Advanced Energy Reports Second Quarter 2024 Results

Rhea-AI Summary

Advanced Energy Industries (Nasdaq: AEIS) reported strong Q2 2024 results, with revenue of $364.9 million, exceeding expectations. GAAP EPS from continuing operations was $0.41, and non-GAAP EPS was $0.85, both above the mid-point of guidance. The company saw sequential revenue growth in three of its four markets. CEO Steve Kelley highlighted efforts to incorporate AE's technologies into leading-edge systems and execute manufacturing consolidation plans to drive market share gains and profitability improvement.

For Q3 2024, Advanced Energy projects revenue of $370 million ± $20 million, GAAP EPS from continuing operations of ($0.10) ± $0.25, and non-GAAP EPS of $0.90 ± $0.25. The company plans further actions related to its manufacturing consolidation initiatives, with associated charges expected in Q3 2024.

Positive

• Revenue of $364.9 million exceeded expectations, up from $327.5 million in Q1 2024
• Non-GAAP EPS of $0.85, above the mid-point of guidance
• Sequential revenue growth in three of four markets
• Generated $6.9 million in cash flow from continuing operations
• Q3 2024 guidance suggests continued revenue growth

Negative

• Revenue decreased year-over-year from $415.5 million in Q2 2023
• GAAP net income from continuing operations decreased to $15.6 million from $27.5 million year-over-year
• Expected employment-related charges for severance and facility exit costs in Q3 2024
• Projected negative GAAP EPS for Q3 2024

Insights

Financial Analyst

Advanced Energy Industries' Q2 2024 results demonstrate resilience in a challenging market environment. Revenue of $364.9 million exceeded expectations, showing sequential growth in three out of four markets. This performance, coupled with the company's focus on incorporating differentiated technologies and executing manufacturing consolidation plans, suggests a strategic positioning for future market share gains.

The company's GAAP EPS from continuing operations of $0.41 and non-GAAP EPS of $0.85 both surpassed the mid-point of guidance, indicating effective cost management and operational efficiency. The sequential improvement in both GAAP and non-GAAP net income is particularly noteworthy, reflecting the company's ability to enhance profitability even in a softer market.

However, investors should note the year-over-year decline in revenue and earnings, which highlights the broader market challenges. The planned further actions related to manufacturing consolidation initiatives, while potentially beneficial in the long term, may impact short-term financials due to expected charges in Q3 2024.

The Q3 2024 guidance suggests cautious optimism, with projected revenue of $370 million ±$20 million and non-GAAP EPS of $0.90 ±$0.25. This outlook indicates potential for continued sequential growth, but the wide range in EPS guidance (-$0.10 ±$0.25 for GAAP EPS) suggests some uncertainty in the near-term operating environment.

Overall, while Advanced Energy faces industry headwinds, its strategic initiatives and financial discipline position it well for potential market recovery. Investors should closely monitor the execution of the manufacturing consolidation plan and its impact on future profitability.

Market Research Analyst

Advanced Energy's Q2 2024 results offer valuable insights into the current state of the precision power conversion and control solutions market. The company's ability to grow revenue sequentially in three out of four markets suggests a nuanced recovery pattern across different sectors.

The emphasis on incorporating differentiated technologies into leading-edge systems indicates a strategic focus on innovation-driven growth. This approach could be important in maintaining a competitive edge and capturing market share as the industry recovers. It's particularly relevant given the cyclical nature of the semiconductor and industrial technology sectors.

The planned manufacturing consolidation initiatives are a notable development. While potentially disruptive in the short term, such moves often lead to improved operational efficiency and cost structure in the long run. This could position Advanced Energy favorably against competitors when market demand fully rebounds.

The Q3 guidance, while showing potential for growth, also reflects ongoing market uncertainties. The wide range in the EPS forecast suggests that the company is preparing for various scenarios, which is prudent given the volatile nature of their end markets.

Investors should pay attention to broader industry trends, such as the demand for power solutions in emerging technologies like AI and 5G, which could significantly impact Advanced Energy's future performance. The company's ability to align its product portfolio with these trends will be important for long-term growth.

• Revenue was $364.9 million, at the higher end of guidance
• GAAP EPS from continuing operations was $0.41, above the mid-point of guidance
• Non-GAAP EPS was $0.85, above the mid-point of guidance

DENVER--(BUSINESS WIRE)-- 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, 2024.

“Second quarter financial results exceeded expectations, with sequential revenue growth in three of our four markets,” said Steve Kelley, president and CEO of Advanced Energy. “We continue to work intensively with our customers to incorporate AE’s differentiated technologies into leading-edge systems. These efforts, together with the execution of our manufacturing consolidation plan, are expected to drive meaningful market share gains and profitability improvement as our markets recover.”

Quarter Results

Revenue was $364.9 million in the second quarter of 2024, compared with $327.5 million in the first quarter of 2024 and $415.5 million in the second quarter of 2023.

GAAP net income from continuing operations was $15.6 million or $0.41 per diluted share in the quarter, compared with $5.8 million or $0.15 per diluted share in the prior quarter, and $27.5 million or $0.73 per diluted share a year ago.

Non-GAAP net income was $32.0 million or $0.85 per diluted share in the second quarter of 2024. This compares with $21.9 million or $0.58 per diluted share in the first quarter of 2024, and $41.9 million or $1.11 per diluted share in the second quarter of 2023.

Advanced Energy generated $6.9 million in cash flow from continuing operations during the quarter and paid $3.8 million in quarterly dividends.

The company announced plans to take further actions related to its previously announced manufacturing consolidation initiatives. Advanced Energy expects to incur employment-related charges for severance, benefits expenses, payroll taxes, and facility exit costs. The majority of these charges are expected to be recognized during the third quarter of 2024.

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

Third Quarter 2024 Guidance

Based on the Company’s current view, beliefs, and assumptions, guidance is within the following ranges:

	Q3 2024
Revenue	$370 million +/- $20 million
GAAP EPS from continuing operations	($0.10) +/- $0.25
Non-GAAP EPS	$0.90 +/- $0.25

Conference Call

Management will host a conference call today, July 30, 2024, at 4:30 p.m. Eastern Time to discuss the second quarter financial results. To participate in the live earnings conference call, please dial 877-407-0890 approximately ten minutes prior to the start of the meeting and an operator will connect you. International participants can dial +1-201-389-0918. A webcast will also be available on our investor web page at ir.advancedenergy.com in the Events & Presentations section. The archived webcast will be available approximately two hours following the end of the live event.

About Advanced Energy

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

Advanced Energy | Precision. Power. Performance. Trust.

Non-GAAP Measures

This release includes GAAP and non-GAAP income and per-share earnings data and other GAAP and non-GAAP financial information. The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, restructuring, asset impairments, and other charges, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. In addition, the tax effect also includes a discrete tax benefit associated with the release of a portion of our deferred tax asset valuation allowance.

The non-GAAP measures included in this release are not prepared 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. We believe 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 our usual operations. We use 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, we believe that these non-GAAP measures, in combination with its financial results calculated in accordance with GAAP, provide investors with additional perspective. To gain a complete picture of all effects on our financial results from any and all events, management does (and investors should) rely upon the GAAP measures as well, as the items excluded from non-GAAP measures may contribute to not accurately reflecting the underlying performance of the company’s continuing operations for the period in which they are incurred. Furthermore, the use of non-GAAP measures has limitations in that such measures do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

Forward-Looking Statements

This release and statements we make on the above announced conference call contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements in this report that are not historical information are forward-looking statements. For example, statements relating to our beliefs, expectations, and plans are forward-looking statements, as are statements that certain actions, conditions, or circumstances will continue. The inclusion of words such as "anticipate," "expect," "estimate," "can," "may," "might," "continue," "enables," "plan," "intend," "should," "could," "would," "likely," "potential," or "believe," and similar expressions and the negative versions thereof indicate forward-looking statements; however, not all forward-looking statements may contain such words or expressions. These forward-looking statements are based upon information available as of the date of this report and management’s current estimates, forecasts, and assumptions. Although we believe that our expectations reflected in or suggested by these forward-looking statements are reasonable, we may not achieve the results, performance, plans, or objectives expressed or implied by such forward-looking statements. Forward-looking statements involve risks and uncertainties, which are difficult to predict and many of which are beyond our control.

Risks and uncertainties to which our forward-looking statements are subject include, but are not limited to: our ability to achieve design wins with new and existing customers; our ability to accurately forecast and meet customer demand; risks related to global economic conditions, including, but not limited to, the impact of escalating global conflicts on macroeconomic conditions, economic uncertainty, market volatility, rising interest rates, inflation, or recession; risks inherent in our international operations, including the effect of trade and export controls, political and geographical risks, fluctuations in currency exchange rates; concentration of our customer base; risks associated with breach of our information security measures; our loss of or inability to attract and retain key personnel; disruptions to our manufacturing operations or those of our customers or suppliers; risks associated with our manufacturing footprint optimization and movement of manufacturing locations for certain products; our ability to successfully identify, close, integrate and realize anticipated benefits from our acquisitions; quality issues or unanticipated costs in fulfilling our warranty obligations (including our discontinued solar inverter product line), and adequacy of our warranty reserves; our ability to enforce, protect and maintain our proprietary technology and intellectual property rights; our ability to achieve cost savings, profitability, and gross margin goals; changes to tax laws and regulations or our tax rates; changes in federal, state, local and foreign regulations, including with respect to privacy and data protection, and environmental regulation; the effect of our debt obligations and restrictive covenants on our ability to operate our business; customer price sensitivity; risks related to our unfunded pension obligations; restructuring and severance activities; legal matters, claims, and proceedings; our estimates of the fair value of intangible assets; and the potential impact of dilution related to our convertible debt, hedge, and warrant transactions.

Actual results could differ materially and adversely from those expressed in any forward-looking statements, and readers are cautioned not to place undue reliance on forward-looking statements. Factors that could contribute to these differences or prove our forward-looking statements, by hindsight, to be overly optimistic or unachievable include, but are not limited to, the risks and uncertainties listed above and described in 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 us 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. We assume 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,
		2024				2023				2024				2024				2023
Revenue, net		$	364,947			$	415,508			$	327,475			$	692,422			$	840,548
Cost of revenue			237,206				268,428				214,646				451,852				538,357
Gross profit			127,741				147,080				112,829				240,570				302,191
Gross margin %			35.0	%			35.4	%			34.5	%			34.7	%			36.0	%
Operating expenses:
Research and development			52,335				51,413				49,836				102,171				103,023
Selling, general, and administrative			55,013				55,613				55,124				110,137				110,971
Amortization of intangible assets			6,800				7,075				6,947				13,747				14,137
Restructuring, asset impairments, and other charges			625				3,154				245				870				4,197
Total operating expenses			114,773				117,255				112,152				226,925				232,328
Operating income			12,968				29,825				677				13,645				69,863
Interest income			12,119				4,301				12,645				24,764				7,886
Interest expense			(6,956	)			(2,858	)			(7,127	)			(14,083	)			(5,588	)
Other income (expense), net			638				982				1,379				2,017				(423	)
Income from continuing operations, before income tax			18,769				32,250				7,574				26,343				71,738
Income tax provision			3,165				4,795				1,787				4,952				12,531
Income from continuing operations			15,604				27,455				5,787				21,391				59,207
Loss from discontinued operations, net of income tax			(575	)			(315	)			(571	)			(1,146	)			(1,146	)
Net income		$	15,029			$	27,140			$	5,216			$	20,245			$	58,061
Basic weighted-average common shares outstanding			37,474				37,573				37,359				37,417				37,524
Diluted weighted-average common shares outstanding			37,777				37,803				37,687				37,733				37,804
Earnings per share attributable to Advanced Energy Industries, Inc:
Continuing operations:
Basic earnings per share		$	0.42			$	0.73			$	0.15			$	0.57			$	1.58
Diluted earnings per share		$	0.41			$	0.73			$	0.15			$	0.57			$	1.57
Discontinued operations:
Basic loss per share		$	(0.02	)		$	(0.01	)		$	(0.02	)		$	(0.03	)		$	(0.03	)
Diluted loss per share		$	(0.02	)		$	(0.01	)		$	(0.02	)		$	(0.03	)		$	(0.03	)
Net income:
Basic earnings per share		$	0.40			$	0.72			$	0.14			$	0.54			$	1.55
Diluted earnings per share		$	0.40			$	0.72			$	0.14			$	0.54			$	1.54

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
		June 30,			December 31,
		2024				2023
ASSETS
Current assets:
Cash and cash equivalents		$	986,148		$	1,044,556
Accounts receivables, 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
Goodwill and intangible assets, net			449,092			445,318
Total assets		$	2,541,859		$	2,556,757
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	157,523		$	141,850
Other accrued expenses			113,015			156,254
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			887,309			895,679
Other long-term liabilities			182,637			181,048
Long-term liabilities			1,069,946			1,076,727
Total liabilities			1,376,783			1,412,575
Total stockholders' equity			1,165,076			1,144,182
Total liabilities and stockholders’ equity		$	2,541,859		$	2,556,757

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(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			(63,830	)			(51,067	)
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			(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

ADVANCED ENERGY INDUSTRIES, INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
(in thousands)
Net Revenue by Market		Three Months Ended									Six Months Ended
		June 30,						March 31,			June 30,
		2024			2023			2024			2024			2023
Semiconductor Equipment		$	188,321		$	173,177		$	179,903		$	368,224		$	367,386
Industrial and Medical			79,104			127,603			83,418			162,522			250,623
Data Center Computing			72,964			59,076			41,902			114,866			118,735
Telecom and Networking			24,558			55,652			22,252			46,810			103,804
Total		$	364,947		$	415,508		$	327,475		$	692,422		$	840,548

Net Revenue by Geographic Region		Three Months Ended									Six Months Ended
		June 30,						March 31,			June 30,
		2024			2023			2024			2024			2023
North America		$	172,794		$	171,516		$	134,079		$	306,873		$	352,458
Asia			151,955			186,498			151,943			303,898			365,681
Europe			39,813			56,213			40,553			80,366			118,779
Other			385			1,281			900			1,285			3,630
Total		$	364,947		$	415,508		$	327,475		$	692,422		$	840,548

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,
			2024				2023				2024				2024				2023
Gross profit from continuing operations, as reported		$	127,741			$	147,080			$	112,829			$	240,570			$	302,191
Adjustments to gross profit:
Stock-based compensation			1,056				589				829				1,885				972
Facility expansion, relocation costs and other			161				60				1,308				1,469				1,017
Acquisition-related costs			(57	)			97				44				(13	)			150
Non-GAAP gross profit			128,901				147,826				115,010				243,911				304,330
Non-GAAP gross margin			35.3	%			35.6	%			35.1	%			35.2	%			36.2	%
Operating expenses from continuing operations, as reported			114,773				117,255				112,152				226,925				232,328
Adjustments:
Amortization of intangible assets			(6,800	)			(7,075	)			(6,947	)			(13,747	)			(14,137	)
Stock-based compensation			(10,328	)			(7,348	)			(10,176	)			(20,504	)			(13,766	)
Acquisition-related costs			(1,934	)			(1,165	)			(1,266	)			(3,200	)			(2,043	)
Restructuring, asset impairments, and other charges			(625	)			(3,154	)			(245	)			(870	)			(4,197	)
Non-GAAP operating expenses			95,086				98,513				93,518				188,604				198,185
Non-GAAP operating income		$	33,815			$	49,313			$	21,492			$	55,307			$	106,145
Non-GAAP operating margin			9.3	%			11.9	%			6.6	%			8.0	%			12.6	%

Reconciliation of Non-GAAP measure - income excluding certain items		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
			2024				2023				2023				2024				2023
Income from continuing operations, less non-controlling interest, net of income tax		$	15,604			$	27,455			$	5,787			$	21,391			$	59,207
Adjustments:
Amortization of intangible assets			6,800				7,075				6,947				13,747				14,137
Acquisition-related costs			1,877				1,262				1,310				3,187				2,193
Facility expansion, relocation costs, and other			161				60				1,308				1,469				1,017
Restructuring, asset impairments, and other charges			625				3,154				245				870				4,197
Unrealized foreign currency loss (gain)			(1,545	)			(2,266	)			(1,757	)			(3,302	)			(1,213	)
Tax effect of non-GAAP adjustments, including certain discrete tax benefits			(498	)			(1,051	)			(622	)			(1,120	)			(2,172	)
Non-GAAP income, net of income tax, excluding stock-based compensation			23,024				35,689				13,218				36,242				77,366
Stock-based compensation, net of tax			8,993				6,191				8,694				17,687				11,495
Non-GAAP income, net of income tax		$	32,017			$	41,880			$	21,912			$	53,929			$	88,861

ADVANCED ENERGY INDUSTRIES, INC.
SELECTED OTHER DATA (UNAUDITED)
Reconciliation of non-GAAP measure - per share earnings excluding certain items		Three Months Ended												Six Months Ended
		June 30,								March 31,				June 30,
			2024				2023				2024				2024				2023
Diluted earnings per share from continuing operations, as reported		$	0.41			$	0.73			$	0.15			$	0.57			$	1.57
Add back:
Per share impact of non-GAAP adjustments, net of tax			0.44				0.38				0.43				0.86				0.78
Non-GAAP earnings per share		$	0.85			$	1.11			$	0.58			$	1.43			$	2.35

Reconciliation of Q3 2024 Guidance
		Low End				High End
Revenue		$350 million				$390 million
Reconciliation of non-GAAP earnings per share
GAAP earnings per share		$	(0.35	)		$	0.15
Stock-based compensation			0.28				0.28
Amortization of intangible assets			0.19				0.19
Restructuring, asset impairments, and other charges			0.77				0.77
Tax effects of excluded items			(0.24	)			(0.24	)
Non-GAAP earnings per share		$	0.65			$	1.15

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730102829/en/

Andrew Huang

Advanced Energy Industries, Inc.

970-407-6555

ir@aei.com

Source: Advanced Energy Industries, Inc.

FAQ

What was Advanced Energy's (AEIS) revenue for Q2 2024?

Advanced Energy (AEIS) reported revenue of $364.9 million for Q2 2024, which was at the higher end of their guidance.

How did Advanced Energy's (AEIS) Q2 2024 earnings compare to guidance?

Advanced Energy's (AEIS) Q2 2024 earnings exceeded expectations, with GAAP EPS of $0.41 and non-GAAP EPS of $0.85, both above the mid-point of guidance.

What is Advanced Energy's (AEIS) revenue guidance for Q3 2024?

Advanced Energy (AEIS) projects revenue of $370 million ± $20 million for Q3 2024.

What actions is Advanced Energy (AEIS) taking to improve profitability?

Advanced Energy (AEIS) is executing manufacturing consolidation plans and working to incorporate its technologies into leading-edge systems to drive market share gains and profitability improvement.