.1) | % |

The decrease in Semiconductor Equipment revenue was primarily due to a cyclical downturn in the semiconductor industry and the U.S. export controls restricting shipments of equipment to Chinese semiconductor customers. The revenue decline was partially mitigated by strong service revenues and growth in certain applications, such as high voltage power supplies.

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |

| Industrial and Medical | | | | 23.1 | || 23.4 | |
| Data Center Computing | | | | 17.7 | | | 18.6 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| Telecom and Networking || | | 8.7 || | 9.2 | |
| Total | | | | 100.0 | % | | 100.0 | % |

| |
| | | (in thousands) |
| Industrial and Medical | | $ | 474,449 | | $ | 426,763 | | $ | 47,686 | | 11.2 | % |


OPERATING EXPENSE

The following table summarizes our operating expenses (in thousands) and as a percentage of sales:

The increase in Industrial and Medical revenue was primarily due to improved materials availability, relatively stable demand for our portfolio of products in the first half of the year, and incremental revenues on new design wins.

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| Research and development || | $ | 191,020 || 10.4 | % | $ | 161,831 | | 11.1 | % |
| Selling, general, and administrative | | | | 218,463 || 11.8 | | | 191,998 | | 13.2 | |
| Amortization of intangible assets | | | | 26,114 | |1.4 | | | 22,060 | | 1.5 | |

| |
| | | (in thousands) |
| Data Center Computing | | $ | 249,874 | | $ | 327,466 | | $ | (77,592) | | (23.7) | % |

The decrease in Data Center Computing revenue was due to the cyclical downturn in the data center server and storage market, partially offset by increased demand for advanced computing applications by some customers.

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |

| Restructuring charges | | | | 6,814 | | 0.4 | | | 4,752 | |0.3 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |

| Total operating expenses | | | $ | 442,411 | | 24.0 | % | $ | 380,641 | | 26.1 | % |
| | | (in thousands) |
| Telecom and Networking | | $ | 187,693 | | $ | 160,384 | | $ | 27,309 | | 17.0 | % |


SALES AND BACKLOG

Sales

Sales increased $389.5 million, or 26.8%, to $1,845.4 million, as compared to $1,456.0 million in the prior year. The increase in sales was primarily due to increased demand for our products across all four of our markets and measures we took to improve material availability, and capacity, which allowed us to better meet higher demand In addition, premium recoveries, which are revenues we collected from our customers to partially reimburse us for premiums we paid to secure scarce materials, represented $68.3 million in revenue in 2022 compared to $14.3 million in 2021. the acquisition of SL Power contributed $50.3 million to our total sales in 2022. For additional information, see Note 2. Acquisitions in Part II, Item 8 "Financial Statements and Supplementary Data."
The increase in Telecom and Networking revenue was due to substantially improved material availability, allowing us to largely fulfill outstanding demand from the prior year.

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Backlog

The following table summarizes our backlog (in thousands):
Gross Profit and Gross Margin

| | | | | | | | | | | | | |
| | | December 31, | | December 31, | | Change from | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | | | | | Year End | |
| || 2022 || 2021 | | Dollar || Percent | |
| Backlog | | $ | 875,346 | | $ | 927,810 | | $ | (52,464) | | (5.7) | % |

| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Gross profit | | $ | 592,398 | | $ | 675,506 | | $ | (83,108) | | (12.3) | % |

| Gross margin | | | 35.8 | % | | 36.6 | % | | | | | |

Backlog represents outstanding orders for products we expect to deliver within The next 12 months. Backlog at the end of 2022 decreased from the end of 2021 primarily due to the impact of the China export controls regulation announced in October 2022 by the U.S. Commerce Department, lower demand in the Semiconductor Equipment market, and changes in order patterns for our semiconductor customers as we improved lead times, which occurred in the fourth quarter of 2022. Backlog in our other markets increased for the year.
The decrease in gross profit as a percentage of revenue was largely due to the decline in revenue, unfavorable product mix, and higher operating costs based on investments made in 2023, partially offset by lower premiums and related recoveries for securing critical parts.


We believe the current backlog levels provide some level of revenue protection if demand levels are reduced due to macroeconomic factors. We expect to bring our backlog back into normalized levels of $400 million to $500 million over the next several quarters as parts availability improves and lead times are reduced.

Backlog at any particular date is not necessarily indicative of actual sales which may be generated for any succeeding period. in addition, there is uncertainty of the timing of when backlog can convert into revenue, due to continuing supply constraints. Because our customers generally order on a purchase order basis, they can typically cancel, change, or delay product purchase commitments with little or no notice.

Sales by Market

Sales in the Semiconductor Equipment market increased $220.6 million, or 31.1%, to $930.8 million, as compared to $710.2 million in the prior year. The increase in sales was primarily due to the growth in the Semiconductor Equipment market, particularly highlighted by the 40% increase in sales to our top two customers who are primarily in this market. In addition, we improved our ability to secure critical components and increased delivery to our customers in this market.

Sales in the Industrial and Medical market increased $85.6 million, or 25.1%, to $426.8 million, as compared to $341.2 million in the prior year. The increase in sales was primarily due to the acquisition of SL Power, which added incremental sales of $46.5 million in this market. The remainder of the increase in revenue was due to increased demand for our portfolio of products across our medical and industrial applications and improved material availability.

Sales in the Data Center Computing market increased $56.5 million, or 20.9%, to $327.5 million, as compared to $270.9 million in the prior year. The increase in Data Center Computing market sales was due to better supply availability, enabling us to partially fulfill product shipments against higher customer demand.

Sales in the Telecom and Networking market increased $26.7 million, or 20.0%, to $160.4 million as compared to $133.7 million in the prior year. The increase in sales was primarily due to improved material availability, allowing us to meet the increased demand.

GROSS PROFIT AND GROSS MARGIN

Gross profit dollars in 2022 increased by $143.2 million to $675.5 million, or 36.6% of revenue, as compared to prior year's $532.3 million, or 36.6% of revenue, primarily driven by higher revenue.

Gross margin percentage remained flat year over year as the benefit of higher volume and favorable mix. was offset primarily by higher material costs related to Gross margin percentage declined year over year primarily due to unfavorable product mix. This decline was partially offset by lower premiums paid to brokers for scarce parts. Premium recoveries which represent revenue at zero gross margin.generate revenue but no gross profit. As a result, they are dilutive to our gross margin. Premium recoveries impacted gross margins by approximately 35 basis points in the current year, compared to approximately 140 basis points in the prior period.

Additionally, when including
higher material costs not recovered, gross margin was impacted

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by approximately 70 basis points in the current year, compared to approximately 200 basis points in the prior period. We expect that the amount of higher material costs and related recoveries will abate as the supply chain normalizes and scarce parts become more available from original manufacturers.

Operating EXPENSE

Expenses

We perform R&D of products to develop new or emerging applications, technological advances to provide higher performance, lower cost, or other attributes that we may expect to advance our customers' products. We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue.
The following table summarizes our operating expenses (in thousands) and as a percentage of revenue:

| | | | | | | | | | | | | |
| | | | Years Ended December 31, | |
| | | | 2023 | | 2022 | |
| Research and development | | | $ | 202,439 | | 12.2 | % | $ | 191,020 | | 10.4 | % |
| Selling, general, and administrative | | | | 221,034 | | 13.3 | | | 218,463 | | 11.8 | |
| Amortization of intangible assets | | | | 28,254 | | 1.7 | | | 26,114 | | 1.4 | |
| Restructuring, asset impairments, and other charges | | | | 26,977 | | 1.6 | | | 6,814 | | 0.4 | |
R&D expenses increased $29.2 million to $191.0 million, as compared to $161.8 million in the prior Year
| Total operating expenses | | | $ | 478,704 | | 28.9 | % | $ | 442,411 | | 24.0 | % |

Research and Development

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | (in thousands) |
| Research and development | | $ | 202,439 | | $ | 191,020 | | $ | 11,419 | | 6.0 | % |

The increase in research and development was primarily driven by increased headcount and compensation costs of $9.0 million, which was partially due to the SL Power acquisition. In addition, during 2023, we incurred $2.2 million in higher program and material costs as we invested in new programs to maintain and increase our technological leadership and provide solutions to our customers' evolving needs.

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Selling, General and Administrative

Our selling expenses support domestic and international sales and marketing activities that include personnel, trade shows, advertising, third-party sales representative commissions, and other Selling, and marketing activities. Our general, and administrative expenses support our worldwide corporate, legal, tax, financial, governance, administrative, information systems, and human resource functions in addition to our general management, including acquisition related activities.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Selling, general, and administrative | | $ | 221,034 | | $ | 218,463 | | $ | 2,571 | | 1.2 | % |

The increase in


selling, general, and administrative ("SG&A") expenses increased $26.5 million to $218.5 million, as compared to $192.0 million in the prior year. The increase in SG&A is primarily related to $16.9 million from increased headcount and associated costs including sales commissions and compensation driven by higher revenue and $6.0 million from the addition of SL Power, See Note 2. Acquisitions in Part II, Item 8 "Financial Statements and Supplementary Data" for additional details.was primarily related to higher stock-based compensation cost and the addition of SL Power, partially offset by lower employee variable compensation expense.

Amortization of Intangible Assets

Amortization expense increased $4.1 million to $26.1 million, as compared to $22.1 million in the prior Year The increase
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Amortization of intangible assets | | $ | 28,254 | | $ | 26,114 | | $ | 2,140 | | 8.2 | % |

The increase in amortization
was primarily driven by incremental amortization of newly acquired intangible assets from the SL Power acquisition. For additional information, see Note 2. Acquisitions and Note 11. Intangible Assets and Goodwill in Part II, Item 8 "Financial Statements and Supplementary Data."

Restructuring, Asset Impairments and Other Charges

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Restructuring, asset impairments, and other charges | | $ | 26,977 | | $ | 6,814 | | $ | 20,163 | | 295.9 | % |

The increase is primarily driven by the initiation of 2023 Plan for which we incurred charges of $27.0 million in 2023. We have several restructuring plans in process, including the following:
in the fourth quarter of 2022, management approved a restructuring plan (the "2022 Plan"). which is expected


2023 Plan

In 2023, we approved a plan intended to optimize and consolidate our manufacturing operations and functional support groups as well as a general reduction-in-force to align to our expenses to revenue levels (the "2023 Plan"). We expect additional charges of $1.0 million to $2.0 million to be incurred in future periods through the second quarter of 2025. We anticipate the 2023 Plan will be substantially completed by the end of 2024, with the final activities concluding by June 2025.

2022 Plan

This plan was approved to further improve our operating efficiencies and drive the realization of synergies from our business combinations by consolidating our operations, optimizing our factory footprint, including moving certain production into our higher volume factories, and reducing redundancies, The majority of these actions impact our factory operations and should partially mitigate the impact of lower volumes on gross margins. and lowering our cost structure. We anticipate the 2022 Plan will be substantially completed and associated expenses will be incurred by 2024.by the end of 2024.

In 2018, we committed to a restructuring plan (the "2018 Plan") to optimize our manufacturing footprint and to improve our operating efficiencies and synergies related to business combinations. We incurred severance costs primarily related to the transition and exit of our facility in Shenzhen, China and actions associated with synergies related to the acquisition of Artesyn Embedded Technologies, Inc.'s embedded power business ("Artesyn"). This plan is

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substantially complete with the closure of our Shenzhen facility expected in 2023. For additional information, see Note 12. Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 "Financial Statements and Supplementary Data."

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Interest Income, Interest Expense, and Other Income (Expense), net

| | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change 2023 v. 2022 | |
| | | 2023 | | 2022 | | Dollar | | Percent | |
| |
| | | (in thousands) |
| Interest income | | $ | 27,092 | | $ | 4,147 | | $ | 22,945 | | 553.3 | % |
| Interest expense | | $ | (16,566) | | $ | (7,325) | | $ | (9,241) | | 126.2 | % |
| Other income (expense), net consists primarily of interest income and expense | | $ | (1,759) | | $ | 11,824 | | $ | (13,583) | | (114.9) | % |

We experienced an increase in interest income on higher cash balances, due in part to proceeds from our issuance of Convertible Notes in the third quarter of 2023, ability to concentrate cash in investment accounts, and higher short term interest rates.

We experienced an increase in interest expense due to a higher interest rate on the portion of our Term Loan Facility subject to a variable interest rate and the issuance of our Convertible Notes. The interest rate swap contracts expire on September 10, 2024. After that date, the entire balance of our Term Loan Facility will be subject to a variable interest rate. In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate.

Other income (expense), net consists primarily of foreign exchange gains and losses, gains and losses on sales of fixed assets, and other miscellaneous items.

Other income (expense), net was $8.6 million in 2022, as compared to ($3.0) million in The prior year. The increase The decrease in income between periods was primarily a result of lower unrealized foreign exchange gains of $4.2 million due to the strengthening U.S. dollar compared to our other foreign currencies and a one-time gain on and a gain in 2022 from the sale of intellectual property from a previous acquisition This was partially offset by higher interest expenses because of increasing interest rates.that did not recur in 2023.

See Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding our debt.

Income Tax Provision (Benefit)


The following table summarizes tax provision (benefit) (in thousands) and the effective tax rate for our income from continuing operations:

| | | | | | | | | |
| | | | Years Ended December 31, | |
| | | | 2023 | | 2022 | |
| Income from continuing operations, before income taxes | | $ | 241,741 | | $ | 148,711 | |tax | | | $ | 122,461 | | $ | 241,741 | |
| provision for income taxes | | $ | 39,850 | | $ | 14,004 | |
| Income tax provision (benefit) | | | $ | (8,288) | | $ | 39,850 | |
| Effective tax rate | | | 16.5 | % | | 9.4 | % |
| Effective tax rate | | | | (6.8) | % | | 16.5 | % |

Our effective tax rate increased in 2022 compared to 2021, primarily driven by a change in tax law from the 2017 Tax Cuts and Jobs Act related to the capitalization of R&D expenses, as it impacts the net U.S. tax on foreign operations, that went into effect in January 2022, offset by Our effective tax rates differ from the U.S. federal statutory rate of 21% for 2023 and 2022, primarily due to a valuation allowance release for certain deferred tax assets in 2023 and the benefit of earnings in foreign jurisdictions which are subject to lower tax rates,

The Inflation Reduction Act ("IRA") and CHIPS and Science Act ("CHIPS Act") were both enacted in August 2022. The IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock repurchases. The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related activities. The IRA and the CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no benefit to our consolidated financial statements for any of the periods presented, and we do not expect them to have a direct material impact on our future results of operations, financial condition, or cash flows.
as well as tax credits, partially offset by net U.S. tax on foreign operations in 2022. The effective tax rate for 2023 was lower than the same periods in 2022 primarily due to a $25.6 million release of a deferred tax asset valuation allowance in 2023.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

The Organization for Economic Cooperation and Development is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. Various countries have implemented the legislation as of January 1, 2024, and we are still evaluating the impact. As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase in future years.

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Non-GAAP Results

Management uses non-GAAP operating income and non-GAAP earnings per share ("EPS") to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods. In addition, management's incentive plans include these non-GAAP measures as criteria for achievements. These non-GAAP measures are not in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management. The presentation of this additional information should not be considered a substitute for results prepared in accordance with U.S. GAAP.

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The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, and amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, restructuring, asset impairments, and other charges, as they are not indicative of future performance. 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. and effect of adoption of the 2017 tax Cuts and Jobs Act.In addition, the tax effect also includes a discrete tax benefit associated with the release of a portion of our deferred tax asset valuation allowance.

| | | | | | | | |
| Reconciliation of non-GAAP measure | | | | | | | |
| Operating expenses and operating income from continuing | | | Years Ended December 31, |
| operations, excluding certain items (in thousands) | | | 2023 | | 2022 |
| Gross profit from continuing operations, as reported | | | $ | 592,398 | | $ | 675,506 |
| Adjustments to gross profit: | | | | | | | |
| Stock-based compensation | | | | 2,059 | | | 1,478 |
| Facility expansion, relocation costs and other | | | | 2,334 | | | 5,295 |
| Acquisition-related costs | | | | 238 | | | (299) |
| Non-GAAP gross profit | | | | 597,029 | | | 681,980 |
| Non-GAAP gross margin | | | | 36.1% | | | 37.0% |
| | | | | | | | |
| Operating expenses from continuing operations, as reported | | | | 478,704 | | | 442,411 |
| Adjustments: | | | | | | | |
| Amortization of intangible assets | | | | (28,254) | | | (26,114) |
| Stock-based compensation | | | | (28,942) | | | (18,371) |
| Acquisition-related costs | | | | (4,026) | | | (8,637) |
| Facility expansion, relocation costs and other | | | | (189) | | | - |
| Restructuring, | | | (6,814) | | | (4,752) |
| Restructuring, asset impairments, and other charges | | | | (26,977) | | | (6,814) |
| Non-GAAP operating expenses | | | | 390,316 | | | 382,475 |
| Non-GAAP operating income | | | $ | 206,713 | | $ | 299,505 |
| Non-GAAP operating margin | | | | 12.5% | | | 16.2% |

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| | | | | | | | |
| Reconciliation of non-GAAP measure | | | | | | | |
| Income from continuing operations, excluding certain items | | | Years Ended December 31, |
| (in thousands, except per share amounts) | | | 2023 | | 2022 |
| Income from continuing operations, less non-controlling interest, net of income tax | | | $ | 130,749 | | $ | 201,875 |
| Adjustments: | | | | | | | |
| Amortization of intangible assets | | | | 28,254 | | | 26,114 |
| Acquisition-related costs | | | | 4,264 | | | 8,338 |
| Facility expansion, relocation costs, and other | | | | 2,523 | | | 5,295 |
| Restructuring, | | 6,814 | | | 4,752 |
| Restructuring, asset impairments, and other charges | | | | 26,977 | | | 6,814 |
| Unrealized foreign currency gain | | | | (89) | | | (7,645) |
| Acquisition-related costs and other included in other (income) expense, net | | (8,417) | | | (2,186) |income (expense), net | | | | (1,516) | | | (8,417) |
| Tax effect of non-GAAP adjustments, including certain discrete tax benefits | | | | (31,303) | | | (3,008) |
| Non-GAAP income, net of income tax, excluding stock-based compensation | | | | 159,859 | | | 229,366 |
| Stock-based compensation, net of tax | | | | 24,181 | | | 15,444 |
| Non-GAAP income, net of income tax | | | $ | 184,040 | | $ | 244,810 |
| Non-GAAP diluted earnings per share | | | $ | 4.88 | | $ | 6.49 |

| | | | | | | |
| Reconciliation of non-GAAP measure | | Year Ended December 31, |
| Per share earnings excluding certain items | | 2023 | | 2022 |
In previous years, inflation did not have a material impact on our operations. However, more recently, we have experienced inflationary pressure from price increases in select components driven by factors such as higher global demand, supply chain disruptions, higher labor expenses, and increased freight costs. In this environment, we are actively working with our customers to adjust pricing that helps offset the inflationary pressure on the cost of our components. We have also been able to recover some premiums on pricing related to securing scarce materials with our customers, thus limiting the financial impact of inflationary pressures.
| Diluted earnings per share from continuing operations, as reported | | $ | 3.46 | | $ | 5.35 |
| Add back: | | | | | | |
| Per share impact of non-GAAP adjustments, net of tax | | | 1.42 | | | 1.14 |
| Non-GAAP earnings per share | | $ | 4.88 | | $ | 6.49 |

Liquidity and Capital Resources

Liquidity

We believe that Adequate liquidity and cash generation is important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, investments, cash generated from current operations, and available borrowing capacity under the Revolving Facility (defined below).

The following table summarizes our cash, cash equivalents, and marketable securities (in thousands):
in Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data").

| | | | |
As of December 31, 2023, our cash and cash equivalents total $1,044.6 million, while our available funding under our Revolving Facility is $200.0 million. Additionally, we generated $212.9 million of cash flow from continuing operations in 2023. We believe our
| cash and cash equivalents | | $ | 458,818 |
| Marketable securities | | | 2,128 |
| total cash, cash equivalents, and marketable securities | | $ | 460,946 |

We believe the above
sources of liquidity will be adequate to meet anticipated working capital needs, anticipated levels of capital expenditures, contractual obligations, debt repayment, debt service, share repurchase programs, and dividends. for the next 12 months and, on a long-term basis. During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives.

In addition, we may, depending upon the number or size of additional acquisitions, seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

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In September 2019, in connection with the acquisition of Artesyn, we entered into a credit agreement ("Credit Agreement") that provided aggregate financing of $500.0 million consisting of a $350.0 million senior unsecured term loan facility (the "Term Loan Facility") and a $150.0 million senior unsecured revolving facility (the "Revolving Facility" and together with the Term Loan Facility, the "Credit Facility").
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Debt

On September 12, 2023, we completed a private, unregistered offering of $575.0 million Convertible Notes and received net proceeds of approximately $561.1 million after the discount for the initial purchasers' fees. We intend to use the net proceeds to fund future growth, which may include strategic acquisitions, opportunistically repay existing outstanding indebtedness, repurchase our common stock, or general corporate purposes.


In April 2020, We executed interest rate swap contracts with independent financial institutions to partially reduce the variability of cash flows in LIBOR indexed debt interest payments on our Term Loan Facility. The interest rate swap contracts fixed a portion of the outstanding principal balance on our term loan to a total interest rate of 1.271%. For information additional information, see Note 8. Derivative Financial Instruments in Part II, Item 8 "Financial Statements and Supplementary Data."

In September 2021, we amended the Credit Agreement whereby we borrowed an additional $85.0 million, which increased the aggregate amount outstanding under the Term Loan Facility to $400.0 million. In addition, we increased the Revolving Facility capacity by $50.0 million to $200.0 million. Both the Term Loan Facility and Revolving Facility mature on September 9, 2026.

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The following table summarizes borrowings under our Credit Facility and the associated interest rate The following table summarizes our borrowings (in thousands, except for interest rates).

| | | | | | || |
| | | December 31, 2023 |
| | | Balance | | Interest Rate || Unused Line Fee |
| Term Loan Facility subject to a fixed interest rate due to interest Rate swap || $ | 238,219 | | 1.271% | | - |

| | | Balance | | Interest |
| | | | | Rate |
| Convertible Notes | | $ | 575,000 | | 2.50% |

| Term Loan Facility subject to a variable interest rate | | | 136,781 | | 5.134% | | - |
| Term Loan Facility at fixed interest rate due to interest rate swap | | | 220,719 | | 1.17% |
| Revolving Facility subject to a variable interest rate | | | - | | 5.134% | | 0.10% |
| Term Loan Facility at variable interest rate | | | 134,281 | | 6.21% |
| Total borrowings under the Credit Agreement | | $ | 375,000 | | || |
| Total borrowings | | $ | 930,000 | | |

The interest rate swap contracts expire on September 10, 2024. After that date, the entire balance of our Term Loan Facility will be subject to a variable interest rate. In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate.

As of December 31, 2023, we had $200.0 million in available funding under the Revolving Facility. The Term Loan Facility requires quarterly repayments of $5.0 million plus accrued interest, with the remaining balance due in September 2026.

In addition to the available capacity on the Revolving Facility, prior to the maturity date of our Credit Agreement, we may also request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. at identical terms to our existing Credit Facility.$115.0 million. Any requested increase is subject to lender approval.

For additional information on our Credit Facility, see Note 21. Credit Facility For more information see Note 18 Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data." For more information on the interest rate swap that fixes the interest rate for a portion of our Term Loan Facility, see Note 7. Derivative Financial Instruments in Part II, Item 8 "Financial Statements and Supplementary Data."

Dividends

In March 2021, the Board of Directors (the "Board") declared the first quarterly cash dividend since our inception as a public company. During 2022, During 2023, we paid quarterly cash dividends of $0.10 per share, totaling $15.2 million for the full year. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Share Repurchases

To repurchase shares of our common stock, we periodically enter into stock repurchase agreements. The following table summarizes these repurchases:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| (in thousands, except per share amounts) | | | 2023 | | 2022 | | 2021 |
| Amount paid or accrued to repurchase shares | | | $ | 40,132 | | $ | 26,635 | | $ | 78,125 |
| Number of shares repurchased | | | | 378 | | | 356 | | | 901 |
| Average repurchase price per share | | | $ | 105.74 | | $ | 74.90 | | $ | 86.76 |

In July 2022, The Board of Directors approved an increase to the share repurchase plan that increased the remaining amount authorized for future repurchases to a maximum of $200.0 million with no time limitation. The above table reflects a $40.1 million repurchase of our common stock that was concurrent with the Convertible Notes issuance. See Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data." At December 31, 2023, the remaining amount authorized by the Board of Directors for future share repurchases was $199.2 million with no time limitation.

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Cash Flows

A summary of our cash from operating, investing, and financing activities was as follows (in thousands):

| | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 |
| Net cash from operating activities from continuing operations | | | $ | 212,925 | | $ | 183,731 |
| Net cash from operating activities from discontinued operations | | | | (3,988) | | | (144) |
| Net cash from operating activities | | | | 208,937 | | | 183,587 |
| Net cash from investing activities | | | | (64,751) | | | (208,272) |
| Net cash from financing activities | | | | 445,684 | | | (61,865) |
| Effect of currency translation on cash and cash equivalents | | | | (4,132) | | | 996 |
| Net change in cash and cash equivalents | | | | 585,738 | | | (85,554) |
| Cash and cash equivalents, beginning of period | | | | 458,818 | | | 544,372 |
| Cash and cash equivalents, end of period | | | $ | 1,044,556 | | $ | 458,818 |

Net Cash From Operating Activities

Net cash from operating activities from continuing operations was $212.9 million, an increase of $29.2 million, compared to $183.7 million in the prior year. The increase is primarily due to an increase in net income. This was partially offset by an unfavorable increase in net operating assets driven primarily by an increase in accounts receivable due to our strong revenue growth.a favorable decrease in accounts receivable and inventory. This was partially offset by a decrease in net income driven primarily by slowing market demand.

Net Cash From Investing Activities

Net cash used in investing activities in 2023 was $64.8 million, driven by the following:

| | ● | $61.0 million in purchases of property and equipment as we invested in our manufacturing footprint and capacity; and |
| | ● | ($149.4) million for business combinations. |
| | ● | $3.7 million in purchase of long-term investments. |

Net cash used in investing activities in 2021 was ($47.3) million, and primarily related to investment in facilities 2022 was $208.3 million, driven by the following:

| | ● | $149.4 million paid for business combinations; and |
| | ● | $58.9 million in purchases of property and equipment as we invested in our manufacturing footprint and capacity. |

Net Cash From Financing Activities

Net cash from financing activities in 2022 was ($61.9) million and included:
Net cash provided by financing activities in 2023 was $445.7 million, driven by the following:

| | ● | $561.1 million net proceeds from issuance of long-term debt; |
| | ● | ($15.2) million for dividend payments; |
| | ● | $74.9 million proceeds from sale of warrants; |
| | ● | ($20.0) million for repayment of long-term debt; and |
| | ● | $115.0 million payment for purchase of note hedges; |
| | ● | $40.0 million related to repurchases of our common stock; |
The net cash from financing activities in 2021 was ($25.4) million and included:

| | ● | $83.7 million in proceeds from borrowings, net of debt-issuance costs paid; |

| | ● | $20.0 million for repayments on long-term borrowing; and |
| | ● | $15.2 million for dividend payments. |

| | ● | ($13.8) million for repayment of long-term debt; |

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The net cash used in financing activities in 2022 was $61.9 million, driven by the following:

| | ● | $26.6 million related to repurchases of our common stock; |
| | ● | $20.0 million for repayment of long-term debt; and |
| | ● | ($1.8) million related to stock-based award activities, |
| | ● | $15.2 million for dividend payments. |

Critical Accounting Estimates

The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported. Note 1. Summary of Operations and Significant Accounting Policies and Estimates in Part II, Item 8 "Financial Statements and Supplementary Data" describes the significant accounting policies used in the preparation of our consolidated financial statements. The accounting positions described below are significantly affected by critical accounting estimates. Such accounting positions require significant judgments, assumptions, and estimates to be used in the preparation of the consolidated financial statements. Actual results could differ materially from the amounts reported based on variability in factors affecting these statements.

Inventories

We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis. General market conditions, as well as our design activities, can cause certain products to become obsolete and we adjust our inventory carrying value for estimated excess and obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. The determination of projected end-user demand requires the use of estimates and assumptions related to projected unit sales for each product. Demand for our products can fluctuate significantly. A significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand.

Income Taxes

We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for future tax consequences. A deferred tax asset or liability is computed for both the expected future impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. Tax rate changes are reflected in the period such changes are enacted.

We assess the recoverability of our net deferred tax assets and the need for a valuation allowance on a quarterly basis. Our assessment includes several factors, including historical results and taxable income projections for each jurisdiction. The ultimate realization of deferred income tax assets is dependent on the generation of taxable income in appropriate jurisdictions during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in determining the amount of the valuation allowance. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, we determine if we will more likely than not realize the benefits of these deductible differences.

Due to uncertainties in any tax audit outcome, our estimates of the ultimate settlement of our unrecognized tax positions may change and the actual tax benefits may differ significantly from the estimates. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.

For more details see Note 4. Income Taxes in Part II, Item 8 "Financial Statements and Supplementary Data."

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Business Combinations

We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. Fair values of assets acquired, and liabilities assumed are based upon available information and may involve engaging an independent third party to perform an appraisal. Estimating fair values can be complex and subject to significant business judgment. We must also identify and include in the allocation all acquired tangible and intangible assets that meet certain criteria, including assets that were not previously recorded by the acquired entity. The estimates most commonly involve intangible assets. The excess of the purchase price over the net fair value of acquired assets and assumed liabilities is recorded as goodwill, which is not amortized but instead is evaluated for impairment at least annually. Pursuant to U.S. GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination.

Off-Balance Sheet Arrangements

As of December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.pursuant to Regulation S-K.

Contractual Obligations

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to income taxes, lease obligations, pension liabilities, and debt is provided in Note 4. Income Taxes, Note 14. Leases, Note 15. Employee Retirement Plans and Postretirement Benefits, and Note 18. Long-Term Debt, respectively, in Part II, Item 8 "Financial Statements and Supplementary Data."

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update. ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our consolidated financial statements upon adoption.

To understand the impact of recently issued guidance from the Financial Accounting Standards Board ("FASB") or other standards setting bodies, whether adopted or to be adopted, please review the information provided in Note 1. Summary of Operations and Significant Accounting Policies and Estimates in Part II, Item 8 "Financial Statements and Supplementary Data."

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk and Risk Management

In the normal course of business, we have exposures to interest rate risk from our investments and Credit Facility. We also have exposure to foreign exchange rate risk related to our foreign operations and foreign currency transactions.

Foreign Currency Exchange Rate Risk

We are impacted by changes in foreign currency exchange rates through revenue and purchasing transactions when we sell products and purchase materials in currencies different from the currency in which product and manufacturing costs were incurred.

Our reported financial results of operations, including the reported value of our assets and liabilities, are also impacted by changes in foreign currency exchange rates. Assets and liabilities of substantially all our subsidiaries outside the U.S. are translated at period end rates of exchange for each reporting period. Operating results and cash flow statements are translated at average rates of exchange during each reporting period. Although these translation changes have no immediate cash impact, the translation changes may impact future borrowing capacity, and overall value of our net assets.

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The functional currencies of our worldwide facilities primarily include the United States Dollar, (USD), Euro, South Korean Won, New Taiwan Dollar, Japanese Yen, Pound Sterling, and Chinese Yuan. We are subject to risks associated with revenue and purchasing activities and costs to operate that are denominated in currencies other than our functional currencies such as the Singapore Dollar, Malaysian Ringgit, Mexican Peso and Philippine Peso. and Mexican Peso. Our purchasing and sales activities are primarily denominated in the USD, Japanese Yen, Euro, and Chinese Yuan.

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Currency exchange rates vary daily and often one currency strengthens against the USD while another currency weakens. Because of the complex interrelationship of the worldwide supply chains and distribution channels, it is difficult to quantify The impact of a change in one or more of these particular exchange rates

As currencies fluctuate against each other we are exposed to foreign currency exchange rate risk on sales, purchasing transactions, and labor. Exchange rate fluctuations could require us to increase prices to foreign customers, which could result in lower net sales. Alternatively, if we do not adjust the prices for our products in response to unfavorable currency fluctuations, our results of operations could be adversely impacted. Changes in the relative buying power of our customers may impact sales volumes.

Acquisitions are a large component of our capital deployment strategy. A significant number of acquisition target opportunities are located outside the U.S., and their value may be denominated in foreign currency. Changes in exchange rates therefore may have a material impact on their valuation in USD and may impact our view of their attractiveness.
would be immaterial.

From time to time, we may enter into foreign currency exchange rate contracts to hedge against changes in foreign currency exchange rates on assets and liabilities expected to be settled at a future date, including foreign currency, which may be required for a potential foreign acquisition. Market risk arises from the potential adverse effects on the value of derivative instruments that result from a change in foreign currency exchange rates. We may enter into foreign currency forward contracts to manage the exchange rate risk associated with intercompany debt denominated in nonfunctional currencies. We minimize our market risk applicable to foreign currency exchange rate contracts by establishing and monitoring parameters that limit the types and degree of our derivative contract instruments. We enter into derivative contract instruments for risk management purposes only. We do not enter into or issue derivatives for trading or speculative purposes.

Interest Rate Risk

Our market risk exposure relates primarily to changes in interest rates on our Credit Facility. The following table summarizes borrowings (in thousands) under our Credit Facility and the associated interest rate

Our interest rate risk exposure relates primarily on our variable rate Term Loan Facility. As of December 31, 2023 we have interest rate swap agreements in effect that fix the interest rate for $220.7 million at 1.17% of our Term Loan Facility, while $134.3 million of the Term Loan Facility remains floating at 6.21%.
| | | | | | | | |
| | | December 31, 2022 |
| | | Balance | | interest rate | | Unused Line Fee |

The Term Loan Facility subject to a fixed interest rate | | $ | 238,219 | | 1.271% | | - |and Revolving Credit Facility bear interest, at our option, at a rate based on the Base Rate or SOFR, as defined in the Credit Agreement, plus an applicable margin. The interest rate swap contracts expire on September 10, 2024. After that date, the entire balance of our Term Loan Facility will be
| Term Loan Facility subject to a variable interest rate. | | | 136,781 | | 5.134% | | - |
| Revolving Facility, subject to a variable interest rate.| | | - | | 5.134% | | 0.10% |
In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate.
| Total borrowings under the Credit Agreement | | $ | 375,000 | | | | |

For more information on the Term Loan Facility see Note 21. Credit Facility For more information see Note 18. Long-Term Debt in Part II, Item 8 "Financial Statements and Supplementary Data." For more information on the interest rate swap that fixes the interest rate for a portion of our Term Loan Facility, see Note 7. Derivative Financial Instruments in Part II, Item 8 "Financial Statements and Supplementary Data."The Term Loan Facility and Revolving Facility bear interest, at our option, at a rate based on a reserve adjusted "Eurodollar Rate" or "Base Rate," as defined in the Credit Agreement, plus an applicable margin.

Our interest payments are impacted by interest rate fluctuations. with respect to the As of December 31, 2023 with respect to the borrowed portion of our Credit Facility that is subject to a variable interest rate, a hypothetical increase of 100 basis points (1%) in interest rates would have an insignificant impact on our interest expense. A change in interest rates does not have a material impact upon our future earnings and cash flow for fixed rate debt. However, increases in interest rates could impact our ability to refinance existing maturities and acquire additional debt on favorable terms.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

| | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) | 45 |
| Consolidated Balance Sheets | 48 |
| Consolidated Statements of Operations | 49 |
| Consolidated Statements of Comprehensive Income | 50 |
| Consolidated Statements of Stockholders' Equity | 51 |
| Consolidated Statements of Cash Flows | 52 |
| Notes to Consolidated Financial Statements | 53 |

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Advanced Energy Industries, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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| | | |
| | | Inventory valuation |
| Description of the Matter | | As more fully described in Notes 1 and 9 to the consolidated financial statements, the Company has inventories with a carrying value of $336.1 million as of December 31, 2023. The Company adjusts its inventory carrying value for estimated excess or obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected customer demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. |
| | | |
| | | Auditing management's inventory valuation was complex and involved a high degree of judgment because a critical factor in determining excess and obsolete inventory requires management to determine projected customer demand, which could be impacted by future market and economic conditions. |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls related to the Company's process for evaluating inventory valuation inclusive of controls related to the development of and management's review of the underlying data, including historical usage and the estimation of projected customer demand. |
| | | |
| | | We evaluated certain inventories for excess or obsolescence by testing key inputs, including historical usage and projected customer demand, and by testing the completeness and accuracy of the underlying data supporting management's inventory valuation assessment. Specifically, we compared the Company's projected customer demand to historical sales and inventory usage. We assessed historical trends of management's estimates and performed analyses to evaluate management's excess and obsolete inventory estimates and underlying assumptions. We also performed a retrospective review of the prior year valuation assumptions, including inventory write-off history. |

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2019.

Denver, Colorado

February 20, 2024

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Advanced Energy Industries, Inc.'s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Advanced Energy Industries, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management's Annual Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SL Power Electronics, which is included in the 2022 consolidated financial statements of the Company and constituted 2% and 3% of total and net assets, respectively, as of December 31, 2022 and 3% and 3% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of SL Power Electronics.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Denver, Colorado

February 20, 2024

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ADVANCED ENERGY INDUSTRIES, INC.

Consolidated Balance Sheets

(In thousands, except per share amounts)

| | | | | | | | |
| | | December 31, | | December 31, | |
| | | 2023 | | 2022 | |
| ASSETS | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | | $ | 1,044,556 | | $ | 458,818 | |
| Accounts and other receivable, net | | | 300,683 | | | 237,227 |
| Accounts receivable, net | | | 282,430 | | | 300,683 | |
| Inventories | | | 376,012 | | | 338,410 |
| Inventories | | | 336,137 | | | 376,012 | |
| Other current assets | | | 48,771 | | | 53,001 | |
| Total current assets | | | 1,188,514 | | | 1,162,234 |
| Total current assets | | | 1,711,894 | | | 1,188,514 | |
| Property and equipment, net | | | 167,665 | | | 148,462 | |
| Operating lease right-of-use assets | | | 95,432 | | | 100,177 | |
| Other assets | | | 84,056 | | | 66,911 |
| Other assets | | | 136,448 | | | 84,056 | |
| Intangible assets, net | | | 161,478 | | | 189,526 | |
| Goodwill | | | 281,433 | | | 212,190 |
| Goodwill | | | 283,840 | | | 281,433 | |
| TOTAL ASSETS | | $ | 1,992,168 | | $ | 1,817,340 |
| TOTAL ASSETS | | $ | 2,556,757 | | $ | 1,992,168 | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | | $ | 170,467 | | $ | 193,708 |
| Accounts payable | | $ | 141,850 | | $ | 170,467 | |
| Accrued payroll and employee benefits | | | 73,595 | | | 82,733 | |
| Other accrued expenses | | | 66,662 | | | 76,750 | |
| Customer deposits and other | | | 15,997 | | | 26,322 | |
| Current portion of long-term debt | | | 20,000 | | | 20,000 | |
| Current portion of operating lease liabilities | | | 17,744 | | | 16,771 | |
| Total current liabilities | | | 335,848 | | | 393,043 | |
| Long-term debt, net | | | 895,679 | | | 353,262 | |
| Operating lease liabilities | | | 89,330 | | | 94,460 | |
| Pension benefits | | | 49,135 | | | 44,031 | |
| Other long-term liabilities | | | 42,583 | | | 41,105 | |
| Total liabilities | | | 925,901 | | | 945,844 |
| Total liabilities | | | 1,412,575 | | | 925,901 | |
| | | | | | | | |
| Commitments and contingencies (Note 17) | | | | | | | |
| | | | | | | | |
| Stockholders' equity: | | | | | | | |
| Preferred stock, $0.001 par value, 1,000 shares authorized, none issued and outstanding | | | - | | | - | |
| Common stock, $0.001 par value, 70,000 shares authorized; 37,318 and 37,429 issued and outstanding at December 31, 2023 and December 31, 2022, respectively | | | 37 | | | 37 | |
| Additional paid-in capital | | | 148,300 | | | 134,640 | |
| Accumulated other comprehensive income | | | 6,114 | | | 16,320 | |
| Retained earnings | | | 915,270 | | | 756,323 |
| Retained earnings | | | 989,731 | | | 915,270 | |
| Advanced Energy Industries, Inc. stockholders' equity | | | 1,066,267 | | | 870,851 |
| Total stockholders' equity | | | 1,144,182 | | | 1,066,267 | |
| Noncontrolling interest | | | - | | | 645 |
| Total stockholders' equity | | | 1,066,267 | | | 871,496 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 2,556,757 | | $ | 1,992,168 | |
| | | | | | | | |

The accompanying notes are an integral part of these consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

Consolidated Statements of Operations

(In thousands, except per share amounts)

| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Sales, net | | | $ | 1,845,422 | | $ | 1,455,954 | | $ | 1,415,826 |
| Revenue, net | | | $ | 1,655,810 | | $ | 1,845,422 | | $ | 1,455,954 |
| Cost of sales | | | | 1,169,916 | | | 923,632 | | | 873,957 |
| Cost of revenue | | | | 1,063,412 | | | 1,169,916 | | | 923,632 |
| Gross profit | | | | 675,506 | | | 532,322 | | | 541,869 |
| Gross profit | | | | 592,398 | | | 675,506 | | | 532,322 |
| | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | |
| Research and development | | | | 202,439 | | | 191,020 | | | 161,831 |
| Selling, general, and administrative | | | | 221,034 | | | 218,463 | | | 191,998 |
| Amortization of intangible assets | | | | 28,254 | | | 26,114 | | | 22,060 |
| Restructuring, | | | | 6,814 | | | 4,752 | | | 13,166 |
| Restructuring, asset impairments, and other charges | | | | 26,977 | | | 6,814 | | | 4,752 |
| Total operating expenses | | | | 478,704 | | | 442,411 | | | 380,641 |
| Operating income | | | | 113,694 | | | 233,095 | | | 151,681 |
| | | | | | | | | | | |
| Interest income | | | | 27,092 | | | 4,147 | | | 454 |
| Interest expense | | | | (16,566) | | | (7,325) | | | (3,576) |
| Other income (expense), net | | | | (1,759) | | | 11,824 | | | 152 |
| Income from continuing operations, before income taxes | | | | 241,741 | | | 148,711 | | | 158,147 |tax | | | | 122,461 | | | 241,741 | | | 148,711 |
| Provision for Income taxes | | | | 39,850 | | | 14,004 | | | 22,996 |
| Income tax provision (benefit) | | | | (8,288) | | | 39,850 | | | 14,004 |
| Income from continuing operations | | | | 130,749 | | | 201,891 | | | 134,707 |
| Income (loss) from discontinued operations, net of income taxes | | | | (2,215) | | | 73 | | | (421) |tax | | | | (2,465) | | | (2,215) | | | 73 |
| Net income | | | $ | 199,676 | | $ | 134,780 | | $ | 134,730 |
| Net income | | | $ | 128,284 | | $ | 199,676 | | $ | 134,780 |
| Income from continuing operations attributable to noncontrolling interest | | | | - | | | 16 | | | 44 |
| Net income attributable to Advanced Energy Industries, Inc. | | | $ | 199,660 | | $ | 134,736 | | $ | 134,675 |128,284 | | $ | 199,660 | | $ | 134,736 |
| | | | | | | | | | | |
| Basic weighted-average common shares outstanding | | | | 37,480 | | | 37,463 | | | 38,143 |
| Diluted weighted-average common shares outstanding | | | | 37,750 | | | 37,721 | | | 38,355 |
| | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | |
| Continuing operations: | | | | | | | | | | |
| Basic earnings per share | | | $ | 3.49 | | $ | 5.39 | | $ | 3.53 |
| Diluted earnings per share | | | $ | 3.46 | | $ | 5.35 | | $ | 3.51 |
| Discontinued operations: | | | | | | | | | | |
| Basic earnings (loss) per share | | | $ | (0.06) | | $ | - | | $ | (0.01) |
| Basic loss per share | | | $ | (0.07) | | $ | (0.06) | | $ | - |
| Diluted earnings (loss) per share | | | $ | (0.06) | | $ | - | | $ | (0.01) |
| Diluted loss per share | | | $ | (0.07) | | $ | (0.06) | | $ | - |
| Net income: | | | | | | | | | | |
| Basic earnings per share | | | $ | 3.42 | | $ | 5.33 | | $ | 3.53 |
| Diluted earnings per share | | | $ | 3.40 | | $ | 5.29 | | $ | 3.51 |

The accompanying notes are an integral part of these consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

Consolidated Statements of Comprehensive Income

(In thousands)

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Net income | | $ | 199,676 | | $ | 134,780 | | $ | 134,730 |
| Net income | | $ | 128,284 | | $ | 199,676 | | $ | 134,780 |
| Other comprehensive income (loss), net of income tax | | | | | | | | | |
| Foreign currency translation | | | 2,027 | | | (10,543) | | | (12,262) |
| Change in fair value of cash flow hedges | | | (6,374) | | | 9,741 | | | 4,246 |
| Minimum pension benefit retirement liability | | | (5,859) | | | 18,338 | | | 9,405 |
| Comprehensive income | | | 217,212 | | | 136,169 | | | 138,022 |
| Comprehensive income | | | 118,078 | | | 217,212 | | | 136,169 |
| Comprehensive income attributable to noncontrolling interest | | | - | | | 16 | | | 44 |
| Comprehensive income attributable to Advanced Energy Industries, Inc. | | $ | 217,196 | | $ | 136,125 | | $ | 137,967 |118,078 | | $ | 217,196 | | $ | 136,125 |

The accompanying notes are an integral part of these consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

Consolidated Statements of Stockholders' Equity

(In thousands)

| | | | | | | | | | | | | | | | | | | | | |
| | | Advanced Energy Industries, Inc. Stockholders' Equity | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Common Stock | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated | | | | | | | | | |
| | | | | | | | Additional | | Other | | | | | Non- | | Total |
| | | | | | | | Paid-in | | Comprehensive | | Retained | | controlling | | Stockholders' |
| | | Shares | | Amount | | Capital | | Income (Loss) | | Earnings | | Interest | | Equity |
| Balances, December 31, 2019 | | 38,358 | | $ | 38 | | $ | 104,849 | | $ | (5,897) | | $ | 577,724 | | $ | 546 | | $ | 677,260 |
| Adoption of new accounting standards | | - | | | - | | | - | | | - | | | (102) | | | - | | | (102) |
| Stock issued from equity plans | | 179 | | | - | | | (482) | | | - | | | - | | | - | | | (482) |
| Stock-based compensation | | - | | | - | | | 12,272 | | | - | | | - | | | - | | | 12,272 |
| Share repurchases | | (244) | | | - | | | (11,630) | | | - | | | - | | | - | | | (11,630) |
| Other comprehensive income | | - | | | - | | | - | | | 3,292 | | | - | | | - | | | 3,292 |
| Net income | | - | | | - | | | - | | | - | | | 134,675 | | | 55 | | | 134,730 |
| Balances, December 31, 2020 | | 38,293 | | $ | 38 | | $ | 105,009 | | $ | (2,605) | | $ | 712,297 | | $ | 601 | | $ | 815,340 |
| Stock issued from equity plans, net | | 197 | | | - | | | (1,931) | | | - | | | - | | | - | | | (1,931) |
| Stock-based compensation | | - | | | - | | | 15,428 | | | - | | | - | | | - | | | 15,428 |
| Share repurchases | | (901) | | | - | | | (2,800) | | | - | | | (75,325) | | | - | | | (78,125) |
| Dividends declared ($0.10 per share) | | - | | | - | | | - | | | - | | | (15,385) | | | - | | | (15,385) |
| Other comprehensive income | | - | | | - | | | - | | | 1,389 | | | - | | | - | | | 1,389 |
| Net income | | - | | | - | | | - | | | - | | | 134,736 | | | 44 | | | 134,780 |
| Balances, December 31, 2021 | | 37,589 | | | 38 | | | 115,706 | | | (1,216) | | | 756,323 | | | 645 | | | 871,496 |
| Stock issued from equity plans, net | | 196 | | | - | | | (26) | | | - | | | - | | | - | | | (26) |
| Stock-based compensation | | - | | | - | | | 19,624 | | | - | | | - | | | - | | | 19,624 |
| Share repurchases | | (356) | | | (1) | | | (1,125) | | | - | | | (25,509) | | | - | | | (26,635) |
| Dividends declared ($0.10 per share) | | - | | | - | | | - | | | - | | | (15,204) | | | - | | | (15,204) |
| Other comprehensive income | | - | | | - | | | - | | | 17,536 | | | - | | | - | | | 17,536 |
| Acquisition of non-controlling interest | | - | | | - | | | 461 | | | - | | | - | | | (661) | | | (200) |
| Net income | | - | | | - | | | - | | | - | | | 199,660 | | | 16 | | | 199,676 |
| Balances, December 31, 2022 | | 37,429 | | | 37 | | | 134,640 | | | 16,320 | | | 915,270 | | | - | | | 1,066,267 |
| Stock issued from equity plans, net | | 267 | | | 1 | | | (80) | | | - | | | - | | | - | | | (79) |
| Stock-based compensation | | - | | | - | | | 29,314 | | | - | | | - | | | - | | | 29,314 |
| Share repurchases | | (378) | | | (1) | | | (1,530) | | | - | | | (38,601) | | | - | | | (40,132) |
| Dividends declared ($0.10 per share) | | - | | | - | | | - | | | - | | | (15,222) | | | - | | | (15,222) |
| Other comprehensive income | | - | | | - | | | - | | | (10,206) | | | - | | | - | | | (10,206) |
| Warrants and note hedges, net | | - | | | - | | | (40,135) | | | - | | | - | | | - | | | (40,135) |
| Tax impact of convertible notes and note hedges | | - | | | - | | | 26,091 | | | - | | | - | | | - | | | 26,091 |
| Net income | | - | | | - | | | - | | | - | | | 128,284 | | | - | | | 128,284 |
| Balances, December 31, 2023 | | 37,318 | | $ | 37 | | $ | 148,300 | | $ | 6,114 | | $ | 989,731 | | $ | - | | $ | 1,144,182 |
$ | 37 | | $ | 134,640 | | $ | 16,320 | | $ | 915,270 | | $ | - | | $ | 1,066,267 |

The accompanying notes are an integral part of these consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

Consolidated Statements of Cash Flows

(In thousands)

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| Net income | | $ | 199,676 | | $ | 134,780 | | $ | 134,730 |
| Net income | | $ | 128,284 | | $ | 199,676 | | $ | 134,780 |
| Less: income (loss) from discontinued operations, net of income taxes | | | (2,215) | | | 73 | | | (421) |tax | | | (2,465) | | | (2,215) | | | 73 |
| Income from continuing operations, net of income taxes | | | 201,891 | | | 134,707 | | | 135,151 |tax | | | 130,749 | | | 201,891 | | | 134,707 |
| Adjustments to reconcile net income to net cash from operating activities: | | | | | | | | | |
| Depreciation and amortization | | | 66,533 | | | 60,296 | | | 52,893 |
| Stock-based compensation expense | | | 19,849 | | | 15,739 | | | 12,272 |
| Stock-based compensation | | | 31,001 | | | 19,849 | | | 15,739 |
| Provision for Deferred income taxes | | | (5,736) | | | 1,326 | | | (622) |
| Deferred income tax provision (benefit) | | | (33,940) | | | (5,736) | | | 1,326 |
| (Gain) loss from discount on notes receivable | | | - | | | - | | | (638) |
| Loss (gain) on disposal and sale of assets | | | 439 | | | (3,962) | | | 1,496 |
| Changes in operating assets and liabilities, net of assets acquired | | | | | | | | | |
| Accounts and other receivable, net | | | (59,630) | | | 5,271 | | | 15,412 |
| Accounts receivable, net | | | 23,282 | | | (59,630) | | | 5,271 |
| Inventories | | | (32,244) | | | (115,737) | | | 11,658 |
| Inventories | | | 39,300 | | | (32,244) | | | (115,737) |
| Other assets | | | (19,673) | | | (2,910) | | | 1,750 |
| Other assets | | | 5,015 | | | (19,673) | | | (2,910) |
| Accounts payable | | | (28,703) | | | 67,111 | | | (48,163) |
| Accounts payable | | | (26,080) | | | (28,703) | | | 67,111 |
| Other liabilities and accrued expenses | | | (23,374) | | | 51,643 | | | (18,344) |
| Net cash from operating activities from continuing operations | | | 212,925 | | | 183,731 | | | 140,914 |
| Net cash from operating activities from discontinued operations | | | (3,988) | | | (144) | | | (669) |
| Net cash from operating activities | | | 208,937 | | | 183,587 | | | 140,245 |
| | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | |
| Receipt (issuance) of notes receivable | | | - | | | 3,050 || | (1,000) || Purchases of long-term investments | | | (3,746) | | | - | | | - |
| Proceeds from the sale of assets | | | - | | | - | | | 3,050 |

| Purchases of property and equipment | | | (58,885) | | | (28,817) | | | (36,364) |(61,005) | | | (58,885) | | | (28,817) |
| Acquisitions, net of cash acquired | | | (149,387) | | | (21,535) | | | (5,476) |- | | | (149,387) | | | (21,535) |
| Net cash from investing activities | | | (208,272) | | | (47,302) | | | (42,840) |(64,751) | | | (208,272) | | | (47,302) |
| | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | |
| Proceeds from long-term borrowings | | | 575,000 | | | - | | | 85,000 |
| Payment of debt-issuance costs | | | - | | | (1,350) | | | - |
| Payment of fees for long-term borrowings | | | (13,880) | | | - | | | (1,350) |
| Payments on long-term borrowings | | | (20,000) | | | (20,000) | | | (13,750) |
| Dividend payments | | | (15,222) | | | (15,204) | | | (15,385) |
| Payment for purchase of note hedges | | | (115,000) | | | - | | | - |
| Proceeds from sale of warrants | | | 74,865 | | | - | | | - |
| Purchase and retirement of common stock | | | (26,635) | | | (78,125) | | | (11,630) |(40,000) | | | (26,635) | | | (78,125) |
| Net payments related to stock-based awards | | | (79) | | | (26) | | | (1,762) |
| Net cash from financing activities | | | (61,865) | | | (25,372) | | | (29,612) |445,684 | | | (61,865) | | | (25,372) |
| | | | | | | | | | |
| EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS | | | (4,132) | | | 996 | | | (3,567) |
| | | | | | | | | | |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | | | 585,738 | | | (85,554) | | | 64,004 |
| CASH AND CASH EQUIVALENTS, beginning of period | | | 458,818 | | | 544,372 | | | 480,368 |
| CASH AND CASH EQUIVALENTS, end of period | | $ | 458,818 | | $ | 544,372 | | $ | 480,368 |1,044,556 | | $ | 458,818 | | $ | 544,372 |
| | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
| Cash paid for interest | | $ | 14,429 | | $ | 6,608 | | $ | 4,040 |
| Cash paid for income taxes | | $ | 47,937 | | $ | 17,546 | | $ | 32,543 |

The accompanying notes are an integral part of these consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

NOTE 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Advanced Energy Industries, Inc., a Delaware corporation, and its consolidated subsidiaries ("we," "us," "our," "Advanced Energy," or the "Company") provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment.

our plasma power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products are used in a wide range of applications.such as semiconductor equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets. Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.

Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

As of December 31, 2015, we discontinued our engineering, production, In December 2015, we completed the wind down of engineering, manufacturing, and sales of our solar inverter product line. As such, all inverter product revenues, costs, assets, and liabilities are reported in Discontinued Operations for all periods presented herein. See Note 4. discontinued operations, for more information. Ongoing inverter repair and service operations are reported as part of our continuing Operations.We have continuing involvement with regard to certain warranty obligations. Accordingly, the results of our inverter business are reflected as income (loss) from discontinued operations, net of income taxes on our Consolidated Statements of Operations.

Principles of Consolidation

Our consolidated financial statements include the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. Our consolidated financial statements are stated in United States ("U.S.") Dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). We reclassified certain prior period amounts to conform to the current year presentation.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The significant estimates, assumptions, and judgments include, but are not limited to:

| | ● |
| excess and obsolete inventory; |acquisitions and asset valuations, and |
| | ● |
| pension obligations; | income taxes and other provisions; and |
| | ● | acquisitions and asset valuations |

Segment Information-

Our Chief Executive Officer is the chief operating decision maker who reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, we determined we operate in a single reporting segment.

Foreign Currency Translation

The functional currency of certain of our foreign subsidiaries is the local currency. Assets and liabilities of these foreign subsidiaries are translated to the United States Dollar at prevailing exchange rates on the balance sheet date. Revenues and expenses are translated at the average exchange rates in effect for each period. Translation adjustments resulting from this process are reported as a separate component of other comprehensive income.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

For certain other subsidiaries, the functional currency is the U.S. Dollar. Foreign currency transactions are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates for foreign

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

currency denominated monetary assets and liabilities result in foreign currency transaction gains and losses, which are reflected as unrealized (based on period end remeasurement) or realized (upon settlement of the transactions) in other income (expense), net in our Consolidated Statements of Operations.

Derivatives

We use derivative financial instruments to manage risks associated with foreign currency and interest rate fluctuations. Unless we meet specific hedge accounting criteria, changes in the fair value of derivative financial instruments are recognized in the Consolidated Statements of Operations within other income (expense), net.

For derivatives designated as cash flow hedges, changes in fair value are recorded to accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and are reclassified into earnings when the underlying forecasted transaction is settled. We reassess the probability of the underlying forecasted transactions occurring on a quarterly basis.

Fair Value

We value certain financial assets and liabilities using fair value measurements.

U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows:

| | ● | Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access on the measurement date. |
| | ● | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| | ● | Level 3 - Unobservable inputs for the asset or liability. |

We categorize fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

We have various assets and liabilities measured at fair value on a recurring basis, including:

| | | | | |
| Category of Asset or Liability | | Fair | | Methodology |
| | | | | |
| | | Value | | |
| | | | | |
| | | Hierarchy | | |
| Certificates of deposit | | Level 2 | | Observable market data for similar assets |
| Foreign currency forward contracts

| | Level 2 | | Forecasted movement in the forward rates of foreign currency for the applicable duration in which the hedging instrument is denominated |
| Interest rate swaps

We determine the fair value by estimating the | | Level 2 | | Estimated net present value of the expected cash flows based on market rates and the associated yield curves, adjusted for non-performance credit risk, as applicable

Contingent consideration associated with business combinations
|
We determine the fair value by estimating the net present value of the expected cash flows based on the probability of expected payment.
| Pension benefit obligations | | Level 2 | | Actuarial analysis, which includes various estimates and assumptions including, but not limited to, discount rates, expected return on plan assets, and future inflation rates |

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate fair value as recorded due to the short-term nature of these instruments.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Our non-financial assets, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value. See Note 12. Goodwill and Note 13. Intangible Assets 11. Intangible Assets and Goodwill for further discussion and presentation of these amounts.

The fair value of borrowings approximates the recorded borrowing value based upon market interest rates for similar facilities. See Note 21. Credit Facility for additional information. The fair value of contingent consideration and other acquired assets and liabilities associated with our acquisitions are based on Level 3 inputs.

Cash, Cash Equivalents, and Marketable Securities

We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist primarily of short-term money market instruments and demand deposits with insignificant interest rate risk.

In some instances, we invest excess cash in money market funds not insured by the Federal Deposit Insurance Corporation. We believe The investments in money market funds are on deposit with credit-worthy financial institutions and the funds are highly liquid. These investments are reported at fair value and included in cash and cash equivalents.We record interest income within other income (expense), net in our Consolidated Statement of Operations.

We classify investments with stated maturities of greater than three months at time of purchase in other current assets on the Consolidated Balance Sheets.

Concentrations of Credit Risk-

Financial instruments with potential credit risk include cash and cash equivalents marketable securities, and trade accounts receivable. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of high quality and sound financial condition. Our investments are in low-risk instruments, and we limit our credit exposure in any one institution or type of investment instrument based upon criteria, including creditworthiness.

We establish a reserve for credit losses based upon factors surrounding the credit risk of specific customers, historical trends, and other information.
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Accounts Receivable and Reserve for Credit Losses - Accounts receivable are recorded at net realizable value. We maintain a credit approval process and we make judgments in connection with assessing our customers' ability to pay. Despite this assessment, from time to time, our customers are unable to meet their payment obligations. We continuously monitor our customers' credit worthiness and use our judgment in establishing a provision for estimated Credit LossesWe do not require collateral from customers. Our principal customers are original equipment manufacturers ("OEM") and end user customers, which operate globally through wholly owned subsidiaries that purchase our products under substantially the same credit terms, with similar historical credit risks. As a result, we assess credit risks as a single group.
ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Allowance for Credit Losses

We evaluate collection risk and establish expected credit loss primarily through a combination of the following: an assessment of customer credit, risk ratings utilizing third party credit risk data,continuous monitoring of customer credit, analysis of historical aging and credit loss experience, current economic conditions, and customer specific information.

Our standard payment terms are net 30 days. Certain large volume customers have longer payment terms. Generally, we do not require collateral from customers.

Inventories

Inventories- inventories are valued at the lower of cost (using the first-in, first-out method) or net realizable value,
We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis. General market conditions, as well as our design activities, can cause certain products to become obsolete and we adjust our inventory carrying value for estimated excess and obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. The determination of projected end-user demand requires the use of estimates and assumptions related to

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

projected unit sales for each product. Demand for our products can fluctuate significantly. A significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand.

Property and Equipment

Property and equipment are stated at cost or estimated fair value if acquired in a business combination. We compute depreciation over the estimated useful lives using the straight-line method. Additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group containing the property and equipment may not be recoverable.

When depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gains or losses are included in other income (expense), net, in our Consolidated Statements of Operations.

Business Combinations - Business combinations are accounted for using the purchase method of accounting. Under the purchase method, assets and liabilities, including intangible assets, are recorded at their fair values as of the acquisition date. Acquisition Costs in excess of amounts assigned to assets acquired and liabilities assumed are recorded as goodwill. Transaction related costs associated with business combinations are expensed as incurred.
Internal-Use Software Development Costs

We capitalize qualifying costs associated with software applications developed for internal use. We begin capitalization after meeting two criteria: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in significant additional functionality. We cease capitalization when the software is substantially complete and ready for its intended use, including the completion of all significant testing.

Costs related to preliminary project activities, post-implementation operating activities, maintenance, and minor upgrades are expensed as incurred.


We classify capitalized software development costs within property and equipment, net and other assets on the Consolidated Balance Sheets. These costs are amortized on a straight-line basis over the software's estimated useful life. Amortization is included in both cost of revenue and operating expenses. We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Leases

We lease manufacturing and office space under non-cancelable operating leases. Some of these leases contain provisions for landlord funded leasehold improvements, which we record as a reduction to right-of-use ("ROU") assets and the related operating lease liabilities. Our lease agreements generally contain lease and non-lease components, and we combine fixed payments for non-lease components with lease payments and account for them together as a single lease component. Certain lease agreements may contain variable payments, which are expensed as incurred and not included in the right-of-use lease assets and operating lease liabilities. When renewal options are reasonably certain of exercise, we include the renewal period in the lease term. In many cases, we have leases with a term of less than one year. We elected the practical expedient to exclude these short-term leases from our ROU assets and operating lease liabilities. On an ongoing basis, we negotiate and execute new leases to meet business objectives.

Right-of-use assets and operating lease liabilities are recognized at the present value of the future lease payments on the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. We have a centrally managed treasury function; therefore, we apply a portfolio approach for determining the incremental borrowing rate applicable to the lease term. Operating lease expense is recognized on a straight-line basis over the lease term.

Intangible assets Goodwill and Other Long-Lived Assets - As a result of our acquisitions, we identified and recorded Intangible Assetsand Goodwill Intangible assets are valued based on estimates of future cash flows and amortized over their estimated useful lives. goodwill is subject to annual impairment testing, as well as testing upon the occurrence of any event that indicates a potential impairment. Intangible assets and other long-lived assets are subject to an impairment test If there is an indicator of impairment. the carrying value and ultimate realization of these assets is dependent upon our estimates of future earnings and benefits that we expect to generate from their use. If our expectations of future results and cash flows are significantly diminished, intangible assets, and goodwill may be impaired. and the resulting charge to operations may be material. When we determine that the carrying value of intangibles or other long-lived assets may not be recoverable Based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method to determine whether an impairment exists, and then measure the impairment using discounted cash flows.
We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group containing the right-of-use assets may not be recoverable.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. We evaluate goodwill for impairment as a single reporting unit annually during the fourth quarter or when events or changes in circumstances indicate the carrying value may not be recoverable.


Our goodwill impairment evaluation consists of a qualitative assessment. If this assessment indicates it is more likely than not that the Company's estimated fair value exceeds the carrying value of our net assets, we do not consider goodwill to be impaired. Otherwise, we perform a quantitative assessment by comparing the Company's fair value to the carrying value of our net assets, including goodwill. If the carrying value of our net assets exceeds the fair value, we consider goodwill to be impaired.

Based on the facts and circumstances, we determine the fair value based on an income, market, or cost approach. Each method is subjective in nature and involves the use of significant estimates and assumptions, which can include projected financial results, discount rates, long-term growth rates, and industry trends.


The estimation of useful lives and expected cash flows requires us to make judgments regarding future periods that are subject to some factors outside of our control. changes in these estimates can result in revisions to our carrying value of these assets and may result in material charges to our results of operations.
Our intangible assets consist of customer relationships, developed technology, trademarks, patents, and intellectual property, which are stated at cost less accumulated amortization. Intangible assets, which are considered long-lived assets, are amortized over their estimated useful lives and reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset group containing these assets may not be recoverable.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

We conduct an annual goodwill impairment analysis using an assessment of qualitative factors in determining if it is more likely than not that goodwill is impaired. If this assessment indicates that it is more likely than not that goodwill is impaired, the next step of impairment testing compares the fair value of a reporting unit to its carrying value. Goodwill would be impaired if the resulting implied fair value of goodwill was less than the recorded carrying value of the goodwill.

Debt Issuance Costs- We incurred debt issuance costs in connection with our debt. facilities. Amounts paid directly to lenders are classified as issuance costs. Commitment fees and other costs directly associated with obtaining credit facilities are classified as deferred financing costs, which are recorded in the Consolidated Balance Sheets and amortized over the term of the debt facility. we allocated deferred debt issuance costs incurred for the current credit facility between the revolver and term loan based on their relative borrowing capacity. Deferred debt issuance costs associated with the revolving credit facility are recorded within other assets and those associated with the term loan are recorded as a reduction of the carrying value of the debt. on the Consolidated Balance Sheets. We amortize the majority of deferred debt issuance costs to interest expense using the effective interest rate method. Deferred debt issuance costs on the line of credit are amortized on the straight-line basis over the life of the debt agreement. Amortization of debt issuance costs is reflected in other income (expense), net

Debt Issuance Costs

We capitalize costs associated with issuing debt. Depending on the nature of the agreement, we record these costs on the Consolidated Balance Sheets either in other assets or as a direct deduction from the carrying amount of the debt. We amortize the costs over the term of the agreement using the effective interest method. Amortization expense is reflected within interest expense
on the Consolidated Statements of Operations. See Note 18. Long-Term Debt for additional details.

Revenue Recognition- Net sales consist of revenue from the sale
Revenue Recognition

Net revenue consists
of products and support services.

We recognize substantially all revenue at a point in time when we satisfy our performance obligations. Typically, this occurs on shipment of goods because, at that point, we transfer control to our customer. The transaction price is based upon the standalone selling price. In most transactions, we have no obligations to our customers after the date products are shipped, other than pursuant to warranty obligations. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Surcharges, cost recoveries, and shipping and handling fees billed to customers, if any, are recognized as revenue. The related cost for shipping and handling fees is recognized in cost of sales. We expense the incremental costs of obtaining contracts when the amortization period of the costs is less than one year. These costs are included in selling, general, and administrative expenses in our Consolidated Statements of Operations. Payment terms for customers' extended credit are typically net 30 days.revenue.

Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell. Repairs covered under our standard warranty do not generate revenue. We recognize substantially all non-warranty revenue upon completion of the service because that is the point in time when we satisfy our performance obligation.

As part of our ongoing service business, we satisfy our service obligations under preventative maintenance contracts and extended warranties. which had previously been offered on our discontinued inverter products. Any Up-front fees received for extended warranties or maintenance plans are deferred and recorded in customer deposits and other on the Consolidated Balance Sheets. Revenue under these arrangements is recognized ratably over the underlying terms, as we do not have historical information that would allow us to project the estimated service usage pattern at this time.

We expense the incremental costs of obtaining contracts when the amortization period of the costs is less than one year. These costs are included in selling, general, and administrative expenses in our Consolidated Statements of Operations.

Our remaining performance obligations primarily relate to customer purchase orders for products we have not yet shipped. We expect to fulfill the majority of these performance obligations within one year.

Research and Development Expenses

Costs incurred to advance, test, or otherwise modify our proprietary technology or develop new technologies are considered research and development costs and are expensed when incurred. These costs are primarily comprised of costs associated with the operation of our laboratories and research facilities, including internal labor, materials, and overhead.

Warranty Costs - We provide for the estimated costs to fulfill customer warranty obligations upon the recognition of the related revenue. We offer warranty coverage for a majority of our precision power products for periods typically ranging from 12 to 24 months after shipment. We warranted our inverter products for five to ten years and provided the option to purchase additional warranty coverage for up to 20 years. The warranty expense accrued

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

related to our standard inverter product warranties is now considered part of our discontinued operations and is recorded as such on our Consolidated Balance Sheets. See Note 4. Discontinued Operations for more information. See Note 15. Warranties for more information on our warranties from continuing operations. We estimate the anticipated costs of repairing our products under such warranties based on the historical costs of the repairs. The assumptions we use to estimate warranty accruals are reevaluated periodically, considering actual experience, and when appropriate, the accruals are adjusted. Should product failure rates differ from our estimates, actual costs could vary significantly from our expectations.

Stock-Based Compensation

Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair value at the grant date. We utilize the Black-Scholes Merton option pricing model to estimate the fair value of stock options. and Employee Stock Purchase Plan ("ESPP") purchase rights. This model requires various estimates and assumptions.including:

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We use the market closing price of our common stock, as reported on the NASDAQ Exchange.
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Expected term

The expected term is based on historical experience and represents the period we expect the stock option or ESPP purchase right to be outstanding.

Expected volatility

We derive the expected volatility from the historical volatility of our common stock over a period equivalent to the expected term.

ADVANCED ENERGY INDUSTRIES, INC.
We obtain the risk-free interest rate from the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury NOTES with maturities approximately equal TO the expected term of the stock-based award.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Expected dividend

The expected dividend is based on the assumption that future dividend payments will follow recent historical practice.
(in thousands, except per share amounts)

We estimate the fair value of restricted stock units ("RSUs") on the grant date. For RSUs that contain a time-based and/or performance-based vesting condition, we estimate fair value using the closing share price on the grant date.

We record stock-based compensation expense for awards with time-based vesting conditions on a straight-line basis over the requisite service period. For awards with a performance-based vesting condition, we record stock-based compensation expense (based on our assessment of the probability of meeting the performance conditions) over the estimated period to achieve the performance conditions. Upon forfeiture or expiration of these awardsIf the awards are forfeited, we reverse the stock-based compensation expense.

Certain RSUs vest based on a market condition. Our stock-based compensation expense is based on an estimate of the fair value and probability of achievement for each tranche of these awards using a Monte Carlo simulation. Because the probability of achievement is a factor in the Monte Carlo simulation, For these RSUs, we recognize stock-based compensation expense over each tranche's estimated achievement period even if some or all of the shares never vest.

For all stock awards, we estimate forfeitures at the grant date and revise those estimates in subsequent periods if actual forfeitures differ from our estimates.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Income Taxes

We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for future tax consequences. A deferred tax asset or liability is computed for both the expected future impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. Tax rate changes are reflected in the period such changes are enacted.

We assess the recoverability of our net deferred tax assets and the need for a valuation allowance on a quarterly basis. Our assessment includes several factors, including historical results and taxable income projections for each jurisdiction. The ultimate realization of deferred income tax assets is dependent on the generation of taxable income in appropriate jurisdictions during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in determining the amount of the valuation allowance. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, we determine if we will more likely than not realize the benefits of these deductible differences.

Accounting for income taxes requires a two-step approach to recognize and measure uncertain tax positions. In general, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities. The first step is to evaluate the tax position for recognition by determining, if based on the technical merits, it is more likely than not that the position will be sustained upon audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.

Under U.S. GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-tax income ("GILTI") in future years, or to provide for the tax expense related to GILTI in the year that the tax is incurred as a period expense only. We have elected to account for GILTI in the year that the tax is incurred.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Commitments and Contingencies- From time to time

We are involved in disputes and legal actions arising in the normal course of our business. While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations. in a particular period. An unfavorable decision particularly in patent litigation An unfavorable decision in intellectual property litigation also could require material changes in production processes and products or result in our inability to ship products or components found to have violated third party intellectual property rights. We accrue loss contingencies in connection with our commitments and contingencies, including litigation, when it is probable that a loss has occurred, or will occur, and the amount of such loss can be reasonably estimated. Our estimates of probability of losses are subjective, involve significant judgment and uncertainties, and are based on the best information we have at any given point in time. Resolution of these uncertainties in a manner inconsistent with our expectations could have a significant impact on our results of operations and financial condition.We are not currently a party to any legal action that we believe would reasonably have a material adverse impact on our business, financial condition, results of operations or cash flows.

New Accounting Standards

From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, will not have a material impact on the consolidated financial statements upon adoption.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

New Accounting Standards Adopted

In October 2021, The FASB issued ASU 2021-08, "Business Combinations (Topic 806) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." the amendments in ASU 2021-08 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. ASU 2021-08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.
The FASB issued the following ASUs that we adopted in the current year:


we adopted ASU 2021-08 on a prospective basis effective January 1, 2022. The adoption will impact business combinations subsequent to that date and require recognition and measurement of acquired contract assets and liabilities in accordance with ASC 606. Specifically, we will account for the related revenue contracts of the acquiree as if we originated the contracts. Adoption of ASU 2021-08 did not impact acquired contract assets or liabilities from prior business combinations.


New Accounting Standards Issued But Not Yet Adopted

The FASB issued the following ASUs:

| Issuance Date | ASU | Title |
| March 2020 | 2020-04 | Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting |
| January 2021 | 2021-01 | Reference Rate Reform (Topic 848): Scope |
| December 2022 | 2022-06 | Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 |

This collective guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another reference rate that is expected to be discontinued.The above accounting standards will be in effect through December 31, 2024.

Our Credit Facility (refer to Note 21. Credit Facility) Our Credit Agreement (see Note 18. Long-Term Debt) and interest rate swap agreements (see Note 7. Derivative Financial Instruments) reference the one-month USD LIBOR rate. Both agreements contain provisions for transition to a new reference rate upon discontinuance of LIBOR We expect the one-month USD LIBOR Rate to be available through June 2023, We are currently assessing the potential timing of transitioning TO a replacement interest rate benchmark for our Credit Facility (refer to Note 21. Credit Facility) and referenced the one-month USD LIBOR rate. On March 31, 2023, we executed agreements with our debt holders and the counterparties to our interest rate swap agreements to transition the benchmark interest rate from LIBOR to the one-month-USD Term Secured Overnight Financing Rate ("SOFR"). The impact of this transition and the adoption of the above guidance was not material to our consolidated financial statements.

New Accounting Standards Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures." The amendments in ASU 2023-07 expand disclosure requirements to require additional information about significant segment expenses. In addition, the ASU enhances interim disclosures, clarifies

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

circumstances in which an entity can disclose multiple segment measures of profit or loss, and provides new disclosures requirements for entities with a single reportable segment. This guidance will be effective for us on January 1, 2024. We do not expect the above guidance to materially impact our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 "Improvements to Income Tax Disclosures." The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional disclosure on income taxes paid. This guidance will be effective for us on January 1, 2025. We do not expect the above guidance to materially impact our consolidated financial statements.

NOTE 2. ACQUISITIONS

SL Power Electronics Corporation

On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power Electronics Corporation ("SL Power"), which is based in Calabasas, California. We accounted for this transaction as a business combination. This acquisition added complementary products to Advanced Energy's medical power offerings and extended our presence in several advanced industrial markets.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The components of the fair value of the total consideration transferred were as follows:

| | | | |
| Cash paid for acquisition | | $ | 145,693 |
| Less cash acquired | | | (3,484) |
| Total fair value of purchase consideration | | $ | 142,209 |

We allocated the purchase price consideration to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess allocated to goodwill.

| | | | |
| | | Fair Value |
| Current assets and liabilities, net | | $ | 12,329 |
| Property and equipment | | | 3,567 |
| Operating lease right-of-use assets | | | 4,640 |
| Deferred tax and other liabilities | | | (2,326) |
| Intangible assets | | | 57,600 |
| Goodwill | | | 71,039 |
| Operating lease liability | | | (4,640) |
| Total fair value of net assets acquired | | $ | 142,209 |

The following table summarizes the intangible assets acquired:

| | | | | | | | |
| | | | | | Amortization | | Useful Life |
| | | Fair Value | | Method | | (in years) |
| Customer relationships | | $ | 50,500 | | Straight-line | | 10 |
| Technology | | | 7,100 | | Straight-line | | 5 |
| Total | | $ | 57,600 | | | | |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

To estimate the fair value of intangible assets, we used a multi-period excess earnings approach for the customer relationships and a relief from royalty approach for developed technology. Goodwill represents SL Power's assembled workforce and the expected operating synergies from combining operations. We expect approximately 85% of goodwill to be deductible for tax purposes.We are still evaluating the fair value for the assets acquired and liabilities assumed. Accordingly, the purchase price allocation presented above is preliminary.Virtually all of the goodwill is deductible for tax purposes.

We included SL Power's results of operations in our consolidated financial statements from the date of acquisition. During the years the following table summarizes SL Power's contribution to sales in our Consolidated Statements of Operations.

| | | | |
| | | Year ended December 31, |
| | | 2022 |
| Sales, net | | $ | 50,321 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

TEGAM, Inc.

On June 1, 2021, we acquired 100% of the issued and outstanding shares of capital stock of TEGAM, Inc., which is based in Geneva, Ohio. We accounted for this transaction as a business combination. This acquisition added metrology and calibration instrumentation to Advanced Energy's RF process Power solutions in our Semiconductor and Industrial and Medical markets.
2023 and 2022, SL Power contributed $54.9 million and $50.3 million, respectively, to our net revenue.


The components of the fair value of the total consideration transferred were as follows:

| | | | |
| Cash paid at closing | | $ | 15,430 |
| Cash paid for indemnity holdback released in June 2022 | | | 1,800 |
| Less cash acquired | | | (177) |
| Total fair value of purchase consideration | | $ | 17,053 |

We allocated the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess allocated to goodwill.

| | | | |
| | | |
| | | Fair Value |
| Current assets and liabilities, net | | $ | 3,475 |

| Property and equipment | | | 755 |
| Operating lease right-of-use assets | | | 425 |
| Intangible assets | | | 6,900 |
| Goodwill (deductible for tax purposes) | | | 5,917 |
| Other | | | 6 |
| Operating lease liability | | | (425) |
| Total fair value of net assets acquired | | $ | 17,053 |

A summary of the intangible assets acquired, amortization method, and estimated useful lives follows:

| | | | | | | | |
| | | Fair Value | | Amortization Method | | Useful Life |
| | | | | | | (in years) |
| Technology | | $ | 1,100 | | Straight-line | | 5 |
| Customer relationships | | | 5,500 | | Straight-line | | 15 |
| Tradename | | | 300 | | Straight-line | | 5 |
| Total | | $ | 6,900 | | | | |

Goodwill represents TEGAM's assembled workforce and the expected operating synergies from combining operations. We included TEGAM's results of operations in our consolidated financial statements from the date of acquisition.

Intangible Assets Acquired

In January 2021, we acquired certain intangible assets related to the manufacturing of fiber optic sensing equipment for a total purchase price of $6.5 million in cash. These intangible assets have an estimated useful life of five years. See Note 13. Intangible Assets for additional details.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 3. REVENUE

Disaggregation of Revenue

The following tables present additional information regarding our revenue:

Revenue by Market

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Semiconductor Equipment | | | $ | 930,809 | | $ | 710,174 | | $ | 611,864 |743,794 | | $ | 930,809 | | $ | 710,174 |
| Industrial and Medical | | | | 474,449 | | | 426,763 | | | 341,176 |
| Data Center Computing | | | | 249,874 | | | 327,466 | | | 270,924 |
| Telecom and Networking | | | | 187,693 | | | 160,384 | | | 133,680 |
| Total | | | $ | 1,845,422 | | $ | 1,455,954 | | $ | 1,415,826 |
| Total | | | $ | 1,655,810 | | $ | 1,845,422 | | $ | 1,455,954 |

Revenue by Region

| | | | | | | | | | | | | | | | | | |
| | | | Years Ended December 31, | |
| | | | 2023 | | 2022 | | 2021 | |
| North America | | | $ | 724,481 | | 43.8 | % | $ | 857,490 | | 46.5 | % | $ | 665,479 | | 45.7 | % |$ | 687,821 | | 48.6 | % |
| Asia |

| Asia | | | | 713,571 | | 43.1
| | | 754,997 | | 40.9 | | | 597,830 | | 41.1 | |
| Europe | | | | 212,368 | | 12.8
| 606,893 | | 42.9 | |
| Europe |
| | | 219,119 | | 11.9 | | | 179,056 | | 12.3 | |
| Other | | | | 5,390 | | 0.3
| 117,989 | | 8.3 | |
| Other |
| | | 13,816 | | 0.7 | | | 13,589 | | 0.9 | | | 3,123 | | 0.2 | |
| Total | | | $ | 1,655,810 | | 100.0 | % | $ | 1,845,422 | | 100.0 | % | $ | 1,455,954 | | 100.0 | % |

Revenue by Significant Countries

| | | | | | | | | | | | | | | | | | |
| | | | Years Ended December 31, | |
| | | | 2023 | | 2022 | | 2021 | |
| United States | | | $ | 723,564 | | 39.2 | % | $ | 561,312 | | 38.5 | % | $ | 530,965 | | 37.5 | % |
| United States | | | $ | 598,359 | | 36.2 | % | $ | 723,564 | | 39.2 | % | $ | 561,312 | | 38.5 | % |
| China | | | | 180,355 | | 9.8 | | | 188,708 | | 13.0 | | | 173,554 | | 12.3 | |
| China | | | | 165,940 | | 10.0 | | | 180,355 | | 9.8 | | | 188,708 | | 13.0 | |
| Mexico | | | | 131,573 | | 7.1 | | | 102,199 | | 7.0 | | | 150,896 | | 10.7 | |
| All others | | | | 809,930 | | 43.9 | | | 603,735 | | 41.5 | | | 560,411 | | 39.6 | |
| All others | | | | 891,511 | | 53.8 | | | 941,503 | | 51.0 | | | 705,934 | | 48.5 | |
| Total | | | $ | 1,655,810 | | 100.0 | % | $ | 1,845,422 | | 100.0 | % | $ | 1,455,954 | | 100.0 | % |

We attribute revenue to individual countries and regions based on the customer's ship to location. Apart from the United States and China, no revenue attributable to any individual country exceeded 10% of our total consolidated revenues during the periods presented.

Revenue by Category

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Product | | $ | 1,686,053 | | $ | 1,318,213 | | $ | 1,296,867 |
| Product | | $ | 1,484,007 | | $ | 1,686,053 | | $ | 1,318,213 |
| Services | | | 159,369 | | | 137,741 | | | 118,959 |
| Services and other | | | 171,803 | | | 159,369 | | | 137,741 |
| Total | | $ | 1,845,422 | | $ | 1,455,954 | | $ | 1,415,826 |
| Total | | $ | 1,655,810 | | $ | 1,845,422 | | $ | 1,455,954 |

Remaining Performance Obligations

our remaining performance obligations primarily relate to customer purchase orders for products we have not yet shipped. We expect to fulfill the majority of these performance obligations within one year.

Other revenue includes certain spare parts and products sold by our service group.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Significant Customers

In December 2015, we completed the wind down of engineering, manufacturing, and sales of our solar inverter product line. Accordingly, the results of our inverter business are reflected as income (loss) from discontinued operations, net of income taxes on our Consolidated Statements of Operations.
During the year ended December 31, 2023, Applied Materials, Inc. accounted for 22% of our total revenue. During the years ended December 31, 2022 and 2021, Applied Materials Inc. and Lam Research Corporation accounted for 20% and 14%, respectively, and 20% and 10%, respectively, of our total revenue.



We defer revenue.associated with sales of extended inverter warranties and include them within customer deposits and other in our Consolidated balance Sheets. Deferred revenue for extended inverter warranties and the associated costs of warranty service will be reflected in Sales and Cost of goods sold, respectively, from continuing operations in future periods in our Consolidated Statement of Operations as the deferred revenue is earned and the associated services are rendered. We no longer offer extended warranties related to the inverter product line.
As of December 31, 2023 and 2022, the account receivable balance from Applied Materials, Inc. accounted for 26% and 18%, respectively, of our total accounts receivable. No other customer's account receivable exceeded 10% of our total accounts receivable in the periods presented.

NOTE 4. INCOME TAXES

The geographic distribution of pretax income from continuing operations was as follows:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Domestic | | $ | 5,969 | | $ | 24,541 | | $ | 17,526 |
| Domestic | | $ | (17,458) | | $ | 5,969 | | $ | 24,541 |
| Foreign | | | 235,772 | | | 124,170 | | | 140,621 |
| Foreign | | | 139,919 | | | 235,772 | | | 124,170 |
| Income from continuing operations, before income taxes | | $ | 241,741 | | $ | 148,711 | | $ | 158,147 |122,461 | | $ | 241,741 | | $ | 148,711 |

The income tax provision (benefit) from continuing operations is summarized as follows:

| | | | | | | | | | | |
| | | Years Ended December 31, | |
| | | 2023 | | 2022 | | 2021 | |2020 |
| Current: | | | | | | | | | | |
| Federal | | $ | 23,370 | | $ | (2,468) | | $ | 5,475 |
| Federal | | $ | 13,402 | | $ | 23,370 | | $ | (2,468) | |
| State | | | 1,949 | | | 929 | | | 1,927 |
| State | | | 589 | | | 1,949 | | | 929 | |
| Foreign | | | 20,267 | | | 14,217 | | | 16,216 |
| Foreign | | | 11,661 | | | 20,267 | | | 14,217 | |
| Total current provision | | | 25,652 | | | 45,586 | | | 12,678 | |
| | | | | | | | | | | |
| Deferred: | | | | | | | | | | |
| Federal | | | (6,742) | | | 762 | | | (312) |
| Federal | | | (5,455) | | | (6,742) | | | 762 | |
| State | | | (1,030) | | | (200) | | | 1,270 |
| State | | | (955) | | | (1,030) | | | (200) | |
| Foreign | | | 2,036 | | | 764 | | | (1,580) |
| Foreign | | | (27,530) | | | 2,036 | | | 764 | |
| Total deferred provision (benefit) | | | (33,940) | | | (5,736) | | | 1,326 | |
| Total provision for income taxes | | $ | 39,850 | | $ | 14,004 | | $ | 22,996 |
| Total income tax provision (benefit) | | $ | (8,288) | | $ | 39,850 | | $ | 14,004 | |
| Effective tax rate increased in 2022 compared to 2021, primarily driven by a change in tax law from the 2017 Tax Cuts and Jobs Act related to the capitalization of R&D expenses, as it impacts the net U.S. tax on foreign operations, that went into effect in January 2022, offset by the benefit of earnings in foreign jurisdictions which are subject to lower tax rates.| | | (6.8) | % | | 16.5 | % | | 9.4 | % |

Our effective tax rate decreased in 2023 compared to 2022, primarily driven by one-time tax benefits due to reductions in uncertain tax positions and increased tax credits.a change in valuation allowance assessment in 2023.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Income taxes per federal statutory rate | | $ | 25,850 | | $ | 50,766 | | $ | 31,229 |
| State income taxes, net of federal deduction | | | (490) | | | 510 | | | 534 |
| U.S. tax on foreign operations | | | 20,451 | | | 28,726 | | | 5,786 |
| Foreign derived intangible income deduction | | | (2,868) | | | (6,259) | | | (3,927) |
| Tax effect of foreign operations | | | (28,432) | | | (11,520) | | | (20,527) |(27,959) | | | (28,432) | | | (11,520) |
| Uncertain tax positions | | | 1,291 | | | 1,080 | | | (6,899) |
| Audit settlements | | | - | | | 34 | | | 7,764 |
| Unremitted earnings | | | - | | | 261 | | | (567) |
| Change in valuation allowance assessment | | | (25,636) | | | - | | | - |
| Tax credits | | | (5,857) | | | (6,149) | | | (2,292) |
| Tax credits | | | (7,289) | | | (5,857) | | | (6,149) |
| Change in valuation allowance | | | 12,927 | | | 268 | | | (73) |
| Withholding taxes | | | 413 | | | 756 | | | 4,265 |
| Executive compensation limitation | | | 1,955 | | | 641 | | | 1,926 |
| Other permanent items, net | | | (6,520) | | | (1,627) | | | (4,667) |
| Total provision for income taxes | | $ | 39,850 | | $ | 14,004 | | $ | 22,996 |
| Total income tax provision (benefit) | | $ | (8,288) | | $ | 39,850 | | $ | 14,004 |

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Deferred tax assets | | | | | | |
| Net operating loss and tax credit carryforwards | | $ | 73,954 | | $ | 47,733 |
| Interest expense limitation | | | 7,282 | | | 7,282 |
| Pension obligation | | | 9,960 | | | 7,301 |
| Bond hedge original issue discount | | | 24,755 | | | - |
| Employee bonuses and commissions | | | 6,654 | | | 9,276 |
| Depreciation and amortization | | | 24,787 | | | 25,879 |
| Operating lease liabilities | | | 12,054 | | | 10,136 |
| Other | | | 28,099 | | | 17,102 |
| Total deferred tax assets | | | 187,545 | | | 124,709 |
| Less: valuation allowance | | | (37,999) | | | (36,046) |
| Net Deferred tax assets, net of valuation allowance | | | 149,546 | | | 88,663 |
| | | | | | | |
| Deferred tax liabilities | | | | | | |
| Depreciation and amortization | | | 32,110 | | | 35,678 |
| Unremitted earnings | | | 3,277 | | | 4,115 |
| Operating lease right-of-use assets | | | 9,520 | | | 8,392 |
| Other | | | 4,107 | | | 1,801 |
| Total deferred tax liabilities | | | 49,014 | | | 49,986 |
| Net deferred tax assets | | $ | 100,532 | | $ | 38,677 |

Of the $100.5 million and $38.7 million net deferred tax asset on December 31, 2022 and 2021, respectively, $48.1 million and $47.2 2023 and 2022, respectively, $107.9 million and $48.1 million, respectively, are included as a net non-current deferred tax asset within other assets on

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

the Consolidated Balance Sheets. $7.4 million and $9.4 million, respectively, are included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

67

During the fourth quarter of 2023, we executed a tax planning strategy to facilitate the future utilization of deferred tax assets against which a valuation allowance had been previously recorded. We simultaneously evaluated the need for a valuation allowance and determined that the tax planning strategy resulted in sufficient positive evidence to more likely than not realize the deferred tax assets. As a result, we recorded at $25.6 million tax benefit from the release of the related valuation allowance.

ADVANCED ENERGY INDUSTRIES, INC.
NOTES to CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

As of December 31, 2023, we have recorded a total valuation allowance on $2.5 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $35.5 million and is associated primarily with operations in Germany, Hong Kong, and Switzerland. As of December 31, 2023, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized. The December 31, 2023 valuation allowance balance reflects a decrease of $1.9 million during the year. The change in the valuation allowance is primarily due to the release of valuation allowance in Germany, offset by increased losses in Hong Kong subject to a valuation allowance and increases from foreign exchange movements and current year's activity.

As of December 31, 2023, we had U.S., foreign and state tax loss carryforwards of $36.7 million, $287.1 million, and $103.9 million, respectively. Additionally, we had $1.8 million and $30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $0.1 million and $1.9 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign loss carryforwards, and $8.0 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore, China, and Malaysia. These tax holidays are in effect through June 30, 2027, December 31, 2025, and January 31, 2025, respectively. The tax holidays are and December 31, 2022, respectively. The tax holiday is conditional upon our meeting certain employment and investment thresholds. For the years ended December 31, 2023, 2022 and 2021, the impact of the tax holidays decreased foreign taxes by $14.3 million, $19.4 million, and $13.3 million, for 2022 and 2021, respectively, the benefit of the tax holiday respectively, and. the benefit on earnings per diluted share was $0.38, $0.52, and $0.35, respectively. $0.52, and $0.35, for 2022 and 2021, respectively.

As of December 31, 2023, we have undistributed earnings in certain foreign subsidiaries of approximately $34.9 million that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements. The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Balance at beginning of period | | $ | 7,467 | | $ | 5,513 | | $ | 9,673 |
| Additions based on tax positions taken during a prior period | | | 199 | | | 245 | | | 963 |
| Additions based on tax positions taken during a prior period - acquisitions | | | - | | | 1,025 | | | - |
| Additions based on tax positions taken during the current period | | | 1,070 | | | 836 | | | 566 |
| Reductions based on tax positions taken during a prior period | | | - | | | - | | | - |
| Reductions related to a lapse of applicable statute of limitations | | | (139) | | | (152) | | | (4,575) |
| Reductions related to a settlement with taxing authorities | | | (145) | | | - | | | (1,114) |
| Balance at end of period | | $ | 8,452 | | $ | 7,467 | | $ | 5,513 |

The unrecognized tax benefits of $8.5 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $0.7 million and $0.6 million of accrued interest and penalties on December 31, 2022

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

and 2021,
2023 and 2022, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2020.

The Inflation Reduction Act ("IRA") and CHIPS and Science Act ("CHIPS Act") were both enacted in August 2022. The IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock repurchases. The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related activities. The IRA and the CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no benefit to our consolidated financial statements for any of the periods presented, and we do not expect them to have a direct material impact on our future results of operations, financial condition, or cash flows.

The Organization for Economic Cooperation and Development is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. Various countries have implemented the legislation as of January 1, 2024, and we are still evaluating the impact. As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase in future years.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

We compute basic EARNINGS PER SHARE("EPS") by dividing Incomeavailable to common stockholders by The weighted-average number of common shares outstanding during the period. The diluted EPS computation is similar to basic EPS except we increase the denominator to include the number of additional common shares that would have been outstanding (using the if-converted and treasury stock methods) if our outstanding stock options and restricted stock units had been converted TO common shares (when such conversion is dilutive).
NOTE 5. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

Accumulated Other Comprehensive Income

The following table summarizes the components of and changes in accumulated other comprehensive income (loss), net of income taxes.


| | | | | | | | | | | | | |
| | | | Foreign Currency Translation | | | Change in Fair Value of Cash Flow Hedges | | | Minimum Pension Benefit Retirement Liability | | | Total |
| Balance at December 31, 2020 | | $ | 9,982 | | $ | (2,139) | | $ | (10,448) | | $ | (2,605) |
| Other comprehensive income prior to reclassifications | | | (12,262) | | | 3,116 | | | 8,585 | | | (561) |
| Amounts reclassified from accumulated other comprehensive income | | | - | | | 1,130 | | | 820 | | | 1,950 |
| Balance at December 31, 2021 | | | (2,280) | | | 2,107 | | | (1,043) | | | (1,216) |
| Other comprehensive income prior to reclassifications | | | (10,543) | | | 12,625 | | | 18,016 | | | 20,098 |
| Amounts reclassified from accumulated other comprehensive income | | | - | | | (2,884) | | | 322 | | | (2,562) |
| Balance at December 31, 2022 | | | (12,823) | | | 11,848 | | | 17,295 | | | 16,320 |
| Other comprehensive income prior to reclassifications | | | 2,027 | | | 4,502 | | | (5,455) | | | 1,074 |
| Amounts reclassified from accumulated other comprehensive income | | | - | | | (10,876) | | | (404) | | | (11,280) |
| Balance at December 31, 2023 | | $ | (10,796) | | $ | 5,474 | | $ | 11,436 | | $ | 6,114 |

Amounts reclassified from accumulated other comprehensive income (loss) to the specific caption within the Consolidated Statements of Operations were as follows:

| | | | | | | | | | | | |
| | | Years Ended December 31, | | To Caption on |
| | | 2023 | | 2022 | | 2021 | | Consolidated Statements of Operations |
| Change in fair value of cash flow hedges | | $ | (10,876) | | $ | (2,884) | | $ | 1,130 | | Interest expense |
| Minimum pension benefit retirement liability | | | (404) | | | 322 | | | 820 | | Other income (expense), net |
| Total reclassifications | | $ | (11,280) | | $ | (2,562) | | $ | 1,950 | | |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Earnings Per Share

The following table summarizes our earnings per share ("EPS"):

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Income from continuing operations | | | $ | 201,891 | | $ | 134,707 | | $ | 135,151 |130,749 | | $ | 201,891 | | $ | 134,707 |
| Less: income from continuing operations attributable to noncontrolling interest | | | | - | | | 16 | | | 44 |
| Income from continuing operations attributable to Advanced Energy Industries, Inc. | | | $ | 130,749 | | $ | 201,875 | | $ | 134,663 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Basic weighted-average common shares outstanding | | | | 37,480 | | | 37,463 | | | 38,143 |
| Assumed exercise of dilutive stock options and restricted stock units | | | 258 | | | 212 | | | 228 |
| Dilutive effect of stock awards | | | | 270 | | | 258 | | | 212 |
| Diluted weighted-average common shares outstanding | | | | 37,750 | | | 37,721 | | | 38,355 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| EPS from continuing operations | | | | | | | | | | |
| Basic EPS | | | $ | 3.49 | | $ | 5.39 | | $ | 3.53 |
| Diluted EPS | | | $ | 3.46 | | $ | 5.35 | | $ | 3.51 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Anti-dilutive shares not included above | | | | | | | | | | |
| Stock awards | | | | 95 | | | 67 | | | 1 |
| Warrants | | | | 3,486 | | | - | | | - |
| Total anti-dilutive shares | | | | 3,581 | | | 67 | | | 1 |

We compute basic earnings per share of common stock ("Basic EPS") by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

See Note 18. Long-Term Debt for information regarding our Convertible Notes, Note Hedges, and Warrants. For diluted earnings per share of common stock ("Diluted EPS"), we increase the weighted-average number of common shares outstanding during the period, as needed, to include the following:
diluted earnings per share | | $ | 5.35 || $ | 3.51 | | $ | 3.51 |


| | ● | Dilutive impact associated with the Convertible Notes using the if-converted method. The Convertible Notes are repayable in cash up to par value and in cash or shares of common stock for the excess over par value, as such when the stock price is lower than the strike price, there is no dilutive or anti-dilutive impact. Prior to conversion, we do not consider the Note Hedges for purposes of Diluted EPS as their effect would be anti-dilutive. Upon conversion, we expect the Note Hedges to offset the dilutive effect of the Convertible Notes when the stock price is above $137.46; |
| | ● | Additional common shares that would have been outstanding if our outstanding stock awards had been converted to common shares using the treasury stock method. We exclude any stock awards that have an anti-dilutive effect; and |
| | ● | Dilutive effect of the Warrants issued concurrently with the Convertible Notes using the treasury stock method. For all periods presented, the Warrants did not increase the weighted-average number of common shares outstanding because the exercise price of the Warrants exceeded the average market price of our common stock. |


Share Repurchases

To repurchase shares of our common stock, we periodically enter into stock repurchase agreements. The following table summarizes these repurchases:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| (in thousands, except per share amounts) | | | 2023 | | 2022 | | 2021 |
| Amount paid or accrued to repurchase shares | | | $ | 40,132 | | $ | 26,635 | | $ | 78,125 |
| Number of shares repurchased | | | | 378 | | | 356 | | | 901 |
| Average repurchase price per share | | | $ | 105.74 | | $ | 74.90 | | $ | 86.76 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

There were no shares repurchased from related parties. Repurchased shares were retired and assumed the status of authorized and unissued shares.

In July 2022, the Board of Directors approved an increase to the share repurchase plan that increased the remaining amount authorized for future repurchases to a maximum of $200.0 million with no time limitation. At December 31, 2023, the remaining amount authorized by the Board of Directors ("our Board" or "the Board") for future share repurchases was $199.2 million with no time limitation.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 6. FAIR VALUE MEASUREMENTS

The following tables present information about our assets and liabilities measured at fair value on a recurring basis.

| | | | | | | | | | | | | | | |
| | | | | December 31, 2023 |
| Description | | Balance Sheet Classification | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | | | | Fair Value |
| Assets: | | | | | | | | | | | | | | |
| Certificates of deposit | | Other current assets | | $ | - | | $ | 163 | | $ | - | | $ | 163 |
| Interest rate swaps | | Other current assets | | $ | - | | | 6,995 | | $ | - | | | 6,995 |
| Available for sale investments | | Other assets | | | - | | | 5,952 | | | - | | | 5,952 |
| Net assets measured at fair value on a recurring basis | | | | $ | - | | $ | 13,110 | | $ | - | | $ | 13,110 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | December 31, 2022 |
| Description | | Balance Sheet Classification | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | | | | Fair Value |
| Assets: | | | | | | | | | | | | | | |
| Certificates of deposit | | Other current assets | | $ | - | | $ | 2,128 | | $ | - | | $ | 2,128 |
| Interest rate swaps | | Other assets | | | - | | | 15,310 | | | - | | | 15,310 |
| Net assets measured at fair value on a recurring basis | | | | $ | - | | $ | 17,438 | | $ | - | | $ | 5,035 |
| | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | |
| Contingent consideration | | Other current liabilities | | $ | - | | $ | - | | $ | 1,738 | | $ | 1,738 |
| Total liabilities measured at fair value on a recurring basis | | | | $ | - | | $ | - | | $ | 1,738 | | $ | 1,738 |
17,438 |

For all periods presented, there were no transfers into or out of Level 3.

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

Changes in foreign currency exchange rates impact our results of operations and cash flows. We may manage these risks through the use of derivative financial instruments, primarily forward contracts with banks. These forward contracts manage the exchange rate risk associated with assets and liabilities denominated in nonfunctional currencies. Typically, we execute these derivative instruments for one-month periods and do not designate them as hedges; however, they do partially offset the economic fluctuations of certain of our assets and liabilities due to foreign exchange rate changes.

There were no foreign currency forward contracts outstanding at December 31, 2023 or 2022.

Gains and losses related to foreign currency exchange contracts were offset by corresponding gains and losses on the revaluation of the underlying assets and liabilities. Both are included as a component of other income (expense),

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

net in our Consolidated Statements of Operations.As of December 31, 2022 and 2021, there were no foreign currency forward contracts outstanding.

We have executed interest rate swap contracts with independent financial institutions to partially reduce the variability of cash flows in LIBOR indexed debt interest payments on our Term Loan Facility (under our existing Credit Agreement dated September 10, 2019, as amended). These transactions that fix a portion of the interest payments related to the outstanding principal balance on our Term Loan Facility to a total interest rate of 1.172%. The interest rate swap contracts expire on September 10, 2024 and are accounted for as cash flow hedging instruments.

The interest rate swap contracts fixed a portion of the outstanding principal balance on our Term Loan.TO a total interest rate of 1.271%. This is comprised of an 0.521% average fixed rate per annum in exchange for a variable interest rate based on one-month USD-LIBOR-BBA plus the credit spread in our existing Credit Agreement (see Note 21. Credit Facility), which is 75 basis points at current leverage ratios.
See Note 18. Long-term Debt for information regarding the Term Loan.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The following table summarizes the notional amount of our qualified hedging instruments:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Interest rate swap contracts | | $ | 220,719 | | $ | 238,219 |

The following table summarizes the amounts net of tax recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets for qualifying hedges.

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Interest rate swap contract gains | | $ | 5,350 | | $ | 11,779 |

See Note 6. Fair Value Measurements for information regarding the fair value of derivative instruments.

As a result of using derivative financial instruments, we are exposed to the risk that counterparties to contracts could fail to meet their contractual obligations. We manage this credit risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty.

NOTE 8. ACCOUNTS RECEIVABLE, NET

We record accounts and other receivable at net realizable value. Components of accounts and other receivable, net of reserves, were as follows:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2022 | | 2021 |
| Amounts billed, net | | $ | 283,617 | | $ | 217,549 |
| Unbilled receivables | | | 17,066 | | | 19,678 |
| Total receivables, net | | $ | 300,683 | | $ | 237,227 |

"Amounts billed, net" represents amounts invoiced to customers in accordance with our terms and conditions. These receivables are short term in nature and do not include any financing components.

"Unbilled receivables" consist of amounts where we satisfied our contractual obligations associated with customer inventory stocking agreements. Such amounts typically become billable upon the customer's consumption of the inventory. We anticipate invoicing and collecting substantially all unbilled receivables within the next 12 months.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The following table summarizes the changes in expected credit losses related to receivables:

| | | | | | | | | | |
| | | December 31, | | December 31, | | December 31, |
| | | 2023 | | 2022 | | 2021 |
| Balance at beginning of period | | $ | 1,814 | | $ | 5,784 | | $ | 7,602 |
| Additions | | | 220 | | | 441 | | | 135 |
| Deductions - write-offs, net of recoveries | | | (281) | | | (4,381) | | | (687) |
| Foreign currency translation | | | 9 | | | (30) | | | (18) |
| Other | | | - | | | - | | | (1,248) |
| Balance at end of period | | $ | 1,762 | | $ | 1,814 | | $ | 5,784 |

NOTE 9. INVENTORIES

We value inventories at the lower of cost or net realizable value, and computed on a first-in, first-out basis. Components of inventories were as follows:

| | | | | | | |
|
| | December 31, | | December 31, |
| | | | 2023 | | 2022 |
| Parts and raw materials | | | $ | 249,698 | | $ | 286,955 |
| Work in process | | | | 14,595 | | | 23,002 |
| Finished goods | | | 66,055 | | | 52,823 |
| Finished goods | | | | 71,844 | | | 66,055 |
| Total | | | $ | 336,137 | | $ | 376,012 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 10. PROPERTY AND EQUIPMENT, NET

Property and equipment, net is comprised of the following:

| | | | | | | | | |
| | | Estimated Useful | | December 31, | | December 31, |
| | | Life (in years) | | 2023 | | 2022 |
| Buildings, machinery, and equipment | | 5 to 25 | | $ | 191,744 | | $ | 165,673 |
| Software | | 3 to 5 | | | 24,526 | | | 21,120 |
| Computer equipment, furniture, fixtures, and vehicles | | 3 to 5 | | | 19,281 | | | 15,161 |
| Leasehold improvements | | 2 to 10 | | | 79,764 | | | 63,103 |
| Construction in process | | | | | 18,226 | | | 5,914 |
| Capital projects in process | | | | | 21,721 | | | 18,226 |
| | | | | | 337,036 | | | 283,283 |
| Less: Accumulated depreciation | | | | | (169,371) | | | (134,821) |
| Property and equipment, net | | | | $ | 167,665 | | $ | 148,462 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The following table summarizes property and equipment, net by geographic area:

| | | | | | | |
| | | December 31, |
| | | 2023 | | 2022 |
| United States | | $ | 63,222 | | $ | 43,963 |
| Asia | | | 96,045 | | | 98,684 |
| Europe and other | | | 8,398 | | | 5,815 |
| Total | | $ | 148,462 | | $ | 114,830 |
| Total | | $ | 167,665 | | $ | 148,462 |

The following table summarizes depreciation expense. All depreciation expense is recorded in income from continuing operations:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023
| Depreciation expense | | $ | 34,182 | | $ | 30,833 | | $ | 27,641 |

NOTE 12. GOODWILL

The following table summarizes the changes in goodwill:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2022 | | 2021 |
| Balance at beginning of period | | $ | 212,190 | | $ | 209,983 |
| Depreciation expense | | | $ | 38,279 | | $ | 34,182 | | $ | 30,833 |
| Measurement period adjustments | | | 40 | | | (1,426) |
| Additions from acquisition | | | 70,686 | | | 5,877 |
| Foreign currency translation | | | (1,483) | | | (2,244) |
| Balance at end of period | | $ | 281,433 | | $ | 212,190 |

Additions and adjustments are the result of business combinations. Refer to Note 2. Acquisitions.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 11. INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the following:

| | | | | | | | | | | | |
| | | December 31, 2023 |
| | | Gross Carrying | | Accumulated | | Net Carrying | | Weighted Average Remaining |
| | | Amount | | Amortization | | Amount | | Useful Life (in years) |
| Technology | | $ | 97,237 | | $ | (47,196) | | $ | 50,041 |
| Technology | | $ | 97,961 | | $ | (60,412) | | $ | 37,549 | | 6.8 |
| Customer relationships | | | 168,685 | | | (58,835) | | | 109,850 | | 9.5 |
| Trademarks and other | | | 27,036 | | | (10,408) | | | 16,628 |
| Trademarks and other | | | 27,141 | | | (13,062) | | | 14,079 | | 5.6 |
| Total | | $ | 291,904 | | $ | (102,378) | | $ | 189,526 |
| Total | | $ | 293,787 | | $ | (132,309) | | $ | 161,478 | | 8.5 |
| | | | | | | | | | | | |
| | | December 31, 2022 |
| | | Gross Carrying | | Accumulated | | Net Carrying | | |
| | | Amount | | Amortization | | Amount | | |
| Technology | | $ | 91,461 | | $ | (35,854) | | $ | 55,607 |
| Technology | | $ | 97,237 | | $ | (47,196) | | $ | 50,041 | | |
| Customer relationships | | | 167,631 | | | (44,774) | | | 122,857 | | |
| Trademarks and other | | | 27,244 | | | (7,964) | | | 19,280 |
| Trademarks and other | | | 27,036 | | | (10,408) | | | 16,628 | | |
| Total | | $ | 237,411 | | $ | (78,005) | | $ | 159,406 |

| Total | | $ | 291,904 | | $ | (102,378) | | $ | 189,526 | | |
At December 31, 2022, the weighted average remaining useful life of intangibles subject to amortization was 9.1 years.

Amortization expense related to intangible assets was as follows:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Amortization expense | | | $ | 28,254 | | $ | 26,114 | | $ | 22,060 |

Estimated future amortization expense related to intangibles is as follows:

| | | | |
| Year Ending December 31, | | | |
| 2024 | | $ | 25,250 |
| 2025 | | | 21,013 |
| 2026 | | | 19,297 |
| 2027 | | | 17,384 |
| 2027 | | | 16,141 |
| Thereafter | | | 62,393 |
| Total | | $ | 161,478 |

The following table summarizes the changes in goodwill:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Balance at beginning of period | | $ | 281,433 | | $ | 212,190 |
| Measurement period adjustments | | | 353 | | | 40 |
| Additions from acquisition | | | - | | | 70,686 |
| Foreign currency translation | | | 2,054 | | | (1,483) |
| Balance at end of period | | $ | 283,840 | | $ | 281,433 |

Additions and adjustments are the result of business combinations. Refer to Note 2. Acquisitions.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 12. RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES

Details of restructuring, asset impairments, and other charges are as follows:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Restructuring | | $ | 25,134 | | $ | 6,814 | | $ | 4,752 |
| Asset impairments | | | 1,446 | | | - | | | - |
| Other charges | | | 397 | | | - | | | - |
| Total restructuring, asset impairments, and other charges | | $ | 26,977 | | $ | 6,814 | | $ | 4,752 |

RestructuringCOSTS

We have several restructuring plans in process:
in the fourth quarter of 2022 management approved a restructuring Plan(the "2022 plan which is expected


2023 Plan

In 2023, we approved a plan intended to optimize and consolidate our manufacturing operations and functional support groups as well as a general reduction-in-force to align to our expenses to revenue levels (the "2023 Plan"). We expect additional charges of $1.0 million to $2.0 million to be incurred in future periods through the second quarter of 2025. We anticipate the 2023 Plan will be substantially completed by the end of 2024, with the final activities concluding by June 2025.

2022 Plan

This plan was approved to further improve our operating efficiencies and drive the realization of synergies from our business combinations by consolidating our operations, optimizing our factory footprint, including moving certain production into our higher volume factories, and reducing redundancies, and lowering our cost structure. We anticipate the 2022 Plan will be substantially completed and associated expenses will be incurred by 2024.by the end of 2024.

In 2018 we committed to a restructuring Plan(the "2018 plan
2018 Plan

The purpose of this plan is to optimize our manufacturing footprint and to improve our operating efficiencies and synergies related to business combinations. We incurred severance costs primarily related to the transition and exit of our facility in Shenzhen, China and actions associated with synergies related to the acquisition of Artesyn Embedded Technologies, Inc.'s embedded power business. This plan is complete with the final closure of our Shenzhen facility expected in early 2023.The table below summarizes the in February 2023.

Charges related to our restructuring plans are as follows:

| | | | | | | | | | |
| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Severance and related charges | | $ | 25,134 | | $ | 6,469 | | $ | 3,467 |
| Facility relocation and closure charges | | | - | | | 345 | | | 1,285 |
| Total restructuring charges | | $ | 25,134 | | $ | 6,814 | | $ | 4,752 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

| | | | | | | |
| | | | | |
| | | Cumulative Cost |
| | | | | | | | | Through |
| | | | | | | | | December 31, 2023 |
| | | 2023 Plan | | 2022 Plan | | 2018 Plan | | Total |
| Severance and related charges | | $ | 17,103 | | $ | 13,987 | | $ | 20,893 | | $ | 51,983 |
| Facility relocation and closure charges | | | - | | | - | | | 7,160 | | | 7,160 |
| Total restructuring charges | | $ | 17,103 | | $ | 13,987 | | $ | 28,053 | | $ | 59,143 |

Our restructuring liabilities are included in other accrued expenses in our Consolidated Balance Sheets. Changes in restructuring liabilities were as follows:

| | | | | | | | | | | | | |
| | | 2023 Plan | | 2022 Plan | | 2018 Plan | | Total |
| December 31, 2020 | | $ | - | | $ | - | | $ | 10,641 | | $ | 10,641 |
| Costs incurred and charged to expense | | | - | | | - | | | 4,752 | | | 4,752 |
| Costs paid or otherwise settled | | | - | | | - | | | (6,127) | | | (6,127) |
| Foreign currency translation | | | - | | | - | | | (3) | | | (3) |
| December 31, 2021 | | $ | - | | $ | - | | $ | 9,263 | | $ | 9,263 |
| Costs incurred and charged to expense | | | - | | | 5,788 | | | 1,026 | | | 6,814 |
| Costs paid or otherwise settled | | | - | | | - | | | (8,751) | | | (8,751) |
| Foreign currency translation | | | - | | | - | | | (116) | | | (116) |
| December 31, 2022 | | $ | - | | $ | 5,788 | | $ | 1,422 | | $ | 7,210 |
| Costs incurred and charged to expense | | | 17,103 | | | 8,199 | | | (168) | | | 25,134 |
| Costs paid or otherwise settled | | | (2,879) | | | (11,057) | | | (1,066) | | | (15,002) |
| December 31, 2023 | | $ | 14,224 | | $ | 2,930 | | $ | 188 | | $ | 17,342 |

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Asset Impairments

In connection with vacating facilities, we remeasured the operating lease right-of-use assets at fair value using Level 2 measurements and recorded a $1.4 million impairment charge.

NOTE 13. WARRANTIES

Our sales agreements include customary product warranty provisions, which generally range from 12 to 24 months after shipment. We record the estimated warranty obligations cost when we recognize revenue. This estimate is based on historical experience by product and configuration.

Our estimated warranty obligation is included in other accrued expenses in our Consolidated Balance Sheets. Changes in our product warranty obligation were as follows:

| | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 |
| Balance at beginning of period | | | $ | 5,702 | | $ | 3,350 |
| Additions from acquisitions | | | | - | | | 181 |
| Net increases to accruals | | | | 2,317 | | | 5,620 |
| Warranty expenditures | | | | (4,017) | | | (3,408) |
| Effect of changes in exchange rates | | | | 5 | | | (41) |
| Balance at end of period | | | $ | 4,007 | | $ | 5,702 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 14.LEASES

NOTE 16. LEASES

Components of total operating lease cost were as follows:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Operating lease cost | | | $ | 22,571 | | $ | 22,626 | | $ | 23,443 |
| Short-term and variable lease cost | | | | 4,150 | | | 4,838 | | | 2,555 |
| Total operating lease cost | | | $ | 26,721 | | $ | 27,464 | | $ | 25,998 |

Payments on our operating lease liabilities are as follows:

| | | | |
| Year Ending December 31, | | | |
| 2024 | | $ | 22,523 |
| 2025 | | | 19,341 |
| 2026 | | | 16,652 |
| 2027 | | | 13,649 |
| 2028 | | | 13,244 |
| Thereafter | | | 53,003 |
| Total lease payments | | | 138,412 |
| Less: Interest | | | (31,338) |
| Present value of lease liabilities | | $ | 107,074 |

In addition to the above, we have lease agreements with total payments of $48.9 million that commence on various dates in 2024 and 2025 and extend through 2037.

The following tables present additional information about our lease agreements:

| | | | | | | | | |
| | | | December 31, | | | December 31, | |
| | | | 2023 | | 2022 | |
| Weighted average remaining lease term (in years) | | | | 8.3 | | | 8.9 | |
| Weighted average discount rate | | | | 5.0 | % | | 4.6 | % |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

| | | | | | | | | ||
| | | Year Ended December 31, |
| | 2023 | | 2022 | | 2021 | | 2020 |
| Cash paid for operating leases | | $ | 22,988 | | $ | 22,287 | | $ | 23,668 |
| Right-of-use assets obtained in exchange for operating lease liabilities | | $ | 14,321 | | $ | 17,022 | | $ | 16,399 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 15. EMPLOYEE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

Defined Contribution Plans

We have a 401(k) profit-sharing and retirement savings plan covering substantially all full-time U.S. employees. Participants may defer up to the maximum amount allowed permitted by law. Participants are immediately vested in both their own contributions and profit-sharing contributions. Profit-sharing contributions, which are discretionary, are approved by the Board. of Directors. For the year ended December 31, For the years ended December 31, 2023 and 2022, we based our profit-sharing contribution on matching 100% of employee contributions up to 3% of compensation plus an additional match of 50% on the next 2% of compensation. For the year ended December 31, 2021 and 2020 we based our profit-sharing contribution on matching 50% of employee contributions up to 6% of the employee's compensation.

During the years ended December 31, 2023, 2022, and 2021 we recognized total defined contribution plan costs of $5.1 million, $4.5 million, and $3.1 million, and $2.6 million, respectively.

Defined Benefit Plans

We maintain defined benefit pension plans for certain of our non-U.S. employees in the United Kingdom, Germany, and Philippines. Each plan is managed locally and in accordance with respective local laws and regulations.

To measure the expense and related benefit obligation, we make various assumptions, including discount rates used to value the obligation, expected return on plan assets used to fund these expenses, and estimated future inflation rates. We base these assumptions on historical experience as well as current facts and circumstances. We use an actuarial analysis to measure the expense and liability associated with pension benefits.

The information provided below includes one pension plan which is part of discontinued operations. As such, for all periods presented, all related expenses are reported in discontinued operations in the Consolidated Statements of Operations.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Our projected benefit obligation and plan assets for defined benefit pension plans and the related assumptions used to determine the related liabilities are as follows:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Projected benefit obligation, beginning of year | | $ | 56,520 | | $ | 85,776 |
| Service cost | | | 1,016 | | | 1,133 |
| Interest cost | | | 2,909 | | | 1,819 |
| Actuarial gain | | | (23,677) | | | (8,682) |
| Actuarial loss (gain) | | | 4,808 | | | (23,677) |
| Benefits paid | | | (1,502) | | | (2,010) |
| Benefits paid | | | (1,452) | | | (1,502) |
| Translation adjustment | | | 1,852 | | | (7,029) |
| Projected benefit obligation, end of year | | | 65,653 | | | 56,520 |
| | | | | | | |
| Fair value of plan assets, beginning of year | | $ | 12,489 | | $ | 18,521 |
| Expected return | | | 654 | | | 535 |
| Contributions | | | 1,443 | | | 1,430 |
| Benefits paid | | | (1,124) | | | (1,112) |
| Benefits paid | | | (1,140) | | | (1,124) |
| Actuarial gain (loss) | | | 17 | | | (5,060) |
| Translation adjustment | | | 652 | | | (1,813) |
| Fair value of plan assets, end of year | | | 14,115 | | | 12,489 |
| Funded status of plan | | $ | (51,538) | | $ | (44,031) |

The components of net periodic pension benefit cost recognized in our Consolidated Statements of Operations for the periods presented are as follows:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| Service cost | | $ | 1,133 | | $ | 1,282 | | $ | 1,068 |
| Service cost | | $ | 1,016 | | $ | 1,133 | | $ | 1,282 |
| Interest cost | | | 1,819 | | | 1,452 | | | 1,716 |
| Interest cost | | | 2,909 | | | 1,819 | | | 1,452 |
| Expected return on plan assets | | | (654) | | | (535) | | | (642) |
| Amortization of actuarial gains and losses | | | (404) | | | 322 | | | 820 |
| Net periodic pension cost | | $ | 2,867 | | $ | 2,739 | | $ | 2,912 |

Assumptions used in the determination of the net periodic pension cost are:

| | | | | | | | |
| | | Years Ended December 31, | |
| | | 2023 | | 2022 | | 2021 | |
| Discount rate | | 2.6 | % | 1.6 | % |1.8 | % || Discount rate used for net periodic pension costs | | 5.1 | % | 2.6 | % | 1.6 | % |
| Discount rate used for pension benefit obligations | | 4.4 | % | 5.1 | % | 2.6 | % |

| Expected long-term return on plan assets | | 5.2 | % | 3.2 | % | 3.2 | % |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

The fair value of our qualified pension plan assets by category was as follows:

| | | | | | | | | | | | | |
| | | December 31, 2023 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Diversified Growth Fund | | $ | - | | $ | 11,606 | | $ | - | | $ | 11,606 |
| Corporate Bonds | | | - | | | 1,212 | | | - | | | 1,212 |
| Insurance Contracts | | | - | | | - | | | 799 | | | 799 |
| Cash | | | 498 | | | - | | | - | | | 498 |
| Total | | $ | 258 | | $ | 11,433 | | $ | 798 | | $ | 12,489 |
| Total | | $ | 498 | | $ | 12,818 | | $ | 799 | | $ | 14,115 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

| | | | | | | | | | | | | |
| | | December 31, 2022 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Diversified Growth Fund | | $ | - | | $ | 9,100 | | $ | - | | $ | 9,100 |
| Corporate Bonds | | | - | | | 2,333 | | | - | | | 2,333 |
| Insurance Contracts | | | - | | | - | | | 798 | | | 798 |
| Cash | | | 258 | | | - | | | - | | | 258 |
| Total | | $ | 648 | | $ | 16,889 | | $ | 984 | | $ | 18,521 |
| Total | | $ | 258 | | $ | 11,433 | | $ | 798 | | $ | 12,489 |

The diversified growth fund aims to generate an "equity-like" return over an economic cycle with significantly reduced volatility relative to equity markets and has the scope to use a diverse range of asset classes, including equities, bonds, cash, and alternatives (e.g., property, infrastructure, high yield bonds, floating rate debt, private, equity, hedge funds and currency). These investments are intended to provide a degree of protection against changes in the value of our plan's liabilities related to changes in long-term expectations for interest rates and inflation.

Expected future payments during the next ten years for our defined benefit pension plans are as follows:

| | | | |
| Year Ending December 31, | | | |
| 2024 | | $ | 3,884 |
| 2025 | | | 2,205 |
| 2026 | | | 4,224 |
| 2027 | | | 2,927 |
| 2028 | | | 3,217 |
| 2029 to 2033 | | | 21,309 |

NOTE 16. STOCK-BASED COMPENSATION

The Board of Directors Compensation Committee The Compensation Committee of our Board administers our stock plans. As of December 31, 2023, we have two active stock-based incentive compensation plans: the 2023 Omnibus Incentive Plan ("the 2023 Plan") and the Employee Stock Purchase Plan ("ESPP"). The 2023 Plan was approved on April 27, 2023. We issue all new equity compensation grants under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans.

On May 4, 2017, The stockholders approved the 2017 Plan, and all shares that were then available for issuance under the 2008 Omnibus Incentive Plan ("the 2008 Plan") are now available for issuance under the 2017 Plan. The 2017 Plan and 2008 Plan provide The 2023 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units, (including deferred stock units), unrestricted stock, and dividend equivalent rights. Any of the awards issued may be issued as performance-based awards to align stock compensation awards to the attainment of annual or long-term performance goals.

The following table summarizes information related to our stock-based incentive compensation plans:

| | | |
| | | |
| | | December 31, 2023 |
| Shares available for future issuance under the 2023 Plan | | 2,323 |
| Shares available for future issuance under the ESPP | | 577 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Stock-based Compensation Expense

We recognize stock-based compensation expense based on the fair value of the awards issued and the functional area of the employee receiving the award. Stock-based compensation was as follows:

| | | | | | | | | | | |
| | | | Years Ended December 31, |
| | | | 2023 | | 2022 | | 2021 |
| Stock-based compensation expense | | | $ | 31,001 | | $ | 19,849 | | $ | 15,739 |

Estimated forfeiture rates for our stock-based compensation expense applicable to stock options and RSUs were approximately 9%, 8% and 5% for the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Stock Units

Generally, we grant RSUs with a three-year Generally, we grant restricted stock units ("RSUs") with a three year time-based vesting schedule. Certain RSUs contain performance-based or market-based vesting conditions in addition to the time-based vesting requirements. RSUs are generally granted with a grant date fair value based on the market price of our stock on the date of grant.

Changes in our unvested RSUs were as follows:

| | | | | | |
| | | Year Ended December 31, 2023 |
| | | | | Weighted- |
| | | | | Average |
| | | Number of | | Grant Date |
| | | RSUs | | Fair Value |
| RSUs outstanding at beginning of period | | 803 | | $ | 78.46 |
| RSUs granted | | 408 | | $ | 100.04 |
| RSUs vested | | (228) | | $ | 85.47 |
| RSUs forfeited | | (255) | | $ | 61.39 |
| RSUs forfeited | | (66) | | $ | 81.40 |
| RSUs outstanding at end of period | | 917 | | $ | 85.96 |

The total intrinsic value of RSUs converted to shares The weighted-average grant date fair value for RSUs granted in the years ended December 31, 2023, 2022, and 2021 was $100.04, $74.62, and $94.60, respectively. The fair value of RSUs vested for the years ended December 31, 2023, 2022 and 2021 was $19.5 million, $13.5 million, and $11.2 2022 2021 and 2020 was $13.6 million, $19.2 million, and $9.2 million, respectively. As of December 31, 2023, there was $40.5 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested RSUs, that we expect to recognize through December 2026, with a weighted-average remaining vesting period of 1.1 years.

Stock Options

Generally, we grant stock option awards with an exercise price equal to the market price of our stock at the date of grant and with either a three or four-year vesting schedule or performance-based vesting. Stock option awards generally have a term of ten years.

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Changes in our stock options were as follows:

| | | | | | | | |
| | | Year Ended December 31, 2023 |
| | | | | Weighted- | | Weighted- |
| | | | | Average | | Average |
| | | Number of | | Exercise Price | | Remaining |
| | | Options | | per Share | | Contractual Life |
| Options outstanding at beginning of period | | 112 | | $ | 24.41 | | |
| Options granted | | 76 | | $ | 85.97 | | |
151 | | $ | 55.48 | | 5.63 years |
| Options exercised | | (37) | | $ | 23.26 | | |
| Options exercised | | (62) | | $ | 24.67 | | |
| Options outstanding at end of period | | 89 | | $ | 76.69 | | 7.10 years |
| Options vested at end of period | | 39 | | $ | 64.74 | | 5.68 years |

The total intrinsic value of options exercised for the years ended December 31, 2023, 2022 and 2021 was $4.6 million, $2.6 million, and $2.6 million, respectively. Options outstanding on December 31, 2022 have aggregate intrinsic value of $4.6 millionAs of December 31, 2023, the aggregate intrinsic value of options outstanding and exercisable was $2.9 million and $1.7 million, respectively. As of December 31, 2023, there was $1.0 million of total unrecognized compensation cost, net of expected forfeitures, related to the unvested options that we expect to recognize over a remaining period of 1.2 years.

Employee Stock Purchase Plan

The ESPP, a stockholder-approved plan, provides for the issuance of rights to purchase up to 1.5 million shares of common stock. Most employees are eligible to participate in the ESPP if employed for at least 20 hours per week during at least five months per calendar year. Participating employees may contribute up to the lesser of 15% of their eligible earnings or $5,000 during each plan period. Currently, the plan period is six months. The purchase price of common stock purchased under the ESPP is currently equal to the lower of 1) 85% of the fair market value of our common stock on the commencement date of each plan period or 2) 85% of the fair market value of our common shares on each plan period purchase date.

As of December 31, 2023, there was $0.5 million of total unrecognized compensation cost related to the ESPP that we expect to recognize over a remaining period of five months.

Estimating Fair Value

We estimated the fair value of each stock option and ESPP purchase right on the grant date using the Black-Scholes-Merton option pricing model with the following assumptions:

| | | | |
| | | Year Ended December 31, | |
| Stock Options | | 2022 | |
| Risk-free interest rate | | 2.18 | % |
| Expected dividend yield rate | | 0.5 | % |
| Expected term | | 4.7 years | |
| Expected volatility | | 48.6 | % |
| Weighted average grant date fair value of options granted | | $ 35.84 | |

| | | | | | | | |
| | | Years Ended December 31, | |
| ESPP | | 2022 | | 2021 | | 2020 | |
| Risk-free interest rates | | 1.63% - 4.65% | % | 0.04% - 0.10 | % | 0.10% - 0.18% | % |
| Expected dividend yield rate | | 0.1 | % | - | % | - | % |
| Expected term | | 0.5 years | | 0.5 years | | 0.5 years | |
| Expected volatility | | 43.7 | % | 42.7 | % | 70.1 | % |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 17. COMMITMENTS AND CONTINGENCIES

We are involved in disputes and legal actions arising in the normal course of our business. While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations. An unfavorable decision in intellectual property litigation also could require material changes in production processes and products or result in our inability to ship products or components found to have violated third party intellectual property rights. We accrue loss contingencies in connection with our commitments and contingencies, including litigation, when it is probable that a loss has occurred, and the amount of such loss can be reasonably estimated. We are not currently a party to any legal action that we believe would reasonably have a material adverse impact on our business, financial condition, results of operations or cash flows.

82

During the year ended December 31, 2022, Applied Materials, Inc. and Lam Research Corporation accounted for 20% and 14%, respectively, of our total revenue compared TO 20% and 10%, respectively, of our total revenue during the year ended December 31, 2021 and 18. and 10%, respectively, of our total revenue during the year ended December 31, 2020.
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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

NOTE 18. LONG-TERM DEBT

Long-term debt on our Consolidated Balance Sheets consists of the following:

| | | | | | | |
| | | December 31, | |


As of December 31, |
| | | 2023 | | 2022 |
2022 and 2021, the account receivable balance from Applied Materials, Inc. accounted for 18% of our total accounts receivable. No other customer's account receivable exceeded 10% of our total accounts receivable in the periods presented.
| Convertible Notes due 2028 | | $ | 575,000 | | $ | - |
In September 2019, in connection with the acquisition of Artesyn, we entered into a credit agreement ("Credit Agreement") that provided aggregate financing of $500.0 million, consisting of a $350.0 million senior unsecured Term Loan Facility (the "Term Loan Facility") and a $150.0 million senior unsecured revolving facility (the "Revolving Facility" and together with the Term Loan Facility, the "Credit Facility").
| Term Loan Facility due 2026 | | | 355,000 | | | 375,000 |
| Gross long-term debt, including current maturities | | | 930,000 | | | 375,000 |
| Less: debt discount | | | (14,321) | | | (1,738) |
| Net long-term debt, including current maturities | | | 915,679 | | | 373,262 |
In September 2021, we amended the Credit Agreement whereby we borrowed an additional $85.0 million, which increased the aggregate amount outstanding under the Term Loan Facility to $400.0 million. In addition, we increased the Revolving Facility capacity by $50.0 million to $200.0 million. Both the Term Loan Facility and Revolving Facility mature on September 9, 2026
| Less: current maturities | | | (20,000) | | | (20,000) |
| Net long-term debt | | $ | 895,679 | | $ | 353,262 |

For all periods presented, we were in compliance with the covenants under all debt agreements. Contractual maturities of our gross long-term debt, including current maturities, are as follows:

| | | | |
| Year Ending December 31, | | |
| 2024 | | $ | 20,000 |
| 2025 | | | 20,000 |
| 2026 | | | 315,000 |
| 2027 | | | - |
| 2028 | | | 575,000 |
| Total | | $ | 930,000 |

The following table summarizes borrowings:under our Credit Facility and the associated interest rate.
The following table summarizes our borrowings:

| | | | | | |
| | | December 31, 2023 |
| | | Balance | | Interest |
| | | | | Rate |
| Convertible Notes | | $ | 575,000 | | 2.50% |
| Term Loan Facility at fixed interest rate due to interest rate swap | | | 220,719 | | 1.17% |
| Term Loan Facility at variable interest rate | | | 134,281 | | 6.21% |
| Total borrowings | | $ | 930,000 | | |

The interest rate swap contracts expire on September 10, 2024. After that date, this portion of our Term Loan Facility will be subject to a variable interest rate. For more information, see Note 7. Derivative Financial Instruments. The Term Loan Facility and Revolving Facility bear interest, at our option, at a rate based on the Base Rate or SOFR, as defined in the Credit Agreement, plus an applicable margin.

The following table summarizes interest expense related to our debt:

| | | | | | | | | | | |
| | | | Years Ended December 31, |

| | | 136,781 | |5.134% | | - |
| Revolving Facility subject to a variable Interest rate | | | - | | 5.134% | | 0.10% |
| | | | 2023 | | 2022 | | 2021 |
| Interest expense | | | $ | 15,186 | | $ | 6,607 | | $ | 3,969 |
| Amortization of debt issuance costs | | | | 1,330 | | | 547 | | | 822 |
| Total borrowings under the Credit Agreement | Total interest expense related to debt | | | $ | 16,516 | | $ | 7,154 | | $ | 4,791 |

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

Convertible Senior Notes due 2028

On September 12, 2023, we completed a private, unregistered offering of $575.0 million aggregate principal amount 2.50% convertible senior notes ("Convertible Notes") and received net proceeds of approximately $561.1 million after the discount for the initial purchasers' fees. We used $40.1 million of the net proceeds to repurchase approximately 0.4 million shares of common stock and $40.1 million to fund the net cost of convertible note hedge transactions ("Note Hedges") after such costs were offset by the proceeds from the sale of warrants to purchase our common stock ("Warrants").
for more information on the interest.rate swap that fixes The interest rate for a portion of our Term Loan Facility, see Note 8. Derivative FINANCIAL Instruments. the Term Loan Facility and Revolving Facility bear interest, at our option at a rate based on a reserve adjusted "Eurodollar Rate" or "Base Rate," as defined in the Credit Agreement plus an applicable margin.


The Convertible Notes mature on September 15, 2028, unless earlier repurchased, redeemed, or converted. Interest is payable semi-annually in arrears in March and September. We do not maintain a sinking fund.

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after September 20, 2026 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period). The redemption price is 100% of the principal amount plus accrued and unpaid interest.

Prior to May 15, 2028, holders have the option to convert all or a portion of their Convertible Notes under the following circumstances:

| | ● | during any calendar quarter if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days is greater than or equal to 130% of the conversion price on each applicable trading day; |
| | ● | during the five business day period immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day was less than 98% of the product of the last reported sale price of our common stock on each such trading day and the conversion rate on each such trading day; |
| | ● | if Advanced Energy calls any or all of the Convertible Notes for redemption; or |
| | ● | upon the occurrence of specified corporate transactions or events described in the indenture. |

From May 15, 2028 through the maturity date, holders have the option to convert at any time regardless of circumstances.

The initial conversion rate is 7.2747 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $137.46 per share of common stock. The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the indenture.

Upon conversion, Advanced Energy will do the following:

| | ● | pay cash up to the aggregate principal amount to be converted; and |
| | ● | pay or deliver cash, shares of our common stock, or a combination (at our election) with respect to the remainder, if any, of the conversion obligation in excess of the aggregate principal amount being converted. |

Concurrent with the Convertible Notes issuance, we entered into the Note Hedges with respect to our common stock. We will exercise the Note Hedges simultaneously when the Convertible Notes are settled. The Note Hedges have a $137.46 per share initial exercise price and cover, subject to customary anti-dilution adjustments, the number of shares

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ADVANCED ENERGY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

of common stock that initially underlie the Convertible Notes and are expected to reduce the potential dilution to the common stock and/or offset potential cash payments in excess of the principal amount upon conversion of the Convertible Notes. We paid approximately $115.0 million in cash for the Note Hedges, which we recorded to additional paid-in capital in our Statements of Stockholders' Equity.

Also concurrent with the issuance of our Convertible Notes, we sold Warrants, which provide the counterparties the option to acquire approximately 4.2 million aggregate shares of our common stock (subject to customary anti-dilution adjustments), which is the same number of shares of our common stock covered by the Note Hedges at a $179.76 per share initial exercise price, which represents a 70% premium over the $105.74 closing price of our common stock on September 7, 2023. The Warrants expire on July 7, 2029. We received aggregate proceeds of $74.9 million for the sale of Warrants, which we recorded to additional paid-in capital in our Statements of Stockholders' Equity.

If the market value per share of our common stock exceeds the exercise price of the Warrants during the measurement period at the maturity of such Warrants, the Warrants will have a dilutive effect on our earnings per share as we will owe the counterparties a number of shares of common stock in an amount based on the excess of such market price per share of the common stock over the Warrants' exercise price.

The Note Hedge and Warrants are separate from the Convertible Notes. The Convertible Notes holders have no rights with respect to the Note Hedges and Warrants. Counterparties in the Note Hedge and Warrants transactions have no rights with respect to the Convertible Notes. However, in combination, the Note Hedges and Warrants synthetically increase the initial conversion price on the Convertible Notes from $137.46 to $179.76, reducing the potential dilutive effect of the Convertible Notes.

We recorded a $26.1 million deferred tax asset to reflect the impact of the Convertible Notes and Note Hedges.

Credit Agreement

Our credit agreement dated as of September 10, 2019, as amended (the "Credit Agreement") consists of a senior unsecured term loan facility ("Term Loan Facility") and a senior unsecured revolving facility ("Revolving Facility"). Both mature on September 9, 2026.

On March 31, 2023, we executed agreements pursuant to the Credit Agreement to transition the benchmark interest rate from LIBOR to SOFR. The impact of this transition was not material to our consolidated financial statements.

For all periods presented, we were in compliance with the Credit Agreement covenants,
On September 7, 2023, we entered into an additional amendment to the Credit Agreement to amend certain definitions, covenants, and events of default to enable the issuance of the Convertible Notes and the entry into the Note Hedges and Warrants.

The following table summarizes our availability to withdraw on the Revolving Facility:

| | | | | | | |
| | | December 31, | | December 31, |
| | | 2023 | | 2022 |
| Available capacity on Revolving Facility | | $ | 200,000 | | $ | 200,000 |

As part of our available capacity on the Revolving Facility, prior to the maturity date of our Credit Agreement, we may also request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. at identical terms to our existing Credit Facility.$115.0 million. Any requested increase is subject to lender approval.

The fair value of the Term Loan Facility approximates the outstanding balance of $375.0 million as of December 31, 2022.
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The debt obligation on our Consolidated Balance Sheets consists of the following:
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ADVANCED ENERGY INDUSTRIES, INC.
| | | December 31, | | December 31, | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(in thousands, except per share amounts)

| Term Loan Facility | | $ | 375,000 | | $ | 395,000 | |
| Less: debt discount | | | (1,738) | | | (2,267) | |
| Total debt | | | 373,262 | | | 392,733 | |
| Less current portion of long-term debt | | | (20,000) | | | (20,000) | |
| Total long-term debt | | $ | 353,262 | | $ | 372,733 | |

Contractual maturities of our debt. obligations, excluding amortization of debt issuance costs, are as follows:
We use level 2 measurements to estimate the fair value of our debt. As of December 31, 2023, we estimate the fair value of our Convertible Notes to be $598.7 million, and the par value of the Term Loan Facility approximates its fair value.


| | | | |
| Year Ending December 31, | | |
| 2023, | | $ | 20,000 |
| 2024 | | | 20,000 |
| 2025 | | | 20,000 |
| 2026 | | | 315,000 |
| Total | | $ | 375,000 |

Interest expense and unused line of credit fees were recorded in other income (expense), net in our Consolidated Statements of Operations as follows:

| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2022 | | 2021 | | 2020 |
| Interest expense | | $ | 6,607 | | $ | 3,969 | | $ | 5,080 |
| Amortization of debt issuance costs | | | 547 | | | 822 | | | 519 |
| Unused line of credit fees and other | | | 202 | | | 168 | | | 153 |
| Total interest expense | | $ | 7,356 | | $ | 4,959 | | $ | 5,752 |

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures, which are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 ("Exchange Act")Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer (Stephen D. Kelley, President and Chief Executive Officer) and Principal Financial Officer (Paul Oldham, Chief Financial and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, we conducted an evaluation, with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to the Exchange Act Rule 13a-15(b). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. The conclusions of the Chief Executive Officer and Chief Financial Officer from this evaluation were communicated to the Audit and Finance Committee. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Management's Annual Report on Internal Control over Financial Reporting

It is management's responsibility to establish and maintain effective internal control over our financial reporting, which is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management, and other personnel. Our internal control over financial reporting is designed to provide reasonable assurance concerning the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.

In April 2022, we acquired SL Power. Refer to Note 2. Acquisitions in Part II, Item 8 "Financial Statements and Supplementary Data" for additional information. SL Power's objectives regarding internal controls over financial reporting are consistent, in all material respects, with Advanced Energy's objectives. We are in the process of completing a more comprehensive review of SL Power's internal control over financial reporting and will be implementing changes to better align their reporting and controls with the rest of Advanced Energy. As a result of the timing of the acquisition, anticipated changes, and general guidance issued by the SEC regarding exclusion of certain acquired businesses, we excluded SL Power from Advanced Energy's December 31, 2022 assessment of internal controls over financial reporting. SL Power accounted for approximately 2% of our total assets at December 31, 2022, and 3% of our total net sales for the year ended December 31, 2022.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2023, using the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

84

2023.

Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements included in this Form 10-K, and as part of the audit, has issued an audit report, included herein, on the effectiveness of our internal control over financial reporting as of December 31, 2023.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fourth quarter of the current year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Limitations on Controls and Procedures

Management has concluded that our disclosure controls and procedures and internal control over financial reporting provide reasonable assurance that the objectives of our control system are met. We do not expect, however, that our disclosure controls and procedures or internal control over financial reporting will prevent or detect all misstatements, errors, or fraud, if any. All control systems, no matter how well designed and implemented, have inherent limitations, and therefore no evaluation can provide absolute assurance that every misstatement, error, or instance of fraud, if any, or risk thereof, has been or will be prevented or detected. The occurrence of a misstatement, error, or fraud, if any, would not necessarily require a conclusion that our controls and procedures are not effective.

ITEM 9B. OTHER INFORMATION

During the fourth quarter of 2023, no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or a "Non-Rule 10b5-1 trading arrangement" (as defined in Item 408 of Regulation S-K).

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

In accordance with General Instruction G (3) of Form 10-K, certain information required by this Part III is incorporated by reference to the definitive proxy statement relating to our 2024 annual meeting of stockholders (the "2024 Proxy Statement"), as set forth below. The 2024 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information set forth in the 2024 Proxy Statement under the headings "Management" and "Proposal No. 1 - Election of Directors," "Corporate Governance," "Management," and "Delinquent Section 16(a) Reports" is incorporated herein by reference.

We adopted a Code of Ethical Conduct that applies to all employees, including our Chief Executive Officer, Chief Financial Officer, and others performing similar functions. We posted a copy of the Code of Ethical Conduct on our website at www.advancedenergy.com, and such Code of Ethical Conduct is available, in print, without charge, to any stockholder who requests it from our Secretary. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Ethical Conduct by posting such information on our website at www.advancedenergy.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this report.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth in the 2024 Proxy Statement under the headings "Executive Compensation" is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information set forth in the 2024 Proxy Statement under the headings "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" is incorporated herein by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes information about the equity incentive compensation plans as of December 31, 2023. All outstanding awards relate to our common stock.

| | | | | | | | | | |
| | (A) | | (B) | | (C) | |
| Plan Category | Number of securities to be issued | | Weighted average exercise price | | Number of securities remaining available | |
| | upon exercise of outstanding | | of outstanding options, warrants | | for future issuance under equity | |
| | options, warrants and rights | | and rights | | compensation plans (excluding securities | |
| | | | | | reflected in column A) | |
| |
| | (in thousands, except exercise price per share) | |
| Equity compensation plans approved by security holders | | 89 | | $ | 76.69 | | | 2,900 | (1) |
| Equity compensation plans not approved by security holders | | - | | | - | | | - | |
| Total | | 151 | | $ | 55.48 | | | 2,094 | |
| Total | | 89 | | $ | 76.69 | | | 2,900 | |
| (1) | This number includes 577 thousand shares available for future issuance under the Employee Stock Purchase Plan. |

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The information set forth in the 2024 Proxy Statement under the heading "Certain Relationships and Related Transactions" is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information set forth in the 2024 Proxy Statement under the caption "Proposal No. 2 - Ratification of the Appointment of Ernst & Young LLP as Advanced Energy's Independent Registered Public Accounting Firm for 2024" is incorporated herein by reference.

PART IV

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

| | (A) | Documents filed as part of this annual report on Form 10-K are as follows: |
| | 1. | Financial Statements: |

See Index to Financial Statements at Part II, Item 8 herein.

| | 2. | Financial Statement Schedules for the years ended December 31, 2023, 2022, and 2021 |

NOTE: All schedules have been omitted because they are either not applicable or the required information is included in the financial statements and notes thereto.

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| | (B) | Exhibits: |

| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |
| 2.1 | | Stock Purchase Agreement by and among Advanced Energy Industries, Inc., Artesyn Embedded Technologies, Inc., Pontus Intermediate Holdings II, LLC and Pontus Holdings, LLC, dated May 14, 2019 ** | | 8-K | | 000-26966 | | 2.1 | | May 15, 2019 |
| | | | | | | | | | | |
| 2.2 | | First Amendment to the Stock Purchase Agreement by and among Advanced Energy Industries, Inc., Artesyn Embedded Technologies, Inc., Pontus Intermediate Holdings II, LLC and Pontus Holdings, LLC, dated September 9, 2019 ** | | 8-K | | 000-26966 | | 2.2 | | September 10, 2019 |
| | | | | | | | | | | |
| 2.3 | | Stock Purchase Agreement, dated April 1, 2022, | | 8-K | | 000-26966 | | 2.1 | | April 4, 2022 |
| | | | | | | | | | | |
| | | by and among SL Power Electronics Corporation, | | | | | | | | |
| | | | | | | | | | | |
| | | SL Delaware Holdings, Inc., Steel Partners | | | | | | | | |
| | | | | | | | | | | |
| | | Holdings L.P., AEI US Subsidiary, LLC and | | | | | | | | |
| | | | | | | | | | | |
| | | Advanced Energy Industries, Inc. ** | | | | | | | | |
| | | | | | | | | | | |
| 3.1 | | Amended and Restated Certificate of Incorporation of Advanced Energy Industries, Inc. | | 10-Q | | 000-26966 | | 3.1 | | August 5, 2019 |
| | | | | | | | | | | |
| 3.2 | | Second Amended and Restated By-Laws of Advanced Energy Industries, Inc. | | 8-K | | 000-26966 | | 3.1 | | May 20, 2020 |
| | | | | | | | | | | |
| 4.1 | | Form of Specimen Certificate for Common Stock | | S-1 | | 33-97188 | | 4.1 | | September 21, 1995 |
| | | | | | | | | | | |
| 4.2 | | Description of Advanced Energy Industries, Inc. Securities | | 10-K | | 000-26966 | | 4.2 | | March 2, 2020 |
| | | | | | | | | | | |
| 4.3 | | Indenture, dated September 12, 2023, between Advanced Energy Industries, Inc. and U.S. Bank Trust Company, National Association, as trustee | | 8-K | | 000-26966 | | 4.1 | | September 13, 2023 |
| | | | | | | | | | | |
| 4.4 | | Form of Global 2.50% Convertible Senior Note due 2028 (included in Exhibit 4.3) | | 8-K | | 000-26966 | | 4.2 | | September 13, 2023 |
| | | | | | | | | | | |
| 10.1 | | Lease, dated January 16, 2003, by and between China Great Wall Computer Shenzhen Co., Ltd., Great Wall Limited and Advanced Energy Industries (Shenzhen) Co., Ltd., for a building located in Shenzhen, China | | 10-K | | 000-26966 | | 10.18 | | February 24, 2004 |
| | | | | | | | | | | |
| 10.2 | | Form of Director and Officer Indemnification Agreement | | 10-K | | 000-26966 | | 10.2 | | February 17, 2023 |
| | | | | | | | | | | |
| 10.3 | | Form of Notice of Grant Stock Option under 2008 Omnibus Incentive Plan * | | 8-K | | 000-26966 | | 10.3 | | May 10, 2013 |
| | | | | | | | | | | |
| 10.4 | | Form of Non-Qualified Stock Option Agreement under 2008 Omnibus Incentive Plan * | | 8-K | | 000-26966 | | 10.5 | | May 10, 2013 |
| | | | | | | | | | | |
| 10.5 | | 2017 Omnibus Incentive Plan * | | DEF 14A | | 000-26966 | | Appendix A | | March 14, 2017 |

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| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 10.6 | | 2008 Omnibus Incentive Plan, as amended May 4, 2010 * | | 10-K | | 000-26966 | | 10.37 | | March 2, 2011 |
| | | | | | | | | | | |
| 10.7 | | Employee Stock Purchase Plan * | | S-1 | | 33-97188 | | 10.17 | | September 21, 1995 |
| | | | | | | | | | | |
| 10.8 | | Offer Letter dated February 8, 2021 * | | 8-K | | 000-26966 | | 10.2 | | February 10, 2021 |
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| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 10.9 | | Global Supply Agreement by and between Advanced Energy Industries, Inc. and Applied Materials, Inc., dated August 29, 2005 + | | 10-Q | | 000-26966 | | 10.1 | | November 7, 2005 |
| | | | | | | | | | | |
| 10.10 | | Shipping Amendment to the Global Supply Agreement by and between Advanced Energy Industries, Inc. and Applied Materials, Inc., dated August 29, 2005 + | | 10-Q | | 000-26966 | | 10.2 | | November 7, 2005 |
| | | | | | | | | | | |
| 10.11 | | Bridge Amendment to the Global Supply Agreement by and between Advanced Energy Industries, Inc. and Applied Materials, Inc., dated January 28, 2011 + | | 10-Q | | 000-26966 | | 10.1 | | May 6, 2011 |
| | | | | | | | | | | |
| 10.12 | | Offer Letter to Paul Oldham, dated March 26, 2018 * | | 8-K | | 000-26966 | | 10.1 | | March 29, 2018 |
| | | | | | | | | | | |
| 10.13 | | Form of Executive Change in Control and General Severance Agreement | | 8-K | | 000-26966 | | 10.1 | | August 6, 2018 |
| | | | | | | | | | | |
| 10.14 | | Credit Agreement, dated September 10, 2019, by and among Advanced Energy Industries, Inc., Bank of America N.A. as the Administrative Agent, Bank of America N.A., Bank of the West and HSBC Bank USA, N.A. as the Joint Lead Arrangers and Joint Book Runners, and Citibank N.A., as the Co-Manager | | 8-K | | 000-26966 | | 10.1 | | September 10, 2019 |
| | | | | | | | | | | |
| 10.14 | | ISDA 2002 Master Agreement, by and between Advanced Energy Industries, Inc. and HSBC Bank USA, National Association, dated as of April 2, 2020 (the "HSBC ISDA Master Agreement") | | 8-K | | 000-26966 | | 10.1 | | April 10, 2020 |
| | | | | | | | | | | |
| 10.15 | | ISDA 2002 Master Agreement, by and between Advanced Energy Industries, Inc. and Citibank, N.A., dated as of April 7, 2020 (the "Citibank ISDA Master Agreement") | | 8-K | | 000-26966 | | 10.2 | | April 10, 2020 |
| | | | | | | | | | | |
| 10.16 | | Schedule to the HSBC ISDA Master Agreement | | 8-K | | 000-26966 | | 10.3 | | April 10, 2020 |
| | | | | | | | | | | |
| 10.17 | | Schedule to the Citibank ISDA Master Agreement | | 8-K | | 000-26966 | | 10.4 | | April 10, 2020 |
| | | | | | | | | | | |
| 10.18 | | Rate Swap Transaction Confirmation, by and between Advanced Energy Industries, Inc. and HSBC Bank USA, National Association, dated April 7, 2020 | | 8-K | | 000-26966 | | 10.5 | | April 10, 2020 |
| | | | | | | | | | | |

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| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |

| 10.20 | | Rate Swap Transaction Confirmation, by and between Advanced Energy Industries, Inc. and Citibank, N.A., dated April 9, 2020 | | 8-K || 000-26966 | | 10.6 | | April 10, 2020 |
| | | | | || | | | | |

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| Exhibit | | | | Incorporated by Reference |

| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| 10.19 | | Rate Swap Transaction Confirmation, by and between Advanced Energy Industries, Inc. and Citibank, N.A., dated April 9, 2020 | | 8-K | | 000-26966 | | 10.6 | | April 10, 2020 |
| | | | | | | | | | | |
| 10.20 | | Amendment No. 1 to Credit Agreement, dated September 9, 2021, by and among Advanced Energy Industries, Inc., the guarantors party thereto, Bank of America N.A. as the Administrative Agent, and the lenders party thereto (which included the marked Credit Agreement as Exhibit A thereto) | | 8-K | | 000-26966 | | 10.2 | | September 9, 2021 |
| | | | | | | | | | | |
| 10.21 | | Offer of Employment to Eduardo Bernal Acebedo, dated August 2, 2021 * | | 8-K | | 000-26966 | | 10.1 | | September 8, 2021 |
| | | | | | | | | | | |
| 10.22 | | Form of Long-Term Incentive Plan * | | 8-K | | 000-26966 | | 10.1 | | February 4, 2021 |
| | | | | | | | | | | |
| 10.23 | | Amended and Restated Deferred Compensation Plan * | | 10-Q | | 000-26966 | | 10.1 | | November 1, 2022 |
| | | | | | | | | | | |
| 10.24 | | Form of Restricted Stock Unit Agreement under 2017 Omnibus Incentive Plan * | | 10-K | | 000-26966 | | 10.25 | | February 17, 2023 |
| | | | | | | | | | | |
| 10.25 | | Form of LTI Performance Stock Unit Agreement under 2017 Omnibus Incentive Plan * | | 10-K | | 000-26966 | | 10.26 | | February 17, 2023 |
| | | | | | | | | | | |
| 10.26 | | Amendment No. 2 to Credit Agreement, dated March 31, 2023, among Advanced Energy Industries, Inc., the guarantors party thereto, Bank of America N.A., as Administrative Agent, and the Lenders party thereto | | 10-Q | | 000-26966 | | 10.1 | | May 3, 2023 |
| | | | | | | | | | | |
| 10.27 | | Form of Confirmation for Convertible Note Hedges*** | | 8-K | | 000-26966 | | 10.1 | | September 13, 2023 |
| | | | | | | | | | | |
| 10.28 | | Form of Confirmation for Warrants*** | | 8-K | | 000-26966 | | 10.2 | | September 13, 2023 |
| | | | | | | | | | | |
| 10.29 | | Amendment No. 3 to Credit Agreement, dated September 7, 2023, among Advanced Energy Industries, Inc., the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto | | 8-K | | 000-26966 | | 10.3 | | September 13, 2023 |
| | | | | | | | | | | |
| 10.30 | | Amended and Restated 2023 Omnibus Incentive Plan * | | 8-K | | 000-26966 | | 10.1 | | November 8, 2023 |
| | | | | | | | | | | |
| 10.31 | | Form of Executive Change in Control and General Severance Agreement * | | 8-K | | 000-26966 | | 10.2 | | November 8, 2023 |
| | | | | | | | | | | |
| 10.32 | | Form of Performance Stock Unit Agreement under the Amended and Restated 2023 Omnibus Incentive Plan * | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 10.33 | | Form of Restricted Stock Unit Agreement under the Amended and Restated 2023 Omnibus Incentive Plan * | | | | | | | | Filed herewith |
| | | | | | | | | | | |

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| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |
| 10.34 | | Form of Annual Incentive Plan * | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 19.1 | | Insider Trading Policy | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 21.1 | | Subsidiaries of Advanced Energy Industries, Inc. | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 23.1 | | Consent of Independent Registered Public Accounting Firm | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 31.1 | | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 31.2 | | Certification of the Principal Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 32.1 | | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 32.2 | | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 97.1 | | Compensation Clawback Policy | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 101.INS | | Inline XBRL Instance Document | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | Filed herewith |
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| Exhibit | | | | Incorporated by Reference |
| Number | | Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | Filed herewith |
| | | | | | | | | | | |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) | | | | | | | | Filed herewith |

* Management contract or compensatory plan.

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** Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

*** Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a)(6) of Regulation S-K.

+ Confidential treatment has been granted for portions of this agreement.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

| | | ADVANCED ENERGY INDUSTRIES, INC. |
| | | (Registrant) |
| | | |
| | | /s/ Stephen D. Kelley |
| | | Stephen D. Kelley |
| | | Chief Executive Officer |
| | Date: | February 20, 2024 |

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| Signatures | | Title | | Date |
| /s/ Stephen D. Kelley | | Chief Executive Officer and Director | | February 20, 2024 |
| Stephen D. Kelley | | (Principal Executive Officer) | | |
| | | | | |
| /s/ Paul Oldham | | Chief Financial Officer and Executive Vice President | | February 20, 2024 |
| Paul Oldham | | (Principal Financial Officer) | | |
| | | | | |
| /s/ Bernard R. Colpitts, Jr. | | Chief Accounting Officer and Senior Vice President | | February 20, 2024 |
| Bernard R. Colpitts, Jr. | | (Principal Accounting Officer) | | |
| | | | | |
| /s/ Grant H. Beard | | Chairman of the Board | | February 20, 2024 |
| Grant H. Beard | | | | |
| | | | | |
| /s/ Frederick A. Ball | | Director | | February 20, 2024 |
| Frederick A. Ball | | | | |
| | | | | |
| /s/ Anne T. DelSanto | | Director | | February 20, 2024 |
| Anne T. DelSanto | | | | |
| | | | | |
| /s/ Tina M. Donikowski | | Director | | February 20, 2024 |
| Tina M. Donikowski | | | | |
| | | | | |
| /s/ Ronald C. Foster | | Director | | February 20, 2024 |
| Ronald C. Foster | | | | |
| | | | | |
| /s/ Edward C. Grady | | Director | | February 17, 2023 |
| Edward C. Grady | | | | |
| | | | | |
| /s/ Lanesha T. Minnix | | Director | | February 20, 2024 |
| Lanesha T. Minnix | | | | |
| | | | | |
| /s/ David W. Reed | | Director | | February 20, 2024 |
| David W. Reed | | | | |
| | | | | |
| /s/ John A. Roush | | Director | | February 20, 2024 |
| John A. Roush | | | | |
| | | | | |
| /s/ Brian M. Shirley | | Director | | February 20, 2024 |
| Brian M. Shirley | | | | |

95

Exhibit 10.32

ADVANCED ENERGY INDUSTRIES, INC.

AMENDED AND RESTATED 2023 OMNIBUS INCENTIVE PLAN

PERFORMANCE STOCK UNITS AWARD

[PARTICIPANTID]

[FIRSTNAME] [LASTNAME]

THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into as of ___________ between You have been granted an award of Performance Stock Units (this "Award") of Advanced Energy Industries, Inc. a Delaware corporation (the "Company") and ___________ ("Indemnitee"). (the "Company") under the Advanced Energy Industries, Inc. Amended and Restated 2023 Omnibus Incentive Plan (the "Plan"), effective as of the Grant Date, with the terms and conditions set forth below.

| | |
WHEREAS, highly competent persons have become more reluctant to serve publicly held corporations as directors, officers, or in other capacities unless they are provided with, adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of the corporation;
| Grant Date: | [___________], [____] |
| Number of Performance Stock Units ("PSUs") at Target: | [SHARESGRANTED] ("Target PSUs") |
| Performance Period: | [______], [____] to [_____], [____] |
| Earning of PSUs: | [VESTING SCHEDULE and/or PERFORMANCE VESTING CONDITIONS.] |
| Forfeiture of PSUs: | Except as otherwise provided in any Company-issued executive change of control and severance agreement to which you are subject (a "CIC & Severance Agreement"), upon your termination of employment with, or cessation of services to, the Company and its Affiliates prior to the date the PSUs and any Dividend Equivalent Units have been settled and paid, Section 18 of the Plan will govern the effect of such termination or cessation on the PSUs. |


WHEREAS, the Board of Directors of the Company (the "Board") has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among U.S.-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. the Second Amended and Restated Bylaws (the "Bylaws") and Restated Certificate of Incorporation (the "Certificate") of the Company require indemnification of the officers and directors of the Company, Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware ("DGCL"). The Bylaws, the Certificate, and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers, and other persons with respect to indemnification;
| | |
| | Upon the Committee's determination of the extent to which the PSUs have been earned, any PSUs that are thereby determined not to have been earned will be immediately and automatically forfeited. |
| Settlement of PSUs: | As soon as reasonably practicable after the Committee's determination of the number of PSUs that have been earned and vested following the end of the Performance Period, the Company will settle the earned and vested PSUs, subject to any applicable deferral election under a deferred compensation arrangement of the Company, by the delivery of a number of Shares equal to the number of earned and vested PSUs (or by the delivery of cash equal to the Fair Market Value of a number of Shares equal to the number of earned and vested PSUs, or a combination of such cash and Shares, as determined at the discretion of the Committee). Notwithstanding anything to the contrary in the |


WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;


| | foregoing sentence, the settlement of any PSUs that are earned and vested will be made no later than 2 ½ months following the end of the year in which the PSUs are no longer subject to a substantial risk of forfeiture. |


WHEREAS, it is reasonable, prudent, and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified;
| Transferability of | You may not sell, transfer or otherwise alienate or hypothecate this Award or any of your PSUs until they have been settled. In addition, by accepting this Award, you agree not to sell any Shares acquired under this Award other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale. The Company also may require you to enter into a stockholder's agreement that will include additional restrictions on the transfer of Shares acquired under this Award. |


WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and the Certificate and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Bylaws, the Certificate, and insurance as adequate in the present circumstances, and may not be willing to serve as a director or officer without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve, and to take on additional service for or on behalf of The Company on the condition that he be so indemnified.

NOW, THEREFORE, in consideration of Indemnitee's agreement to serve and/or continue to serve as a director or officer after the date hereof, the parties hereto agree as follows:
1.Services to the Company. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise (as hereinafter defined)) and Indemnitee. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as a director or officer of the Company

| | |
| PSUs: | |
| Rights as Stockholder; Dividend Equivalent Units: | You will not be deemed for any purposes to be a stockholder of the Company with respect to any of the PSUs or the Shares subject to the PSUs (including with respect to voting or dividends) unless and until the PSUs are settled in Shares; provided that your Award will include Dividend Equivalent Units as described below. |
2.Indemnity of Indemnitee. the Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:
(a)Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in This Section 2(a) if, by reason of Indemnitee's Corporate Status (as hereinafter defined), Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 2(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by Indemnitee, or on Indemnitee's behalf, in connection with such Proceeding or Any claim, issue, or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee's conduct was unlawful.
| | |
| | This Award includes Dividend Equivalent Units representing a right to receive a cash payment equal to any cash dividends that would have been received by you if each PSU earned hereunder had been an issued and outstanding Share on all dividend record dates between the Grant Date and the settlement date of such PSU. Any such cash payment shall be made at the same time as the related PSUs are settled. |
| Market Stand-Off: | In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, you agree that you shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Award without the prior written consent of the Company. Such restriction shall be in effect for such period of time following the date of the final prospectus for the offering as may be determined by the Company. In no event, however, shall such period exceed one hundred eighty (180) days. |
(b)Proceedings by or in the Right of the Company Indemnitee shall be entitled to the rights of indemnification provided in this Section 2(b) if, by reason of Indemnitee's Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of, the Company. Pursuant to this Section 2(b), Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee, or on Indemnitee's behalf, in connection with such Proceeding or any claim, issue, or matter therein if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to, the best interests of the Company. provided, however, if applicable law so provides, no indemnification against Such Expenses shall be made in respect of any claim, issue, or matter in such Proceeding as to which Indemnitee shall have been finally adjudged to be liable to the Company. unless and only to the

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extent that the Court of Chancery of the State of Delaware or any court in which such Proceeding was brought shall determine upon application that such indemnification may be made, despite the adjudication of liability.
| Taxes: | You understand that you (and not the Company or any Affiliate) shall be responsible for your own federal, state, local or foreign tax liability and any of your other tax consequences that may arise as a result of the transactions contemplated by this Award. You |


(c)Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue, or matter therein, in whole or in part, Indemnitee shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with each successfully resolved claim, issue, or matter. For purposes of this Section and without limitation, the termination of any claim, issue, or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue, or matter.


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| | shall rely solely on the determinations of your tax advisors or your own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. |
| | |
| | To the extent that the receipt, earning or settlement of the PSUs or Dividend Equivalent Units, or other event, results in income to you for federal, state or local income tax purposes, you shall deliver to the Company at the time the Company is obligated to withhold taxes in connection with such receipt, earning, settlement or other event, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations. If you fail to do so, the Company has the right and authority to deduct or withhold from other compensation payable to you an amount sufficient to satisfy its withholding obligations. |
(d)Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, To the fullest extent permitted by applicable law, to the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he or she shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith.
| | |
| | To the extent permitted by the Company at the time a tax withholding requirement arises, you may satisfy the withholding requirement in whole or in part, by electing to have the Company withhold for its own account that number of Shares otherwise deliverable to you upon settlement having an aggregate Fair Market Value on the date the tax is to be determined equal to the tax that the Company must withhold in connection with the earning or settlement of PSUs or Dividend Equivalent Units; provided that the amount so withheld shall not exceed the maximum statutory rate to the extent necessary to avoid an accounting charge. Your election must be irrevocable, in writing, and submitted to the Administrator or its delegee before the applicable earning or settlement date. The Fair Market Value of any fractional Share not used to satisfy the withholding obligation (as determined on the date the tax is determined) will be paid to you in cash. |
3.Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 2 of this Agreement, the Company shall and hereby does indemnify and hold harmless to the fullest extent permitted by applicable law Indemnitee against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee's behalf if, by reason of Indemnitee's Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company's obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.
4.Contribution.
(a)Whether or not the indemnification provided in Sections 2 and 3 hereof is available, in respect of any threatened, pending, or completed Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall pay, in The first instance, the entire amount of any judgment or settlement of such Proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. the Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.
| Miscellaneous: | ● |
(b)Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending, or completed Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall contribute to the amount of expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors, or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such Proceeding arose; provided however, that, the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines, or settlement amounts, as well As any other equitable considerations which applicable law may require to be considered. the relative fault of the Company and all officers, directors, or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive.
| | Neither the Plan nor the grant of this Award shall constitute or be evidence of any agreement or understanding, express or implied, that you have a right to continue as an employee of the Company or any of its Affiliates for any period of time, or at any particular rate of compensation. |
| | ● |
| | The Plan and this Award constitute the entire understanding of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof; provided that, to the extent a more favorable result would apply to you with respect to this Award in specific circumstances under the terms of a CIC & Severance Agreement to which you are a party, such terms of such CIC & Severance Agreement shall apply in such circumstances. You expressly warrant that you are not |

3

| | accepting this Award in reliance on any promises, representations, or inducements other than those contained herein. |
| | |
| | ● |
| | By accepting the grant of the PSUs, you agree not to sell any Shares acquired in connection with the PSUs other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale. |
| | |
| | ● |
| | As a condition of the granting of this Award, you agree, for yourself and your legal representatives or guardians, that this Award shall be interpreted by the Committee and that any interpretation by the Committee of the terms of this Award or the Plan and any determination made by the Committee pursuant to this Award shall be final, binding and conclusive. |
| | |
| | ● |
| | Subject to the terms of the Plan, the Committee may modify or amend this Award without your consent as permitted by Section 15(c) of the Plan. |
(c)The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors, or employees of the Company. other than Indemnitee, who may be jointly liable with Indemnitee.
| | |
| | ● |
| | The Company shall not be required to fund or otherwise segregate any cash or any other assets which may at any time be paid to you under this Award. This Award shall constitute an "unfunded" plan of the Company. |
| | |
(d)To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement, and/or Expenses, in connection with any claim relating to an indemnifiable event under This Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) The relative fault of the Company (and its directors, officers, employees, and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
| | ● |
| | Notwithstanding anything to the contrary in this Award, this Award and any Shares or other amounts received under this Award are subject to any compensation recovery, recoupment, clawback or similar policy or arrangement adopted or maintained by, or otherwise applicable to, the Company and its Affiliates from time to time. |
| | |
| | ● |
| | This Award may be executed in counterparts. |

This Award is granted under and governed by the terms and conditions of the Plan. The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Award and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Award. Capitalized terms used in this Award and not defined shall have the meanings given in the Plan.

5.Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance, to the extent not prohibited by law, all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding BY reason of Indemnitee's Corporate Status within thirty (30) days after THE receipt by THE Company of a statement OR statements from Indemnitee requesting such advance or advances from time TO time, whether prior to or after final disposition OF such Proceeding. Such statement or statements shall reasonably evidence THE Expenses incurred by Indemnitee AND shall include or be preceded or accompanied by an undertaking by or on behalf OF Indemnitee TO repay ANY Expenses ADVANCED if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.


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BY CLICKING ON THE "ACCEPT" BOX WHERE INDICATED IN THE COMPANY'S ELECTRONIC ACCEPTANCE PROCEDURE OR OTHERWISE ELECTRONICALLY ACCEPTING THIS AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED HEREIN AND IN THE PLAN. YOU ALSO ACKNOWLEDGE RECEIPT OF THE PLAN AND REAFFIRM YOUR AGREEMENT TO ANY RESTRICTIVE COVENANTS SET FORTH IN ANY AGREEMENT BETWEEN YOU AND THE COMPANY OR ITS AFFILIATES.


ADVANCED ENERGY INDUSTRIES, INC.


By:_______________________

Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. This Section 5shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.
Date: ______________________

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6.Procedures AND Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:
Exhibit 10.33

ADVANCED ENERGY INDUSTRIES, INC.

AMENDED AND RESTATED 2023 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD

[EMPLOYEE IDENTIFIER]

[FIRSTNAME] [LASTNAME]

You have been granted an award of Restricted Stock Units (this "Award") of Advanced Energy Industries, Inc. (the "Company") under the Advanced Energy Industries, Inc. Amended and Restated 2023 Omnibus Incentive Plan (the "Plan"), effective as of the Grant Date, with the terms and conditions set forth below.

| Grant Date: | [DATE] |
| Vesting Commencement Date: | [VEST BASE DATE] |
| Number of Restricted Stock Units: | [TOTAL SHARES GRANTED] |
(a)To obtain indemnification (which in each case in this agreement shall include but not be limited to the advancement of Expenses or contribution by the Company) under this Agreement, Indemnitee shall submit to, the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification without waiver of privilege, as soon as is reasonably practicable following the receipt by Indemnitee of written notice thereof. such written request to the Company shall include a description of the nature of the Proceeding and the facts underlying such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability that it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company, shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.
| Vesting Schedule; | [VESTING SCHEDULE] |
| | |
| Forfeiture: | Except as otherwise provided in any Company-issued executive change of control and severance agreement to which you are subject (a "CIC & Severance Agreement"), upon your termination of employment with, or cessation of services to, the Company and its Affiliates prior to the date the Restricted Stock Units and any Dividend Equivalent Units have been settled and paid, Section 18 of the Plan will govern the effect of such termination or cessation on the Restricted Stock Units. Upon a Change of Control, Section 17(c) of the Plan will apply to this Award. |
| Settlement of Restricted Stock Units: | Subject to any applicable deferral election under a deferred compensation plan of the Company, as soon as practicable after your Restricted Stock Units vest (but no later than the fifteen (15th) day of the third (3rd) month following the end of the fiscal year in which vesting occurs), the Company will settle such vested Restricted Stock Units by, as determined by the Committee in its discretion, (a) making an appropriate book entry for a number of Shares equal to the number of Restricted Stock Units that have vested, (b) paying to you an amount in each equal to the product of the Fair Market Value at the time of settlement multiplied by the number of Restricted Stock Units that have vested or (c) settling a portion in Shares and a portion in cash. |
(b)Upon written request by Indemnitee for indemnification pursuant to Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case by one of the following four (4) methods, which shall be at the election of the Board: (1) by a majority vote of the Disinterested Directors, even though less than a quorum, (2) by, a committee comprised of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (3) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (4) if so directed by the Board, by the stockholders of the Company; provided, however, that if a Change in Control shall have occurred, such determination as to Indemnitee's entitlement to indemnification hereunder shall be made, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.
| Transferability of | You may not sell, transfer or otherwise alienate or hypothecate this Award or any of your Restricted Stock Units until they have settled. In addition, by accepting this Award, you agree not to sell any |
(c)If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and The Board shall give written notice to Indemnitee of the identity of such Independent Counsel. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply) and Indemnitee
| | |
| Restricted Stock Units: | |

| | Shares acquired under this Award other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale. The Company also may require you to enter into a stockholder's agreement that will include additional restrictions on the transfer of Shares acquired under this Award. |


5
shall give written notice to the Company of the identity of such Independent Counsel. In either event, the Company or Indemnitee, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to Indemnitee or the Company, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by Indemnitee or the Company to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by Such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. the Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel In connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of, the manner in which such Independent Counsel was selected or appointed. Upon the commencement of, any Proceeding or arbitration pursuant to Section 7(a) hereof, the Independent Counsel shall be discharged and relieved of, any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
| Rights as Stockholder; Dividend Equivalent Units: | You will not be deemed for any purposes to be a stockholder of the Company with respect to any of the Restricted Stock Units or the Shares subject to the Restricted Stock Units (including with respect to voting or dividends) unless and until the Restricted Stock Units are settled in Shares; provided that your Award will include Dividend Equivalent Units as described below. |
| | |
| | This Award includes Dividend Equivalent Units representing a right to receive a cash payment equal to any cash dividends that would have been received by you if each Restricted Stock Unit that vests hereunder had been an issued and outstanding Share on all dividend record dates between the Grant Date and the settlement date of such Restricted Stock Unit. Any such cash payment shall be made at the same time as the related Restricted Stock Units are settled. |
| | |
| | Notwithstanding the foregoing, the Company may, in its discretion, rather than accruing and paying Dividend Equivalent Units in cash, deem Dividend Equivalent Units to be reinvested into a number of additional Restricted Stock Units determined by dividing the value of the dividend equivalents that would have been received by the Fair Market Value on the date of reinvestment, as determined by the Company. Such additional Restricted Stock Units shall be subject to the same terms and conditions, and shall become vested and paid, or forfeited, at the same time and in the same form as the Restricted Stock Units to which the dividend equivalents relate. |
| Market Stand-Off: | In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, you agree that you shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Award without the prior written consent of the Company. Such restriction shall be in effect for such period of time following the date of the final prospectus for the offering as may be determined by the Company. In no event, however, shall such period exceed one hundred eighty (180) days. |
(d)In making a determination with respect to, entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement, to the fullest extent not prohibited by law if Indemnitee has submitted a request for indemnification in accordance with this Agreement. Anyone seeking to overcome this presumption, including the Company. shall have the burden of proof and the burden of persuasion by clear and convincing evidence, to the fullest extent not prohibited by law. Neither the failure of the Company. (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper In the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
| Taxes: | You understand that you (and not the Company or any Affiliate) shall be responsible for your own federal, state, local or foreign tax liability and any of your other tax consequences that may arise as a result of the transactions contemplated by this Award. You shall |
(e)Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent, or employee of the



2

| | rely solely on the determinations of your tax advisors or your own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. |
| | |
| | To the extent that the receipt, vesting or settlement of the Restricted Stock Units or Dividend Equivalent Units, or other event, results in income to you for federal, state or local income tax purposes, you shall deliver to the Company at the time the Company is obligated to withhold taxes in connection with such receipt, vesting, settlement or other event, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations. If you fail to do so, the Company has the right and authority to deduct or withhold from other compensation payable to you an amount sufficient to satisfy its withholding obligations. |
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Enterprise shall not be, imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed To the best interests of the Company Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
| | |
| | To the extent permitted by the Company at the time a tax withholding requirement arises, you may satisfy the withholding requirement in whole or in part, by electing to have the Company withhold for its own account that number of Shares otherwise deliverable to you upon settlement having an aggregate Fair Market Value on the date the tax is to be determined equal to the tax that the Company must withhold in connection with the vesting or settlement of Restricted Stock Units or Dividend Equivalent Units; provided that the amount so withheld shall not exceed the maximum statutory rate to the extent necessary to avoid an accounting charge. Your election must be irrevocable, in writing, and submitted to the Administrator or its delegee before the applicable vesting or settlement date. The Fair Market Value of any fractional Share not used to satisfy the withholding obligation (as determined on the date the tax is determined) will be paid to you in cash. |
(f)If the person, persons, or entity empowered or selected under this Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided further, that the foregoing provisions of this Section 6(f) shall not apply (1) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or The Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (2) if the determination of entitlement to indemnification is to be made by the Independent Counsel.
| Miscellaneous: | ● |
| | Neither the Plan nor the grant of this Award shall constitute or be evidence of any agreement or understanding, express or implied, that you have a right to continue as an employee of the Company or any of its Affiliates for any period of time, or at any particular rate of compensation. |
(g)Indemnitee shall cooperate with the person, persons, or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons, or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of The Company shall act reasonably and in good faith in making a determination regarding Indemnitee's entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons, or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification), and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
| | ● |
| | The Plan and this Award constitute the entire understanding of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof; provided that, to the extent a more favorable result would apply to you with respect to this Award in specific circumstances under the terms of a CIC & Severance Agreement to which you are a party, such terms of such CIC & Severance Agreement shall apply in such circumstances. You expressly warrant that you are not accepting this Award in reliance on any promises, |
(h)The Company acknowledges that, a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption, and uncertainty. in the event that any action, claim, or proceeding to which Indemnitee is a party, is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim, or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the

3

merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
| | representations, or inducements other than those contained herein. |
| | |
| | ● |
| | By accepting the grant of the Restricted Stock Units, you agree not to sell any Shares acquired in connection with the Restricted Stock Units other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale. |
(i)The termination of any Proceeding or of any claim, issue, or matter therein, by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful.
| | |
(a)Subject to Section 7(f), in the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware of Indemnitee's entitlement to such indemnification.
| | ● |
| | As a condition of the granting of this Award, you agree, for yourself and your legal representatives or guardians, that this Award shall be interpreted by the Committee and that any interpretation by the Committee of the terms of this Award or the Plan and any determination made by the Committee pursuant to this Award shall be final, binding and conclusive. |
| | |
| | ● |
| | Subject to the terms of the Plan, the Committee may modify or amend this Award without your consent as permitted by Section 15(c) of the Plan. |
(b)In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b). In any judicial proceeding commenced pursuant to this Section 7, The Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be

| | |
| | ● |
| | The Company shall not be required to fund or otherwise segregate any cash or any other assets which may at any time be paid to you under this Award. This Award shall constitute an "unfunded" plan of the Company. |
(c)If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company. shall be bound by such determination in any judicial proceeding commenced pursuant to This Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.
| | |
| | ● |
| | This Award may be executed in counterparts. |

This Award is granted under and governed by the terms and conditions of the Plan. The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Award and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Award. Capitalized terms used in this Award and not defined shall have the meanings given in the Plan.

(d)In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee's rights under, or to recover damages for breach of, this Agreement, or to recover under any directors' and officers' liability insurance policies maintained by the Company, the Company shall pay on Indemnitee's behalf, in advance, any and all expenses

8


(of the types described in the definition of Expenses in Section 14(e) of this Agreement) actually and reasonably incurred by Indemnitee regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of expenses or insurance recovery.
(e)The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding, and enforceable and shall stipulate in any such court that the Company is bound BY all THE provisions of THIS Agreement. THE Company shall indemnify Indemnitee against any AND all Expenses AND if requested by Indemnitee, shall (within ten (10) days after RECEIPT by the Company OF a written request therefore) advance, to THE extent not prohibited by law, such expenses TO Indemnitee, which are incurred by Indemnitee IN connection with ANY action brought by Indemnitee for indemnification or advance of Expenses from the Company under this AGREEMENT or under any directors' AND officers' liability insurance policies maintained by THE COMPANY regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of expenses OR insurance recovery.


BY CLICKING ON THE "ACCEPT" BOX WHERE INDICATED IN THE COMPANY'S ELECTRONIC ACCEPTANCE PROCEDURE OR OTHERWISE ELECTRONICALLY ACCEPTING THIS AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED HEREIN AND IN THE PLAN. YOU ALSO ACKNOWLEDGE RECEIPT OF THE PLAN AND REAFFIRM YOUR AGREEMENT TO ANY RESTRICTIVE COVENANTS SET FORTH IN ANY AGREEMENT BETWEEN YOU AND THE COMPANY OR ITS AFFILIATES.


(f)Notwithstanding anything in This Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
ADVANCED ENERGY INDUSTRIES, INC.

By:_______________________

Date: _______________________

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Exhibit 10.34

Advanced Energy Industries, Inc.

ANNUAL INCENTIVE PLAN

Article 1.
PURPOSE AND DURATION
Section 1.1. Purpose. This Advanced Energy Industries, Inc. Annual Incentive Plan is intended to motivate employees of the Company and its Affiliates achieve performance objectives, measured on an annual basis, that are aligned with the Company's objectives and which are intended to result in increased value to the shareholders of the Company. Awards granted under this Plan represent Cash Incentive Awards under, and will be subject to the terms of, the Advanced Energy Industries, Inc. 2023 Amended and Restated Omnibus Incentive Plan In the event of any discrepancy between the terms of this Plan and the terms of the Omnibus Incentive Plan, the terms of the Omnibus Incentive Plan shall control.
8.Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a)The rights of indemnification as provided by this Agreement shall not be deemed exclusive of, any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate, the Bylaws, any agreement, a vote of stockholders, a resolution of directors, or otherwise. No amendment, alteration, or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee's Corporate Status prior to such amendment, alteration, or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate, The Bylaws, and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. to the extent that a change in the DGCL, whether by statute or judicial decision, limits the indemnification rights that would be afforded currently under the Certificate, the Bylaws, and, this Agreement, it is the intent of the parties hereto that such change, to the extent not otherwise required by such law, statute, or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
Section 1.2. Duration. The Plan is effective for Award Periods beginning as of January 1, 2024, and will remain in effect until terminated pursuant to Article 9.
Article 2.
DEFINITIONS AND CONSTRUCTION
Section 2.1. Definitions. Wherever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. Capitalized terms not otherwise defined herein shall have the same meanings as in the Omnibus Incentive Plan:
(a)"Affiliate" means any corporation or any other entity that is directly or indirectly, controlled by, or under common control by the Company.
(b)To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents, or fiduciaries of the Company or of any Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent, or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability
(b)"AIP Committee" means the Chief Executive Officer of the Company ("CEO") or a committee of one or more employees or other individuals appointed by the CEO to administer the Plan. No member of the AIP Committee may act or pass upon any matters pertaining to the eligibility for, or participation in, the Plan of any AIP Committee member or Section 16 Participant, and instead, the Administrator (i.e., the Board or the Committee) will act as the AIP Committee with respect to such matters. Further, if a Participant becomes a Section 16 Participant following the end of an Award Period but before the Award is payable, if any, for such Section 16 Participant, the Administrator will act as the AIP Committee with respect to such Section 16 Participant.


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insurance in, effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. the Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c)In the event of any, payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(d)The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.
(e)The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee, or agent of any other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise.
(c)"Award Period" means the fiscal year of the Company or such period longer or shorter than a fiscal year, as determined by the Administrator. Each Award Period shall be divided for performance calculation purposes into two six-month performance measurement periods (i.e., January 1 to June 30 and July 1 to December 31), unless another division of periods (or no division) is determined by the Administrator.
9.Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a)for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or
(b)(i) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized from the sale of the Company's securities, as required in each case under the Exchange Act or applicable national securities exchange rules (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or


(d)"Base Salary" of a Participant means the annual rate of base pay in effect for such Participant as of the last day of the Award Period, or such other date as the Administrator specifies.
(e)"Entry Deadline" means, as to any Award Period, the first business day in the last Company fiscal quarter of such Award Period (i.e., October 1 or the first subsequent business day), or such other date as the Committee may determine for the applicable Award Period. For the avoidance of doubt, the Committee may modify an Entry Deadline for an Award Period at any time during or following such Award Period (but prior to payment of any Awards for such Award Period).
(f)"Omnibus Incentive Plan" means Advanced Energy Industries, Inc. Amended and Restated 2023 Omnibus Incentive Plan, as from time amended and in effect.
(c)in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees, or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii)
(g)"Participant" means, as to any Award Period, any employee of the Company or an Affiliate who is at a job level grade of tier 6, or other job grade level or other employee selected by the AIP Committee, subject in all cases to Section 3.1. However, except as provided in Section 3.1, a Participant for a given Award Period does not include any employee who first commences employment at the Company or an Affiliate after the Entry Deadline for the applicable Award Period. Notwithstanding the foregoing, the AIP Committee, in its sole discretion, may determine that an otherwise eligible employee or group of employees (including all or a portion of employees in an otherwise eligible job level grade) will not be a Participant in the Plan for a given Award Period. Only employees (not independent contractors) of the Company or one of its Affiliates may be a Participant in this Plan.


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the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) the proceeding was initiated to establish or enforce a right to indemnification under this Agreement, any other agreement or insurance policy, or under the Bylaws or the Certificate, or (iv) as otherwise required under the laws of the State of Delaware.
10.Duration of Agreement. all agreements and obligations of the Company contained herein shall continue during the period Indemnitee is a director, officer, or key employee of the Company (or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of Indemnitee's Corporate Status, whether or not Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.
(h)"Plan" means the arrangement described herein, as from time amended and in effect.
Section 2.2. Gender and Number. Except where otherwise indicated by the context, any masculine term used herein includes the feminine, the plural includes the singular, and the singular the plural.

Article 3.
ELIGIBILITY

11.Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's estate, spouse, heirs, executors, or, personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released Unless asserted by the timely filing of a legal action within such two-year (2) Period provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter Period shall govern.
Section 3.1 Participation. All eligible Participants will be automatically enrolled in the Plan for each Award Period on the first day of such Award Period or, if later (or again), on the first full business day during such Award Period that the individual first meets the definition of "Participant" for such Award Period (e.g., the individual moves to an eligible job level grade level). Participants who become eligible to participate in the Plan after the beginning of an Award Period (e.g., promoted, hired or rehired) may be eligible for a Cash Incentive Award payment on a prorated basis. Unless otherwise determined by the AIP Committee, a Participant enrolled in the Plan during an Award Period will cease to be enrolled for the portion of such Award Period in which such individual no longer meets the definition of "Participant"; provided, however, that they may remain eligible to receive an Award for the portion of such Award Period in which they met the definition of "Participant", and provided the Participant meets the other terms and conditions for eligibility to receive an Award unless determined otherwise by the AIP Committee. Notwithstanding the foregoing, the AIP Committee may determine that an
12.Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company's obligations hereunder through an irrevocable bank line of credit, funded trust, or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.


2


otherwise eligible employee will not be a Participant in the Plan for a given Award Period or a portion thereof. Accordingly, a Participant who participates in the Plan in a given Award Period is not in any way guaranteed or assured of participation in the Plan in any subsequent Award Period. Unless otherwise determined by the AIP Committee, a Participant in this Plan is not eligible to participate concurrently in any other annual or short-term incentive plan of the Company or its Affiliates, including sales incentive plans. Notwithstanding the foregoing, in determining whether an otherwise eligible employee shall become a Participant with respect to an Award Period (or portion thereof), the AIP Committee, in its sole discretion, may provide that an individual will be deemed to have become a Participant on the first day of the Award Period, if, as of the Entry Deadline for such Award Period, (a) such individual was an employee of an entity or its predecessor that, by virtue of an acquisition or similar transaction by the Company, first became an Affiliate after the Entry Deadline for the Award Period, and (b) such employee otherwise meets the definition of a "Participant".
13.Enforcement.
(a)The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve, or continue to serve, as a director, officer, or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, or key employee of the Company.
(b)This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate, the Bylaws, and any applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

(c) the Company shall not seek from a court, or agree to a "bar order" which would have the effect of prohibiting or limiting Indemnitee's rights to receive advancement of expenses or any other rights under this Agreement.

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14.Definitions. For purposes of this Agreement:
(a)A "Change of Control" shall be deemed to have occurred upon the earliest to occur after the date of this Agreement of any of the following events:
(i)Acquisition of Stock by Third Party. The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding Shares (the "Outstanding Company Common Stock") or (b) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally In, the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate or (4) any acquisition by any corporation pursuant to a transaction that complies with Sections 14(a)(iii)(A) - 14(a)(iii)(C) below;


Section 3.2 New Hires; Transfers In, Out and Between Eligible Positions.

(a)For a Participant who is promoted into a position that is eligible for a Cash Incentive Award, or promoted into a position that is eligible for additional Cash Incentive Award, the AIP Committee may (1) select such employee as a Participant at any time during the course of a Award Period, (2) take action as a result of which there is an additional Cash Incentive Award made to a Participant who, as to an Award Period that is in progress, is already a Participant and as to whom a Cash Incentive Award is already in effect where the additional Cash Incentive Award relates to the same Award Period, or (3) change the Performance Goals, or potential award amount under a Cash Incentive Award that is already in effect. In such event, the AIP Committee may, but is not required to, prorate the amount that would otherwise be payable under such Cash Incentive Award if the Participant had been employed during the entire Award Period to reflect the period of actual employment during the Award Period.
(ii) Change in Board of Directors. Any time at which individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii)Corporate Transaction. Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of the Company's assets which occurs on the date that any Person acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a "Business Combination"), in each case unless following such Business Combination, (A) all at least 50% of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock AND the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding common equity and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially
(b)If a Participant is demoted during a Award Period, the AIP Committee may decrease the potential award amount of any Cash Incentive Award, or revise the Performance Goals, as determined by the AIP Committee to reflect the demotion.
(c)If a Participant is transferred from employment by the Company to the employment of an Affiliate, or vice versa, or between Affiliates, the AIP Committee may revise the Participant's Cash Incentive Award to reflect the transfer, including changing the potential Award amount or Performance Goals.

Section 3.3 Termination of Employment.

(d)Except as otherwise provided under the terms of an employment or severance agreement between a Participant and the Company, no Participant shall earn an Award for an Award Period unless the Participant is employed by the Company or an Affiliate (or is on an approved leave of absence) on the date of payment of such Award, or unless payment is approved by the Administrator after considering the cause of termination.

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Article 4.
AWARD AMOUNTS AND WEIGHTINGS
(a)At the time of grant of a Cash Incentive Award, the AIP Committee shall determine for each Award the Performance Goals, and the amount payable to the Participant if and to the extent the Performance Goals are met. Performance Goals for current year are set forth on an appendix to this Plan.
(b)The amount payable to a Participant may be designated as a flat dollar amount or as a percentage of the Participant's Base Salary, or may be determined by any other means as the Administrator may specify at the time the Cash Incentive Award is granted. The maximum amount of the Cash Incentive Award that may be earned by and paid to any Participant in respect of an Award Period shall not exceed $3 million.


12


the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and The Outstanding Company Voting Securities, as the case may be (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or an Affiliate or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common equity of the entity resulting from such business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of The Board providing for such Business Combination; or

(c)The Administrator may weight each performance period differently based on the underlying business plan for the Award Period (i.e. 1H at 40%, 2H at 60%). Unless otherwise determined by the Administrator, in no instance can the target Performance Goals weighting exceed 100% in any Award Period. Unless otherwise determined by the Administrator, Company-wide achievement will fund an overall incentive pool 50% at threshold, 100% at target, and 200% at stretch, each of which will be determined by the Administrator; provided that, the Administrator may determine that certain employment level tiers or other categories of Participants are not eligible for stretch achievement. The Administrator may determine that one or more Performance Goals must be met to trigger pool funding for the remaining Performance Goals. Achievement percentages between the threshold and target and between the target and stretch levels will, unless otherwise determined by the Administrator, be interpolated based on actual results in each category to determine the final achievement percentage to fund the pool. The AIP Committee (or Administrator, as appropriate) may also establish other individual achievement scales for any or all Participants.
(iv)Liquidation. Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Article 5.
PAYMENT
For purposes of this Section 14(a), the following terms shall have the following meanings:
Section 5.1. Evaluating Performance and Computing Awards.

(a) "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the Exchange Act.
(a) As soon as practicable following the close of an Award Period, the Administrator shall determine whether and to what extent the Performance Goals and other material terms of the Cash Incentive Award issued for such period were satisfied, and shall determine whether any discretionary adjustments under Subsection (b) shall be made. Based on such determination, the Administrator (or its delegee the AIP Committee) shall determine the award amount payable to a Participant under the Cash Incentive Award for that Award Period. The Company may permit or require the deferral of payment of any Cash Incentive Award in accordance with the terms of any deferred compensation plan or similar arrangement established by the Company.


(B) "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, or any group of Persons acting in concert that would be considered "persons acting as a group" within the meaning of Treas. Reg. § 1.409A-3(i)(5).

(C) "Subsidiary" means any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entities in the chain) owns The stock or equity interest possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.

(b)"Corporate Status" describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(c)"Disinterested Director" means a director of the Company who is not and was not interested in The transaction or conduct giving rise to the Proceeding in respect of which indemnification is sought by Indemnitee.
(b) The Administrator may adjust any Participant's Award amount to take into account or exclude the effects of any material unforeseen or extraordinary events that would otherwise result in unintended enlargement or diminution of benefits under the Award.
(d)"Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.
(e)"Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs,

4


printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of The types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for and other costs relating to any cost bond, supersede as bond or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
The Administrator may also provide in the terms of any Award for adjustments to amounts payable based on individual performance.

Section 5.2. Timing and Form of Payment. When the payment due to the Participant has been determined, payment shall be made in a cash lump sum in the calendar year immediately following the close of the Award Period, typically as soon as practicable after the Administrator has certified the extent to which the Performance Goals have been achieved.
(f)"Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. the Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
Article 6.
RIGHTS OF PARTICIPANTS
Section 6.1. No Funding. No Participant shall have any interest in any fund or in any specific asset or assets of the Company or any Affiliate by reason of any Cash Incentive Award under the Plan. It is intended that the Company has merely a contractual obligation to make payments when due hereunder and it is not intended that the Company or any Affiliate hold any funds in reserve or trust to secure payments hereunder.
Section 6.2. No Transfer. No Participant may assign, pledge, or encumber his or her interest under the Plan, or any part thereof.
Section 6.3. No Implied Rights; Employment. Nothing contained in this Plan shall be construed to:
(g)"Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee's Corporate Status, by reason of any action taken by Indemnitee orof any inaction on Indemnitee's part while acting as a director, officer or key employee of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by Indemnitee pursuant to Section 7.of this Agreement to enforce Indemnitee's rights under this Agreement.
(a)Give any employee or Participant any right to receive any award other than in the sole discretion of the Administrator;
(b)Limit in any way the right of the Company or an Affiliate to terminate a Participant's employment at any time; or
(c)Be evidence of any agreement or understanding, express or implied, that a Participant will be retained in any particular position or at any particular rate of remuneration.

Article 7.
ADMINISTRATION

15.Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever: (a) the validity, legality, and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that is not itself invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to: the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent
Section 7.1. General. The Plan shall be administered by the AIP Committee or where required by law or otherwise provided for in this Plan, the Administrator (i.e. the Board or Committee).
Section 7.2. Authority. In addition to the authority specifically provided herein, the Administrator shall have full power and discretionary authority to: (a) administer the Plan, including but not limited to the power and authority to construe and interpret the Plan; (b) correct errors, supply omissions or reconcile inconsistencies in the terms of the Plan or any Cash Incentive Award; (c) establish, amend or waive rules and regulations, and appoint such agents, as it deems appropriate for the Plan's administration; and (d) make any other determinations, including factual determinations, and take any other action as it determines is necessary or desirable for the Plan's administration.


14


possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that is not itself invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Without limiting the generality of The foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.


5

Section 7.3. Decision Binding. The AIP Committee's or Administrator's determinations and decisions made pursuant to the provisions of the Plan and all related orders or resolutions of the Board or Committee shall be final, conclusive and binding on all persons who have an interest in the Plan or an award, and such determinations and decisions shall not be reviewable.


16.Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
17.Assignment. This Agreement shall be binding upon and inure to the benefit of AND be enforceable by The parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal representatives. The Company may not assign this Agreement without prior approval of Indemnitee; provided that, the Company may assign to and shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, or agent of the Company or of any other enterprise at the Company's request.
Article 8.
AMENDMENT AND TERMINATION
Section 8.1. Amendment. The Committee may modify or amend, in whole or in part, any or all of the provisions of the Plan or any Cash Incentive Award, and may suspend the Plan, at any time; provided, however, that, except for modifications expressly contemplated by the Plan, no such modification, amendment, or suspension may, without the consent of the Participant or his legal representative in the case of his death, adversely affect the amount of any payment due under the Plan with respect to any Cash Incentive Award in effect prior to the date of such modification, amendment or suspension.
Section 8.2. Termination. The Committee may terminate the Plan at any time; provided, however, that no such termination may, without the consent of the Participant or his legal representative in the case of his death, adversely affect the amount of any payment due under the Plan with respect to any Cash Incentive Award in effect prior to the date of such termination.
18.Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. the failure to so notify The Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.
Article 9.
TAX WITHHOLDING

The Company shall have the right to deduct from all cash payments made hereunder (or from any other payments due a Participant) any foreign, federal, state, or local taxes required by law to be withheld with respect to such cash payments.

19.Notices. all notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:

(a)To Indemnitee at the address set forth below Indemnitee's signature hereto.
Article 10.
OFFSET

The Company shall have the right to offset from any amount payable hereunder any amount that the Participant owes to the Company or any Affiliate, e.g. due to the Company's clawback policy, without the consent of the Participant (or his estate, in the event of the Participant's death).

Advanced Energy Industries, Inc.

1595 Wynkoop Street, Suite 800
Denver, Colorado 80202
Attention: President & CEO

General Counsel

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

20.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.


Article 11.
21.Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
SUCCESSORS

All obligations of the Company under the Plan with respect to Cash Incentive Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company. The Plan shall be binding upon and inure to the benefit of the Participants and their heirs, executors, administrators and legal representatives.
22.Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of law rules. the Company, and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably the Company's agent for service of process in Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with The same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

ADVANCED ENERGY INDUSTRIES, INC. (THE COMPANY)



By:____________________________________
Name:

Title:

INDEMNITEE

______________________________________
Name:
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[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
| | | |
| | | |

Exhibit 10.25

ADVANCED ENERGY INDUSTRIES, INC.

19.1

INSIDER TRADING POLICY

Advanced Energy Industries, Inc., a Delaware corporation (the "Company"), hereby grants restricted stock units ("RSUs") relating to shares of its common stock, $0.001 par value (the "Stock"), to the individual named below as the Grantee. The terms and conditions of the grant are set forth in this Agreement and in the This Insider Trading Policy (the "Policy") establishes rules and procedures with respect to trading in the securities of Advanced Energy Industries, Inc. 2017 Omnibus Incentive Plan (the "Plan"). Capitalized terms used but not defined in this Agreement have the meanings given to them in the Plan.and its subsidiaries (the "Company") and certain other publicly traded companies. The Company's Board of Directors has adopted this Policy to promote compliance with applicable securities laws that prohibit insider trading, to help Company personnel avoid the severe consequences associated with insider trading, to prevent even the appearance of improper insider trading by anyone employed by or associated with the Company, and to protect the Company's reputation for adhering to the highest standards of conduct.

Attachment

This is not a stock certificate or a negotiable instrument.

| Stock Unit Transferability | This grant is an award of restricted stock units in the number set forth on the cover sheet, subject to the vesting conditions described below ("RSUs"). Your RSUs may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may your RSUs be made subject to execution, attachment or similar process. |

| Vesting | Your RSUs shall vest according to the schedule set forth on the cover sheet; provided, that, you remain in Service on the relevant vesting dates. If your Service terminates for any reason, you will forfeit any RSUs in which you have not yet become vested. |
| Section | Page |
| 1. | |
| | Notwithstanding anything in this Agreement to the contrary, your RSUs shall not vest unless and until you confirm that you are not obliged to make any Hart-Scott-Rodino filings in connection with the vesting of your award of RSUs. |
| General Policy: No Trading or Causing Trading While in Possession of Material Non-Public Information | 1 |
| Delivery of Stock Pursuant to Vesting of RSUs | A certificate for the shares of Stock represented by your RSUs typically shall be delivered to you upon vesting, unless the Administrator (in its sole discretion) allows you to elect to defer delivery of such Stock and you make such election in a timely manner. If your Service terminates for a reason other than for Cause prior to such date of election, you will instead be delivered a certificate for the vested portion of your RSUs represented by this Agreement. If your Service terminates for Cause, you shall forfeit of all of your RSUs. |
| 2. | 3 |
| Prohibited Activities | |
| | Notwithstanding the preceding paragraph: |
| 3. | 4 |
| Limited Exceptions | |
| 4. | 5 |
| | If you are a "key employee" within the meaning of Section 409A of the Code and shares would otherwise be delivered to you on account of your separation from Service, then such |
| Administration | |
| | shares shall not be delivered to you until six months after your separation from Service; and |
| 5. | 6 |
| Key Insiders Only: Additional Policies and Procedures | |

| | If the shares relating to the vested RSUs would otherwise be delivered during a period in which you are (i) subject to a lock-up agreement restricting your ability to sell shares of Stock in the open market or (ii) restricted from selling shares of Stock in the open market because you are not then eligible to sell under the Company's insider trading." or similar plan or policy as then in effect (whether because a trading window is not open or you are otherwise restricted from Trading delivery of the shares related to the vested RSUs may be delayed until no earlier than the first date on which you are no longer prohibited.from selling shares of Stock due to a. lock-up agreement or insider trading plan or Policy restriction; provided, however, that the delivery of the shares related to vested RSUs will be made within 2 ½ months after the end of taxable year in which the RSUs vest or such other time as is required to comply with the requirements of Section 409A of the Internal Revenue Code. |
| 1. | General Policy: No Trading or Causing Trading While in Possession of Material Non-Public Information |

Under U.S. federal securities laws, it is illegal to transact in securities while in possession of "material non-public information" (defined in paragraph (c) below). This conduct is known as "insider trading." Providing material non-public information to another person who may then trade or advise others to trade based on that information (known as "tipping") is also illegal.

Trading in the securities of the Company or any other publicly traded company while aware of material non-public information, or disclosing such material non-public information to others without authorization, are prohibited.

| | a. | Scope. This Policy applies to all directors, officers, employees, consultants, and contractors of the Company, acting on their own behalf or on the behalf of the Company, as well as their respective immediate family members, persons with whom they share a household and any other persons or entities whose transactions in securities they influence, direct, or control (collectively referred to as "Insiders"). Each employee, director, officer, consultant, and contractor is responsible for ensuring that these other individuals and entities comply with this Policy. |

This Policy continues to apply even after termination of service to the Company for so long as an Insider remains in possession of material non-public

| | Page 1 of 7 | |

| Deferral of Delivery of Stock | The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code. Section 409A of the Internal Revenue Code provides that deferred compensation that is not structured to satisfy Section 409A may result in accelerated federal income taxation, a 20% penalty tax applied in addition to federal income tax otherwise owed and potentially, interest for any underpayment of tax at the ordinary underpayment rate plus one percentage point. RSUs that allow for deferral of delivery of stock following vesting are likely to be impacted. For this reason, unless you have received written notice otherwise, the Administrator does not intend to allow for such deferral. |
| | | |
| | | |

information. Key Insiders (defined in Section 5 below) are also subject to any blackout period in effect at the time of their termination until the earlier of the end of the blackout period or three months after termination.

| | b. | Consequences. The Securities and Exchange Commission (the "SEC") and the Department of Justice have made prosecution of insider trading violations a priority, and penalties can be severe, both for individuals involved in such unlawful conduct and for the Company and its management. |

| Withholding Taxes | You agree, as a condition of this grant, that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of vesting in RSUs or your acquisition of Stock under this grant. In the event that The Company determines that any federal, state, local or foreign tax or withholding payment is required relating to your RSUs, The Company will have the right to (i) require that you arrange such payments to the Company, (ii) withhold such amounts from other payments due to you from the Company or any affiliate, or (iii) cause an immediate forfeiture of shares of Stock subject to the RSUs granted pursuant to this Agreement in an amount equal to the withholding or other taxes due. |
Individuals who violate insider trading laws may be required to pay large civil or criminal penalties, disgorge profits made or losses avoided by trading, or serve a prison term, even if they derived little or no profit from the transaction or tipped others without trading themselves. The Company may also be required to pay significant civil or criminal penalties and could experience irreparable harm to its reputation or competitive position.

Because of the risks posed by violations of this Policy those who fail to comply with this Policy will be subject to appropriate disciplinary action by the Company, which may include termination of employment, regardless of whether such non-compliance results in a violation of law. The Company reserves the right to determine, in its own discretion, whether this Policy has been violated based on information available to it.

| | c. | Material Non-Public Information. |

Information is "material" if a reasonable investor would consider that information important in making a decision to buy, hold, or sell securities. Any information that could be expected to affect the market price of a company's securities, whether positive or negative, should be considered material. Material information can also include information that something might happen. Materiality depends on the particular facts and circumstances of each situation and should be carefully assessed on a case-by-case basis. However, certain types of information are more likely to be deemed material. Examples include:

| | i. | Significant changes in the Company's financial results or operating prospects; |
| Corporate Transaction | Notwithstanding the vesting schedule set forth above, upon the consummation of a Corporate Transaction, the RSUs will become |

| | ii. | Significant changes in financial forecasts; |
2
| | 100% vested if it is not assumed, or equivalent RSUs are not substituted for the RSUs, by the Company or its successor. |
| | iii. | Potential significant M&A activity or financing, or any securities offerings to raise capital; |
| Employment Rights | This Agreement does not confer on you any right with respect to continuance of employment or other service with the Company or of its affiliates, nor will it interfere in any way with any right the Company or its affiliates would otherwise have to terminate or modify the terms of your employment or other service at any time. |
| | iv. | Stock splits, changes to dividend policy, or major stock repurchases; |
| | v. | Major changes in the Company's senior management or board of directors; |
| | vi. | Important developments regarding major litigation or investigations; |
| | Page 2 of 7 | |

| | | |
| | You acknowledge and understand that this grant of RSUs and any future RSUs granted under the Plan are wholly discretionary in nature and are not to be considered part of any normal or expected compensation that is or would be subject to severance, resignation, redundancy or similar pay, other than to the extent required by local law. |
| | | |

| | vii. | Significant cybersecurity or data security incidents; or |
| Shareholder Rights | You do not have any of the rights of a shareholder with respect to the RSUs, unless and until the Stock relating to the RSUs has been delivered to you. |
| | viii. | Liquidity problems. |

Enforcement authorities will evaluate materiality with the benefit of hindsight, and any doubts about whether something is material should be resolved in favor of materiality.

Information is "non-public" if it has not been widely distributed to the investing public through a widely circulated news service or through a public filing with the SEC. Even after the information's release by the Company, a reasonable period of time must elapse for the public to absorb the information. For the purposes of this Policy, information will not be considered public until after the close of trading on the first full trading day following the Company's widespread public release of the information.
| Adjustments | In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of RSUs covered by this grant will be adjusted (and rounded down to the nearest whole number) in accordance with the terms of the Plan. |
| Applicable Law | this Agreement will be interpreted and enforced under the laws of the State of Colorado, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. |


If you are unsure as to whether information is material or non-public, you should either assume the information's materiality or confidentiality, or consult the Chief Financial Officer or General Counsel before making any decision to disclose such information or trade in the securities to which that information relates.

| 2. | Prohibited Activities |
| Consent to Electronic Delivery | The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grant you agree that the Company may deliver the Plan prospectus and the Company's annual report to you in an electronic format. If at any time you would prefer to receive paper copies of these documents, as you are entitled to receive, the Company. would be pleased to provide copies. Please contact the Stock Plan Administrator to request paper copies of these documents. |
| | a. | Trading in Company Securities. Except as otherwise provided in Section 3 below, no Insiders may buy, sell, offer to buy or sell, gift, donate, or otherwise transact in the Company's securities, including common stock, preferred stock, options, notes, bonds, and convertible securities, as well as any derivative instruments (collectively referred to as "Securities") while in possession of material non-public information about the Company. |
| Consent to Process Personal Data | You acknowledge that in order to perform its requirements under this Plan, the Company and its affiliates may process sensitive personal data about you. Such data include but are not limited to the information provided above and any changes thereto and other appropriate personal and financial data about you. You hereby give explicit consent to the Company to process any such personal data and/or sensitive personal data. You also hereby give explicit consent | | b. | Tipping. No Insider may "tip" or provide material non-public information about the Company or any company with which the Company does business to any person (including other Insiders), unless and only to the extent specifically authorized or required in the performance of such Insider's duties in service to the Company. |
| | c. | Trading Advice. No Insider may recommend to anyone else that he or she trade in the Company's Securities, whether or not such Insider is aware of material non-public information. |
to transfer any such personal data and/or sensitive personal data outside the country |
3

| | in which you are employed, and to the United States. the legal persons for whom Such personal data are intended are Advanced Energy Industries, Inc. and E*TRADE. You have been informed of your right of access and correction to your personal data by applying to Advanced Energy's stock plan administrator. |

| | d. | Derivative Transactions, Short Sales, and Hedging. Except as otherwise provided under the heading "Exceptions" below, Insiders may not (i) buy or sell options, warrants, puts, calls, or other derivative securities relating to the Company's Securities, (ii) engage in short sales of the Company's Securities, or (iii) enter into hedging or monetization transactions (including forward sale or purchase contracts, equity swaps, collars, or exchange funds) with respect to the Company's Securities. Such transactions are speculative in nature and create |
| | Page 3 of 7 | |

| The Plan | the text of the Plan is incorporated in this Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant of RSUs. Any prior agreements, commitments or negotiations concerning this grant are superseded. The Plan will control in the event any provision of this Agreement should appear to be inconsistent with the terms of the Plan. |
| | | |
| | | |

| | | the appearance that the transaction is based on non-public information. They also may undermine or be perceived to undermine the alignment of the Insider's interests with the long-term interests of shareholders. |
| | |
| | You understand that the Company has reserved the right to amend or terminate the Plan at any time and that the grant of an RSU under the Plan at one time does not in any way obligate the Company or its affiliates to grant additional RSUs in any future year or in any given amount. |
e. | Margin or Pledging. Insiders may not hold the Company's Securities in a margin account or pledge the Company's Securities as collateral. Forced margin or foreclosure sales may occur at any time and could result in trading when the Insider is aware of material non-public information or otherwise not permitted to trade in the Company's Securities. |
| | f. | Trading in the Securities of Other Companies. No Insider may buy, sell, offer to buy or sell, gift, donate, or otherwise transact in the Securities of any other publicly traded company (such as customers, suppliers, or acquisition targets) while in possession of material non-public information about such other company that was acquired in the course of the Insider's involvement with the Company. |
| | g. | Stock Repurchases. Neither the Company nor any Insider(s) acting in the name or on the behalf of the Company may adopt a Rule 10b5-1 stock repurchase agreement for the repurchase of the Company's Securities or initiate a repurchase of the Company's Securities outside of such Rule 10b5-1 stock repurchase agreement at a time when the Company possesses material non-public information. |
the following shall apply with respect to the vesting of a RSU if, on the date of such vesting, you are a resident in a country where stock is not offered but instead is settled in Cash at vesting. (Please contact Human Resources for a list of such countries):

| | |
| Withholding Taxes | As soon as reasonably practical, you shall be entitled to payment of the proceeds of the transaction. You agree as a condition of this grant that any resulting taxes due, the Company shall have the right to take such action, so as to satisfy and pay an amount equal to the withholding or other taxes due to the Company |
| 3. | Limited Exceptions |

By accepting this Agreement, you agree to all of the terms and conditions described above and in the Plan.
The following are certain limited exceptions to the trading restrictions set forth in Section 2(a) above and Sections 5(a) - (c) below; however, there are no unconditional safe harbors for insider trading and all Insiders should exercise good judgment at all times.


4


Exhibit 10.26

ADVANCED ENERGY INDUSTRIES, INC.

______ LONG TERM INCENTIVE PLAN

2017 OMNIBUS INCENTIVE PLAN

LTI PERFORMANCE STOCK UNIT AGREEMENT

Advanced Energy Industries, Inc., a. Delaware corporation (the "Company"), hereby awards performance Stock units ("PSUs") relating to shares of its common Stock $0.001 par value (the "Stock"), to you in the amounts outlined in the attached Notice of Award of Performance Stock Units (the "Notice of Award"). the terms and conditions of the award are set forth in this Agreement, the _____ Long-Term Incentive Plan ("LTI Plan") and the Advanced Energy Industries, Inc. 2017 Omnibus Incentive Plan (the "2017 Plan"). Capitalized terms used but not defined in this Agreement have the meanings given to them in the LTI Plan and 2017 Plan.
| | a. | Employee Stock Purchase Plan. Purchases of the Company's Securities through automatic periodic or lump sum payroll contributions to the Company's Employee Stock Purchase Plan ("ESPP"). This exception does not include elections to enroll in the ESPP, modifications to prior ESPP elections, or sales of shares acquired through the ESPP, all of which are subject to the restrictions of this Policy; |


Attachment

this is not a stock certificate or a negotiable instrument.

| Stock Unit Transferability | This is an award of performance stock units, in the number identified in the Notice of Award, subject to the vesting conditions described below ("PSUs"). Your PSUs may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may your PSUs be made subject to execution, attachment or similar process. |
| | b. | Incentive Compensation. The receipt and vesting of restricted stock units, stock options, and other compensatory awards issued to the Insider by the Company; |
| Vesting | This is a performance-based award of PSUs that may result in shares of the Company's common stock being granted and vested if the Company's meets or exceeds the performance metrics outlined in the LTI Plan. Please note that the Company may settle all or a portion of the shares underlying the PSUs by the payment of cash, or a combination of cash and shares, as outlined in the LTI Plan. |
| | c. | Exercise of Options for Cash. The exercise of stock options granted under the Company's incentive compensation plans for cash. This exception does not include the cashless exercise of options or the sale of shares issued upon exercise; and |
| | Page 4 of 7 | |

| | Your PSUs only vest as set forth in the LTI Plan; provided, that, you remain in Service on the relevant vesting dates if allowed under the LTI Plan. If your Service terminates for any reason, you will forfeit any PSUs in which you have not yet become vested. |
| | | |
| | | |

| | Notwithstanding anything in this Agreement to the contrary, your PSUs shall not vest unless and until you confirm that you are not obliged to make any Hart-Scott-Rodino filings in connection with the vesting of your award of PSUs. |
| | d. | Rule 10b5-1 Trading Plans. Transactions made pursuant to a valid written plan that was established in compliance with the terms of Rule 10b5-1 of the Securities Exchange Act of 1934 and meets the following requirements (a "10b5-1 Plan"): |



| Delivery of Stock Pursuant to Vesting of PSUs | A certificate for the shares of Stock represented by your PSUs typically shall be delivered to you upon vesting, unless the Administrator (in its sole discretion) allows you to elect to defer delivery of such Stock and you make such election in a timely manner. If your Service terminates for Cause, you shall forfeit of all of your PSUs. |
| | |
| | i. | The 10b5-1 Plan (and any amendments or modifications thereto) has been reviewed and approved in writing by the Company's Chief Financial Officer; || | Notwithstanding the preceding paragraph: |
| | |
| | ii. | The 10b5-1 Plan was entered into in good faith and at a time when the Insider was not in possession of material non-public information regarding the Company, and the 10b5-1 Plan includes representations by the Insider certifying as such; || | If you are a "key employee" within the meaning of Section 409A of the Code and shares would otherwise be delivered to you on account of your separation from Service, then such; shares shall not be delivered to you until six months after your separation from Service; and |
| | iii. | The 10b5-1 Plan was not adopted, amended, or modified during any applicable quarterly or special blackout period; and |
| | If The shares relating to the vested PSUs would otherwise be delivered during a period in which you are (i) subject to a lock-up agreement restricting your ability to sell shares of Stock in the open market or (ii) restricted from selling shares of Stock in the open market because you are not then eligible to sell under the Company's Insider, trading or similar plan as then in effect (whether because a trading window is not open or you are otherwise restricted from trading), delivery of the shares related to the vested PSUs may be delayed until no earlier than the first date on which you are no longer prohibited from selling shares of Stock due to a lock-up agreement or insider trading plan restriction; provided, however, that the delivery of the shares, related to vested PSUs will be made within 2 ½ months after the end of taxable year in which the PSUs vest or such other time as is required to comply with the requirements of Section 409A of the Internal Revenue Code. |
| | iv. | The 10b5-1 Plan gives a third-party discretion authority to execute transactions in the Company's Securities, outside the control of the Insider, or explicitly specifies the securities to be purchased or sold, the number of shares, prices and/or dates of transactions, or other formula(s) describing such transactions. |

| Deferral of Delivery of Stock | The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code. Section 409A of the Internal Revenue Code provides that deferred compensation that is not structured to satisfy Section 409A may result in accelerated federal income taxation, a 20% penalty tax applied in addition to federal income tax otherwise owed and, potentially, interest for any underpayment of tax at the ordinary underpayment rate plus one percentage point. PSUs that allow for deferral of delivery of stock following vesting are likely to be impacted. For this reason, unless you have received written notice otherwise, the Administrator does not intend to allow for such deferral. |
The approval by the Chief Financial Officer, General Counsel, or their designees of any 10b5-1 Plan does not in any way constitute the Chief Financial Officer's, the General Counsel's, their designee's or the Company's opinion, guarantee, or assurance that such 10b5-1 Plan, or the execution of transactions thereunder, will be effective in preventing civil or criminal liability under state or federal insider trading laws. Insiders electing to purchase or sell securities pursuant to a 10b5-1 Plan should consult their own legal, financial and/or tax advisors before adopting, modifying, or terminating a 10b5-1 Plan. Final executed copies of a 10b5-1 Plan should be promptly submitted to the Stock Administrator, Chief Financial Officer, and General Counsel or their designee.
| Withholding Taxes | You agree, as a condition of this award, that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of vesting in PSUs or your acquisition of Stock under this award. In the event that the Company determines that any federal, state local or foreign tax or withholding payment is required relating to the delivery of shares under your PSUs, the |

2

| | Company will have The right to: (i) require that you arrange such payments to the Company, (ii) withhold such amounts from other payments due to you from the Company or any affiliate, or (iii) cause an immediate forfeiture of shares of Stock subject to the PSUs awarded pursuant to this Agreement in an amount equal to The withholding or other taxes due. |
| 4. | Administration |

The Company's Chief Financial Officer and General Counsel shall serve as the "compliance officers" for this Policy. The compliance officers shall:


| Corporate Transaction | Notwithstanding the vesting schedule set forth in the LTI Plan, upon the consummation of a. Corporate Transaction, the PSUs will become 100% vested if it is not assumed, or equivalent PSUs are not substituted for the PSUs, by the Company or its successor. Vesting may also occur pursuant to the terms of a separate authorized agreement. |
| | a. | Determine when to impose special blackout periods; |
| Employment Rights | This Agreement does not confer on you any right with respect to continuance of employment or other service with the Company or of its affiliates, nor will it interfere in any way with any right the Company or its affiliates would otherwise have to terminate or modify the terms of your employment or other service at any time. |
| | b. | Consider any requested waivers to this Policy; |
| | c. | Assist with determining who are Key Insiders; |
| | d. | Pre-clear all trading in securities of the Company by Key Insiders; |
| | e. | Approve all Rule 10b5-1 Plans' adoption, modification, or termination; |
| | You acknowledge and understand that this award of PSUs and any future PSUs awarded under the LTI Plan and 2017 Plan are wholly discretionary in nature and are not to be considered part of any normal or expected compensation that is or would be subject to severance, resignation, redundancy or similar pay, other than to the extent required by local law. |
| | f. | Interpret this Policy and respond to inquiries about this Policy; |
| Shareholder Rights | You do not have any of the rights of a shareholder with respect to the PSUs, unless and until the Stock relating to the PSUs has been delivered to you. |
| | Page 5 of 7 | |

| | | |
| | | |

| | g. | Assist with implementation and enforcement of this Policy; |
| Adjustments | In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of PSUs covered by this award will be adjusted (and rounded down to the nearest whole number) in accordance with the terms of the LTI Plan and 2017 Plan. |
| | h. | Propose amendments to this Policy; and |
| Applicable Law | this Agreement will be interpreted and enforced under the laws of the State of Colorado, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. |
| | i. | Address issues under this Policy, including violations. |

All determinations and interpretations relating to this Policy by the compliance officers shall be final.

The Chief Financial Officer and General Counsel each may act in the absence of the other if the other is not available in connection with any of the above duties, and each may delegate duties in the event they are unavailable or unable to perform such duties. Alternatively, in their absence, another employee designated by the Chief Executive Officer or Board of Directors shall be responsible for the administration of this Policy.

| Consent to Electronic Delivery | the Company, may choose to deliver certain statutory materials relating to the LTI Plan and 2017 Plan in electronic form. by accepting this award, you agree that the Company may deliver the 2017 Plan prospectus and the Company's annual report to you in an electronic format. If at any time you would prefer to receive paper copies of these documents, as you are entitled to receive, the Company. would be pleased to provide copies. Please contact |
| 5. | Key Insiders Only: Additional Policies and Procedures |

Members of the Company's Board of Directors, Section 16 officers of the Company, employees at the level of Senior Vice President or above, and certain other employees designated by the Company from time to time (collectively referred to as "Key Insiders") are subject to the additional trading restrictions described in this Section 5 because of their position, responsibilities, and actual or potential access to material non-public information about the Company. Each person designated a "Key Insider" shall be notified in writing. A complete list of Key Insiders is maintained by the Company's Stock Administrator and shall be updated on no less frequently than an annual basis.


3


| | the Stock Plan Administrator to request paper copies of these documents. |

| Consent to Process Personal Data | You acknowledge that to perform its requirements under the LTI Plan and 2017 Plan, the Company and its affiliates may process sensitive personal data about you. Such data include but are not limited to the information provided in the Notice of Award and any changes thereto and other appropriate personal and financial data about you. You hereby give explicit consent to the Company to process any such personal data and/or sensitive personal data. You also hereby give explicit consent to the Company to transfer any such personal data and/or sensitive personal data outside the country in which you are employed, and to the United States. The legal persons for whom such personal data are intended are Advanced Energy Industries, Inc. and E*TRADE. You have been informed of your right of access and correction to your personal data by applying to Advanced Energy's stock plan administrator. |
| | a. | Quarterly Blackout Periods. Key Insiders are prohibited from trading in the Company's Securities during each period (i) beginning on the fifteenth (15th) day of the third (3rd) calendar month of each of the Company's fiscal quarters and (ii) ending after the close of the market on the second (2nd) full trading day following the Company's public release of its quarterly or year-end earnings, as applicable. During these periods, Key Insiders generally possess, or are presumed to possess, material non-public information about the Company's financial and operating results. |
| The Plan | The text of the LTI Plan and the 2017 Plan is incorporated in this Agreement by reference. This Agreement, LTI Plan and the 2017 Plan constitute the entire understanding between you and the Company, regarding this award of PSUs. Any prior agreements, commitments or negotiations concerning this award are superseded. the LTI Plan and the 2017 Plan will control in the event Any provision of this Agreement should appear to be inconsistent with the terms of the LTI Plan and 2017 Plan. |
| | b. | Special Blackout Periods. From time to time, other types of material information regarding the Company may be pending and not publicly disclosed. While such material nonpublic information is pending, the Chief Financial Officer and the General Counsel, acting jointly, or the Chief Financial Officer or General Counsel individually, if the other is unavailable, may impose a special blackout period applicable to any or all Key Insiders and other employees, consultants, or contractors of the Company, during which such persons are prohibited from trading in the Company's Securities. If a special blackout period is imposed, the Company will notify the Key Insiders and other persons affected. Any person |
| | Page 6 of 7 | |

| | | |
| | You understand that the Company has reserved the right to amend or terminate the LTI Plan and the 2017 Plan at any time, and that the award of a PSU under the LTI Plan and 2017 Plan at one time does not in any way obligate the Company or its affiliates to award additional PSUs in any future year or in any given amount. |
| | | |

| | | made aware of the existence of a special blackout period should not disclose its existence to any other person (except as necessary to ensure compliance with this Policy by immediate family members or controlled entities in accordance with paragraph (d) below). |
| | c. | Pre-Clearance of Trades. Even if no blackout period is in effect, Key Insiders may not trade in the Company's Securities (including, for the avoidance of doubt, the exercise of options awarded by the Company, or a gift, contribution to a trust, or other transfer) without first pre-clearing the transaction. Once a Key Insider has concluded that he or she does not have material non-public information, requests for pre-clearance may be submitted in writing to the Chief Financial Officer, with the General Counsel on copy, at least two (2) business days in advance of the proposed transaction. Requests should include the nature of the proposed transaction (i.e. the type of transaction and Securities under consideration, such as open market purchase or sale of common stock, exercise of options, gift, etc.) and a confirmation that the Key Insider is not aware of any material non-public information regarding the Company. |
the following shall apply with respect to the vesting of a PSU if, on the date of such vesting, you are a resident in a country where stock is not offered (please contact Human Resources for a list of such countries):

| Delivery of Stock Pursuant to Vesting of PSUs | Upon the vesting of this PSU, you shall authorize the Company to direct the broker to immediately sell any and all shares of stock, that otherwise would have been delivered net of applicable withholding taxes and acquisition consideration due to the Company. This Agreement shall serve as your express authorization to immediately sell any and all shares of Stock to be acquired upon the vesting of this PSU. As soon as reasonably practical, you shall be entitled to payment of the proceeds resulting from such sale, net of the applicable tax withholding and acquisition consideration (if any) due to The Company, |


If pre-clearance is granted, the Key Insider must engage in the proposed transaction within three business days of approval. If for any reason the trade is not completed within those three business days, pre-clearance must be obtained again before the transaction may be completed. The Key Insider may not complete the proposed trade if, at any time after receiving pre-clearance and before effecting the transaction, he or she becomes aware of material non-public information regarding the Company or becomes subject to a blackout period.

The Company, Chief Financial Officer, and General Counsel are under no obligation to approve a transaction submitted for pre-clearance and may determine not to permit the transaction. None of the Company, Chief Financial Officer, or General Counsel will have any liability for any delay in reviewing, or any refusal of, a request for pre-clearance submitted pursuant to this provision. Notwithstanding any pre-clearance of a transaction pursuant to this provision, none of the Company, Chief Financial Officer, or General Counsel assumes any liability for the legality or consequences of such transaction to the Key Insider engaging in the transaction.

| Withholding Taxes | You agree, as a condition of this award, that the Company, shall have the right to either (1) cause an immediate forfeiture of a |

4


| | number of shares of Stock subject to the PSUs awarded pursuant to this Agreement, or (2) take such other action, so as to satisfy and pay an amount equal to the withholding or other taxes due to the Company. |

By accepting this Agreement, you agree to all of the terms and conditions described above and in the LTI Plan and the 2017 Plan.


| | d. | Family and Controlled Entities. The blackout periods and pre-clearance procedures set forth in this Section 5 also apply to each Key Insider's immediate family members, persons with whom the Key Insider shares a household and any other persons or entities whose transactions in securities the Key Insider influences, directs, or controls. |
| | Page 7 of 7 | |


Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

| | | |
| Name | | Jurisdiction of Incorporation or Organization |
| Advanced Energy Industries Inc. | | United States |
| Advanced Energy Industries (Malaysia) SDN. BHD. | | Malaysia |
| Advanced Energy Industries (Shenzhen) Co., Ltd. | | China |
| Advanced Energy Industries (Thailand) Ltd. | | Thailand |
| Advanced Energy Industries AE - Israel Ltd. | | Israel |
| Advanced Energy Industries, GmbH | | Germany |
| Advanced Energy Industries Limited | | Hong Kong |
| Advanced Energy Industries U.K., Ltd. | | United Kingdom |
| Advanced Energy Industries, GmbH | | Germany |
| Advanced Energy Industries, Inc. Shanghai | | China |
| Advanced Energy Japan K.K. | | Japan |
| Advanced Energy Services PTE. Ltd. | | Singapore |
| Advanced Energy Singapore PTE. Ltd. | | Singapore |
| Advanced Energy Taiwan, Ltd. | | Taiwan |
| Advanced Energy Xi'an Co., Ltd. | | China |
| Advanced Energy Industries (Malaysia) SDN. BHD. | | Malaysia |
| AE Korea, Ltd. | | South Korea |
| AE Power Singapore Pte Ltd. | | Singapore |
| AEI Canada, Inc. | | Canada |
| AEI Finance GmbH & Co., KG | | Germany |
| AEI Finance Limited | | Hong Kong |
| AEI Finance Verwaltungs GmbH | | Germany |
| AEI Holdings GmbH | | Germany |
| AEI Irish Holdings Ltd. | | Ireland |
| AEI Korea Services, Ltd. | | South Korea |
| AEI Power GmbH | | Germany |
| AEI Power India PVT. Ltd. | | India |
| AEI US Subsidiary, LLC | | Delaware |
| AES Global Holding PTE Ltd. | | Singapore |
| Artesyn Embedded Technologies (Hong Kong) Limited | | Hong Kong |
| Artesyn Embedded Technologies GmbH | | Germany |
| Artesyn Embedded Technologies Philippines Inc. | | Philippines |
| Artesyn Embedded Technologies, Inc. | | Florida |
| Artesyn Technologies Asia-Pacific Ltd. | | Hong Kong |
| Astec Agencies Limited | | Hong Kong |
| Astec Agencies Limited [Philippines ROHQ] | | Philippines |
| Astec Agencies Limited [Taiwan Branch] | | Taiwan |
| Astec America, LLC | | Delaware |
| Astec Custom Power (Singapore) Pte. Ltd. | | Singapore |
| Astec Electronics Company Limited | | China |
| Astec Electronics Company Limited [Beijing Branch] | | China |
| Astec Electronics Company Limited [Xi'an Branch] | | China |
| Astec Europe Limited | | United Kingdom |
| Astec Europe Limited [Austria Branch] | | Austria |
| Astec Europe Limited [Italy Branch] | | Italy |
| Astec Europe Limited [Ireland Branch] | | Ireland |
| Astec Europe Limited [Ireland Branch] | | Ireland |
| Astec Europe Limited [Italy Branch] | | Italy |
| Astec International Limited | | Hong Kong |
| Astec Power Philippines, Inc. | | Philippines |
| Astec Power Supply (Shenzhen) Company Limited | | China |
| Embedded Computing & Power (India) Private Limited | | India |
| Excelsys Group Ltd. | | Ireland |
| Excelsys Holdings Ltd. | | Ireland |
| Excelsys Technologies Ltd. | | Ireland |
| HiTek DB Pension Scheme Trustees Ltd | | United Kingdom |
| HiTek Power GmbH | | Germany |

| | | |
| Name | | Jurisdiction of Incorporation or Organization |
| HiTek Power Ltd. | | United Kingdom |
| Industrias SL S.A. de C.V. | | Mexico |
| LumaSense Equipments India Pvt. Ltd. | | India |

| | | |
| Name | | Jurisdiction of Incorporation or Organization |
| LumaSense Europe GmbH | | Germany |
| LumaSense Sensor GmbH | | Germany |
| LumaSense Technologies A/S | | Denmark |
| LumaSense Technologies B.V. | | Netherlands |
| LumaSense Technologies GmbH | | Germany |
| LumaSenseTechnologies Holdings, Inc. | | Delaware |
| LumaSense Technologies SARL | | France |
| LumaSenseTechnologies, Inc. | | Delaware |
| Microware Manufacturing Limited | | United Kingdom |
| Sekidenko, Inc. | | Washington |
| Siren Acquisition Sub, Inc. | | New York |
| SL Power Electronics Corporation | | Delaware |
| SL Power Electronics Limited | | United Kingdom |
| SL Shanghai Power Electronics Corporation | | China |
| SL Xianghe Power Electronics Corporation | | China |
| Solvix GmbH | | Switzerland |
| Solvix LLC | | Colorado |
| String Inverter Repair Services LLC | | Colorado |
| Stourbridge Holdings (UK) Limited | | United Kingdom |
| String Inverter Repair Services LLC | | United States |
| Tegam, Inc. | | Ohio |
| TJ Acquisition Subsidiary, Inc. | | United States |
New York |
| Trek Holdings Co., Ltd. | | Japan |
| Trek Japan K.K. | | Japan |
| Trek, Inc. | | New York |
| UltraVolt Group Inc. | | Delaware |
| UltraVolt, Inc. | | New York |
| Versatile Power, Inc. | | California |
| Zhongshan Artesyn Technologies Co., Ltd. | | China |


Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

| (1) | Registration Statements (Form S-3 Nos. 333-167027; 333-87459; and 333-34039) | (1) | Registration Statement (Form S-3 No. 333-269852) of Advanced Energy Industries, Inc., and |

| (2) | Registration Statements (Form S-8 Nos. 333-221376; 333-168519; 333-167741; 333-152865; 333-129858; 333-105367; 333-69150; and 333-04073) 333-04073; 333-105367; 333-129858; 333-152865; 333-167741; 333-168519; 333-221376; and 333-271614) of Advanced Energy Industries, Inc. |

of our reports dated February 20, 2024, with respect to the consolidated financial statements of Advanced Energy Industries, Inc. and the effectiveness of internal control over financial reporting of Advanced Energy Industries, Inc. included in this Annual Report (Form 10-K) of Advanced Energy Industries, Inc. for the year ended December 31, 2023.

/s/ Ernst & Young LLP

Denver, Colorado

February 20, 2024


EXHIBIT 31.1

SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Stephen D. Kelley, certify that:

| 1. | I have reviewed this annual report on Form 10-K for the period ended December 31, 2023 of Advanced Energy Industries, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| | a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| | b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| | c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| | d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| | a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| | b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |

Date: February 20, 2024

| | |
| | /s/ Stephen D. Kelley |
| | Stephen D. Kelley |
| | Chief Executive Officer |


EXHIBIT 31.2

SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Paul Oldham, certify that:

| 1. | I have reviewed this annual report on Form 10-K for the period ended December 31, 2023 of Advanced Energy Industries, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| | a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| | b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| | c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| | d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| | a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| | b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |

Date: February 20, 2024

| | |
| | /s/ Paul Oldham |
| | Paul Oldham |
| | Chief Financial Officer & Executive Vice President |


EXHIBIT 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER

FURNISHED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

AND FOR THE PURPOSE OF COMPLYING WITH RULE 13a-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934

The undersigned, the Chief Executive Officer of Advanced Energy Industries, Inc. (the "Company"), hereby certifies that to his knowledge on the date hereof:

| a) | the Annual Report on Form 10-K of the Company for the year ended December 31, 2023 filed on the date hereof with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |

| b) | information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |

Date: February 20, 2024

| | |
| | /s/ Stephen D. Kelley |
| | Stephen D. Kelley |
| | Chief Executive Officer |

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


EXHIBIT 32.2

WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER

FURNISHED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

AND FOR THE PURPOSE OF COMPLYING WITH RULE 13a-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934

The undersigned, the Chief Financial Officer of Advanced Energy Industries, Inc. (the "Company"), hereby certifies that to his knowledge on the date hereof:

| a) | the Annual Report on Form 10-K of the Company for the year ended December 31, 2023 filed on the date hereof with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |

| b) | information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |

Date: February 20, 2024

| | |
| | /s/ Paul Oldham |
| | Paul Oldham |
| | Chief Financial Officer & Executive Vice President |

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


Exhibit 97.1

Advanced Energy Industries, Inc.

Compensation Clawback Policy

As approved by the Board of Directors on November 2, 2023

| | 1. | Overview. |

Advanced Energy Industries, Inc. (the "Company") has adopted this Compensation Clawback Policy (the "Policy") to provide for the recovery, or "clawback," of erroneously awarded incentive-based compensation from Section 16 Officers in the event of certain restatements of the Company's previously issued financial reports in accordance with the applicable listing rules of The Nasdaq Stock Market ("Nasdaq") and with Section 10D and Rule 10D-1 ("Rule 10D-1") of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All capitalized terms not defined herein shall have the meanings set forth in Section 8 of this Policy.

| | 2. | Recovery of Erroneously Awarded Compensation. |
| | a) | In the event of an Accounting Restatement, the Company will reasonably promptly recover the Erroneously Awarded Compensation in accordance with Nasdaq listing rule 5608 and Rule 10D-1 as follows: |
| | i. | Upon the occurrence of an Accounting Restatement, following the Restatement Date, the Compensation Committee shall determine the amount of any Erroneously Awarded Compensation Received by a Section 16 Officer and shall promptly deliver to each such Section 16 Officer a written notice containing the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable. For the avoidance of doubt, recovery of Erroneously Awarded Compensation is on a "no fault" basis, without regard to whether the Section 16 Officer engaged in misconduct or was otherwise directly or indirectly responsible, in whole or in part, for the Accounting Restatement. |
| | A. | To determine the amount of any Erroneously Awarded Compensation for Incentive-Based Compensation that is based on the Company's stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement: |
| | 1. | The amount to be repaid or returned shall be determined by the Compensation Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company's stock price or total shareholder return upon which the Incentive-Based Compensation was Received; and |
| | 2. | The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to Nasdaq. |
| | ii. | The Compensation Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation hereunder based on the particular facts and circumstances. Notwithstanding the foregoing, except as set forth in Section 2(b) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of a Section 16 Officer's obligations hereunder. |
| | iii. | To the extent that a Section 16 Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Section 16 Officer. The applicable Section 16 Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence. |

| | iv. | To the extent that the Section 16 Officer has already reimbursed the Company for any Erroneously Awarded Compensation under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy. |

| | b) | Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section 2(a) above if the Compensation Committee determines that recovery would be impracticable and either of the following two conditions are met: |

| | i. | The Compensation Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. In order for the Compensation Committee to make this determination, the Company must first make a reasonable attempt to recover the Erroneously Awarded Compensation, document such attempt(s) to recover, and provide such documentation to Nasdaq; or |

| | ii. | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder. |
| | 3. | Mandatory Disclosure. |

The Company shall file with the U.S. Securities and Exchange Commission ("SEC") all disclosures with respect to this Policy in accordance with the requirements of federal securities laws and SEC rules.

| | 4. | Prohibition of Indemnification. |

The Company shall not be permitted to insure or indemnify any Section 16 Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned, or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company's enforcement of its rights under this Policy. Section 16 Officers subject to this Policy may purchase insurance to cover their potential recovery obligations, however, the Company shall not be permitted to pay or reimburse the Section 16 Officer for premiums for such an insurance policy. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid, or awarded to a Section 16 Officer from the application of this Policy or that waives the Company's right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on, or after the Effective Date), including, for the avoidance of doubt, any of the Company's indemnification agreements with the Section 16 Officers.

| | 5. | Other Recovery Rights. |

This Policy shall be binding and enforceable against all Section 16 Officers and, to the extent required by applicable law or guidance from the SEC or Nasdaq, their beneficiaries, heirs, executors, administrators, or other legal representatives. The Compensation Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan, or any other agreement or arrangement with a Section 16 Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Section 16 Officer to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation, or rule pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement, or other arrangement.

| | 6. | Administration and Interpretation. |

This Policy shall be administered by the Compensation Committee, which shall have authority to (i) exercise all of the powers granted to it under the Policy, (ii) construe, interpret, and implement this Policy, and (iii) make all determinations necessary, appropriate or advisable for administration of this Policy and for the


Company's compliance with applicable Nasdaq listing rules, Section 10D, Rule 10D-1, and any other applicable law, regulation, rule, or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith; provided, however, that any determinations with respect to the occurrence of an Accounting Restatement shall be made in consultation with the Audit and Finance Committee of the Board and/or officers of the Company, as appropriate; provided, further, that this Policy is intended to conform with the requirements of Rule 10D-1 and applicable Nasdaq listing rules, including Nasdaq Rule 5608, and any interpretations or determinations made hereunder shall be made in a manner consistent with, and within the scope of, such rules and regulations. Any determinations made by the Compensation Committee shall be final and binding on all affected individuals.

| | 7. | Amendment; Termination. |

The Board or the Compensation Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section 7 to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws or regulations, Rule 10D-1, or any applicable Nasdaq listing rule.

| | 8. | Definitions. |

For purposes of this Policy, the following terms shall have the following meanings:

| | a) | "Accounting Restatement" means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (a "Big R" restatement), or that corrects an error that is not material to previously issued financial statements but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a "little r" restatement). |
| | b) | "Board" means the Board of Directors of the Company. |
| | c) | "Clawback Eligible Incentive Compensation" means all Incentive-Based Compensation Received by a Section 16 Officer (i) on or after October 2, 2023, (ii) after beginning service as a Section 16 Officer, (iii) who served as a Section 16 Officer at any time during the applicable performance period relating to any Incentive-Based Compensation (whether or not such Section 16 Officer is serving at the time any Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period. |

| | d) | "Clawback Period" means the three completed fiscal years of the Company immediately preceding the Restatement Date and if the Company changes its fiscal year, any transition period of less than nine months within or immediately following those three completed fiscal years. |
| | e) | "Compensation Committee" means the Compensation Committee of the Board, which is required to be composed entirely of independent directors. |

| | f) | "Effective Date" means November 2, 2023. |

| | g) | "Erroneously Awarded Compensation" means, with respect to each Section 16 Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts in the Accounting Restatement, computed without regard to any taxes paid. |
| | h) | "Financial Reporting Measures" means measures that are determined and presented in accordance with the accounting principles used in preparing the Company's financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall, for purposes of this Policy, be considered Financial Reporting Measures. |

| | | For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company's financial statements or included in a filing with the SEC. |

| | i) | "Incentive-Based Compensation" means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure. |

| | j) | "Received" means, with respect to any Incentive-Based Compensation, actual or deemed receipt. Incentive-Based Compensation shall be deemed Received in the Company's fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation to the Section 16 Officer occurs after the end of that period. |

| | k) | "Restatement Date" means the earlier to occur of (i) the date the Board, a committee of the Board, or officers of the Company authorized to take action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement. |

| | l) | "Section 16 Officer" means each individual who is currently or was previously designated as an "executive officer" of the Company within the meaning of Rule 10D-1(d) under the Exchange Act, and any other senior executive as designated by the Compensation Committee or the Board. |


Attestation and Acknowledgement of

Compensation Clawback Policy

By my signature below, I acknowledge and agree that:

| | 1. | I have received and read the attached Compensation Clawback Policy (this "Policy") of Advanced Energy Industries, Inc. (the "Company"). |

| | 2. | I hereby agree to abide by all of the terms of this Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation (as defined in this Policy) to the Company as determined in accordance with this Policy. |

Signature:

Name:

Date: