12 Nov Advanced Energy Announces Third Quarter 2019 Results
Closed the acquisition of Artesyn Embedded Power on September 10
Q3 total revenue was $175.1 million; organic revenue was $134.2 million, above the guidance range of $123 to $133 million
Q3 GAAP EPS from continuing operations was $0.19
Q3 Non-GAAP EPS was $0.54; before acquisition, non-GAAP EPS was $0.47, also above the guidance range of $0.28 to $0.38
FORT COLLINS, Colo.–(BUSINESS WIRE)–Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the third quarter ended September 30, 2019.
“We delivered a strong third quarter, with both organic revenue and non-GAAP earnings above the high-end of our guidance ranges. Demand for our products in the semi equipment market is improving on increased foundry/logic investments and the beginning of investment in memory,” said Yuval Wasserman, president and CEO. “We closed the acquisition of Artesyn Embedded Power slightly ahead of schedule, adding incremental revenue and non-GAAP earnings to the third quarter. We have started the integration process and I am pleased with our progress.”
Third Quarter Results
Sales were $175.1 million in the third quarter of 2019 compared with $134.8 million in the second quarter of 2019 and $173.1 million in the third quarter of 2018.
GAAP net income from continuing operations was $7.3 million or $0.19 per diluted share, compared with $23.4 million or $0.61 per diluted share in the prior quarter, and $35.2 million or $0.90 per diluted share in the third quarter of 2018.
Non-GAAP net income was $20.9 million or $0.54 per diluted share in the third quarter of 2019. This compares with $17.2 million or $0.45 per diluted share in the second quarter of 2019, and $41.2 million or $1.05 per diluted share in the third quarter of 2018. Non-GAAP net income in the third quarter of 2019 included $2.9 million or $0.07 per diluted share earnings contribution, including financing cost, from the acquisition of Artesyn Embedded Power.
A reconciliation of non-GAAP measures is provided in the tables below.
The company generated $10.5 million of operating cash from continuing operations in the quarter.
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.
Fourth Quarter 2019 Guidance
Based on the company’s current view, beliefs and assumptions, guidance for the fourth quarter of 2019 is within the following ranges.
Q4 2019
Revenues
$310M +/- $15M
GAAP EPS from continuing operations
$0.31 +/- $0.12
Non-GAAP EPS
$0.68 +/- $0.12
Conference Call
Management will host a conference call on Tuesday, November 12, 2019 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 2569664, 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 fourth quarter ending December 31, 2019, potential future growth and profitability, our future business mix, expectations regarding future market trends and the company’s 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; (e) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (f) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (g) the accuracy of the company’s assumptions on which its financial statement projections are based; (h) the impact of product price changes, which may result from a variety of factors; (i) the timing of orders received from customers; (j) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (k) the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (l) unanticipated changes to management’s estimates, reserves or allowances; (m) changes and adjustments to the tax expense and benefits related to the U.S. tax reform that was enacted in late 2017; and (n) 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 (UNAUDITED)
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Sales:
Product
$
148,138
$
144,843
$
106,193
$
366,443
$
485,287
Service
26,989
28,239
28,617
84,237
79,444
Total sales
175,127
173,082
134,810
450,680
564,731
Cost of sales:
Product
87,536
73,019
56,113
204,450
233,778
Service
14,100
14,524
14,571
42,873
40,534
Total cost of sales
101,636
87,543
70,684
247,323
274,312
Gross profit
73,491
85,539
64,126
203,357
290,419
42.0
%
49.4
%
47.6
%
45.1
%
51.4
%
Operating expenses:
Research and development
24,546
18,451
21,840
67,675
55,283
Selling, general and administrative
36,401
25,386
27,612
93,027
78,792
Amortization of intangible assets
3,002
1,437
1,874
6,849
3,958
Restructuring expense
152
403
1,795
3,620
403
Total operating expenses
64,101
45,677
53,121
171,171
138,436
Operating income
9,390
39,862
11,005
32,186
151,983
Other income (expense), net
1,361
401
15,545
17,649
(58
)
Income from continuing operations before income taxes
10,751
40,263
26,550
49,835
151,925
Provision (benefit) for income taxes
3,495
5,106
3,177
3,819
23,998
Income from continuing operations, net of income taxes
7,256
35,157
23,373
46,016
127,927
Income (loss) from discontinued operations, net of income taxes
375
(371
)
8,324
8,690
(226
)
Net income
7,631
34,786
31,697
54,706
127,701
Income from continuing operations attributable to non-controlling interest
10
7
11
29
82
Net income attributable to Advanced Energy Industries, Inc.
$
7,621
$
34,779
$
31,686
$
54,677
$
127,619
Basic weighted-average common shares outstanding
38,313
38,970
38,274
38,258
39,309
Diluted weighted-average common shares outstanding
38,489
39,195
38,462
38,457
39,594
Earnings per share attributable to Advanced Energy Industries, Inc:
Continuing operations:
Basic earnings per share
$
0.19
$
0.90
$
0.61
$
1.20
$
3.25
Diluted earnings per share
$
0.19
$
0.90
$
0.61
$
1.20
$
3.23
Discontinued operations:
Basic earnings per share
$
0.01
$
(0.01
)
$
0.22
$
0.23
$
(0.01
)
Diluted earnings per share
$
0.01
$
(0.01
)
$
0.22
$
0.23
$
(0.01
)
Net income:
Basic earnings per share
$
0.20
$
0.89
$
0.83
$
1.43
$
3.25
Diluted earnings per share
$
0.20
$
0.89
$
0.82
$
1.42
$
3.23
ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
December 31,
2019
2018
Unaudited
ASSETS
Current assets:
Cash and cash equivalents
$
340,402
$
349,301
Marketable securities
747
2,470
Accounts and other receivable, net
250,151
100,442
Inventories, net
240,699
97,987
Income taxes receivable
2,124
2,220
Other current assets
45,757
10,173
Current assets of discontinued operations
84
5,855
Total current assets
879,964
568,448
Property and equipment, net
104,568
31,269
Operating lease right-of-use assets
111,193
—
Deposits and other assets
20,650
6,874
Goodwill and intangibles, net
421,801
156,810
Deferred income tax assets
56,488
47,099
Non-current assets of discontinued operations
755
5,984
Total assets
$
1,595,419
$
816,484
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
210,647
$
39,646
Other accrued expenses
109,192
65,377
Current portion of debt
17,500
—
Current portion of operating lease liability
17,648
—
Current liabilities of discontinued operations
910
5,286
Total current liabilities
355,897
110,309
Long-term debt
325,769
—
Non-current liabilities of continuing operations
252,540
88,158
Non-current liabilities of discontinued operations
1,045
10,715
Long-term liabilities
579,354
98,873
Total liabilities
935,251
209,182
Advanced Energy stockholders’ equity
659,627
606,790
Noncontrolling interest
541
512
Stockholders’ equity
660,168
607,302
Total liabilities and stockholders’ equity
$
1,595,419
$
816,484
December 31, 2018 amounts are derived from the December 31, 2018 audited Consolidated Financial Statements.
ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30,
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
54,706
$
127,701
Income from discontinued operations, net of income taxes
8,690
(226
)
Income from continuing operations, net of income taxes
46,016
127,927
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
15,301
9,488
Stock-based compensation expense
5,053
7,461
Provision for deferred income taxes
2,825
—
Gain on sale of central inverter service business
(14,804
)
—
Net loss on disposal of assets
104
167
Changes in operating assets and liabilities, net of assets acquired
(25,637
)
(26,560
)
Net cash provided by operating activities from continuing operations
28,858
118,483
Net cash provided by operating activities from discontinued operations
317
(4,550
)
Net cash provided by operating activities
29,175
113,933
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities
—
(93
)
Proceeds from sale of marketable securities
1,742
6
Acquisitions, net of cash acquired
(365,798
)
(93,801
)
Issuance of notes receivable
(2,800
)
—
Purchases of property and equipment
(15,681
)
(16,586
)
Net cash used in investing activities from continuing operations
(382,537
)
(110,474
)
Net cash used in investing activities from discontinued operations
—
—
Net cash used in investing activities
(382,537
)
(110,474
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from long-term borrowings
347,486
—
Payments on long-term borrowings
(4,375
)
—
Purchase and retirement of common stock
—
(69,021
)
Net payments related to stock-based award activities
(714
)
(2,636
)
Net cash provided by financing activities from continuing operations
342,397
(71,657
)
Net cash provided by financing activities from discontinued operations
—
—
Net cash provided by financing activities
342,397
(71,657
)
EFFECT OF CURRENCY TRANSLATION ON CASH
(3,185
)
(722
)
DECREASE IN CASH AND CASH EQUIVALENTS
(14,150
)
(68,920
)
CASH AND CASH EQUIVALENTS, beginning of period
354,552
415,037
CASH AND CASH EQUIVALENTS, end of period
340,402
346,117
Less cash and cash equivalents from discontinued operations
—
7,444
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period
$
340,402
$
338,673
ADVANCED ENERGY INDUSTRIES, INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
(in thousands)
Net Sales by Product Line
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Semiconductor Equipment
$
96,426
$
119,969
$
90,058
$
277,911
$
426,380
Telecom & Networking
10,016
—
—
10,016
—
Data Center Computing
13,498
—
—
13,498
—
Industrial & Medical
55,187
53,113
44,752
149,255
138,351
Total
$
175,127
$
173,082
$
134,810
$
450,680
$
564,731
Net Sales by Geographic Region
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
North America
$
83,632
$
85,728
$
61,393
$
203,531
$
295,567
Asia
66,157
61,691
50,962
175,554
198,020
Europe
25,008
25,538
22,092
70,526
70,802
Other Countries
330
125
363
1,069
342
Total
$
175,127
$
173,082
$
134,810
$
450,680
$
564,731
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
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Gross profit from continuing operations, as reported
$
73,491
$
85,539
$
64,126
$
203,357
$
290,419
Adjustments to gross profit:
Stock-based compensation
77
76
55
365
576
Facility expansion and relocation costs
1,342
725
150
1,662
974
Acquisition-related costs
1,506
158
—
1,506
158
Non-GAAP gross profit
76,416
86,498
64,331
206,890
292,127
Operating expenses from continuing operations, as reported
64,101
45,677
53,121
171,171
138,436
Adjustments:
Amortization of intangible assets
(3,002
)
(1,437
)
(1,874
)
(6,849
)
(3,958
)
Stock-based compensation
(840
)
(948
)
(883
)
(4,688
)
(6,885
)
Acquisition-related costs
(6,398
)
(705
)
(1,531
)
(9,440
)
(1,310
)
Facility expansion and relocation costs
(223
)
(29
)
—
(297
)
(518
)
Restructuring charges
(152
)
(403
)
(1,795
)
(3,620
)
(403
)
Non-GAAP operating expenses
53,486
42,155
47,038
146,277
125,362
Non-GAAP operating income
$
22,930
$
44,343
$
17,293
$
60,613
$
166,765
Reconciliation of Non-GAAP measure – operating
expenses and operating income, excluding certain
items
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Gross profit from continuing operations, as reported
42.0
%
49.4
%
47.6
%
45.1
%
51.4
%
Adjustments to gross profit:
Stock-based compensation
—
—
—
0.1
0.1
Facility expansion and relocation costs
0.8
0.5
0.1
0.4
0.2
Acquisition-related costs
0.8
0.1
—
0.3
—
Non-GAAP gross profit
43.6
50.0
47.7
45.9
51.7
Operating expenses from continuing operations, as reported
36.6
26.4
39.4
38.0
24.5
Adjustments:
Amortization of intangible assets
(1.7
)
(0.8
)
(1.4
)
(1.5
)
(0.7
)
Stock-based compensation
(0.5
)
(0.6
)
(0.7
)
(1.0
)
(1.2
)
Acquisition-related costs
(3.7
)
(0.4
)
(1.1
)
(2.1
)
(0.2
)
Facility expansion and relocation costs
(0.1
)
—
—
(0.1
)
(0.1
)
Restructuring charges
(0.1
)
(0.2
)
(1.3
)
(0.8
)
(0.1
)
Non-GAAP operating expenses
30.5
24.4
34.9
32.5
22.2
Non-GAAP operating income
13.1
%
25.6
%
12.8
%
13.4
%
29.5
%
Reconciliation of Non-GAAP measure – income
excluding certain items
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Income from continuing operations, less noncontrolling interest, net of income taxes
$
7,246
$
35,150
$
23,362
$
45,987
$
127,845
Adjustments:
Amortization of intangible assets
3,002
1,437
1,874
6,849
3,958
Acquisition-related costs
7,904
863
1,531
10,946
1,468
Facility expansion and relocation costs
1,565
754
150
1,959
1,492
Restructuring charges
152
403
1,795
3,620
403
Tax Cuts and Jobs Act Impact
—
2,398
—
—
4,251
Central inverter services business sale
—
—
(14,804
)
(14,804
)
—
Acquisition transition services
(29
)
—
—
(29
)
—
Tax effect of Non-GAAP adjustments
326
(598
)
2,536
2,011
(1,145
)
Non-GAAP income, net of income taxes, excluding stock-based compensation
20,166
40,407
16,444
56,539
138,272
Stock-based compensation, net of taxes
702
779
722
3,887
5,716
Non-GAAP income, net of income taxes
$
20,868
$
41,186
$
17,166
$
60,426
$
143,988
Reconciliation of Non-GAAP measure – per share
earnings excluding certain items
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Diluted earnings per share from continuing operations, as reported
$
0.19
$
0.90
$
0.61
$
1.20
$
3.23
Add back (subtract):
per share impact of Non-GAAP adjustments, net of tax
0.35
0.15
(0.16
)
0.37
0.41
Non-GAAP per share earnings
$
0.54
$
1.05
$
0.45
$
1.57
$
3.64
ADVANCED ENERGY INDUSTRIES, INC.
SELECTED OTHER DATA (UNAUDITED)
(in thousands)
Reconciliation of Q4 2019 Guidance
Low End
High End
Revenue
$295 million
$325 million
Reconciliation of Non-GAAP earnings per share
GAAP earnings per share
$
0.19
$
0.43
Stock-based compensation
0.06
0.05
Amortization of intangible assets
0.14
0.14
Amortization of Acquisition Fair Value Adjustment in Inventory
0.10
0.13
Restructuring and other
0.11
0.08
Tax effects of excluded items
(0.04
)
(0.03
)
Non-GAAP earnings per share
$
0.56
$
0.80
Contacts
Brian Smith
Advanced Energy
(970) 407-6555
[email protected]
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