AEIS
$42.58
Advanced Energy
$.59
1.41%
Earnings Details
3rd Quarter September 2018
Monday, October 29, 2018 4:10:00 PM
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Summary

Advanced Energy Guides Below Estimates

Advanced Energy (AEIS) reported 3rd Quarter September 2018 earnings of $1.03 per share on revenue of $173.1 million. The consensus earnings estimate was $0.94 per share on revenue of $166.2 million. Revenue fell 2.0% compared to the same quarter a year ago.

The company said it expects fourth quarter earnings of $0.70 to $0.80 per share on revenue of $150.0 million to $160.0 million. The current consensus earnings estimate is $1.06 per share on revenue of $180.7 million for the quarter ending December 31, 2018.

Advanced Energy Industries Inc offers power conversion products for direct current, pulsed DC mid-frequency, high voltage, and radio frequency power supplies, matching networks, RF instrumentation, and PCM as well as thermal instrumentation products.

Results
Reported Earnings
$1.03
Earnings Whisper
-
Consensus Estimate
$0.94
Reported Revenue
$173.1 Mil
Revenue Estimate
$166.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Advanced Energy Announces Third Quarter 2018 Results

  • Q3 Revenue was $173.1 million
  • Q3 GAAP EPS from continuing operations was $0.90
  • Q3 Non-GAAP EPS from continuing operations was $1.05

FORT COLLINS, Colo., Oct. 29, 2018 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the third quarter ended September 30, 2018.

“As expected, near-term delays in capital spending by some semiconductor manufacturers impacted our revenues from semiconductor markets,” said Yuval Wasserman, president and CEO. “However, revenues from our Industrial markets reached another record high, reflecting the benefits of our diversified growth strategy, including our acquisition of LumaSense Technologies. We expect our fourth quarter to be impacted by the continued pause in semiconductor capital spending and by seasonally lower activity in our Industrial markets. However, we believe the long-term drivers in both markets to be intact. In addition, our customer focus and commitment to innovation should allow us to grow faster than the market.”

Third Quarter Results

Sales were $173.1 million in the third quarter of 2018 compared with $196.0 million in the second quarter of 2018 and $176.6 million in the third quarter of 2017.  The acquisition of LumaSense contributed $5.6 million in revenue in the third quarter.

GAAP income from continuing operations was $35.2 million or $0.90 per diluted share in the third quarter of 2018 compared with $46.4 million or $1.17 per diluted share in the second quarter of 2018, and $83.8 million or $2.09 per diluted share in the third quarter of 2017. Third quarter 2017 results included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.

Non-GAAP income from continuing operations was $41.2 million or $1.05 per diluted share in the third quarter of 2018, including approximately $0.01 per diluted share from LumaSense. This compared with $49.4 million or $1.25 per diluted share in the second quarter of 2018, and $48.0 million or $1.19 per diluted share in the third quarter of 2017. A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $30.6 million of operating cash from continuing operations in the third quarter of 2018. During the quarter the company repurchased approximately 533 thousand shares for $31.0 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 are available in the company’s 2017 Annual Report on Form 10-K.

Fourth Quarter 2018 Guidance

Based on the company's current view, beliefs and assumptions, its guidance for the fourth quarter of 2018 is within the following ranges and does not incorporate any potential adjustments during the measurement period associated with U.S. tax reform.

 Q4 2018
Revenues$150M$160M
GAAP operating margins from continuing operations12.8% - 17.5%
GAAP EPS from continuing operations$0.48 - $0.66
Non-GAAP operating margins from continuing operations20.0% - 22.0%
Non-GAAP EPS from continuing operations$0.70 - $0.80

Third Quarter 2018 Conference Call

Management will host a conference call tomorrow morning, Tuesday, October 30, 2018 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 315-625-6980. Participants will need to provide the operator with the Conference ID Number 8489318, which has been reserved for this call. For a replay of this teleconference, please call 855-859-2056 or 404-537-3406 and enter Conference ID Number 8489318. The replay will be available for one week following the conference call. A webcast will also be available on the company’s Investor Relations web page at http://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 semiconductor and industrial manufacturing applications. 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.

For more information, contact:

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

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 non-recurring items such as acquisition-related costs and restructuring expenses. Additionally, the third quarter non-GAAP results exclude estimated income tax expense associated with U.S. tax reform. 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 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 fourth quarter ending December 31, 2018, potential future growth and profitability, our future business mix, expectations regarding future market trends and the company’s future performance within specific markets (e.g., statements regarding anticipated semiconductor and industrial market growth) 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 accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (e) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (f) the accuracy of the company's assumptions on which its financial statement projections are based; (g) the impact of product price changes, which may result from a variety of factors; (h) the timing of orders received from customers; (i) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (j) the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (k) unanticipated changes to management's estimates, reserves or allowances; (l) changes and adjustments to the tax expense and benefits related to the recently enacted U.S. tax reform; and (m) the effects of recent U.S. government trade restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon demand for our 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 http://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 (UNAUDITED)
(in thousands, except per share data)

 Three Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2018 2017 2018 2018 2017
Sales:         
Product$144,843  $152,363  $169,235  $485,287  $424,478 
Service28,239  24,212  26,797  79,444  67,320 
Total sales173,082  176,575  196,032  564,731  491,798 
Cost of sales:         
Product73,019  72,146  80,953  233,778  198,754 
Service14,524  12,195  13,844  40,534  34,838 
Total cost of sales87,543  84,341  94,797  274,312  233,592 
Gross profit85,539  92,234  101,235  290,419  258,206 
 49.4% 52.2% 51.6% 51.4% 52.5%
Operating expenses:         
Research and development18,451  14,629  19,195  55,283  41,742 
Selling, general and administrative25,386  24,692  24,758  78,792  70,580 
Amortization of intangible assets1,437  1,240  1,264  3,958  3,176 
Restructuring expense403      403   
Total operating expenses45,677  40,561  45,217  138,436  115,498 
Operating income39,862  51,673  56,018  151,983  142,708 
Other income (expense), net401  153  (485) (58) (3,138)
Income from continuing operations before income taxes40,263  51,826  55,533  151,925  139,570 
Provision (benefit) for income taxes5,106  (31,968) 9,133  23,998  (25,538)
Income from continuing operations, net of income taxes35,157  83,794  46,400  127,927  165,108 
Income (loss) from discontinued operations, net of income taxes(371) 70  5  (226) 2,343 
Net income34,786  83,864  46,405  127,701  167,451 
Income from continuing operations attributable to noncontrolling interest7    44  82   
Net income attributable to Advanced Energy Industries, Inc.$34,779  $83,864  $46,361  $127,619  $167,451 
          
Basic weighted-average common shares outstanding38,970  39,786  39,349  39,309  39,787 
Diluted weighted-average common shares outstanding39,195  40,172  39,603  39,594  40,207 
          
Earnings per share attributable to Advanced Energy Industries, Inc:      
          
Continuing operations:         
Basic earnings per share$0.90  $2.11  $1.18  $3.25  $4.15 
Diluted earnings per share$0.90  $2.09  $1.17  $3.23  $4.11 
          
Discontinued operations:         
Basic earnings per share$(0.01) $0.00  $0.00  $(0.01) $0.06 
Diluted earnings per share$(0.01) $0.00  $0.00  $(0.01) $0.06 
          
Net income:         
Basic earnings per share$0.89  $2.11  $1.18  $3.25  $4.21 
Diluted earnings per share$0.89  $2.09  $1.17  $3.23  $4.16 
                    

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

 September 30, December 31,
 2018 2017
ASSETSUnaudited  
    
Current assets:   
Cash and cash equivalents$338,673  $407,283 
Marketable securities3,058  3,104 
Accounts and other receivable, net110,440  87,429 
Inventories, net110,327  78,450 
Income taxes receivable4,229  1,295 
Other current assets9,777  8,129 
Current assets of discontinued operations8,273  9,535 
Total current assets584,777  595,225 
    
Property and equipment, net30,174  17,795 
    
Deposits and other assets5,608  3,051 
Goodwill and intangibles, net157,884  87,311 
Deferred income tax assets44,112  18,841 
Non-current assets of discontinued operations11,077  11,085 
Total assets$833,632  $733,308 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
Current liabilities:   
Accounts payable$45,620  $48,177 
Other accrued expenses73,081  50,092 
Current liabilities of discontinued operations5,895  7,850 
Total current liabilities124,596  106,119 
    
Non-current liabilities of continuing operations97,894  91,271 
Non-current liabilities of discontinued operations11,567  15,277 
Long-term liabilities109,461  106,548 
    
Total liabilities234,057  212,667 
    
Advanced Energy stockholders’ equity599,062  520,641 
Noncontrolling interest513   
Stockholders' equity599,575  520,641 
Total liabilities and stockholders' equity$833,632  $733,308 
    

December 31, 2017 amounts are derived from the December 31, 2017 audited Consolidated Financial Statements.

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

 Nine Months Ended September 30,
 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$127,701  $167,451 
Income from discontinued operations, net of income taxes(226) 2,343 
Income from continuing operations, net of income taxes127,927  165,108 
    
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization9,488  6,792 
Stock-based compensation expense7,461  10,707 
Provision for deferred income taxes  (26,185)
Loss on foreign exchange hedge  3,489 
Net loss on disposal of assets167  106 
Changes in operating assets and liabilities, net of assets acquired(26,560) (19,710)
Net cash provided by operating activities from continuing operations118,483  140,307 
Net cash used in operating activities from discontinued operations(4,550) (7,293)
Net cash provided by operating activities113,933  133,014 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of marketable securities(93) (86)
Proceeds from sale of marketable securities6  1,883 
Acquisitions, net of cash acquired(93,801) (17,347)
Purchase of foreign exchange hedge  (3,489)
Purchases of property and equipment(16,586) (5,646)
Net cash used in investing activities from continuing operations(110,474) (24,685)
Net cash used in investing activities from discontinued operations   
Net cash used in investing activities(110,474) (24,685)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Purchase and retirement of common stock(69,021) (24,998)
Net payments related to stock-based award activities(2,636) (1,902)
Net cash used in financing activities from continuing operations(71,657) (26,900)
Net cash used in financing activities from discontinued operations   
Net cash used in financing activities(71,657) (26,900)
EFFECT OF CURRENCY TRANSLATION ON CASH(722) 1,138 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(68,920) 82,567 
CASH AND CASH EQUIVALENTS, beginning of period415,037  289,517 
CASH AND CASH EQUIVALENTS, end of period346,117  372,084 
Less cash and cash equivalents from discontinued operations7,444  5,512 
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period$338,673  $366,572 
        

ADVANCED ENERGY INDUSTRIES, INC.
SELECTED OTHER DATA (UNAUDITED)
(in thousands)

Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2018 2017 2018 2018 2017
Gross profit from continuing operations, as reported$85,539  $92,234  $101,235  $290,419  $258,206 
Adjustments to gross profit:         
Stock-based compensation76  334  149  576  1,048 
Facility transition and relocation costs725    249  974   
Acquisition-related costs158      158   
Non-GAAP gross profit from continuing operations86,498  92,568  101,633  292,127  259,254 
          
Operating expenses from continuing operations, as reported45,677  40,561  45,217  138,436  115,498 
Adjustments:         
Amortization of intangible assets(1,437) (1,240) (1,264) (3,958) (3,176)
Stock-based compensation(948) (3,119) (1,794) (6,885) (9,659)
Acquisition-related costs(705)   (255) (1,310) (150)
Facility expansion and relocation costs(29)   (13) (518)  
Restructuring charges(403)     (403)  
Non-GAAP operating expenses from continuing operations42,155  36,202  41,891  125,362  102,513 
Non-GAAP operating income from continuing operations$44,343  $56,366  $59,742  $166,765  $156,741 


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2018 2017 2018 2018 2017
Gross profit from continuing operations, as reported49.4% 52.2% 51.6% 51.4% 52.5%
Adjustments to gross profit:         
Stock-based compensation  0.2  0.1  0.1  0.2 
Facility transition and relocation costs0.5    0.1  0.2   
Acquisition-related costs0.1         
Non-GAAP gross profit from continuing operations50.0  52.4  51.8  51.7  52.7 
          
Operating expenses from continuing operations, as reported26.4  23.0  23.1  24.5  23.5 
Adjustments:         
Amortization of intangible assets(0.8) (0.7) (0.6) (0.7) (0.6)
Stock-based compensation(0.6) (1.8) (1.1) (1.2) (2.1)
Acquisition-related costs(0.4)   (0.1) (0.2)  
Facility expansion and relocation costs      (0.1)  
Restructuring charges(0.2)     (0.1)  
Non-GAAP operating expenses from continuing operations24.4  20.5  21.3  22.2  20.8 
Non-GAAP operating income from continuing operations25.6% 31.9% 30.5% 29.5% 31.9%


Reconciliation of Non-GAAP measure - income excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2018 2017 2018 2018 2017
Income from continuing operations, less noncontrolling interest, net of income taxes$35,150  $83,794  $46,356  $127,845  $165,108 
Adjustments:         
Amortization of intangible assets1,437  1,240  1,264  3,958  3,176 
Stock-based compensation1,024  3,453  1,943  7,461  10,707 
Acquisition-related costs863    255  1,468  150 
Facility expansion and relocation costs754    262  1,492   
Restructuring charges403      403   
Nonrecurring tax (benefit) expense associated with inverter business  (40,194)     (40,194)
Loss on foreign exchange hedge        3,489 
Incremental expense associated with start-up of the Asia regional headquarters  1,133      1,133 
Tax Cuts and Jobs Act Impact2,398      4,251   
Tax effect of Non-GAAP adjustments(843) (1,426) (704) (2,890) (4,451)
Non-GAAP income from continuing operations, net of income taxes$41,186  $48,000  $49,376  $143,988  $139,118 


Reconciliation of Non-GAAP measure - per share earnings excluding certain itemsThree Months Ended Nine Months Ended
 September 30, June 30, September 30,
 2018 2017 2018 2018 2017
Diluted earnings per share from continuing operations, as reported$0.90  $2.09  $1.17  $3.23  $4.11 
Add back:         
per share impact of Non-GAAP adjustments, net of tax0.15  (0.90) 0.08  0.41  (0.65)
Non-GAAP per share earnings from continuing operations$1.05  $1.19  $1.25  $3.64  $3.46 


Reconciliation of Q4 2018 Guidance   
 Low End High End
    
Revenue$150 million $160 million
    
Reconciliation of Non-GAAP operating margin   
GAAP operating margin12.8% 17.5%
Stock-based compensation1.5% 1.3%
Amortization of intangible assets1.3% 1.1%
Restructuring and other4.4% 2.1%
Non-GAAP operating margin20.0% 22.0%
    
Reconciliation of Non-GAAP earnings per share   
GAAP earnings per share$0.48  $0.66 
Stock-based compensation0.06  0.05 
Amortization of intangible assets0.05  0.05 
Restructuring and other0.17  0.08 
Tax effects of excluded items(0.06) (0.04)
Non-GAAP earnings per share$0.70  $0.80 

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Source: Advanced Energy Industries, Inc.