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Advanced Energy Announces Third Quarter 2018 Results
Globe Newswire 29-Oct-2018 4:10 PM
Q3 Revenue was $173.1 million
Q3 GAAP EPS from continuing operations was $0.90
Q3 Non-GAAP EPS from continuing operations was $1.05
FORT COLLINS, Colo., Oct. 29, 2018 (GLOBE NEWSWIRE) -- Advanced Energy Industries, Inc. (NASDAQ:AEIS), today announced financial results for the third quarter ended September 30, 2018.
"As expected, near-term delays in capital spending by some semiconductor manufacturers impacted our revenues from semiconductor markets," said Yuval Wasserman, president and CEO. "However, revenues from our Industrial markets reached another record high, reflecting the benefits of our diversified growth strategy, including our acquisition of LumaSense Technologies. We expect our fourth quarter to be impacted by the continued pause in semiconductor capital spending and by seasonally lower activity in our Industrial markets. However, we believe the long-term drivers in both markets to be intact. In addition, our customer focus and commitment to innovation should allow us to grow faster than the market."
Third Quarter Results
Sales were $173.1 million in the third quarter of 2018 compared with $196.0 million in the second quarter of 2018 and $176.6 million in the third quarter of 2017. The acquisition of LumaSense contributed $5.6 million in revenue in the third quarter.
GAAP income from continuing operations was $35.2 million or $0.90 per diluted share in the third quarter of 2018 compared with $46.4 million or $1.17 per diluted share in the second quarter of 2018, and $83.8 million or $2.09 per diluted share in the third quarter of 2017. Third quarter 2017 results included a nonrecurring tax benefit of $40.2 million associated with the solar inverter business.
Non-GAAP income from continuing operations was $41.2 million or $1.05 per diluted share in the third quarter of 2018, including approximately $0.01 per diluted share from LumaSense. This compared with $49.4 million or $1.25 per diluted share in the second quarter of 2018, and $48.0 million or $1.19 per diluted share in the third quarter of 2017. A reconciliation of non-GAAP measures is provided in the tables below.
The company generated $30.6 million of operating cash from continuing operations in the third quarter of 2018. During the quarter the company repurchased approximately 533 thousand shares for $31.0 million.
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 2017 Annual Report on Form 10-K.
Fourth Quarter 2018 Guidance
Based on the company's current view, beliefs and assumptions, its guidance for the fourth quarter of 2018 is within the following ranges and does not incorporate any potential adjustments during the measurement period associated with U.S. tax reform.
Q4 2018
Revenues
$150M – $160M
GAAP operating margins from continuing operations
12.8% - 17.5%
GAAP EPS from continuing operations
$0.48 - $0.66
Non-GAAP operating margins from continuing operations
20.0% - 22.0%
Non-GAAP EPS from continuing operations
$0.70 - $0.80
Third Quarter 2018 Conference Call
Management will host a conference call tomorrow morning, Tuesday, October 30, 2018 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 8489318, 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 8489318. 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 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.
For more information, contact:
Brian Smith Advanced Energy (970) 407-6555 brian.smith@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 and restructuring expenses. Additionally, the third quarter non-GAAP results exclude estimated income tax expense associated with U.S. tax reform. 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, 2018, 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; (k) unanticipated changes to management's estimates, reserves or allowances; (l) changes and adjustments to the tax expense and benefits related to the recently enacted U.S. tax reform; and (m) the effects of recent U.S. government trade restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon demand for our 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 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,
2018
2017
2018
2018
2017
Sales:
Product
$
144,843
$
152,363
$
169,235
$
485,287
$
424,478
Service
28,239
24,212
26,797
79,444
67,320
Total sales
173,082
176,575
196,032
564,731
491,798
Cost of sales:
Product
73,019
72,146
80,953
233,778
198,754
Service
14,524
12,195
13,844
40,534
34,838
Total cost of sales
87,543
84,341
94,797
274,312
233,592
Gross profit
85,539
92,234
101,235
290,419
258,206
49.4
%
52.2
%
51.6
%
51.4
%
52.5
%
Operating expenses:
Research and development
18,451
14,629
19,195
55,283
41,742
Selling, general and administrative
25,386
24,692
24,758
78,792
70,580
Amortization of intangible assets
1,437
1,240
1,264
3,958
3,176
Restructuring expense
403
—
—
403
—
Total operating expenses
45,677
40,561
45,217
138,436
115,498
Operating income
39,862
51,673
56,018
151,983
142,708
Other income (expense), net
401
153
(485
)
(58
)
(3,138
)
Income from continuing operations before income taxes
40,263
51,826
55,533
151,925
139,570
Provision (benefit) for income taxes
5,106
(31,968
)
9,133
23,998
(25,538
)
Income from continuing operations, net of income taxes
35,157
83,794
46,400
127,927
165,108
Income (loss) from discontinued operations, net of income taxes
(371
)
70
5
(226
)
2,343
Net income
34,786
83,864
46,405
127,701
167,451
Income from continuing operations attributable to noncontrolling interest
7
—
44
82
—
Net income attributable to Advanced Energy Industries, Inc.
$
34,779
$
83,864
$
46,361
$
127,619
$
167,451
Basic weighted-average common shares outstanding
38,970
39,786
39,349
39,309
39,787
Diluted weighted-average common shares outstanding
39,195
40,172
39,603
39,594
40,207
Earnings per share attributable to Advanced Energy Industries, Inc:
Continuing operations:
Basic earnings per share
$
0.90
$
2.11
$
1.18
$
3.25
$
4.15
Diluted earnings per share
$
0.90
$
2.09
$
1.17
$
3.23
$
4.11
Discontinued operations:
Basic earnings per share
$
(0.01
)
$
0.00
$
0.00
$
(0.01
)
$
0.06
Diluted earnings per share
$
(0.01
)
$
0.00
$
0.00
$
(0.01
)
$
0.06
Net income:
Basic earnings per share
$
0.89
$
2.11
$
1.18
$
3.25
$
4.21
Diluted earnings per share
$
0.89
$
2.09
$
1.17
$
3.23
$
4.16
ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30,
December 31,
2018
2017
ASSETS
Unaudited
Current assets:
Cash and cash equivalents
$
338,673
$
407,283
Marketable securities
3,058
3,104
Accounts and other receivable, net
110,440
87,429
Inventories, net
110,327
78,450
Income taxes receivable
4,229
1,295
Other current assets
9,777
8,129
Current assets of discontinued operations
8,273
9,535
Total current assets
584,777
595,225
Property and equipment, net
30,174
17,795
Deposits and other assets
5,608
3,051
Goodwill and intangibles, net
157,884
87,311
Deferred income tax assets
44,112
18,841
Non-current assets of discontinued operations
11,077
11,085
Total assets
$
833,632
$
733,308
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
45,620
$
48,177
Other accrued expenses
73,081
50,092
Current liabilities of discontinued operations
5,895
7,850
Total current liabilities
124,596
106,119
Non-current liabilities of continuing operations
97,894
91,271
Non-current liabilities of discontinued operations
11,567
15,277
Long-term liabilities
109,461
106,548
Total liabilities
234,057
212,667
Advanced Energy stockholders' equity
599,062
520,641
Noncontrolling interest
513
—
Stockholders' equity
599,575
520,641
Total liabilities and stockholders' equity
$
833,632
$
733,308
December 31, 2017 amounts are derived from the December 31, 2017 audited Consolidated Financial Statements.
ADVANCED ENERGY INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Nine Months Ended September 30,
2018
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
127,701
$
167,451
Income from discontinued operations, net of income taxes
(226
)
2,343
Income from continuing operations, net of income taxes
127,927
165,108
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
9,488
6,792
Stock-based compensation expense
7,461
10,707
Provision for deferred income taxes
—
(26,185
)
Loss on foreign exchange hedge
—
3,489
Net loss on disposal of assets
167
106
Changes in operating assets and liabilities, net of assets acquired
(26,560
)
(19,710
)
Net cash provided by operating activities from continuing operations
118,483
140,307
Net cash used in operating activities from discontinued operations
(4,550
)
(7,293
)
Net cash provided by operating activities
113,933
133,014
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities
(93
)
(86
)
Proceeds from sale of marketable securities
6
1,883
Acquisitions, net of cash acquired
(93,801
)
(17,347
)
Purchase of foreign exchange hedge
—
(3,489
)
Purchases of property and equipment
(16,586
)
(5,646
)
Net cash used in investing activities from continuing operations
(110,474
)
(24,685
)
Net cash used in investing activities from discontinued operations
—
—
Net cash used in investing activities
(110,474
)
(24,685
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase and retirement of common stock
(69,021
)
(24,998
)
Net payments related to stock-based award activities
(2,636
)
(1,902
)
Net cash used in financing activities from continuing operations
(71,657
)
(26,900
)
Net cash used in financing activities from discontinued operations
—
—
Net cash used in financing activities
(71,657
)
(26,900
)
EFFECT OF CURRENCY TRANSLATION ON CASH
(722
)
1,138
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(68,920
)
82,567
CASH AND CASH EQUIVALENTS, beginning of period
415,037
289,517
CASH AND CASH EQUIVALENTS, end of period
346,117
372,084
Less cash and cash equivalents from discontinued operations
7,444
5,512
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period
$
338,673
$
366,572
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,
2018
2017
2018
2018
2017
Gross profit from continuing operations, as reported
$
85,539
$
92,234
$
101,235
$
290,419
$
258,206
Adjustments to gross profit:
Stock-based compensation
76
334
149
576
1,048
Facility transition and relocation costs
725
—
249
974
—
Acquisition-related costs
158
—
—
158
—
Non-GAAP gross profit from continuing operations
86,498
92,568
101,633
292,127
259,254
Operating expenses from continuing operations, as reported
45,677
40,561
45,217
138,436
115,498
Adjustments:
Amortization of intangible assets
(1,437
)
(1,240
)
(1,264
)
(3,958
)
(3,176
)
Stock-based compensation
(948
)
(3,119
)
(1,794
)
(6,885
)
(9,659
)
Acquisition-related costs
(705
)
—
(255
)
(1,310
)
(150
)
Facility expansion and relocation costs
(29
)
—
(13
)
(518
)
—
Restructuring charges
(403
)
—
—
(403
)
—
Non-GAAP operating expenses from continuing operations
42,155
36,202
41,891
125,362
102,513
Non-GAAP operating income from continuing operations
$
44,343
$
56,366
$
59,742
$
166,765
$
156,741
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,
2018
2017
2018
2018
2017
Gross profit from continuing operations, as reported
49.4
%
52.2
%
51.6
%
51.4
%
52.5
%
Adjustments to gross profit:
Stock-based compensation
—
0.2
0.1
0.1
0.2
Facility transition and relocation costs
0.5
—
0.1
0.2
—
Acquisition-related costs
0.1
—
—
—
—
Non-GAAP gross profit from continuing operations
50.0
52.4
51.8
51.7
52.7
Operating expenses from continuing operations, as reported
26.4
23.0
23.1
24.5
23.5
Adjustments:
Amortization of intangible assets
(0.8
)
(0.7
)
(0.6
)
(0.7
)
(0.6
)
Stock-based compensation
(0.6
)
(1.8
)
(1.1
)
(1.2
)
(2.1
)
Acquisition-related costs
(0.4
)
—
(0.1
)
(0.2
)
—
Facility expansion and relocation costs
—
—
—
(0.1
)
—
Restructuring charges
(0.2
)
—
—
(0.1
)
—
Non-GAAP operating expenses from continuing operations
24.4
20.5
21.3
22.2
20.8
Non-GAAP operating income from continuing operations
25.6
%
31.9
%
30.5
%
29.5
%
31.9
%
Reconciliation of Non-GAAP measure - income excluding certain items
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2018
2017
2018
2018
2017
Income from continuing operations, less noncontrolling interest, net of income taxes
$
35,150
$
83,794
$
46,356
$
127,845
$
165,108
Adjustments:
Amortization of intangible assets
1,437
1,240
1,264
3,958
3,176
Stock-based compensation
1,024
3,453
1,943
7,461
10,707
Acquisition-related costs
863
—
255
1,468
150
Facility expansion and relocation costs
754
—
262
1,492
—
Restructuring charges
403
—
—
403
—
Nonrecurring tax (benefit) expense associated with inverter business
—
(40,194
)
—
—
(40,194
)
Loss on foreign exchange hedge
—
—
—
—
3,489
Incremental expense associated with start-up of the Asia regional headquarters
—
1,133
—
—
1,133
Tax Cuts and Jobs Act Impact
2,398
—
—
4,251
—
Tax effect of Non-GAAP adjustments
(843
)
(1,426
)
(704
)
(2,890
)
(4,451
)
Non-GAAP income from continuing operations, net of income taxes
$
41,186
$
48,000
$
49,376
$
143,988
$
139,118
Reconciliation of Non-GAAP measure - per share earnings excluding certain items
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2018
2017
2018
2018
2017
Diluted earnings per share from continuing operations, as reported
$
0.90
$
2.09
$
1.17
$
3.23
$
4.11
Add back:
per share impact of Non-GAAP adjustments, net of tax
0.15
(0.90
)
0.08
0.41
(0.65
)
Non-GAAP per share earnings from continuing operations
