Advanced Energy Reports Fourth Quarter and Full Year 2023 Results

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 fourth quarter and year ended December 31, 2023.

“Fourth quarter earnings were above the mid-point of guidance, and we delivered record operating cash flow. Our full year results included record Industrial and Medical revenue, partially offsetting corrections in the semiconductor market,” said Steve Kelley, president and CEO of Advanced Energy. “While we see a sluggish market environment in the near-term, we expect demand to strengthen as the year progresses. With strong customer interest in our next-generation platforms and a solid design win pipeline, Advanced Energy is well positioned for strong earnings growth as the market recovers.”

Quarter Results

Revenue was $405.3 million in the fourth quarter of 2023, compared with $410.0 million in the third quarter of 2023 and $490.7 million in the fourth quarter of 2022.

GAAP net income from continuing operations was $37.9 million or $1.01 per diluted share in the quarter, compared with $33.7 million or $0.89 per diluted share in the prior quarter, and $45.3 million or $1.20 per diluted share a year ago. GAAP net income included a restructuring and impairment charge of $18.1 million as part of the factory and cost optimization plan and a tax benefit of $25.6 million as a result of the release of a deferred tax asset valuation allowance.

Non-GAAP net income was $46.7 million or $1.24 per diluted share in the fourth quarter of 2023. This compares with $48.5 million or $1.28 per diluted share in the third quarter of 2023, and $64.2 million or $1.70 per diluted share in the fourth quarter of 2022.

Advanced Energy generated a record $84.7 million in cash flow from continuing operations during the quarter and paid $3.8 million in quarterly dividends.

Full Year 2023 Results

2023 revenue was $1.66 billion, a 10% decrease from $1.85 billion in 2022.

GAAP net income from continuing operations was $130.7 million or $3.46 per diluted share in 2023, compared with $201.9 million or $5.35 per diluted share in 2022.

The company generated $213 million in cash flow from operating activities from continuing operations in 2023, repurchased $40.0 million of common stock and paid $15.2 million in dividends. Cash and equivalents at year end were $1.0 billion.

Also in 2023, Advanced Energy completed a private offering of $575 million aggregate principal amount of 2.50% Convertible Senior Notes due 2028.

Non-GAAP net income was $184.0 million or $4.88 per diluted share in 2023. This compares with $244.8 million or $6.49 per diluted share in 2022.

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

First Quarter 2024 Guidance

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

	Q4 2023
Revenue	$350 million +/- $15 million
GAAP EPS from continuing operations	$0.29 +/- $0.20
Non-GAAP EPS	$0.70 +/- $0.20

Conference Call

Management will host a conference call today, February 6, 2024, at 2:30 p.m. Eastern Time to discuss the third 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 [phone]. 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 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," as well as statements that events or circumstances "will" occur or continue, indicate forward-looking statements. 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) supply chain disruptions and component shortages that may impact our ability to timely manufacture products and deliver to customers; (b) the effects of global macroeconomic conditions upon demand for our products and services, including supply chain cost increases, inflationary pressures, economic downturns, and volatility and cyclicality of the industries we serve; (c) the impact of political and geographical risks, including trade and export regulations, other effects of international disputes, war, terrorism, or geopolitical tensions; (d) managing backlog orders; (e) our ability to develop new products expeditiously and be successful in the design win process; (f) delays in capital spending by end-users in our served markets; (g) the risks and uncertainties related to the integration of acquired companies including SL Power Electronics; (h) the continuing spread of COVID-19 and its potential adverse impact on our operations; (i) our ability to avoid additional costs and lawsuits after the solar inverter wind-down; (j) the accuracy of our assumptions on which our financial statement projections are based; (k) the timing of orders received from customers; (l) our 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; and (n) changes and adjustments to the tax expense and benefits related to the U.S. tax law changes, 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 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									Year Ended
		December 31,						September 30,			December 31,
		2023			2022			2023			2023			2022
Revenue, net		$	405,271		$	490,740		$	409,991		$	1,655,810		$	1,845,422
Cost of revenue			262,405			312,926			262,650			1,063,412			1,169,916
Gross profit			142,866			177,814			147,341			592,398			675,506
Gross margin %			35.3	%		36.2	%		35.9	%		35.8	%		36.6	%
Operating expenses:
Research and development			49,025			49,637			50,391			202,439			191,020
Selling, general, and administrative			54,932			57,407			55,131			221,034			218,463
Amortization of intangible assets			7,068			7,033			7,049			28,254			26,114
Restructuring, asset impairments, and other charges			18,071			5,636			4,709			26,977			6,814
Total operating expenses			129,096			119,713			117,280			478,704			442,411
Operating income			13,770			58,101			30,061			113,694			233,095
Interest income			12,810			2,656			6,396			27,092			4,147
Interest expense			(7,198)			(2,442)			(3,780)			(16,566)			(7,325)
Other income (expense), net			(3,184)			(2,915)			1,848			(1,759)			11,824
Income from continuing operations, before income tax			16,198			55,400			34,525			122,461			241,741
Income tax provision (benefit)			(21,693)			10,055			874			(8,288)			39,850
Income from continuing operations			37,891			45,345			33,651			130,749			201,891
Loss from discontinued operations, net of income tax			(389)			(1,600)			(930)			(2,465)			(2,215)
Net income			37,502			43,745			32,721			128,284			199,676
Income from continuing operations attributable to noncontrolling interest			—			—			—			—			16
Net income attributable to Advanced Energy Industries, Inc.		$	37,502		$	43,745		$	32,721		$	128,284		$	199,660
Basic weighted-average common shares outstanding			37,297			37,405			37,575			37,480			37,463
Diluted weighted-average common shares outstanding			37,585			37,683			37,854			37,750			37,721
Earnings per share attributable to Advanced Energy Industries, Inc:
Continuing operations:
Basic earnings per share		$	1.02		$	1.21		$	0.90		$	3.49		$	5.39
Diluted earnings per share		$	1.01		$	1.20		$	0.89		$	3.46		$	5.35
Discontinued operations:
Basic loss per share		$	(0.01)		$	(0.04)		$	(0.02)		$	(0.07)		$	(0.06)
Diluted loss per share		$	(0.01)		$	(0.04)		$	(0.02)		$	(0.07)		$	(0.06)
Net income:
Basic earnings per share		$	1.01		$	1.17		$	0.87		$	3.42		$	5.33
Diluted earnings per share		$	1.00		$	1.16		$	0.86		$	3.40		$	5.29

ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
		December 31,			December 31,
			2023			2022
ASSETS
Current assets:
Cash and cash equivalents		$	1,044,556		$	458,818
Accounts and other receivables, net			282,430			300,683
Inventories			336,137			376,012
Other current assets			48,771			53,001
Total current assets			1,711,894			1,188,514
Property and equipment, net			167,665			148,462
Operating lease right-of-use assets			95,432			100,177
Other assets			136,448			84,056
Goodwill and intangible assets, net			445,318			470,959
Total assets		$	2,556,757		$	1,992,168
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	141,850		$	170,467
Other accrued expenses			156,254			185,805
Current portion of long-term debt			20,000			20,000
Current portion of operating lease liabilities			17,744			16,771
Total current liabilities			335,848			393,043
Long-term debt			895,679			353,262
Other long-term liabilities			181,048			179,596
Long-term liabilities			1,076,727			532,858
Total liabilities			1,412,575			925,901
Total stockholders' equity			1,144,182			1,066,267
Total liabilities and stockholders’ equity		$	2,556,757		$	1,992,168

ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
		Year Ended December 31,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	128,284			$	199,676
Less: loss from discontinued operations, net of income tax			(2,465	)			(2,215	)
Income from continuing operations, net of income tax			130,749				201,891
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			66,533				60,296
Stock-based compensation			31,001				19,849
Deferred income tax benefit			(33,940	)			(5,736	)
Loss (gain) on disposal and sale of assets			439				(3,962	)
Changes in operating assets and liabilities, net of assets acquired			18,143				(88,607	)
Net cash from operating activities from continuing operations			212,925				183,731
Net cash from operating activities from discontinued operations			(3,988	)			(144	)
Net cash from operating activities			208,937				183,587
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of long-term investments			(3,746	)			—
Purchases of property and equipment			(61,005	)			(58,885	)
Acquisitions, net of cash acquired			—				(149,387	)
Net cash from investing activities			(64,751	)			(208,272	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings			575,000				—
Payment of fees for long-term borrowings			(13,880	)			—
Payments on long-term borrowings			(20,000	)			(20,000	)
Dividend payments			(15,222	)			(15,204	)
Payment for purchase of note hedges			(115,000	)			—
Proceeds from sale of warrants			74,865				—
Purchase and retirement of common stock			(40,000	)			(26,635	)
Net payments related to stock-based awards			(79	)			(26	)
Net cash from financing activities			445,684				(61,865	)
EFFECT OF CURRENCY TRANSLATION ON CASH			(4,132	)			996
NET CHANGE IN CASH AND CASH EQUIVALENTS			585,738				(85,554	)
CASH AND CASH EQUIVALENTS, beginning of period			458,818				544,372
CASH AND CASH EQUIVALENTS, end of period		$	1,044,556			$	458,818

ADVANCED ENERGY INDUSTRIES, INC. SUPPLEMENTAL INFORMATION (UNAUDITED) (in thousands)
Net Revenue by Market		Three Months Ended									Year Ended
		December 31,						September 30,			December 31,
		2023			2022			2023			2023			2022
Semiconductor Equipment		$	191,375		$	232,455		$	185,033		$	743,794		$	930,809
Industrial and Medical			108,600			119,327			115,226			474,449			426,763
Data Center Computing			62,853			94,525			68,286			249,874			327,466
Telecom and Networking			42,443			44,433			41,446			187,693			160,384
Total		$	405,271		$	490,740		$	409,991		$	1,655,810		$	1,845,422

Net Revenue by Geographic Region		Three Months Ended									Year Ended
		December 31,						September 30,			December 31,
		2023			2022			2023			2023			2022
North America		$	187,240		$	230,461		$	184,783		$	724,481		$	857,490
Asia			169,700			197,368			178,190			713,571			754,997
Europe			47,501			61,146			46,088			212,368			219,119
Other			830			1,765			930			5,390			13,816
Total		$	405,271		$	490,740		$	409,991		$	1,655,810		$	1,845,422

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,
		2023				2022				2023				2023				2022
Gross profit from continuing operations, as reported		$	142,866			$	177,814			$	147,341			$	592,398			$	675,506
Adjustments to gross profit:
Stock-based compensation			472				391				615				2,059				1,478
Facility expansion, relocation costs and other			1,146				1,162				171				2,334				5,295
Acquisition-related costs			44				73				44				238				(299	)
Non-GAAP gross profit			144,528				179,440				148,171				597,029				681,980
Non-GAAP gross margin			35.7	%			36.6	%			36.1	%			36.1	%			37.0	%
Operating expenses from continuing operations, as reported			129,096				119,713				117,280				478,704				442,411
Adjustments:
Amortization of intangible assets			(7,068	)			(7,033	)			(7,049	)			(28,254	)			(26,114	)
Stock-based compensation			(7,716	)			(4,450	)			(7,460	)			(28,942	)			(18,371	)
Acquisition-related costs			(1,372	)			(1,660	)			(611	)			(4,026	)			(8,637	)
Facility expansion, relocation costs and other			—				—				(189	)			(189	)			—
Restructuring, asset impairments, and other charges			(18,071	)			(5,636	)			(4,709	)			(26,977	)			(6,814	)
Non-GAAP operating expenses			94,869				100,934				97,262				390,316				382,475
Non-GAAP operating income		$	49,659			$	78,506			$	50,909			$	206,713			$	299,505
Non-GAAP operating margin			12.3	%			16.0	%			12.4	%			12.5	%			16.2	%

Reconciliation of Non-GAAP measure - income excluding certain items		Three Months Ended												Year Ended
		December 31,								September 30,				December 31,
		2023				2022				2023				2023				2022
Income from continuing operations, less non-controlling interest, net of income tax		$	37,891			$	45,345			$	33,651			$	130,749			$	201,875
Adjustments:
Amortization of intangible assets			7,068				7,033				7,049				28,254				26,114
Acquisition-related costs			1,416				1,733				655				4,264				8,338
Facility expansion, relocation costs, and other			1,146				1,162				360				2,523				5,295
Restructuring, asset impairments, and other charges			18,071				5,636				4,709				26,977				6,814
Unrealized foreign currency gain			2,728				5,378				(1,604	)			(89	)			(7,645	)
Acquisition-related costs and other included in other income (expense), net			—				(3,817	)			(1,516	)			(1,516	)			(8,417	)
Tax effect of non-GAAP adjustments, including certain discrete tax benefits			(28,030	)			(2,042	)			(1,101	)			(31,303	)			(3,008	)
Non-GAAP income, net of income tax, excluding stock-based compensation			40,290				60,428				42,203				159,859				229,366
Stock-based compensation, net of tax			6,387				3,776				6,299				24,181				15,444
Non-GAAP income, net of income tax		$	46,677			$	64,204			$	48,502			$	184,040			$	244,810

ADVANCED ENERGY INDUSTRIES, INC. SELECTED OTHER DATA (UNAUDITED)
Reconciliation of non-GAAP measure - per share earnings excluding certain items		Three Months Ended									Year Ended
		December 31,						September 30,			December 31,
		2023			2022			2023			2023			2022
Diluted earnings per share from continuing operations, as reported		$	1.01		$	1.20		$	0.89		$	3.46		$	5.35
Add back:
Per share impact of non-GAAP adjustments, net of tax			0.23			0.50			0.39			1.42			1.14
Non-GAAP earnings per share		$	1.24		$	1.70		$	1.28		$	4.88		$	6.49

Reconciliation of Q1 2024 Guidance
		Low End				High End
Revenue		$335 million				$365 million
Reconciliation of non-GAAP earnings per share
GAAP earnings per share		$	0.09			$	0.49
Stock-based compensation			0.24				0.24
Amortization of intangible assets			0.19				0.19
Restructuring, asset impairments, and other charges			0.06				0.06
Tax effects of excluded items			(0.08	)			(0.08	)
Non-GAAP earnings per share		$	0.50			$	0.90

 

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The Advanced Energy Industries Stock at the time of publication of the news with a raise of +1,30 % to 106,5EUR on Nasdaq stock exchange (06. Februar 2024, 21:55 Uhr).