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

Rhea-AI Summary

Advanced Energy Industries reported Q2 2021 financial results, achieving year-over-year revenue growth of $361.3 million, up from $339.9 million in Q2 2020. GAAP net income was $35.5 million or $0.92 per diluted share, compared to $29.3 million or $0.76 per diluted share in the same quarter last year. The company generated $33.8 million in operating cash flow and repurchased $6.5 million of stock. Additionally, the board authorized a new $200 million stock repurchase. Guidance for Q3 2021 predicts revenues of $340 million +/- $15 million.

Positive

• Revenue growth to $361.3 million, a 6.5% increase year-over-year.
• GAAP net income increased to $35.5 million, up from $29.3 million a year ago.
• Operating cash flow of $33.8 million strengthens financial position.
• Authorization for $200 million stock repurchase boosts shareholder confidence.

Negative

• GAAP EPS decreased from $0.99 in Q1 2021 to $0.92 in Q2 2021.
• Non-GAAP EPS fell from $1.29 in Q1 2021 to $1.25 in Q2 2021.

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

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

Second Quarter Results

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

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

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

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

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

New Share Repurchase Authorization

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

Discontinued Operations

The company’s financial statements for all periods presented reflect results for the continuing precision power business, with the discontinued inverter business included in discontinued operations for all purposes. Further financial detail regarding the amounts related to the discontinued inverter business is available in the company’s 2020 Annual Report on Form 10‑K.

Third Quarter 2021 Guidance

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

		Q3 2021
Revenues		$340M +/- $15M
GAAP EPS from continuing operations		$0.52 +/- $0.20
Non-GAAP EPS		$0.80 +/- $0.20

Conference Call

Management will host a conference call today, August 4, 2021 at 8:30 a.m. Eastern Time to discuss Advanced Energy’s financial results. To register for the call please use this link (www.directeventreg.com/registration/event/3998884). A webcast will also be available on the company’s investors web page at ir.advancedenergy.com.

About Advanced Energy

Advanced Energy (Nasdaq: AEIS) is a global leader in the design and manufacturing of highly engineered, precision power conversion, measurement and control solutions for mission-critical applications and processes. AE’s power solutions enable customer innovation in complex applications for a wide range of industries including semiconductor equipment, industrial, manufacturing, telecommunications, data center computing and healthcare. With engineering know-how and responsive service and support around the globe, the company builds collaborative partnerships to meet technology advances, propel growth for its customers and innovate the future of power. Advanced Energy has devoted four decades to perfecting power for its global customers and is headquartered in Denver, Colorado, USA. For more information, visit www.advancedenergy.com.

Advanced Energy | Precision. Power. Performance.

Non-GAAP Measures

This release includes GAAP and non-GAAP income and per-share earnings data and other GAAP and non-GAAP financial information. Advanced Energy’s non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation and amortization of intangible assets, as well as discontinued operations, and non-recurring items such as acquisition-related costs and restructuring expenses. Beginning in the second quarter of 2020, Advanced Energy’s non-GAAP measures exclude non-cash unrealized foreign currency gains or losses that result from remeasurement to functional currency long-term obligations related to pension and operating lease liabilities as the remeasurement does not represent current economic exposure and is unrelated to our overall operating performance. These long-term obligations were acquired in connection with the Artesyn acquisition and the company previously used derivatives to hedge the exposure; however, the company has determined it will no longer hedge these non-economic exposures. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.

The non-GAAP measures included in this release are not in accordance with, or an alternative for, similar measures calculated under generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Advanced Energy believes that these non-GAAP measures provide useful information to management and investors to evaluate business performance without the impacts of certain non-cash charges, non-economic foreign currency remeasurements, and other cash charges which are not part of the company’s usual operations. The company uses these non-GAAP measures to assess performance against business objectives, make business decisions, develop budgets, forecast future periods, assess trends and evaluate financial impacts of various scenarios. In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. Additionally, the company believes that these non-GAAP measures, in combination with its financial results calculated in accordance with GAAP, provide investors with additional perspective. While some of the excluded items may be incurred and reflected in the company’s GAAP financial results in the foreseeable future, the company believes that the items excluded from certain non-GAAP measures do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred. The use of non-GAAP measures has limitations in that such measures do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP, and these measures should only be used to evaluate the company’s results of operations in conjunction with the corresponding GAAP measures. Please refer to the Form 8‑K regarding this release furnished today to the Securities and Exchange Commission.

Forward-Looking Statements

The company’s guidance with respect to anticipated financial results, potential future growth and profitability, future business mix, expectations regarding future market trends, future performance within specific markets and other statements herein or made on the above-announced conference call that are not historical information are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: (a) the effects of global macroeconomic conditions upon demand for our products and services; (b) the volatility and cyclicality of the industries the company serves, particularly the semiconductor industry; (c) delays in capital spending by end-users in our served markets; (d) the risks and uncertainties related to the integration of Artesyn Embedded Power including the optimization and reduction of our global manufacturing sites; (e) the continuing spread of COVID-19 and its potential adverse impact on our product manufacturing, research and development, supply chain, services and administrative operations; (f) supply chain disruptions and component shortages that may impact the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (g) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (h) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (i) the accuracy of the company’s assumptions on which its financial statement projections are based; (j) the impact of product price changes, which may result from a variety of factors; (k) the timing of orders received from customers; (l) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (m) unanticipated changes to management’s estimates, reserves or allowances; (n) changes and adjustments to the tax expense and benefits related to the U.S. tax reform that was enacted in late 2017; and (o) the impact of political, economic and policy tensions and conflicts between China and the United States including, but not limited to, trade wars and export restrictions between the two countries, China’s national security law for Hong Kong, and China’s expansion of control over the South China Sea, any of which could negatively impact our customers’ and our presence, operations, and financial results. These and other risks are described in Advanced Energy’s Form 10‑K, Forms 10‑Q and other reports and statements filed with the Securities and Exchange Commission (the “SEC”). These reports and statements are available on the SEC’s website at www.sec.gov. Copies may also be obtained from Advanced Energy’s investor relations page at ir.advancedenergy.com or by contacting Advanced Energy’s investor relations at 970‑407‑6555. Forward-looking statements are made and based on information available to the company on the date of this press release. Aspirational goals and targets discussed on the conference call or in the presentation materials should not be interpreted in any respect as guidance. The company assumes no obligation to update the information in this press release.

ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data)
		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
		2021				2020				2021				2021				2020
Sales, net		$	361,311			$	339,880			$	351,620			$	712,931			$	655,336
Cost of sales			226,278				209,576				214,117				440,395				412,801
Gross profit			135,033				130,304				137,503				272,536				242,535
			37.4	%			38.3	%			39.1	%			38.2	%			37.0	%
Operating expenses:
Research and development			40,119				35,855				40,168				80,287				70,625
Selling, general, and administrative			48,110				48,174				46,731				94,841				94,165
Amortization of intangible assets			5,513				5,009				5,384				10,897				10,015
Restructuring expense			211				5,790				1,038				1,249				6,446
Total operating expenses			93,953				94,828				93,321				187,274				181,251
Operating income			41,080				35,476				44,182				85,262				61,284
Other income (expense), net			(3,662)				(1,587)				(507)				(4,169)				(5,097)
Income from continuing operations, before income taxes			37,418				33,889				43,675				81,093				56,187
Provision (benefit) for income taxes			1,876				4,610				5,284				7,160				8,510
Income from continuing operations			35,542				29,279				38,391				73,933				47,677
Income (loss) from discontinued operations, net of income taxes			(102)				(151)				310				208				(471)
Net income			35,440				29,128				38,701				74,141				47,206
Income from continuing operations attributable to noncontrolling interest			31				(16)				33				64				(1)
Net income attributable to Advanced Energy Industries, Inc.		$	35,409			$	29,144			$	38,668			$	74,077			$	47,207
Basic weighted-average common shares outstanding			38,389				38,294				38,328				38,359				38,326
Diluted weighted-average common shares outstanding			38,586				38,458				38,583				38,589				38,525
Earnings per share attributable to Advanced Energy Industries, Inc:
Continuing operations:
Basic earnings per share		$	0.93			$	0.77			$	1.00			$	1.93			$	1.24
Diluted earnings per share		$	0.92			$	0.76			$	0.99			$	1.91			$	1.24
Discontinued operations:
Basic earnings (loss) per share		$	—			$	—			$	0.01			$	0.01			$	(0.01)
Diluted earnings (loss) per share		$	—			$	—			$	0.01			$	0.01			$	(0.01)
Net income:
Basic earnings per share		$	0.92			$	0.76			$	1.01			$	1.93			$	1.23
Diluted earnings per share		$	0.92			$	0.76			$	1.00			$	1.92			$	1.23

ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
		June 30,			December 31,
		2021			2020
ASSETS
Current assets:
Cash and cash equivalents		$	507,176		$	480,368
Marketable securities			2,828			2,654
Accounts and other receivable, net			243,353			235,178
Inventories			296,739			221,346
Income taxes receivable			15,075			4,804
Other current assets			38,815			35,899
Total current assets			1,103,986			980,249
Property and equipment, net			115,160			114,731
Operating lease right-of-use assets			101,419			103,858
Deposits and other assets			18,646			19,101
Goodwill and intangible assets, net			385,125			378,922
Deferred income tax assets			51,896			50,801
Total assets		$	1,776,232		$	1,647,662
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	206,723		$	125,224
Other accrued expenses			137,633			137,081
Current portion of long-term debt			17,500			17,500
Current portion of operating lease liabilities			15,540			16,592
Total current liabilities			377,396			296,397
Long-term debt			296,045			304,546
Non-current liabilities			226,185			231,379
Long-term liabilities			522,230			535,925
Total liabilities			899,626			832,322
Advanced Energy stockholders' equity			875,941			814,739
Noncontrolling interest			665			601
Total stockholders’ equity			876,606			815,340
Total liabilities and stockholders’ equity		$	1,776,232		$	1,647,662

ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
		Six Months Ended June 30,
		2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	74,141		$	47,206
Income (loss) from discontinued operations, net of income taxes			208			(471)
Income from continuing operations, net of income taxes			73,933			47,677
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			25,744			23,196
Stock-based compensation expense			9,145			5,885
Provision for deferred income taxes			(1,663)			(1,439)
Discount on notes receivable			—			721
Loss on disposal of assets			446			231
Changes in operating assets and liabilities, net of assets acquired			(19,539)			(8,711)
Net cash from operating activities from continuing operations			88,066			67,560
Net cash from operating activities from discontinued operations			(377)			(586)
Net cash from operating activities			87,689			66,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities			—			(167)
Issuance of notes receivable			—			(1,000)
Proceeds from sale of property and equipment			29			69
Purchases of property and equipment			(14,232)			(13,391)
Acquisitions, net of cash acquired			(18,686)			—
Net cash from investing activities from continuing operations			(32,889)			(14,489)
Net cash from investing activities from discontinued operations			—			—
Net cash from investing activities			(32,889)			(14,489)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings			(8,750)			(8,750)
Dividend payments			(7,728)			—
Purchase and retirement of common stock			(6,503)			(7,248)
Net payments related to stock-based awards			(3,258)			(1,392)
Net cash from financing activities from continuing operations			(26,239)			(17,390)
Net cash from financing activities from discontinued operations			—			—
Net cash from in financing activities			(26,239)			(17,390)
EFFECT OF CURRENCY TRANSLATION ON CASH			(1,753)			(899)
NET CHANGE IN CASH AND CASH EQUIVALENTS			26,808			34,196
CASH AND CASH EQUIVALENTS, beginning of period			480,368			346,441
CASH AND CASH EQUIVALENTS, end of period			507,176			380,637
Less cash and cash equivalents from discontinued operations			—			—
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period		$	507,176		$	380,637

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

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

ADVANCED ENERGY INDUSTRIES, INC. SELECTED OTHER DATA (UNAUDITED) (in thousands)
Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items		Three Months Ended									Six Months Ended
		June 30,						March 31,			June 30,
		2021			2020			2021			2021			2020
Gross profit from continuing operations, as reported		$	135,033		$	130,304		$	137,503		$	272,536		$	242,535
Adjustments to gross profit:
Stock-based compensation			215			156			350			565			378
Facility expansion, relocation costs and other			1,997			970			1,838			3,835			2,513
Acquisition-related costs			84			215			8			92			5,356
Non-GAAP gross profit			137,329			131,645			139,699			277,028			250,782
Non-GAAP gross margin			38.0%			38.7%			39.7%			38.9%			38.3%
Operating expenses from continuing operations, as reported			93,953			94,828			93,321			187,274			181,251
Adjustments:
Amortization of intangible assets			(5,513)			(5,009)			(5,384)			(10,897)			(10,015)
Stock-based compensation			(3,229)			(2,681)			(5,351)			(8,580)			(5,507)
Acquisition-related costs			(2,328)			(2,978)			(2,028)			(4,356)			(5,383)
Facility expansion, relocation costs and other			(63)			(539)			(51)			(114)			(1,355)
Restructuring charges			(211)			(5,790)			(1,038)			(1,249)			(6,446)
Non-GAAP operating expenses			82,609			77,831			79,469			162,078			152,545
Non-GAAP operating income		$	54,720		$	53,814		$	60,230		$	114,950		$	98,237
Non-GAAP operating margin			15.1%			15.8%			17.1%			16.1%			15.0%

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

Reconciliation of Non-GAAP measure - per share earnings excluding certain items		Three Months Ended									Six Months Ended
		June 30,						March 31,			June 30,
		2021			2020			2021			2021			2020
Diluted earnings per share from continuing operations, as reported		$	0.92		$	0.76		$	0.99		$	1.91		$	1.24
Add back (subtract):
Per share impact of Non-GAAP adjustments, net of tax			0.33			0.42			0.30			0.62			0.85
Non-GAAP per share earnings		$	1.25		$	1.18		$	1.29		$	2.53		$	2.09
Quarterly results may not sum to year to date due to rounding

Reconciliation of Q3 2021 Guidance
		Low End			High End
Revenue		$325 million			$355 million
Reconciliation of Non-GAAP earnings per share
GAAP earnings per share		$	0.32		$	0.72
Stock-based compensation			0.11			0.11
Amortization of intangible assets			0.13			0.13
Restructuring and other			0.08			0.08
Tax effects of excluded items			(0.04)			(0.04)
Non-GAAP earnings per share		$	0.60		$	1.00

 

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FAQ

What were Advanced Energy Industries' Q2 2021 revenue and earnings results?

In Q2 2021, Advanced Energy reported revenues of $361.3 million and GAAP net income of $35.5 million.

How did Advanced Energy's earnings per share perform in Q2 2021?

GAAP EPS in Q2 2021 was $0.92, compared to $0.99 in Q1 2021.

What is the new stock repurchase authorization for Advanced Energy?

The Board of Directors authorized a new stock repurchase program of $200 million.

What is the revenue guidance for Advanced Energy in Q3 2021?

Advanced Energy's revenue guidance for Q3 2021 is $340 million +/- $15 million.

What financial actions did Advanced Energy take in Q2 2021?

In Q2 2021, the company repurchased $6.5 million in stock and paid down $4.4 million in debt.