10-Q 1 aeis-20220630x10q.htm 10-Q
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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, 2022

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)

Registrant’s telephone number, including area code: (970407-6626

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

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 29, 2022, there were 37,358,977 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

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

39

ITEM 4.

CONTROLS AND PROCEDURES

41

PART II OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

41

ITEM 1A.

RISK FACTORS

41

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

42

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

42

ITEM 4.

MINE SAFETY DISCLOSURES

42

ITEM 5.

OTHER INFORMATION

42

ITEM 6.

EXHIBITS

43

SIGNATURES

44

2

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, 

    

2022

    

2021

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

372,685

$

544,372

Accounts and other receivable, net

 

270,839

 

237,227

Inventories

 

395,866

 

338,410

Other current assets

48,126

42,225

Total current assets

 

1,087,516

 

1,162,234

Property and equipment, net

 

126,793

 

114,830

Operating lease right-of-use assets

104,191

101,769

Deposits and other assets

 

29,644

 

19,669

Goodwill

 

280,885

 

212,190

Intangible assets, net

 

201,778

 

159,406

Deferred income tax assets

47,267

47,242

TOTAL ASSETS

$

1,878,074

$

1,817,340

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Accounts payable

$

197,870

$

193,708

Income taxes payable

 

22,665

 

9,226

Accrued payroll and employee benefits

 

58,478

 

55,833

Other accrued expenses

 

45,343

 

53,445

Customer deposits and other

 

27,754

 

22,141

Current portion of long-term debt

20,000

20,000

Current portion of operating lease liabilities

16,911

15,843

Total current liabilities

 

389,021

 

370,196

Long-term debt, net

363,001

372,733

Operating lease liabilities

99,099

95,180

Pension benefits

62,228

67,255

Deferred income tax liabilities

 

8,804

 

9,921

Other long-term liabilities

31,041

30,559

Total liabilities

 

953,194

 

945,844

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; 37,392 and 37,589 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

37

 

38

Additional paid-in capital

 

121,982

 

115,706

Accumulated other comprehensive loss

 

(5,634)

 

(1,216)

Retained earnings

 

807,843

 

756,323

Advanced Energy stockholders' equity

 

924,228

 

870,851

Noncontrolling interest

 

652

 

645

Total stockholders’ equity

 

924,880

 

871,496

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,878,074

$

1,817,340

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

3

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, 

    

2022

2021

    

2022

    

2021

Sales, net

$

440,949

$

361,311

$

838,408

$

712,931

Cost of sales

 

278,791

 

226,278

 

531,934

 

440,395

Gross profit

 

162,158

 

135,033

 

306,474

 

272,536

Operating expenses:

 

 

 

 

Research and development

 

48,009

 

40,119

 

91,623

 

80,287

Selling, general, and administrative

 

55,022

 

48,110

 

104,340

 

94,841

Amortization of intangible assets

 

6,523

 

5,513

 

12,032

 

10,897

Restructuring expense (benefit)

 

(161)

 

211

 

1,057

 

1,249

Total operating expenses

 

109,393

 

93,953

 

209,052

 

187,274

Operating income

 

52,765

 

41,080

 

97,422

 

85,262

Other income (expense), net

 

3,249

 

(3,662)

 

2,407

 

(4,169)

Income from continuing operations, before income taxes

 

56,014

 

37,418

 

99,829

 

81,093

Provision for income taxes

 

11,203

 

1,876

 

18,156

 

7,160

Income from continuing operations

 

44,811

 

35,542

 

81,673

 

73,933

Income (loss) from discontinued operations, net of income taxes

 

180

 

(102)

 

82

 

208

Net income

$

44,991

$

35,440

$

81,755

$

74,141

Income from continuing operations attributable to noncontrolling interest

 

21

 

31

 

7

 

64

Net income attributable to Advanced Energy Industries, Inc.

$

44,970

$

35,409

$

81,748

$

74,077

Basic weighted-average common shares outstanding

 

37,520

 

38,389

 

37,535

 

38,359

Diluted weighted-average common shares outstanding

 

37,710

 

38,586

 

37,754

 

38,589

Earnings per share:

 

  

 

  

 

 

Continuing operations:

 

  

 

  

 

 

Basic earnings per share

$

1.19

$

0.93

$

2.18

$

1.93

Diluted earnings per share

$

1.19

$

0.92

$

2.16

$

1.91

Discontinued operations:

 

 

 

 

Basic earnings (loss) per share

$

$

$

$

0.01

Diluted earnings (loss) per share

$

$

$

$

0.01

Net income:

 

 

 

 

Basic earnings per share

$

1.20

$

0.92

$

2.18

$

1.93

Diluted earnings per share

$

1.19

$

0.92

$

2.17

$

1.92

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

4

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net income

$

44,991

$

35,440

$

81,755

$

74,141

Other comprehensive income (loss), net of income taxes

 

  

 

  

 

  

 

  

Foreign currency translation

 

(8,679)

 

1,068

 

(12,771)

 

(5,873)

Change in fair value of cash flow hedges

 

2,026

 

(2)

 

7,939

 

2,007

Minimum pension benefit retirement liability

 

269

 

(31)

 

414

 

(67)

Comprehensive income

$

38,607

$

36,475

$

77,337

$

70,208

Comprehensive income attributable to noncontrolling interest

 

21

 

31

 

7

 

64

Comprehensive income attributable to Advanced Energy Industries, Inc.

$

38,586

$

36,444

$

77,330

$

70,144

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

5

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, 2020

    

38,293

$

38

$

105,009

$

(2,605)

$

712,297

$

601

$

815,340

Stock issued from equity plans

93

(4,645)

(4,645)

Stock-based compensation

5,701

5,701

Dividends declared ($0.10 per share)

(3,854)

(3,854)

Other comprehensive loss

(4,968)

(4,968)

Net income

38,668

33

38,701

Balances, March 31, 2021

38,386

$

38

$

106,065

$

(7,573)

$

747,111

$

634

$

846,275

Stock issued from equity plans

67

956

 

956

Stock-based compensation

3,277

 

3,277

Share repurchase

(72)

(199)

(6,304)

(6,503)

Dividends declared ($0.10 per share)

(3,874)

(3,874)

Other comprehensive income

1,035

 

1,035

Net income

35,409

31

 

35,440

Balances, June 30, 2021

38,381

$

38

$

110,099

$

(6,538)

$

772,342

$

665

$

876,606

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 repurchase

(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 repurchase

(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

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

6

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

Six Months Ended June 30, 

    

2022

    

2021

    

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

 

Net income

$

81,755

$

74,141

Less: income from discontinued operations, net of income taxes

 

82

 

208

Income from continuing operations, net of income taxes

 

81,673

 

73,933

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

 

  

 

  

Depreciation and amortization

 

28,877

 

25,744

Stock-based compensation expense

 

8,986

 

9,145

Provision for deferred income taxes

 

(1,977)

 

(1,663)

Loss on disposal of assets

 

374

 

446

Changes in operating assets and liabilities, net of assets acquired

 

 

Accounts and other receivable, net

 

(27,790)

 

(9,025)

Inventories

 

(52,109)

 

(73,211)

Other assets

 

(5,402)

 

(1,752)

Accounts payable

 

2,491

 

80,269

Other liabilities and accrued expenses

 

(3,585)

 

(6,483)

Income taxes

 

16,003

 

(9,337)

Net cash from operating activities from continuing operations

 

47,541

 

88,066

Net cash from operating activities from discontinued operations

 

55

 

(377)

Net cash from operating activities

 

47,596

 

87,689

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Purchases of property and equipment

 

(25,476)

 

(14,203)

Acquisitions, net of cash acquired

(145,779)

(18,686)

Net cash from investing activities

 

(171,255)

 

(32,889)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Payments on long-term borrowings

(10,000)

(8,750)

Dividend payments

(7,595)

(7,728)

Purchase and retirement of common stock

(23,578)

(6,503)

Net payments related to stock-based awards

 

(1,667)

 

(3,258)

Net cash from financing activities

 

(42,840)

 

(26,239)

EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS

 

(5,188)

 

(1,753)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(171,687)

 

26,808

CASH AND CASH EQUIVALENTS, beginning of period

 

544,372

 

480,368

CASH AND CASH EQUIVALENTS, end of period

$

372,685

$

507,176

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

  

 

  

Cash paid for interest

$

2,461

$

1,952

Cash paid for income taxes

$

9,982

$

21,393

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

7

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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 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, strip 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 center and telecommunication. We also supply related sensing, controls, and instrumentation products for advanced measurement and calibration of radio frequency ("RF") power and temperature, electrostatic instrumentation products for test and measurement applications, and gas sensing and monitoring solutions for multiple industrial markets. Our network of global service support centers provides a recurring revenue opportunity as we offer repair services, 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 the financial position of the Company as of June 30, 2022, and the results of our operations and cash flows for the three and six months ended June 30, 2022 and 2021.

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, 2021 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
taxes 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, 2021.

We reclassified certain prior period amounts within these consolidated financial statements to conform to the current year presentation.

8

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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

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.

We adopted ASU 2021-08 on a prospective basis effective January 1, 2022. The adoption will impact subsequent business combinations 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

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope" ("ASU 2021-01"). This collective guidance provides optional expedients and exceptions for applying 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. ASU 2020-04 and ASU 2021-01 will be in effect through December 31, 2022. We are currently assessing the potential impact of ASU 2020-04 and ASU 2021-01 on our consolidated financial statements.

Our Credit Facility (refer to Note 18. Credit Facility) and interest rate swap agreements (refer to 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 and do not expect ASU 2020-04 and ASU 2020-01 to materially impact our consolidated financial statements.

9

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

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 extends 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

    

$

146,863

Less cash acquired

(3,484)

Total fair value of purchase consideration

$

143,379

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

    

Fair Value

Current assets and liabilities, net

$

12,320

Property and equipment

4,177

Operating lease right-of-use assets

4,996

Deferred tax asset

546

Intangible assets

55,300

Goodwill (deductible for tax purposes)

71,036

Operating lease liability

(4,996)

Total fair value of net assets acquired

$

143,379

Goodwill represents SL Power’s assembled workforce and expected operating synergies from combining operations. We are still evaluating the fair value for the assets acquired and liabilities assumed. Accordingly, the purchase price allocation presented above is preliminary. SL Power’s results of operations were included in our consolidated financial statements from the date of acquisition. During the three and six months ended June 30, 2022, SL Power contributed $12.9 million in revenue to our Consolidated Statements of Operations.

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.

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

10

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

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

    


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 non-current assets

31

Other non-current liabilities

(25)

Operating lease liability

(425)

Total fair value of net assets acquired

$

17,053

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

NOTE 3.    REVENUE

Nature of goods and services

Products

Advanced Energy provides highly engineered, mission-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 power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch, strip and deposition, high and low voltage applications such as process control, data center computing, networking, telecommunication, medical equipment, life science applications, industrial technology and production, scientific instruments, clean technology production, advanced material production and temperature-critical thermal applications such as material and chemical processing. We also supply related sensing, controls, and instrumentation products for advanced measurement and calibration of RF power and temperature, electrostatic instrumentation products for test and measurement applications, and gas sensing and monitoring solutions for multiple industrial markets. Our network of global service support centers provides a recurring revenue opportunity as we offer repair services, conversions, upgrades, refurbishments, and used equipment to companies using our products.

Services

Our services group offers warranty and after-market repair services in the regions in which we operate, providing us 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. They expect that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, we maintain a worldwide support organization in the U.S., the People’s Republic of China ("PRC"), Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and Great Britain. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell.

11

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands, except per share data)

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. Revenue under these arrangements is recognized ratably over the underlying terms as we do not have historical information which would allow us to project the estimated service usage pattern at this time.

Performance obligations

Our unsatisfied 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. As a result, we elected not to disclose the amount of these remaining performance obligations.

Disaggregation of revenue

The following tables present additional information regarding our revenue:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

2021

    

2022

    

2021

    

Semiconductor Equipment

$

228,797

$

176,671

$

431,754

$

357,387

Industrial and Medical

 

104,951

 

83,197

 

187,849

 

161,612

Data Center Computing

69,161

69,458

145,399

128,612

Telecom and Networking

38,040

31,985

73,406

65,320

Total

$

440,949

$

361,311

$

838,408

$

712,931

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

2021

    

2022

    

2021

    

Product

$

403,977

$

325,522

$

766,853

$

644,401

Services

36,972

 

35,789

71,555

 

68,530

Total

$

440,949

 

$

361,311

$

838,408

 

$

712,931

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

2021

    

2022

    

2021

    

United States

$

174,293

$

139,525

$

333,035

$

271,123

North America (excluding U.S.)

31,824

 

26,112

55,803

 

52,359

Asia

 

180,181

 

148,803

342,228

 

298,394