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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 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

Graphic

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)

(970) 407-6626

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

AEIS

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (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 þ 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 þ 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 þ

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ

As of October 27, 2023, there were 37,280,657 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

ITEM 1.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3

Consolidated Balance Sheets

3

Consolidated Statements of Operations

4

Consolidated Statements of Comprehensive Income

5

Consolidated Statements of Stockholders’ Equity

6

Consolidated Statements of Cash Flows

7

Notes to Consolidated Financial Statements

8

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

25

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

42

ITEM 4.

CONTROLS AND PROCEDURES

43

PART II OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

44

ITEM 1A.

RISK FACTORS

44

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

45

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

46

ITEM 4.

MINE SAFETY DISCLOSURES

46

ITEM 5.

OTHER INFORMATION

46

ITEM 6.

EXHIBITS

47

SIGNATURES

48

2

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1.         UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except per share amounts)

September 30, 

December 31, 

    

2023

    

2022

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

985,931

$

458,818

Accounts and other receivables, net

 

270,348

 

300,683

Inventories

 

364,003

 

376,012

Other current assets

53,191

53,001

Total current assets

 

1,673,473

 

1,188,514

Property and equipment, net

 

161,671

 

148,462

Operating lease right-of-use assets

98,591

100,177

Other assets

 

110,027

 

84,056

Intangible assets, net

 

168,211

 

189,526

Goodwill

 

281,713

 

281,433

TOTAL ASSETS

$

2,493,686

$

1,992,168

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Accounts payable

$

140,320

$

170,467

Accrued payroll and employee benefits

 

68,937

 

82,733

Other accrued expenses

 

50,937

 

76,750

Customer deposits and other

 

17,141

 

26,322

Current portion of long-term debt

20,000

20,000

Current portion of operating lease liabilities

17,477

16,771

Total current liabilities

 

314,812

 

393,043

Long-term debt, net

899,848

353,262

Operating lease liabilities

89,789

94,460

Pension benefits

44,289

44,031

Other long-term liabilities

44,077

41,105

Total liabilities

 

1,392,815

 

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; 37,280 and 37,429 issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

37

 

37

Additional paid-in capital

 

139,283

 

134,640

Accumulated other comprehensive income

 

5,390

 

16,320

Retained earnings

 

956,161

 

915,270

Total stockholders' equity

 

1,100,871

 

1,066,267

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,493,686

$

1,992,168

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

3

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

2022

    

2023

    

2022

Sales, net

$

409,991

$

516,274

$

1,250,539

$

1,354,682

Cost of sales

 

262,650

 

325,056

 

801,007

 

856,990

Gross profit

 

147,341

 

191,218

 

449,532

 

497,692

Operating expenses:

 

 

 

 

Research and development

 

50,391

 

49,760

 

153,414

 

141,383

Selling, general, and administrative

 

55,131

 

56,716

 

166,102

 

161,056

Amortization of intangible assets

 

7,049

 

7,049

 

21,186

 

19,081

Restructuring

 

4,709

 

121

 

8,906

 

1,178

Total operating expenses

 

117,280

 

113,646

 

349,608

 

322,698

Operating income

 

30,061

 

77,572

 

99,924

 

174,994

Other income (expense), net

 

4,464

 

8,940

 

6,339

 

11,347

Income from continuing operations, before income tax

 

34,525

 

86,512

 

106,263

 

186,341

Provision for income tax

 

874

 

11,639

 

13,405

 

29,795

Income from continuing operations

 

33,651

 

74,873

 

92,858

 

156,546

Loss from discontinued operations, net of income tax

 

(930)

 

(697)

 

(2,076)

 

(615)

Net income

$

32,721

$

74,176

$

90,782

$

155,931

Income from continuing operations attributable to noncontrolling interest

 

 

9

 

 

16

Net income attributable to Advanced Energy Industries, Inc.

$

32,721

$

74,167

$

90,782

$

155,915

Basic weighted-average common shares outstanding

 

37,575

 

37,379

 

37,541

 

37,482

Diluted weighted-average common shares outstanding

 

37,854

 

37,630

 

37,842

 

37,725

Earnings per share:

 

  

 

  

 

 

Continuing operations:

 

  

 

  

 

 

Basic earnings per share

$

0.90

$

2.00

$

2.47

$

4.18

Diluted earnings per share

$

0.89

$

1.99

$

2.45

$

4.15

Discontinued operations:

 

 

 

 

Basic loss per share

$

(0.02)

$

(0.02)

$

(0.06)

$

(0.02)

Diluted loss per share

$

(0.02)

$

(0.02)

$

(0.05)

$

(0.02)

Net income:

 

 

 

 

Basic earnings per share

$

0.87

$

1.98

$

2.42

$

4.16

Diluted earnings per share

$

0.86

$

1.97

$

2.40

$

4.13

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

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ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Net income

$

32,721

$

74,176

$

90,782

$

155,931

Other comprehensive income (loss), net of income tax

 

  

 

  

 

  

 

  

Foreign currency translation

 

(5,069)

 

(11,671)

 

(6,798)

 

(24,442)

Change in fair value of cash flow hedges

 

(1,822)

 

2,508

 

(3,840)

 

10,447

Minimum pension benefit retirement liability

 

 

 

(292)

 

414

Comprehensive income

$

25,830

$

65,013

$

79,852

$

142,350

Comprehensive income attributable to noncontrolling interest

 

 

9

 

 

16

Comprehensive income attributable to Advanced Energy Industries, Inc.

$

25,830

$

65,004

$

79,852

$

142,334

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

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ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Stockholders' Equity

(In thousands, except per share amounts)

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, 2021

    

37,589

$

38

$

115,706

$

(1,216)

$

756,323

$

645

$

871,496

Stock issued from equity plans

52

(2,430)

(2,430)

Stock-based compensation

3,906

3,906

Share repurchases

(82)

(254)

(6,340)

(6,594)

Dividends declared ($0.10 per share)

(3,789)

(3,789)

Other comprehensive income

1,966

1,966

Net income (loss)

36,778

(14)

36,764

Balances, March 31, 2022

37,559

38

116,928

750

782,972

631

901,319

Stock issued from equity plans

63

763

 

763

Stock-based compensation

5,016

 

5,016

Share repurchases

(230)

(1)

(725)

(16,293)

(17,019)

Dividends declared ($0.10 per share)

(3,806)

(3,806)

Other comprehensive loss

(6,384)

 

(6,384)

Net income

44,970

21

 

44,991

Balances, June 30, 2022

37,392

37

121,982

(5,634)

807,843

652

924,880

Stock issued from equity plans

35

256

256

Stock-based compensation

5,953

5,953

Share repurchases

(34)

(112)

(2,230)

(2,342)

Dividends declared ($0.10 per share)

(3,812)

(3,812)

Other comprehensive loss

(9,163)

(9,163)

Net income

74,167

9

74,176

Balances, September 30, 2022

37,393

$

37

$

128,079

$

(14,797)

$

875,968

$

661

$

989,948

Balances, December 31, 2022

37,429

$

37

$

134,640

$

16,320

$

915,270

$

$

1,066,267

Stock issued from equity plans

100

(1,991)

(1,991)

Stock-based compensation

6,543

6,543

Dividends declared ($0.10 per share)

(3,814)

(3,814)

Other comprehensive loss

(2,013)

(2,013)

Net income

30,921

30,921

Balances, March 31, 2023

37,529

37

139,192

14,307

942,377

1,095,913

Stock issued from equity plans

121

1

606

607

Stock-based compensation

7,423

7,423

Dividends declared ($0.10 per share)

(3,778)

(3,778)

Other comprehensive loss

(2,026)

(2,026)

Net income

27,140

27,140

Balances, June 30, 2023

37,650

38

147,221

12,281

965,739

1,125,279

Stock issued from equity plans

8

130

 

130

Stock-based compensation

7,506

 

7,506

Share repurchases

(378)

(1)

(1,530)

(38,469)

(40,000)

Dividends declared ($0.10 per share)

(3,830)

 

(3,830)

Other comprehensive loss

(6,891)

 

(6,891)

Warrants and note hedges, net

(40,135)

(40,135)

Tax impact of convertible notes and note hedges

26,091

26,091

Net income

32,721

 

32,721

Balances, September 30, 2023

37,280

$

37

$

139,283

$

5,390

$

956,161

$

$

1,100,871

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

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ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended September 30, 

    

2023

    

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net income

$

90,782

$

155,931

Less: loss from discontinued operations, net of income tax

 

(2,076)

 

(615)

Income from continuing operations, net of income tax

 

92,858

 

156,546

Adjustments to reconcile net income to net cash from operating activities:

 

  

 

  

Depreciation and amortization

 

49,764

 

44,433

Stock-based compensation

 

22,813

 

15,008

Benefit for deferred income tax

 

(996)

 

(2,496)

Loss (gain) on disposal and sale of assets

 

394

 

(4,058)

Changes in operating assets and liabilities, net of assets acquired

 

 

Accounts and other receivable, net

 

35,135

 

(68,591)

Inventories

 

9,025

 

(70,407)

Other assets

 

4,121

 

(11,858)

Accounts payable

 

(26,203)

 

21,630

Other liabilities and accrued expenses

 

(58,671)

 

32,775

Net cash from operating activities from continuing operations

 

128,240

 

112,982

Net cash from operating activities from discontinued operations

 

(3,307)

 

(81)

Net cash from operating activities

 

124,933

 

112,901

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Purchases of investments

(3,447)

Purchases of property and equipment

 

(46,782)

 

(39,507)

Acquisitions, net of cash acquired

(145,779)

Net cash from investing activities

 

(50,229)

 

(185,286)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Proceeds from long-term borrowings

575,000

Payment of fees for long-term borrowings

(12,985)

Payments on long-term borrowings

(15,000)

(15,000)

Dividend payments

(11,422)

(11,407)

Payment for purchase of note hedges

(115,000)

Proceeds from sale of warrants

74,865

Purchase and retirement of common stock

(40,000)

(25,955)

Net payments related to stock-based awards

 

(1,254)

 

(1,411)

Net cash from financing activities

 

454,204

 

(53,773)

EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS

 

(1,795)

 

(9,161)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

527,113

 

(135,319)

CASH AND CASH EQUIVALENTS, beginning of period

 

458,818

 

544,372

CASH AND CASH EQUIVALENTS, end of period

$

985,931

$

409,053

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

  

 

  

Cash paid for interest

$

8,060

$

4,303

Cash paid for income taxes

$

45,040

$

5,393

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

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

NOTE 1.     DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Advanced Energy Industries, Inc., a Delaware corporation, and its consolidated subsidiaries (“we,” “us,” “our,” “Advanced Energy,” or the “Company”) 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 this raw power 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 our original equipment manufacturer (“OEM”) customers to 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-based manufacturing processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products is 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.

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly Advanced Energy’s financial position as of September 30, 2023, and the results of our operations and cash flows for the three and nine months ended September 30, 2023 and 2022.

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2022 and other financial information filed with the SEC.

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;
pension obligations;
acquisitions and asset valuations; and
income tax and other provisions.

Significant Accounting Policies

Our accounting policies are described in Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

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.

New Accounting Standards Adopted

The FASB issued the following ASUs that we adopted in the current year:

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.

Our Credit Agreement (see Note 18. Long-Term Debt) and interest rate swap agreements (see Note 7. Derivative Financial Instruments) 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.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

NOTE 2.     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. 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.

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

 

  

 

  

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 virtually all of the goodwill to be deductible for tax purposes.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

NOTE 3.    REVENUE

Disaggregation of revenue

The following tables present additional information regarding our revenue:

Revenue by Market

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

2022

    

2023

    

2022

Semiconductor Equipment

$

185,033

$

266,600

$

552,419

$

698,354

Industrial and Medical

 

115,226

 

119,587

 

365,849

 

307,436

Data Center Computing

68,286

87,542

187,021

232,941

Telecom and Networking

41,446

42,545

145,250

115,951

Total

$

409,991

$

516,274

$

1,250,539

$

1,354,682

Revenue by Region

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

2022

    

2023

    

2022

North America

$

184,783

$

238,115

$

537,241

$

626,953

Asia

178,190

215,401

543,871

557,629

Europe

46,088

61,456

164,867

157,972

Other

 

930

 

1,302

4,560

 

12,128

Total

$

409,991

 

$

516,274

$

1,250,539

 

$

1,354,682

Revenue by Significant Countries

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

2022

    

2023

    

2022

United States

$

156,710

$

179,205

$

457,325

$

530,240

China

41,391

53,522

132,039

139,652

All others

211,890

283,547

661,175

684,790

Total

$

409,991

 

$

516,274

$

1,250,539

 

$

1,354,682

We attribute sales 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 in the three and nine months ended September 30, 2023 and 2022.

Revenue by Category

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

2022

    

2023

    

2022

Product

$

369,129

$

471,627

$

1,118,284

$

1,238,480

Services

40,862

 

44,647

132,255

 

116,202

Total

$

409,991

 

$

516,274

$

1,250,539

 

$

1,354,682

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.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

NOTE 4.    INCOME TAX

The following table summarizes tax expense and the effective tax rate for our income from continuing operations:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Income from continuing operations, before income tax

$

34,525

$

86,512

$

106,263

$

186,341

Provision for income tax

$

874

$

11,639

$

13,405

$

29,795

Effective tax rate

2.5%

13.5%

12.6%

16.0%

Our effective tax rates differ from the U.S. federal statutory rate of 21% for the three and nine months ended September 30, 2023 and 2022, primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations. The effective tax rate for the three and nine months ended September 30, 2023 was lower than the same periods in 2022 primarily due to the greater impact of beneficial discrete items primarily related to tax strategies we implemented in the three months ended September 30, 2023 relative to the beneficial discrete items recorded in the three months ended September 30, 2022.

NOTE 5.    EARNINGS PER SHARE

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

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Income from continuing operations

$

33,651

$

74,873

$

92,858

$

156,546

Less: income from continuing operations attributable to noncontrolling interest

 

 

9

 

 

16

Income from continuing operations attributable to Advanced Energy Industries, Inc.

$

33,651

$

74,864

$

92,858

$

156,530

Basic weighted-average common shares outstanding

 

37,575

 

37,379

 

37,541

 

37,482

Dilutive effect of stock awards

 

279

 

251

 

301

 

243

Diluted weighted-average common shares outstanding

 

37,854

 

37,630

 

37,842

 

37,725

EPS from continuing operations

 

  

 

  

 

  

 

  

Basic EPS

$

0.90

$

2.00

$

2.47

$

4.18

Diluted EPS

$

0.89

$

1.99

$

2.45

$

4.15

Anti-dilutive shares not included above

Stock awards

27

121

84

58

Warrants

3,180

3,180

Convertible Notes

1,448

1,448

Total anti-dilutive shares

4,655

121

4,712

58

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

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.

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:

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. 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 Repurchase

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