ADVANCED ENERGY INDUSTRIES INC [AEIS] Filings

10-Q 1 aeis-20240630x10q.htm 10-Q

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 June 30, 2024
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)

(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 July 26, 2024, there were 37,672,536 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	26

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43

ITEM 4.	CONTROLS AND PROCEDURES	44

	PART II OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	44

ITEM 1A.	RISK FACTORS	45

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	45

ITEM 4.	MINE SAFETY DISCLOSURES	45

ITEM 5.	OTHER INFORMATION	45

ITEM 6.	EXHIBITS	46

	SIGNATURES	47

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)


	June 30,		December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	986,148	$	1,044,556
Accounts receivable, net		262,419		282,430
Inventories		383,141		336,137
Other current assets		46,131		48,771
Total current assets		1,677,839		1,711,894
Property and equipment, net		180,624		167,665
Operating lease right-of-use assets		103,522		95,432
Other assets		130,782		136,448
Intangible assets, net		151,763		161,478
Goodwill		297,329		283,840
TOTAL ASSETS	$	2,541,859	$	2,556,757

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	157,523	$	141,850
Accrued payroll and employee benefits		53,559		73,595
Other accrued expenses		46,977		66,662
Customer deposits and other		12,479		15,997
Current portion of long-term debt		20,000		20,000
Current portion of operating lease liabilities		16,299		17,744
Total current liabilities		306,837		335,848
Long-term debt, net		887,309		895,679
Operating lease liabilities		97,251		89,330
Pension benefits		47,843		49,135
Other long-term liabilities		37,543		42,583
Total liabilities		1,376,783		1,412,575

Commitments and contingencies (Note 15)

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; 37,671 and 37,318 issued and outstanding at June 30, 2024 and December 31, 2023, respectively		38		37
Additional paid-in capital		169,686		148,300
Accumulated other comprehensive income (loss)		(6,823)		6,114
Retained earnings		1,002,175		989,731
Total stockholders' equity		1,165,076		1,144,182
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,541,859	$	2,556,757

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 Operations

(In thousands, except per share amounts)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue, net	$	364,947	$	415,508	$	692,422	$	840,548
Cost of revenue		237,206		268,428		451,852		538,357
Gross profit		127,741		147,080		240,570		302,191

Operating expenses:
Research and development		52,335		51,413		102,171		103,023
Selling, general, and administrative		55,013		55,613		110,137		110,971
Amortization of intangible assets		6,800		7,075		13,747		14,137
Restructuring, asset impairments, and other charges		625		3,154		870		4,197
Total operating expenses		114,773		117,255		226,925		232,328
Operating income		12,968		29,825		13,645		69,863

Interest income		12,119		4,301		24,764		7,886
Interest expense		(6,956)		(2,858)		(14,083)		(5,588)
Other income (expense), net		638		982		2,017		(423)
Income from continuing operations, before income tax		18,769		32,250		26,343		71,738
Income tax provision		3,165		4,795		4,952		12,531
Income from continuing operations		15,604		27,455		21,391		59,207
Loss from discontinued operations, net of income tax		(575)		(315)		(1,146)		(1,146)
Net income	$	15,029	$	27,140	$	20,245	$	58,061

Basic weighted-average common shares outstanding		37,474		37,573		37,417		37,524
Diluted weighted-average common shares outstanding		37,777		37,803		37,733		37,804

Earnings per share:
Continuing operations:
Basic earnings per share	$	0.42	$	0.73	$	0.57	$	1.58
Diluted earnings per share	$	0.41	$	0.73	$	0.57	$	1.57
Discontinued operations:
Basic loss per share	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.03)
Diluted loss per share	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.03)
Net income:
Basic earnings per share	$	0.40	$	0.72	$	0.54	$	1.55
Diluted earnings per share	$	0.40	$	0.72	$	0.54	$	1.54

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	15,029	$	27,140	$	20,245	$	58,061
Other comprehensive loss, net of income tax
Foreign currency translation		(2,561)		(1,533)		(9,150)		(1,729)
Change in fair value of cash flow hedges		(2,356)		(201)		(3,736)		(2,018)
Defined employee benefit plan		(51)		(292)		(51)		(292)
Comprehensive income	$	10,061	$	25,114	$	7,308	$	54,022

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)



	Common Stock
						Accumulated
				Additional		Other				Total
				Paid-in		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity
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

Balances, December 31, 2023	37,318	$	37	$	148,300	$	6,114	$	989,731	$	1,144,182
Stock issued from equity plans	116		—		(5,327)		—		—		(5,327)
Stock-based compensation	—		—		10,591		—		—		10,591
Dividends declared ($0.10 per share)	—		—		—		—		(3,810)		(3,810)
Other comprehensive loss	—		—		—		(7,969)		—		(7,969)
Deferred compensation	—		—		79		—		(79)		—
Net income	—		—		—		—		5,216		5,216
Balances, March 31, 2024	37,434		37		153,643		(1,855)		991,058		1,142,883
Stock issued from equity plans	93		—		(173)		—		—		(173)
Stock issuance (Note 2. Acquisition)	144		1		4,463		—		—		4,464
Stock-based compensation	—		—		10,720		—		—		10,720
Dividends declared ($0.10 per share)	—		—		—		—		(3,848)		(3,848)
Other comprehensive loss	—		—		—		(4,968)		—		(4,968)
Deferred compensation	—		—		1,033		—		(64)		969
Net income	—		—		—		—		15,029		15,029
Balances, June 30, 2024	37,671	$	38	$	169,686	$	(6,823)	$	1,002,175	$	1,165,076

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)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	20,245	$	58,061
Less: loss from discontinued operations, net of income tax		(1,146)		(1,146)
Income from continuing operations, net of income tax		21,391		59,207
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		33,918		32,966
Stock-based compensation		22,389		14,738
Amortization of debt issuance costs and debt discount		1,630		254
Deferred income tax benefit		(42)		(786)
Loss (gain) on disposal and sale of assets		(16)		192
Unrealized gain on investment		(567)		—
Changes in operating assets and liabilities, net of assets acquired
Accounts receivable, net		18,390		46,044
Inventories		(49,255)		(17,688)
Other assets		5,008		2,859
Accounts payable		14,331		(17,448)
Other liabilities and accrued expenses		(52,304)		(64,834)
Net cash from operating activities from continuing operations		14,873		55,504
Net cash from operating activities from discontinued operations		(876)		(3,090)
Net cash from operating activities		13,997		52,414

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of long-term investments		(2,401)		(3,128)
Purchases of property and equipment		(31,406)		(33,623)
Acquisitions, net of cash acquired		(13,762)		—
Net cash from investing activities		(47,569)		(36,751)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings		(10,000)		(10,000)
Dividend payments		(7,658)		(7,592)
Net payments related to stock-based awards		(5,500)		(1,384)
Net cash from financing activities		(23,158)		(18,976)

EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS		(1,678)		(253)

NET CHANGE IN CASH AND CASH EQUIVALENTS		(58,408)		(3,566)
CASH AND CASH EQUIVALENTS, beginning of period		1,044,556		458,818
CASH AND CASH EQUIVALENTS, end of period	$	986,148	$	455,252

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”) 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.

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 June 30, 2024, and the results of our operations and cash flows for the three and six months ended June 30, 2024 and 2023.

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the U.S. 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, 2023 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, income taxes and other provisions, and acquisitions and asset valuations.

Significant Accounting Policies

Our accounting policies are described in Note 1. Summary of Operations and Significant Accounting Policies and Estimates to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023.

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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 Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands disclosure requirements to require additional information about significant segment expenses. In addition, the ASU enhances interim disclosures, clarifies 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 in our Annual Report on Form 10-K for the year ending December 31, 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.” ASU 2023-09 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.

In March 2024, the SEC issued climate-related disclosure rules. These rules do not change accounting treatment, but they significantly expand the climate-related information companies are required to disclose. Several petitions were filed challenging these climate-related disclosure rules and, in April 2024, the SEC voluntarily stayed the rules, pending completion of judicial review. We do not expect the above disclosure requirement to materially impact our consolidated financial statements. We are evaluating the disclosure requirements and changes to our business processes, systems, and controls to support the additional disclosures.

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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 June 20, 2024, we acquired 100% of the issued and outstanding shares of capital stock of Airity Technologies, Inc. (“Airity”), which is based in Redwood City, California. We accounted for this transaction as a business combination. This acquisition adds high voltage power conversion technologies and products, which broadens our range of targeted applications within our Semiconductor Equipment and Industrial and Medical markets.

The following table summarizes the consideration paid:


	Consideration
Cash paid at closing	$	14,301
Advanced Energy common stock		4,463
Settlement of payables		(654)
Indemnity holdback payable on the one-year anniversary		1,500
Total fair value of purchase consideration	$	19,610

We are still evaluating the fair value of the assets acquired and liabilities assumed, inclusive of the acquired intangible assets, including their estimated useful lives, related tax impacts, and resulting goodwill. Our preliminary allocation of the fair value of purchase consideration was as follows:


	Fair Value
Cash	$	539
Current assets and liabilities, net		372
Property and equipment		42
Deferred tax and other liabilities		(2,144)
Intangible assets		4,200
Goodwill (not deductible for tax purposes)		16,601
Total fair value of net assets acquired	$	19,610

We included Airity’s results of operations in our consolidated financial statements from the date of acquisition.

In connection with the acquisition, we entered into agreements with certain former Airity employees. On the closing date, these individuals received a total of 0.1 million shares of Advanced Energy common stock valued at $15.6 million based on the June 20, 2024 closing price, of which $4.5 million was allocated to purchase consideration and $11.1 million will be future compensation. We will record the $11.1 million as stock-based compensation expense over the three-year expected vesting period.

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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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Semiconductor Equipment	$	188,321	$	173,177	$	368,224	$	367,386
Industrial and Medical		79,104		127,603		162,522		250,623
Data Center Computing		72,964		59,076		114,866		118,735
Telecom and Networking		24,558		55,652		46,810		103,804
Total	$	364,947	$	415,508	$	692,422	$	840,548

Revenue by Region


	Three Months Ended June 30,								Six Months Ended June 30,
	2024				2023				2024				2023
North America	$	172,794	47.4	%	$	171,516	41.3	%	$	306,873	44.3	%	$	352,458	42.0	%
Asia		151,955	41.6			186,498	44.9			303,898	43.9			365,681	43.5
Europe		39,813	10.9			56,213	13.5			80,366	11.6			118,779	14.1
Other		385	0.1			1,281	0.3			1,285	0.2			3,630	0.4
Total	$	364,947	100.0	%	$	415,508	100.0	%	$	692,422	100.0	%	$	840,548	100.0	%

Revenue by Significant Countries

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023