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Advanced Energy Announces Fourth Quarter and Full Year Fiscal 2019 Results

Advanced Energy Industries, Inc. (Nasdaq: AEIS) today announced financial results for the fourth quarter and fiscal year ended December 31, 2019.

“Our fourth quarter marked a strong finish to fiscal year 2019, with quarterly revenue and non-GAAP earnings per share above our guidance ranges. We continue to benefit from the results of our past design wins as they transition into solid incremental revenue growth and market share gains. The semiconductor equipment and data center computing markets were particularly strong this quarter, with our semiconductor revenues growing 30% sequentially,” said Yuval Wasserman, president and CEO. “Further, the integration of Artesyn Embedded Power is progressing very well. We have identified and started to implement actions to achieve our synergies target and to capture exciting potential revenue growth opportunities.”

Fourth Quarter Results

Sales were $338.3 million in the fourth quarter of 2019 compared with $175.1 million in the third quarter of 2019 and $154.2 million in the fourth quarter of 2018.

GAAP net income from continuing operations was $10.5 million or $0.27 per diluted share, compared with $7.3 million or $0.19 per diluted share in the prior quarter, and $19.2 million or $0.50 per diluted share in the fourth quarter of 2018. Both GAAP and non-GAAP operating expenses in the fourth quarter of 2019 include a one-time pre-tax reserve of $4.2 million.

Non-GAAP net income was $33.4 million or $0.87 per diluted share in the fourth quarter of 2019. This compares with $20.9 million or $0.54 per diluted share in the third quarter of 2019, and $28.0 million or $0.73 per diluted share in the fourth quarter of 2018.

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

The company generated $19.0 million of operating cash from continuing operations in the quarter.

Full Year 2019 Results

Sales were $788.9 million in 2019 compared with $718.9 million in 2018, an increase of 9.7%.

GAAP net income from continuing operations was $56.5 million or $1.47 per diluted share in 2019 compared with $147.1 million or $3.74 per diluted share in 2018.

Non-GAAP net income was $93.9 million or $2.44 per diluted share in 2019 compared to $172.0 million or $4.37 per diluted share in 2018. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $47.9 million of operating cash from continuing operations in 2019 and ended the year with $349.1 million in cash and marketable securities.

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 are available in the company’s 2018 Annual Report on Form 10‑K.

First Quarter 2020 Guidance

Based on the company’s current view, beliefs and assumptions, guidance for the first quarter of 2020 is within the following ranges.

Q1 2020

Revenues

$310M +/- $30M

GAAP EPS from continuing operations

$0.36 +/- $0.30

Non-GAAP EPS

$0.70 +/- $0.30

Conference Call

Management will host a conference call today, Tuesday, February 18, 2020 at 6:30 a.m. Mountain Time/ 8:30 a.m. Eastern Time to discuss Advanced Energy’s financial results. Domestic callers may access this conference call by dialing 855-232-8958. International callers may access the call by dialing +1 315-625-6980. Participants will need to provide the operator with Conference ID Number 4717689, which has been reserved for this call. A webcast will also be available on the company’s Investor Relations web page at ir.advanced-energy.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 more than three decades to perfecting power for its global customers and is headquartered in Fort Collins, 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. 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 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 for the first quarter ending March 31, 2020, 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 acquisition and integration of Artesyn Embedded Power including the optimization and reduction of our global manufacturing sites; (e) the recent outbreak of the 2019-Novel Coronavirus (2019-nCoV) and its potential adverse impact on our product manufacturing, research & development, supply chain, services and administrative operations; (f) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (g) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (h) the accuracy of the company’s assumptions on which its financial statement projections are based; (i) the impact of product price changes, which may result from a variety of factors; (j) the timing of orders received from customers; (k) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (l) the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (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 effects of U.S. government trade and export restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon the demand for our, and our customers’, products and services and the U.S. economy. 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.advanced-energy.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
(in thousands, except per share data)

 

  

Three Months Ended

  

Year Ended

December 31,

 

September 30,

  

December 31,

2019

2018

 

2019

  

2019

2018

Unaudited

Unaudited

 

Unaudited

  

Sales:

 

  

Product

$

311,618

$

125,039

 

$

148,138

  

$

678,061

$

610,326

Service

26,650

29,122

 

26,989

  

110,887

108,566

Total sales

338,268

154,161

 

175,127

  

788,948

718,892

Cost of sales:

 

  

Product

212,526

64,819

 

87,536

  

416,976

298,597

Service

13,447

14,154

 

14,100

  

56,320

54,688

Total cost of sales

225,973

78,973

 

101,636

  

473,296

353,285

Gross profit

112,295

75,188

 

73,491

  

315,652

365,607

33.2

%

48.8

%

 

42.0

%

  

40.0

%

50.9

%

Operating expenses:

 

  

Research and development

33,828

20,725

 

24,546

  

101,503

76,008

Selling, general and administrative

49,528

29,241

 

36,401

  

142,555

108,033

Amortization of intangible assets

5,319

1,816

 

3,002

  

12,168

5,774

Restructuring expense

1,418

3,836

 

152

  

5,038

4,239

Total operating expenses

90,093

55,618

 

64,101

  

261,264

194,054

Operating income

22,202

19,570

 

9,390

  

54,388

171,553

Other income (expense), net

(4,843

)

881

 

1,361

  

12,806

823

Income from continuing operations before income taxes

17,359

20,451

 

10,751

  

67,194

172,376

Provision (benefit) for income taxes

6,880

1,229

 

3,495

  

10,699

25,227

Income from continuing operations, net of income taxes

10,479

19,222

 

7,256

  

56,495

147,149

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

(210

)

188

 

375

  

8,480

(38

)

Net income

10,269

19,410

 

7,631

  

64,975

147,111

Income from continuing operations attributable to non-controlling interest

5

4

 

10

  

34

86

Net income attributable to Advanced Energy Industries, Inc.

$

10,264

$

19,406

 

$

7,621

  

$

64,941

$

147,025

 

  

Basic weighted-average common shares outstanding

38,341

38,386

 

38,313

  

38,281

39,081

Diluted weighted-average common shares outstanding

38,554

38,595

 

38,489

  

38,495

39,352

 

  

Earnings per share attributable to Advanced Energy Industries, Inc:

 

  

 

  

Continuing operations:

 

  

Basic earnings per share

$

0.27

$

0.50

 

$

0.19

  

$

1.47

$

3.76

Diluted earnings per share

$

0.27

$

0.50

 

$

0.19

  

$

1.47

$

3.74

 

  

Discontinued operations:

 

  

Basic earnings per share

$

(0.01

)

$

 

$

0.01

  

$

0.22

$

Diluted earnings per share

$

(0.01

)

$

 

$

0.01

  

$

0.22

$

 

  

Net income:

 

  

Basic earnings per share

$

0.27

$

0.51

 

$

0.20

  

$

1.70

$

3.76

Diluted earnings per share

$

0.27

$

0.50

 

$

0.20

  

$

1.69

$

3.74

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

 

December 31,

 

December 31,

2019

 

2018

ASSETS

 

Current assets:

 

Cash and cash equivalents

$

346,441

 

$

349,301

Marketable securities

2,614

 

2,470

Accounts and other receivable, net

246,564

 

100,442

Inventories, net

230,019

 

97,987

Income taxes receivable

4,245

 

2,220

Other current assets

36,825

 

10,173

Current assets of discontinued operations

30

 

5,855

Total current assets

866,738

 

568,448

 

Property and equipment, net

108,109

 

31,269

Operating lease right-of-use assets

105,404

 

 

Deposits and other assets

22,287

 

6,874

Goodwill and intangibles, net

386,943

 

156,810

Deferred income tax assets

42,656

 

47,099

Non-current assets of discontinued operations

269

 

5,984

Total assets

$

1,532,406

 

$

816,484

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

Accounts payable

$

170,671

 

$

39,646

Other accrued expenses

112,935

 

65,377

Current portion of debt

17,500

 

Current portion of operating lease liability

18,312

 

Current liabilities of discontinued operations

914

 

5,286

Total current liabilities

320,332

 

110,309

 

Long-term debt

321,527

 

Non-current liabilities of continuing operations

212,400

 

88,158

Non-current liabilities of discontinued operations

887

 

10,715

Long-term liabilities

534,814

 

98,873

 

Total liabilities

855,146

 

209,182

 

Advanced Energy stockholders’ equity

676,714

 

606,790

Noncontrolling interest

546

 

512

Stockholders’ equity

677,260

 

607,302

Total liabilities and stockholders’ equity

$

1,532,406

 

$

816,484

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

Year Ended December 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

64,975

$

147,111

Income from discontinued operations, net of income taxes

8,480

(38

)

Income from continuing operations, net of income taxes

56,495

147,149

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

26,147

13,592

Stock-based compensation expense

7,327

9,703

Provision for deferred income taxes

(3,225

)

5,618

Discount on notes receivable

1,100

Gain on sale of central inverter service business

(14,795

)

Net loss on disposal of assets

700

481

Changes in operating assets and liabilities, net of assets acquired

(25,850

)

(25,116

)

Net cash provided by operating activities from continuing operations

47,899

151,427

Net cash provided by operating activities from discontinued operations

493

(156

)

Net cash provided by operating activities

48,392

151,271

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities

(95

)

Proceeds from sale of marketable securities

1,742

589

Acquisitions, net of cash acquired

(366,101

)

(93,756

)

Issuance of notes receivable

(4,300

)

Purchases of property and equipment

(25,188

)

(20,330

)

Net cash used in investing activities from continuing operations

(393,847

)

(113,592

)

Net cash used in investing activities from discontinued operations

Net cash used in investing activities

(393,847

)

(113,592

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net Proceeds from long-term borrowings

347,486

Payments on long-term borrowings

(8,750

)

Purchase and retirement of common stock

(95,125

)

Net payments related to stock-based award activities

104

(2,009

)

Net cash provided by financing activities from continuing operations

338,840

(97,134

)

Net cash provided by financing activities from discontinued operations

Net cash provided by financing activities

338,840

(97,134

)

EFFECT OF CURRENCY TRANSLATION ON CASH

(1,496

)

(1,030

)

DECREASE IN CASH AND CASH EQUIVALENTS

(8,111

)

(60,485

)

CASH AND CASH EQUIVALENTS, beginning of period

354,552

415,037

CASH AND CASH EQUIVALENTS, end of period

346,441

354,552

Less cash and cash equivalents from discontinued operations

5,251

CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period

$

346,441

$

349,301

ADVANCED ENERGY INDUSTRIES, INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
(in thousands)

 

Net Sales by Product Line

Three Months Ended

 

Year Ended

December 31,

September 30,

 

December 31,

2019

2018

2019

 

2019

2018

Semiconductor Equipment

$

125,108

$

107,393

$

96,426

 

$

403,018

$

533,770

Industrial & Medical

96,736

46,768

55,187

 

245,992

185,122

Data Center Computing

77,940

13,498

 

91,438

Telecom & Networking

38,484

10,016

 

48,500

Total

$

338,268

$

154,161

$

175,127

 

$

788,948

$

718,892

 

Net Sales by Geographic Region

Three Months Ended

 

Year Ended

December 31,

September 30,

 

December 31,

2019

2018

2019

 

2019

2018

North America

$

172,697

$

77,267

$

83,632

 

$

376,228

$

372,834

Asia

117,559

52,554

66,157

 

293,113

250,574

Europe

47,264

23,991

25,008

 

117,790

94,793

Other Countries

748

349

330

 

1,817

691

Total

$

338,268

$

154,161

$

175,127

 

$

788,948

$

718,892

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

 

Year Ended

December 31,

September 30,

 

December 31,

2019

2018

2019

2019

2018

Gross profit from continuing operations, as reported

$

112,295

$

75,188

$

73,491

 

$

315,652

$

365,607

Adjustments to gross profit:

 

Stock-based compensation

160

166

77

 

525

742

Facility expansion and relocation costs

2,229

354

1,342

 

3,891

1,328

Acquisition-related costs

6,784

411

1,506

 

8,290

569

Non-GAAP gross profit

121,468

76,119

76,416

 

328,358

368,246

Non-GAAP gross margin

35.9

%

49.4

%

43.6

%

 

41.6

%

51.2

%

 

Operating expenses from continuing operations, as reported

90,093

55,618

64,101

 

261,264

194,054

Adjustments:

 

Amortization of intangible assets

(5,319

)

(1,816

)

(3,002

)

 

(12,168

)

(5,774

)

Stock-based compensation

(2,115

)

(2,077

)

(840

)

 

(6,803

)

(8,961

)

Acquisition-related costs

(2,562

)

(416

)

(6,398

)

 

(12,002

)

(1,726

)

Facility expansion and relocation costs

(651

)

(223

)

 

(948

)

(518

)

Restructuring charges

(1,418

)

(3,836

)

(152

)

 

(5,038

)

(4,239

)

Non-GAAP operating expenses

78,028

47,473

53,486

 

224,305

172,836

Non-GAAP operating income

$

43,440

$

28,646

$

22,930

 

$

104,053

$

195,410

Non-GAAP operating margin

12.8

%

18.6

%

13.1

%

 

13.2

%

27.2

%

Reconciliation of Non-GAAP measure - income excluding certain items

Three Months Ended

 

Year Ended

December 31,

September 30,

 

December 31,

2019

2018

2019

 

2019

2018

Income from continuing operations, less noncontrolling interest, net of income taxes

$

10,474

$

19,218

$

7,246

 

$

56,461

$

147,063

Adjustments:

 

Amortization of intangible assets

5,319

1,816

2,973

 

12,168

5,774

Acquisition-related costs

9,346

827

7,904

 

20,263

2,295

Facility expansion and relocation costs

2,879

354

1,565

 

4,838

1,846

Restructuring charges

1,418

3,836

152

 

5,038

4,239

Tax Cuts and Jobs Act Impact

1,452

 

5,703

Central inverter services business sale

1,067

 

(13,737

)

Tax effect of Non-GAAP adjustments

1,195

(1,198

)

326

 

3,206

(2,344

)

Non-GAAP income, net of income taxes, excluding stock-based compensation

31,698

26,305

20,166

 

88,237

164,576

Stock-based compensation, net of taxes

1,740

1,705

702

 

5,627

7,421

Non-GAAP income, net of income taxes

$

33,438

$

28,010

$

20,868

 

$

93,864

$

171,997

 

Reconciliation of Non-GAAP measure - per share earnings excluding certain items

Three Months Ended

 

Year Ended

December 31,

September 30,

 

December 31,

2019

2018

2019

 

2019

2018

Diluted earnings per share from continuing operations, as reported

$

0.27

$

0.50

$

0.19

 

$

1.47

$

3.74

Add back (subtract):

 

per share impact of Non-GAAP adjustments, net of tax

0.60

0.23

0.35

 

0.97

0.63

Non-GAAP per share earnings

$

0.87

$

0.73

$

0.54

 

$

2.44

$

4.37

Reconciliation of Q1 2020 Guidance

Low End

High End

Revenue

$280 million

$340 million

Reconciliation of Non-GAAP earnings per share

GAAP earnings per share

$

0.06

$

0.66

Stock-based compensation

0.09

0.09

Amortization of intangible assets

0.14

0.14

Amortization of acquisition fair value adjustment in inventory

0.13

0.13

Restructuring and other

0.05

0.05

Tax effects of excluded items

(0.07

)

(0.07

)

Non-GAAP earnings per share

$

0.40

$

1.00

Contacts:

Brian Smith
Advanced Energy
(970) 407-6555
brian.smith@aei.com

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