EX-99.1 2 exhibit991q32017pressrelea.htm EXHIBIT 99.1 Q3 2017 PRESS RELEASE Exhibit


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Financial News Release
Advanced Energy Announces Third Quarter 2017 Results
•
Q3 Revenue increased 39.5% y/y and 6.5% q/q to $176.6 million
•
Q3 GAAP EPS from continuing operations was $2.09
•
Q3 Non-GAAP EPS from continuing operations was $1.19
•
Completed Excelsys acquisition and $25M share repurchase

Fort Collins, Colo., October 30, 2017 - Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the third quarter ended September 30, 2017. The company reported third quarter sales of $176.6 million. Third quarter GAAP income from continuing operations was $83.8 million, or $2.09 per diluted share. Non-GAAP income from continuing operations was $48.0 million, or $1.19 per diluted share.
“The growing importance of AE’s advanced power products drove our seventh quarter of strong results. Our Industrial business reached a five-year high, while semiconductors and service continued to benefit from multiple technology drivers, leading to total revenue growth of 40% over last year,” said Yuval Wasserman, president and CEO. “AE’s track record of outperformance, together with our continual investment in innovation to support our customers’ roadmaps and the expansion of our product portfolio through acquisitions, is unlocking strategic opportunities to create sustainable value for our customers and shareholders.”
Third Quarter Results
Sales were $176.6 million compared with $165.9 million in the second quarter of 2017 and $126.6 million in the third quarter of 2016.
GAAP income from continuing operations was $83.8 million or $2.09 per diluted share in the third quarter of 2017 compared with $45.9 million or $1.14 per diluted share in the prior quarter, and $29.0 million or $0.73 per diluted share in the third quarter of 2016. Third quarter 2017 GAAP income included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.
Non-GAAP income from continuing operations was $48.0 million or $1.19 per diluted share in the third quarter of 2017 compared with $49.2 million or $1.22 per diluted share in the prior quarter, and $30.8 million or $0.77 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.
The company generated $33.7 million of operating cash from continuing operations in the third 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 both the balance sheet and income statement. Further financial detail regarding the amounts related to the discontinued inverter business are available in the company’s 2016 Annual Report on Form 10-K.
Fourth Quarter 2017 Guidance
Based on the company's current view, beliefs and assumptions, guidance for the fourth quarter of 2017 is within the following ranges:
 
Q4 2017
Revenues
$172M - $182M
GAAP operating margins from continuing operations
28% - 30%
GAAP EPS from continuing operations
$1.08 - $1.18
Non-GAAP operating margins from continuing operations
30% - 32%
Non-GAAP EPS from continuing operations
$1.15 - $1.25

Third Quarter 2017 Conference Call
Management will host a conference call tomorrow morning, Tuesday, October 31, 2017 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 96121678, 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 96121678. 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 innovative power and control technologies for high-growth, precision power solutions for thin films processes and industrial applications. Advanced Energy is headquartered in Fort Collins, Colorado, with dedicated support and service locations around the world. For more information, go to www.advanced-energy.com.
Advanced Energy and the Advanced Energy logo are trademarks of Advanced Energy Industries, Inc. or one of its Affiliates in the United States and elsewhere.

For more information, contact:

Tom Liguori
Advanced Energy Industries, Inc.
(970) 232-8096
Tom.Liguori@aei.com
Annie Leschin
Advanced Energy Industries, Inc.
(970) 407-6555
ir@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. For the fourth quarter ending December 31, 2017 guidance, the company expects stock based compensation of $3 million and amortization of intangibles of $1 million. 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, 2017, 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; and (k) unanticipated changes to management's estimates, reserves or allowances. 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,
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Sales:
 
 
 
 
 
 
 
 
 
Product
$
152,363

 
$
107,650

 
$
143,288

 
$
424,478

 
$
294,695

Service
24,212

 
18,902

 
22,584

 
67,320

 
53,666

Total sales
176,575

 
126,552

 
165,872

 
491,798

 
348,361

Cost of sales:
 
 
 
 
 
 
 
 
 
Product
72,146

 
49,835

 
66,491

 
198,754

 
137,984

Service
12,195

 
10,594

 
12,240

 
34,838

 
28,748

Total cost of sales
84,341

 
60,429

 
78,731

 
233,592

 
166,732

Gross profit
92,234

 
66,123

 
87,141

 
258,206

 
181,629

 
52.2
%
 
52.2
%
 
52.5
%
 
52.5
%
 
52.1
%
Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
14,629

 
11,293

 
14,610

 
41,742

 
33,324

Selling, general and administrative
24,692

 
19,421

 
23,790

 
70,580

 
56,814

Amortization of intangible assets
1,240

 
1,048

 
974

 
3,176

 
3,180

Total operating expenses
40,561

 
31,762

 
39,374

 
115,498

 
93,318

Operating income
51,673

 
34,361

 
47,767

 
142,708

 
88,311

Other (expense) income, net
153

 
(55
)
 
(83
)
 
(3,138
)
 
1,138

Income from continuing operations before income taxes
51,826

 
34,306

 
47,684

 
139,570

 
89,449

Provision for income taxes
(31,968
)
 
5,268

 
1,811

 
(25,538
)
 
12,937

Income from continuing operations, net of income taxes
83,794

 
29,038

 
45,873

 
165,108

 
76,512

Income from discontinued operations, net of income taxes
70

 
1,323

 
179

 
2,343

 
6,661

Net income
$
83,864

 
$
30,361

 
$
46,052

 
$
167,451

 
$
83,173

 
 
 
 
 
 
 
 
 
 
Basic weighted-average common shares outstanding
39,786

 
39,681

 
39,849

 
39,787

 
39,723

Diluted weighted-average common shares outstanding
40,172

 
39,967

 
40,250

 
40,207

 
40,015

 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.11

 
$
0.73

 
$
1.15

 
$
4.15

 
$
1.93

Diluted earnings per share
$
2.09

 
$
0.73

 
$
1.14

 
$
4.11

 
$
1.91

 
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.00

 
$
0.03

 
$
0.00

 
$
0.06

 
$
0.17

Diluted earnings per share
$
0.00

 
$
0.03

 
$
0.00

 
$
0.06

 
$
0.17

 
 
 
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.11

 
$
0.77

 
$
1.16

 
$
4.21

 
$
2.09

Diluted earnings per share
$
2.09

 
$
0.76

 
$
1.14

 
$
4.16

 
$
2.08






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

 
September 30,
 
December 31,
 
2017
 
2016
ASSETS
Unaudited
 
 
 
 
 
 
Current assets:
 
 
 
     Cash and cash equivalents
$
366,572

 
$
281,953

     Marketable securities
3,046

 
4,737

     Accounts receivable, net
74,993

 
75,667

     Inventories, net
73,520

 
55,770

     Income taxes receivable
6,380

 
1,482

     Other current assets
8,678

 
9,324

Current assets of discontinued operations
7,770

 
9,401

Total current assets
540,959

 
438,334

 
 
 
 
Property and equipment, net
15,736

 
13,337

 
 
 
 
Deposits and other
2,432

 
1,835

Goodwill and intangibles, net
87,944

 
70,196

Deferred income tax assets
58,590

 
32,197

Non-current assets of discontinued operations
15,630

 
15,630

Total assets
$
721,291

 
$
571,529

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
     Accounts payable
$
41,275

 
$
46,255

     Other accrued expenses
40,054

 
35,372

Current liabilities of discontinued operations
9,667

 
13,419

Total current liabilities
90,996

 
95,046

 
 
 
 
Non-current liabilities of continuing operations
65,622

 
63,252

Non-current liabilities of discontinued operations
16,287

 
21,157

Long-term liabilities
81,909

 
84,409

 
 
 
 
Total liabilities
172,905

 
179,455

 
 
 
 
Stockholders' equity
548,386

 
392,074

Total liabilities and stockholders' equity
$
721,291

 
$
571,529

 
 
 
 
December 31, 2016 amounts are derived from the December 31, 2016 audited Consolidated Financial Statements.












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

 
Nine Months Ended September 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
167,451

 
$
83,173

Income from discontinued operations, net of income taxes
2,343

 
6,661

Income from continuing operations, net of income taxes
165,108

 
76,512

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

 
 
Depreciation and amortization
6,792

 
5,938

Stock-based compensation expense
10,707

 
4,299

Provision for deferred income taxes
(26,185
)
 
—

Loss on foreign exchange hedge
3,489

 
—

Net loss on disposal of assets
106

 
259

Changes in operating assets and liabilities, net of assets acquired
(19,710
)
 
(4,343
)
Net cash provided by operating activities from continuing operations
140,307

 
82,665

Net cash used in operating activities from discontinued operations
(7,293
)
 
(4,538
)
Net cash provided by operating activities
133,014

 
78,127

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 
Purchases of marketable securities
(86
)
 
(745
)
Proceeds from sale of marketable securities
1,883

 
7,161

Acquisitions, net of cash acquired
(17,347
)
 
—

Purchase of foreign exchange hedge
(3,489
)
 
—

Purchases of property and equipment
(5,646
)
 
(4,524
)
Net cash (used in) provided by investing activities from continuing operations
(24,685
)
 
1,892

Net cash used in investing activities from discontinued operations
—

 
—

Net cash (used in) provided by investing activities
(24,685
)
 
1,892

CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Purchase and retirement of common stock
(24,998
)
 
—

Proceeds from exercise of stock options
(1,904
)
 
1,753

Other financing activities
2

 
(3
)
Net cash (used in) provided by financing activities from continuing operations
(26,900
)
 
1,750

Net cash used in financing activities from discontinued operations
—

 
(24
)
Net cash (used in) provided by financing activities
(26,900
)
 
1,726

EFFECT OF CURRENCY TRANSLATION ON CASH
1,138

 
(550
)
INCREASE IN CASH AND CASH EQUIVALENTS
82,567

 
81,195

CASH AND CASH EQUIVALENTS, beginning of period
289,517

 
169,720

CASH AND CASH EQUIVALENTS, end of period
372,084

 
250,915

Less cash and cash equivalents from discontinued operations
5,512

 
6,623

CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period
$
366,572

 
$
244,292





















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,
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Gross Profit from continuing operations, as reported
$
92,234

 
$
66,123

 
$
87,141

 
$
258,206

 
$
181,629

Operating expenses from continuing operations, as reported
40,561

 
31,762

 
39,374

 
115,498

 
93,318

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation
(3,453
)
 
(1,301
)
 
(3,856
)
 
(10,707
)
 
(4,299
)
Amortization of intangible assets
(1,240
)
 
(1,048
)
 
(974
)
 
(3,176
)
 
(3,180
)
Acquisition-related costs
—

 
—

 
(150
)
 
(150
)
 
—

Non-GAAP operating expenses from continuing operations
35,868

 
29,413

 
34,394

 
101,465

 
85,839

Non-GAAP operating income from continuing operations
$
56,366

 
$
36,710

 
$
52,747

 
$
156,741

 
$
95,790


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,
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Gross Profit from continuing operations, as reported
52.2
 %
 
52.2
 %
 
52.5
 %
 
52.5
 %
 
52.1
 %
Operating expenses from continuing operations, as reported
23.0

 
25.1

 
23.7

 
23.5

 
26.8

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation
(2.0
)
 
(1.1
)
 
(2.3
)
 
(2.3
)
 
(1.3
)
Amortization of intangible assets
(0.7
)
 
(0.8
)
 
(0.6
)
 
(0.6
)
 
(0.9
)
Acquisition-related costs
—

 
—

 
(0.1
)
 
—

 
—

Non-GAAP operating expenses from continuing operations
20.3

 
23.2

 
20.7

 
20.6

 
24.6

Non-GAAP operating income from continuing operations
31.9
 %
 
29.0
 %
 
31.8
 %
 
31.9
 %
 
27.5
 %






Reconciliation of Non-GAAP measure - income excluding certain items
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of income taxes, as reported
$
83,794

 
$
29,038

 
$
45,873

 
$
165,108

 
$
76,512

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation
3,453

 
1,301

 
3,856

 
10,707

 
4,299

Amortization of intangible assets
1,240

 
1,048

 
974

 
3,176

 
3,180

Loss on foreign exchange hedge
—

 
—

 
—

 
3,489

 
—

Acquisition-related costs
—

 
—

 
150

 
150

 
—

Incremental expense associated with start-up of the Asia regional headquarters
1,133

 
—

 
—

 
1,133

 
—

Nonrecurring tax benefit associated with inverter business
(40,194
)
 
—

 
—

 
(40,194
)
 
—

Tax effect of Non-GAAP adjustments
(1,426
)
 
(608
)
 
(1,629
)
 
(4,451
)
 
(1,973
)
Non-GAAP income from continuing operations, net of income taxes
$
48,000

 
$
30,779

 
$
49,224

 
$
139,118

 
$
82,018


Reconciliation of Non-GAAP measure - per share earnings excluding certain items
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations, as reported
$
2.09

 
$
0.73

 
$
1.14

 
$
4.11

 
$
1.91

Add back:
 
 
 
 
 
 
 
 
 
per share impact of Non-GAAP adjustments, net of tax
(0.90
)
 
0.04

 
0.08

 
(0.65
)
 
0.14

Non-GAAP per share earnings from continuing operations
$
1.19

 
$
0.77

 
$
1.22

 
$
3.46

 
$
2.05






Reconciliation of Q4 2017 Guidance
 
 
 
 
 
 
Low End
 
High End
 
 
 
 
 
Revenue
 
$172 million
 
$182 million
 
 
 
 
 
Reconciliation of Non-GAAP operating margin
 
 
 
 
GAAP operating margin
 
28
%
 
30
%
Stock-based compensation
 
1
%
 
1
%
Amortization of intangible assets
 
1
%
 
1
%
Non-GAAP operating margin
 
30
%
 
32
%
 
 
 
 
 
Reconciliation of Non-GAAP earnings per share
 
 
 
 
GAAP earnings per share
 
$
1.08

 
$
1.18

Stock-based compensation
 
0.07

 
0.07

Amortization of intangible assets
 
0.04

 
0.04

Tax effects of excluded items
 
(0.04
)
 
(0.04
)
Non-GAAP earnings per share
 
$
1.15

 
$
1.25