Advanced Energy Announces Second Quarter Results

Advanced Energy Announces Second Quarter Results

  • Revenue increased 15.3% sequentially
  • GAAP EPS from continuing operations was $0.68
  • Non-GAAP EPS from continuing operations was $0.73
  • Ended the quarter with $215.1 million in cash and marketable securities

FORT COLLINS, Colo., Aug. 1, 2016Advanced Energy Industries, Inc. (Nasdaq:AEIS) today announced financial results for the second quarter ended June 30, 2016. The company reported second quarter sales of $118.8 million. Second quarter GAAP income from continuing operations was $27.3 million, or $0.68 per diluted share. Non-GAAP income from continuing operations was $29.2 million, or $0.73 per diluted share.

“The second quarter exceeded our expectations on the top and bottom line with record contributions from our Semiconductor and Service businesses and a rebound in our Industrial markets,” said Yuval Wasserman, president and CEO of Advanced Energy. “Our current performance is a direct result of the adoption of our recent design wins in next-generation 3D enabling technologies to volume production. With our advantageous financial model, we are progressing towards our aspirational goals.”

Second Quarter Results                            

Sales were $118.8 million compared with $103.0 million in the first quarter of 2016 and $108.7 million in the second quarter of 2015.

GAAP income from continuing operations, net of income taxes was $27.3 million or $0.68 per diluted share in the second quarter of 2016 compared to $20.2 million or $0.50 per diluted share in the first quarter, and $23.0 million or $0.56 per diluted share in the second quarter of 2015.

Non-GAAP income from continuing operations, net of income taxes was $29.2 million or $0.73 per diluted share in the second quarter of 2016 compared to $22.1 million or $0.55 per diluted share in the first quarter, and $24.4 million or $0.59 per diluted share in the same period last year. A reconciliation of non-GAAP measures is provided in the tables below.

The company ended the quarter with $215.1 million in cash and marketable securities.

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 2015 Annual Report on Form 10-K.

Third Quarter 2016 Guidance          

Based on the company's current view, beliefs and assumptions, guidance for the third quarter of 2016 is within the following ranges:

        Q3 2016
Revenues       $116M - $126M
GAAP operating margins from continuing operations       25% - 28%
GAAP EPS from continuing operations       $0.65 - $0.76
Non-GAAP operating margins from continuing operations       27% - 30%
Non-GAAP EPS from continuing operations       $0.70 - $0.80
             

Second Quarter 2016 Conference Call

Management will host a conference call tomorrow morning, Tuesday, August 2, 2016, at 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 49515744, 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 49515744. 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.

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, amortization of intangible assets and restructuring costs, as well as acquisition related costs and other non-recurring items. For the third quarter ending September 30, 2016 guidance, the company expects stock based compensation of $1.2 million and amortization of intangibles of $1.1 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 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 third quarter ending September 30, 2016, expectations regarding future market trends and the company’s future performance within specific markets and other statements 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 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   Six Months Ended
  June 30,   March 31,   June 30,
  2016   2015   2016   2016   2015
                   
Sales:                  
Product $ 100,752     $ 91,424     $ 86,293     $ 187,045     $ 185,032  
Service 18,013     17,230     16,751     34,764     33,132  
Total sales 118,765     108,654     103,044       221,809       218,164  
Cost of sales:                  
Product 47,334     43,778     40,815     88,149     86,070  
Service 9,385     8,327     8,769     18,154     16,446  
Total cost of sales 56,719     52,105     49,584     106,303     102,516  
Gross profit 62,046     56,549     53,460     115,506     115,648  
  52.2 %   52.0 %   51.9 %   52.1 %   53.0 %
Operating expenses:                  
Research and development 11,266     9,984     10,765     22,031     19,744  
Selling, general and administrative 19,377     16,684     18,016     37,393     33,391  
Amortization of intangible assets 1,074     1,102     1,058     2,132     2,200  
Restructuring benefit                 (2 )
Total operating expenses 31,717     27,770     29,839     61,556     55,333  
Operating Income 30,329     28,779     23,621     53,950     60,315  
Other income, net 836     301     357     1,193     1,169  
Income from continuing operations before income taxes 31,165     29,080     23,978     55,143     61,484  
Provision for income taxes 3,911     6,056     3,758     7,669     12,805  
Income from continuing operations, net of income taxes 27,254     23,024     20,220     47,474     48,679  
Income (loss) from discontinued operations, net of income taxes 3,277     (255,483 )   2,061     5,338     (259,862 )
Net income (loss) $ 30,531     $ (232,459 )   $ 22,281     $ 52,812     $ (211,183 )
                   
Basic weighted-average common shares outstanding 39,672     40,946     39,814     39,750     40,843  
Diluted weighted-average common shares outstanding 39,969     41,253     40,100     40,046     41,192  
                   
Earnings per share:                  
                   
Continuing operations:                  
Basic earnings per share $ 0.69     $ 0.56     $ 0.51     $ 1.19     $ 1.19  
Diluted earnings per share $ 0.68     $ 0.56     $ 0.50     $ 1.19     $ 1.18  
                   
Discontinued operations:                  
Basic earnings (loss) per share $ 0.08     $ (6.24 )   $ 0.05     $ 0.13     $ (6.36 )
Diluted earnings (loss) per share $ 0.08     $ (6.24 )   $ 0.05     $ 0.13     $ (6.36 )
                   
Net income:                  
Basic earnings (loss) per share $ 0.77     $ (5.68 )   $ 0.56     $ 1.33     $ (5.17 )
Diluted earnings (loss) per share $ 0.76     $ (5.68 )   $ 0.56     $ 1.32     $ (5.17 )
                                       

 

ADVANCED ENERGY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  June 30,   December 31,
  2016   2015
ASSETS Unaudited    
       
Current assets:      
Cash and cash equivalents $ 209,273     $ 158,443  
Marketable securities 5,784     11,986  
Accounts receivable, net 66,162     54,959  
Inventories, net 57,227     52,573  
Deferred income tax assets 6,027     6,004  
Income taxes receivable 1,875     9,040  
Other current assets 8,978     7,868  
Current assets of discontinued operations 31,517     41,902  
Total current assets 386,843     342,775  
       
Property and equipment, net 11,167     9,645  
       
Deposits and other 1,678     1,729  
Goodwill and intangibles, net 74,750     76,870  
Deferred income tax assets 30,231     30,398  
Non-current assets of discontinued operations 285     1,271  
Total assets $ 504,954     $ 462,688  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 36,951     $ 27,246  
Other accrued expenses 36,807     40,357  
Current liabilities of discontinued operations 24,910     36,481  
Total current liabilities 98,668     104,084  
       
Non-current liabilities of continuing operations 64,370     67,722  
Non-current liabilities of discontinued operations 20,104     27,302  
Long-term liabilities 84,474     95,024  
       
Total liabilities 183,142     199,108  
       
Stockholders' equity 321,812     263,580  
Total liabilities and stockholders' equity $ 504,954     $ 462,688  
       

December 31, 2015 amounts are derived from the December 31, 2015 audited Consolidated Financial Statements.

 

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   Six Months Ended
  June 30,   March 31,   June 30,
  2016   2015   2016   2016   2015
                   
Gross Profit from continuing operations, as reported $ 62,046     $ 56,549     $ 53,460     $ 115,506     $ 115,648  
Operating expenses from continuing operations, as reported 31,717     27,770     29,839     61,556     55,333  
Adjustments:                  
Restructuring charges                 2  
Stock-based compensation (1,569 )   (693 )   (1,429 )   (2,998 )   (1,180 )
Amortization of intangible assets (1,074 )   (1,102 )   (1,058 )   (2,132 )   (2,200 )
Non-GAAP operating expenses from continuing operations 29,074     25,975     27,352     56,426     51,955  
Non-GAAP operating income from continuing operations $ 32,972     $ 30,574     $ 26,108     $ 59,080     $ 63,693  
   
Reconciliation of Non-GAAP measure - income excluding certain items Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
  2016   2015   2016   2016   2015
                   
Income from continuing operations, net of income taxes, as reported $ 27,254     $ 23,024     $ 20,220     $ 47,474     $ 48,679  
Adjustments:                  
Restructuring charges                 (2 )
Stock-based compensation 1,569     693     1,429     2,998     1,180  
Amortization of intangible assets 1,074     1,102     1,058     2,132     2,200  
Tax effect of non-GAAP adjustments (711 )   (375 )   (655 )   (1,366 )   (673 )
Non-GAAP income from continuing operations, net of income taxes $ 29,186     $ 24,444     $ 22,052     $ 51,238     $ 51,384  
   
Reconciliation of Non-GAAP measure - per share earnings excluding certain items Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
  2016   2015   2016   2016   2015
                   
Diluted earnings per share from continuing operations, as reported $ 0.68     $ 0.56     $ 0.50     $ 1.19     $ 1.18  
Add back:                  
per share impact of Non-GAAP adjustments, net of tax 0.05     0.03     0.05     0.09     0.07  
Non-GAAP per share earnings from continuing operations $ 0.73     $ 0.59     $ 0.55     $ 1.28     $ 1.25  
 

 

Reconciliation of Q3 2016 Guidance        
    Low End   High End
         
Revenue   $116 million   $126 million
         
Reconciliation of Non-GAAP operating margin        
GAAP operating margin   25 %   28 %
Stock-based compensation   1 %   1 %
Amortization of intangible assets   1 %   1 %
Non-GAAP operating margin   27 %   30 %
         
Reconciliation of Non-GAAP earnings per share        
GAAP earnings per share   $ 0.65     $ 0.76  
Stock-based compensation   0.03     0.03  
Amortization of intangible assets   0.03     0.03  
Tax effects of excluded items   (0.01 )   (0.02 )
Non-GAAP earnings per share   $ 0.70     $ 0.80  

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.

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