Advanced Energy Industries Inc 10-Q for FY2023 Q2

Advanced Energy Industries Inc (AEIS)

10-Q 2023-08-03 For: 2023-06-30

Added on April 11, 2026

About this 10-Q

Advanced Energy Industries Inc filed this 10-Q on August 3, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $415.51M; down 5.8% from $440.95M a year earlier
Net income: $27.14M; down 39.6% from net income of $44.97M a year earlier
Diluted EPS: $0.72; down 39.5% from $1.19 a year earlier

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☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2023
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Delaware	84-0846841
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1595 Wynkoop Street, Suite 800, Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	AEIS	NASDAQ Global Select Market



	PART I FINANCIAL INFORMATION

ITEM 1.	UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income	5

	Consolidated Statements of Stockholders’ Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37

ITEM 4.	CONTROLS AND PROCEDURES	38

	PART II OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	39

ITEM 1A.	RISK FACTORS	39

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	39

ITEM 4.	MINE SAFETY DISCLOSURES	39

ITEM 5.	OTHER INFORMATION	40

ITEM 6.	EXHIBITS	41

	SIGNATURES	42


	June 30,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	455,252	$	458,818
Accounts and other receivables, net		258,752		300,683
Inventories		392,349		376,012
Other current assets		46,850		53,001
Total current assets		1,153,203		1,188,514
Property and equipment, net		159,025		148,462
Operating lease right-of-use assets		93,994		100,177
Other assets		85,500		84,056
Intangible assets, net		175,493		189,526
Goodwill		282,692		281,433
TOTAL ASSETS	$	1,949,907	$	1,992,168

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	149,259	$	170,467
Accrued payroll and employee benefits		59,927		82,733
Other accrued expenses		44,190		76,750
Customer deposits and other		14,633		26,322
Current portion of long-term debt		20,000		20,000
Current portion of operating lease liabilities		15,421		16,771
Total current liabilities		303,430		393,043
Long-term debt, net		343,516		353,262
Operating lease liabilities		87,780		94,460
Pension benefits		45,518		44,031
Other long-term liabilities		44,384		41,105
Total liabilities		824,628		925,901

Commitments and contingencies (Note 17)

Stockholders' equity:
Preferred stock, $0.001 par value, 1,000 shares authorized, none issued and outstanding		—		—
Common stock, $0.001 par value, 70,000 shares authorized; 37,650 and 37,429 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		38		37
Additional paid-in capital		147,221		134,640
Accumulated other comprehensive income		12,281		16,320
Retained earnings		965,739		915,270
Total stockholders' equity		1,125,279		1,066,267
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,949,907	$	1,992,168



	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Sales, net	$	415,508	$	440,949	$	840,548	$	838,408
Cost of sales		268,428		278,791		538,357		531,934
Gross profit		147,080		162,158		302,191		306,474

Operating expenses:
Research and development		51,413		48,009		103,023		91,623
Selling, general, and administrative		55,613		55,022		110,971		104,340
Amortization of intangible assets		7,075		6,523		14,137		12,032
Restructuring		3,154		(161)		4,197		1,057
Total operating expenses		117,255		109,393		232,328		209,052
Operating income		29,825		52,765		69,863		97,422

Other income (expense), net		2,425		3,249		1,875		2,407
Income from continuing operations, before income taxes		32,250		56,014		71,738		99,829
Provision for income taxes		4,795		11,203		12,531		18,156
Income from continuing operations		27,455		44,811		59,207		81,673
Income (loss) from discontinued operations, net of income taxes		(315)		180		(1,146)		82
Net income	$	27,140	$	44,991	$	58,061	$	81,755
Income from continuing operations attributable to noncontrolling interest		-		21		-		7
Net income attributable to Advanced Energy Industries, Inc.	$	27,140	$	44,970	$	58,061	$	81,748

Basic weighted-average common shares outstanding		37,573		37,520		37,524		37,535
Diluted weighted-average common shares outstanding		37,803		37,710		37,804		37,754

Earnings per share:
Continuing operations:
Basic earnings per share	$	0.73	$	1.19	$	1.58	$	2.18
Diluted earnings per share	$	0.73	$	1.19	$	1.57	$	2.16
Discontinued operations:
Basic loss per share	$	(0.01)	$	—	$	(0.03)	$	—
Diluted loss per share	$	(0.01)	$	—	$	(0.03)	$	—
Net income:
Basic earnings per share	$	0.72	$	1.20	$	1.55	$	2.18
Diluted earnings per share	$	0.72	$	1.19	$	1.54	$	2.17


	Advanced Energy Industries, Inc. Stockholders' Equity

	Common Stock
						Accumulated
				Additional		Other				Non-		Total
				Paid-in		Comprehensive		Retained		controlling		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Interest		Equity
Balances, December 31, 2021	37,589	$	38	$	115,706	$	(1,216)	$	756,323	$	645	$	871,496
Stock issued from equity plans	52		—		(2,430)		—		—		—		(2,430)
Stock-based compensation	—		—		3,906		—		—		—		3,906
Share repurchases	(82)		—		(254)		—		(6,340)				(6,594)
Dividends declared ($0.10 per share)	—		—		—		—		(3,789)		—		(3,789)
Other comprehensive income	—		—		—		1,966		—		—		1,966
Net income (loss)	—		—		—		—		36,778		(14)		36,764
Balances, March 31, 2022	37,559		38		116,928		750		782,972		631		901,319
Stock issued from equity plans	63		—		763		—		—		—		763
Stock-based compensation	—		—		5,016		—		—		—		5,016
Share repurchases	(230)		(1)		(725)		—		(16,293)		—		(17,019)
Dividends declared ($0.10 per share)	—		—		—		—		(3,806)				(3,806)
Other comprehensive loss	—		—		—		(6,384)		—		—		(6,384)
Net income	—		—		—		—		44,970		21		44,991
Balances, June 30, 2022	37,392	$	37	$	121,982	$	(5,634)	$	807,843	$	652	$	924,880

Balances, December 31, 2022	37,429	$	37	$	134,640	$	16,320	$	915,270	$	—	$	1,066,267
Stock issued from equity plans	100		—		(1,991)		—		—		—		(1,991)
Stock-based compensation	—		—		6,543		—		—		—		6,543
Dividends declared ($0.10 per share)	—		—		—		—		(3,814)		—		(3,814)
Other comprehensive loss	—		—		—		(2,013)		—		—		(2,013)
Net income	—		—		—		—		30,921		—		30,921
Balances, March 31, 2023	37,529		37		139,192		14,307		942,377		—		1,095,913
Stock issued from equity plans	121		1		606		—		—		—		607
Stock-based compensation	—		—		7,423		—		—		—		7,423
Dividends declared ($0.10 per share)	—		—		—		—		(3,778)		—		(3,778)
Other comprehensive loss	—		—		—		(2,026)		—		—		(2,026)
Net income	—		—		—		—		27,140		—		27,140
Balances, June 30, 2023	37,650	$	38	$	147,221	$	12,281	$	965,739	$	—	$	1,125,279

Issuance Date	ASU	Title
March 2020	2020-04	Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
January 2021	2021-01	Reference Rate Reform (Topic 848): Scope
December 2022	2022-06	Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848


Cash paid for acquisition	$	145,693
Less cash acquired		(3,484)
Total fair value of purchase consideration	$	142,209


	Fair Value
Current assets and liabilities, net	$	12,329
Property and equipment		3,567
Operating lease right-of-use assets		4,640
Deferred taxes and other liabilities		(2,326)
Intangible assets		57,600
Goodwill		71,039
Operating lease liability		(4,640)
Total fair value of net assets acquired	$	142,209


			Amortization	Useful Life
	Fair Value		Method	(in years)
Customer relationships	$	50,500	Straight-line	10
Technology		7,100	Straight-line	5
Total	$	57,600


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Amount paid or accrued to repurchase shares	$	—	$	17,019	$	—	$	23,613
Number of shares repurchased		—		230		—		312
Average repurchase price per share	$	—	$	74.12	$	—	$	75.68


		June 30, 2023
Description	Balance Sheet Classification	Level 1		Level 2		Level 3		Total Fair Value
Certificates of deposit	Other current assets	$	—	$	175	$	—	$	175
Foreign currency forward contracts	Other current liabilities		—		(68)		—		(68)
Interest rate swaps	Other assets		—		12,630		—		12,630
Net assets measured at fair value on a recurring basis		$	—	$	12,737	$	—	$	12,737


		December 31, 2022
Description	Balance Sheet Classification	Level 1		Level 2		Level 3		Total Fair Value
Certificates of deposit	Other current assets	$	—	$	2,128	$	—	$	2,128
Interest rate swaps	Other assets		—		15,310		—		15,310
Net assets measured at fair value on a recurring basis		$	—	$	17,438	$	—	$	17,438


December 31, 2022	$	1,814
Additions		123
Deductions - write-offs, net of recoveries		(251)
Foreign currency translation		8
June 30, 2023	$	1,694


	Estimated Useful	June 30,		December 31,
	Life (in years)	2023		2022
Buildings, machinery, and equipment	5 to 25	$	180,331	$	165,673
Computer equipment, furniture, fixtures, and vehicles	3 to 5		39,926		36,281
Leasehold improvements	2 to 10		70,937		63,103
Construction in process			19,396		18,226
			310,590		283,283
Less: Accumulated depreciation			(151,565)		(134,821)
Property and equipment, net		$	159,025	$	148,462


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	58,061	$	81,755
Less: income (loss) from discontinued operations, net of income taxes		(1,146)		82
Income from continuing operations, net of income taxes		59,207		81,673
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		32,966		28,877
Stock-based compensation		14,738		8,986
Benefit for deferred income taxes		(786)		(1,977)
Loss on disposal and sale of assets		192		374
Changes in operating assets and liabilities, net of assets acquired
Accounts and other receivable, net		46,044		(27,790)
Inventories		(17,688)		(52,109)
Other assets		2,859		(5,402)
Accounts payable		(17,448)		2,491
Other liabilities and accrued expenses		(64,580)		12,418
Net cash from operating activities from continuing operations		55,504		47,541
Net cash from operating activities from discontinued operations		(3,090)		55
Net cash from operating activities		52,414		47,596

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(3,128)		—
Purchases of property and equipment		(33,623)		(25,476)
Acquisitions, net of cash acquired		—		(145,779)
Net cash from investing activities		(36,751)		(171,255)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings		(10,000)		(10,000)
Dividend payments		(7,592)		(7,595)
Purchase and retirement of common stock		—		(23,578)
Net payments related to stock-based awards		(1,384)		(1,667)
Net cash from financing activities		(18,976)		(42,840)

EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS		(253)		(5,188)

NET CHANGE IN CASH AND CASH EQUIVALENTS		(3,566)		(171,687)
CASH AND CASH EQUIVALENTS, beginning of period		458,818		544,372
CASH AND CASH EQUIVALENTS, end of period	$	455,252	$	372,685


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Semiconductor Equipment	$	173,177	$	228,797	$	367,386	$	431,754
Industrial and Medical		127,603		104,951		250,623		187,849
Data Center Computing		59,076		69,161		118,735		145,399
Telecom and Networking		55,652		38,040		103,804		73,406
Total	$	415,508	$	440,949	$	840,548	$	838,408


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
North America	$	171,516	$	206,117	$	352,458	$	388,838
Asia		186,498		180,181		365,681		342,228
Europe		56,213		49,851		118,779		96,516
Other		1,281		4,800		3,630		10,826
Total	$	415,508	$	440,949	$	840,548	$	838,408


	June 30,		December 31,
	2023		2022
Parts and raw materials	$	292,430	$	286,955
Work in process		18,080		23,002
Finished goods		81,839		66,055
Total	$	392,349	$	376,012


December 31, 2022	$	281,433
Measurement period adjustments		353
Foreign currency translation		906
June 30, 2023	$	282,692


	June 30, 2023
	Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount
Technology	$	97,659	$	(53,838)	$	43,821
Customer relationships		168,116		(51,809)		116,307
Trademarks and other		27,122		(11,757)		15,365
Total	$	292,897	$	(117,404)	$	175,493


Year Ending December 31,
2023 (remaining)	$	14,153
2024		25,212
2025		20,997
2026		19,282
2027		17,372
Thereafter		78,477
Total	$	175,493


	Cumulative Cost Through
	June 30, 2023
	2022 Plan		2018 Plan		Total
Severance and related charges	$	9,921	$	21,125	$	31,046
Facility relocation and closure charges		—		7,160		7,160
Total restructuring charges	$	9,921	$	28,285	$	38,206


December 31, 2022	$	5,702
Net increases to accruals		1,375
Warranty expenditures		(2,229)
Effect of changes in exchange rates		(16)
June 30, 2023	$	4,832


Year Ending December 31,
2023 (remaining)	$	10,010
2024		19,006
2025		15,544
2026		13,813
2027		12,110
Thereafter		58,431
Total lease payments		128,914
Less: Interest		(25,713)
Present value of lease liabilities	$	103,201


		June 30, 2023
Shares available for future issuance under the 2023 Omnibus Incentive Plan		2,383
Shares available for future issuance under the Employee Stock Purchase Plan		598


	Six Months Ended June 30, 2023
		Weighted-
		Average
	Number of	Grant Date
	RSUs	Fair Value
RSUs outstanding at beginning of period	803	$	78.46
RSUs granted	320	$	96.03
RSUs vested	(193)	$	84.97
RSUs forfeited	(38)	$	75.83
RSUs outstanding at end of period	892	$	83.33


	June 30, 2023
	Balance		Interest Rate	Unused Line Fee
Term Loan Facility subject to a fixed interest rate due to interest rate swap	$	229,469	1.172%	—
Term Loan Facility subject to a variable interest rate		135,531	5.952%	—
Revolving Facility subject to a variable interest rate		—	5.952%	0.10%
Total borrowings under the Credit Agreement	$	365,000


Year Ending December 31,
2023 (remaining)	$	10,000
2024		20,000
2025		20,000
2026		315,000
Total	$	365,000


	Three Months Ended June 30,				Change 2023 v. 2022
	2023		2022		Dollar		Percent
Semiconductor Equipment	$	173,177	$	228,797	$	(55,620)	(24.3)	%
Industrial and Medical		127,603		104,951		22,652	21.6	%
Data Center Computing		59,076		69,161		(10,085)	(14.6)	%
Telecom and Networking		55,652		38,040		17,612	46.3	%
Total	$	415,508	$	440,949	$	(25,441)	(5.8)	%

	Six Months Ended June 30,				Change 2023 v. 2022
	2023		2022		Dollar		Percent
Semiconductor Equipment	$	367,386	$	431,754	$	(64,368)	(14.9)	%
Industrial and Medical		250,623		187,849		62,774	33.4	%
Data Center Computing		118,735		145,399		(26,664)	(18.3)	%
Telecom and Networking		103,804		73,406		30,398	41.4	%
Total	$	840,548	$	838,408	$	2,140	0.3	%


	June 30,		December 31,		Change from Year End
	2023		2022		Dollar		Percent
Backlog	$	644,672	$	875,346	$	(230,674)	(26.4)	%


Reconciliation of non-GAAP measure
Operating expenses and operating income from continuing	Three Months Ended June 30,				Six Months Ended June 30,
operations, excluding certain items (in thousands)	2023		2022		2023		2022
Gross profit from continuing operations, as reported	$	147,080	$	162,158	$	302,191	$	306,474
Adjustments to gross profit:
Stock-based compensation		589		402		972		633
Facility expansion, relocation costs and other		60		1,187		1,017		2,471
Acquisition-related costs		97		64		150		(438)
Non-GAAP gross profit		147,826		163,811		304,330		309,140
Non-GAAP gross margin		35.6%		37.1%		36.2%		36.9%

Operating expenses from continuing operations, as reported		117,255		109,393		232,328		209,052
Adjustments:
Amortization of intangible assets		(7,075)		(6,523)		(14,137)		(12,032)
Stock-based compensation		(7,348)		(4,656)		(13,766)		(8,353)
Acquisition-related costs		(1,165)		(4,159)		(2,043)		(5,827)
Restructuring		(3,154)		161		(4,197)		(1,057)
Non-GAAP operating expenses		98,513		94,216		198,185		181,783
Non-GAAP operating income	$	49,313	$	69,595	$	106,145	$	127,357
Non-GAAP operating margin		11.9%		15.8%		12.6%		15.2%


Reconciliation of non-GAAP measure
Income from continuing operations, excluding certain items	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Income from continuing operations, less non-controlling interest, net of income taxes	$	27,455	$	44,790	$	59,207	$	81,666
Adjustments:
Amortization of intangible assets		7,075		6,523		14,137		12,032
Acquisition-related costs		1,262		4,223		2,193		5,389
Facility expansion, relocation costs, and other		60		1,187		1,017		2,471
Restructuring		3,154		(161)		4,197		1,057
Unrealized foreign currency gain		(2,266)		(5,569)		(1,213)		(6,854)
Acquisition-related costs and other included in other income (expense), net		—		85		—		85
Tax effect of non-GAAP adjustments		(1,051)		(752)		(2,172)		(1,821)
Non-GAAP income, net of income taxes, excluding stock-based compensation		35,689		50,326		77,366		94,025
Stock-based compensation, net of taxes		6,191		3,946		11,495		6,971
Non-GAAP income, net of income taxes	$	41,880	$	54,272	$	88,861	$	100,996
Non-GAAP diluted earnings per share	$	1.11	$	1.44	$	2.35	$	2.68


Reconciliation of non-GAAP measure	Three Months Ended				Six Months Ended
Per share earnings excluding certain items	June 30,				June 30,
	2023		2022		2023		2022
Diluted earnings per share from continuing operations, as reported	$	0.73	$	1.19	$	1.57	$	2.16
Add back:
Per share impact of non-GAAP adjustments, net of tax		0.38		0.25		0.78		0.52
Non-GAAP earnings per share	$	1.11	$	1.44	$	2.35	$	2.68


Date		Action
September 2015		Authorized a program to repurchase up to $150.0 million of our common stock

May 2018		Approved a $50.0 million increase in the repurchase program

December 2019		Authorized the removal of the expiration date and increased the balance available for the repurchase program by $25.1 million

July 2021		Approved an increase to the repurchase program, which authorized Advanced Energy Industries, Inc. to repurchase up to $200.0 million with no time limitation

July 2022		Approved an increase to the repurchase program from its remaining authorization of $102.4 million, to repurchase up to $200.0 million with no time limitation

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date

10.1	Advanced Energy Amended and Restated Deferred Compensation Plan Amended and Restated Effective as of August 1, 2023				Filed herewith

10.2	Advanced Energy Industries, Inc. 2023 Omnibus Incentive Plan, effective April 27, 2023.	8-K	000-26966	10.1	April 28, 2023

31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				Filed herewith

31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				Filed herewith

32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				Filed herewith

32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				Filed herewith

101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.				Filed herewith

101.SCH	Inline XBRL Taxonomy Extension Schema Document.				Filed herewith

101.CAL	Inline XBRL Taxonomy Extension Calculation Link base Document.				Filed herewith

101.DEF	Inline XBRL Taxonomy Extension Definition Link base Document.				Filed herewith

101.LAB	Inline XBRL Taxonomy Extension Label Link base Document.				Filed herewith

101.PRE	Inline XBRL Taxonomy Extension Presentation Link base Document.				Filed herewith

104	Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101.				Filed herewith


		ADVANCED ENERGY INDUSTRIES, INC.

Dated:	August 3, 2023	/s/ Paul Oldham
		Paul Oldham
		Chief Financial Officer and Executive Vice President


	/s/ Stephen D. Kelley
	Stephen D. Kelley
	Chief Executive Officer


	/s/ Paul Oldham
	Paul Oldham
	Chief Financial Officer & Executive Vice President