ADVANCED ENERGY INDUSTRIES, INC. This management discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year endedDecember 31, 2020 , which was filed with theSEC onFebruary 24, 2021 .
Special Note on Forward-Looking Statements
The following discussion contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements in this report that are not historical information are forward-looking statements. For example, statements relating to our beliefs, expectations and plans are forward-looking statements, as are statements that certain actions, conditions or circumstances will continue. The inclusion of words such as "anticipate," "expect," "estimate," "can," "may," "might," "continue," "enables," "plan," "intend," "should," "could," "would," "likely," "potential," or "believe," as well as statements that events or circumstances "will" occur or continue, indicate forward-looking statements. Forward-looking statements involve risks and uncertainties, which are difficult to predict and many of which are beyond our control. Therefore, actual results could differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements and readers are cautioned not to place undue reliance on forward-looking statements. For additional information regarding factors that may affect our actual financial condition, results of operations and accuracy of our forward-looking statements, see the information under the caption "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q and, in Part I, Item 1A in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . We undertake no obligation to revise or update any forward-looking statements for any reason.
BUSINESS AND MARKET OVERVIEW
Advanced Energy provides highly engineered, mission-critical, precision power
conversion, measurement, and control solutions to our global customers. We
design, manufacture, sell and support precision power products that transform,
refine, and modify the raw electrical power from the utility and convert it into
various types of highly-controllable, usable power that is predictable,
repeatable, and customizable. Our power solutions enable innovation in complex
semiconductor and thin film plasma processes such as dry etch, strip, chemical
and physical deposition, high and low voltage applications such as process
control, data center computing, networking, telecommunication, analytical
instrumentation, medical equipment, industrial technology and
temperature-critical thermal applications such as material and chemical
processing. We also supply related instrumentation products for advanced
temperature measurement and control, electrostatic instrumentation products for
test and measurement applications, and gas sensing and monitoring solutions for
multiple industrial markets. Our network of global service support centers
provides a recurring revenue opportunity as we offer repair services,
conversions, upgrades, refurbishments, and used equipment to companies using our
products.
Our products are primarily sold into the Semiconductor Equipment, Industrial and
Medical, Data Center Computing, and Telecom and Networking markets. Our recently
launched PowerInsight software product uses data analytics and advanced
algorithms to provide our customers with actionable information, such as
predictive failure, preventive maintenance, and process performance. Advanced
Energy is organized on a global, functional basis and operates in a single
segment structure for power electronics conversion products. We sell our
products into four markets or applications and provide revenue data by market to
enable tracking of market trends.
During the first three months of 2020 we saw the spread of COVID-19 which grew
into a global pandemic. Our focus on providing a healthy and safe working
environment for our employees led to intermittent shutdowns of our manufacturing
facilities to implement new health and safety protocols and additional
investments to comply with government guidelines. During the first and second
quarter of 2020, there were periods when some of our manufacturing facilities
were not operating or were operating at reduced capacity due to government
mandates to restrict travel, maintain social distancing and implement health and
safety procedures. Additionally, ongoing restrictions related to COVID and
disruptions in an already challenged global supply chain limited the
availability of materials, parts and
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subcomponents needed for production during the first three months of 2021, which impacted our ability to ship product to meet customer demand.
During the first quarter of 2021, customer demand was mixed across our served markets. Demand remained strong for products serving Semiconductor and Industrial and Medical applications, while demand from Data Center Computing and Telecom and Networking applications remained below the peak levels seen in prior quarters. Although our manufacturing facilities operated at or near full capacity during the quarter, the limited availability of parts and components affected our ability to produce quantities sufficient to meet demand, especially in Industrial and Medical and Data Center Computing applications. Although COVID-19 has impacted our revenues and manufacturing efficiency over the past year, COVID-19 has not materially impacted our liquidity, our ability to access capital, our ability to comply with our debt covenants or the fair value of our assets. Additionally, we believe the accommodations we have made to our work environment, including employees utilizing work-from-home arrangements where necessary, will not impact our ability to maintain effective internal controls over financial reporting. Looking forward, we expect in the short term, that our ability to procure component parts to meet our customers' needs will be challenged by a tightening global supply chain caused in part by the pandemic-driven rise in consumer demand for tech goods, increased demand for automotive and other products using electronic components, logistics-related disruptions in shipping, and capacity limitations at some suppliers due to COVID-19 and other factors. These supply chain constraints have led to longer lead times in procuring materials and subcomponents and, in some cases, higher costs, which may continue to have an adverse effect on our future operations and our financial results (including, but not limited to, revenue, gross profit, net profit, and cash generation). For additional discussion on the potential impacts of COVID-19 to the future operations of our business, please see the information under the caption "Risk Factors" in Part II, in Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Recent Acquisitions
OnDecember 31, 2020 , we acquired 100% of the issued and outstanding shares ofVersatile Power, Inc. , which is based inCampbell, California . This acquisition added radio frequency ("RF") and programmable power supplies for medical and industrial applications to our product portfolio and further expands our presence in the medical market by adding proven technologies, deep customer relationships, expertise in medical design, and a medical-certified manufacturing center. For additional information, see Note 2. Acquisitions in Part I, Item 1 "Unaudited Consolidated Financial Statements." InJanuary 2021 , we acquired certain intangible assets related to the manufacturing of fiber optic sensing equipment for$3.6 million in cash and$2.9 million in future consideration upon the completion of transition activities. For additional information, see Note 12. Intangible Assets in in Part I, Item 1 "Unaudited Consolidated Financial Statements." 25
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Semiconductor Equipment Market
Growth in the Semiconductor Equipment market is driven by growing integrated
circuits content across many industries, increased demand for processing and
storage in advanced applications such as artificial intelligence or autonomous
vehicles, the rapid adoption of advanced mobile connectivity solutions such as
5G and enhancing existing and enabling new wireless applications. To address the
long-term growing demand for semiconductor devices, the industry continues to
invest in production capacities for advanced logic devices at the 7nm technology
node and beyond, the latest memory devices including 3D-NAND, DRAM, and new
emerging memories such as MRAM, and back-end test and advanced wafer-level
packaging. The industry's transition to advanced technology nodes in logic and
DRAM and to increased layers in 3D memory devices is requiring an increased
number of etch and deposition process tools and higher content of our advanced
power solutions per tool. As etching and deposition processes become more
challenging due to increasing aspect ratios in advanced 3D devices, more
advanced radio frequency ("RF") and direct current ("DC") technologies are
needed. We are meeting these challenges by providing a broader range of more
complex RF and DC power solutions. Beyond etch and deposition processes, the
growing complexity at the advanced nodes also drive a higher number of other
processes across the fab, including inspection, metrology, thermal, ion
implantation, and semiconductor test, where Advanced Energy is actively
participating as a critical technology provider. In addition, our global support
services group offers comprehensive local repair service, upgrade, and retrofit
offerings to extend the useable life of our customers' capital equipment for
additional technology generations. The acquisition of Artesyn in September 2019
expanded Advanced Energy's reach within the Semiconductor Equipment market by
adding a broad range of low voltage applications as well as back-end test and
assembly equipment makers.
In the first half of 2019, the semiconductor industry went through a period of
weakening equipment investment as a result of slowing growth in end market
demand for semiconductor devices, ongoing digestion of equipment capacity, and
consumption of existing inventory. Demand for semiconductor equipment has
continued to grow through the first quarter of 2021 driven by foundry logic and
certain memory investments and has surpassed prior peak levels. In addition,
increased demand for semiconductor devices for a wide range of applications as
global economies begin to recover is expected to drive investment throughout the
remainder of 2021. However, due to the limited visibility and uncertainty
arising from COVID-19 and its impact on the global economy and supply chain,
geopolitical uncertainty, overall levels of current investment by our customers,
and the cyclical nature of the market it is difficult to determine the extent or
duration to which the increased demand for semiconductor equipment will
continue.
Industrial and Medical Markets
Customers in the Industrial and Medical market incorporate our advanced power,
embedded power, and measurement products into a wide variety of equipment used
in applications such as advanced material fabrication, medical devices,
analytical instrumentation, test and measurement equipment, robotics, motor
drives and connected light-emitting diodes.
OEM customers design equipment utilizing our process power technologies in a
variety of industrial applications including glass coating, glass manufacturing,
flat panel displays, photovoltaics solar cell manufacturing, and similar thin
film manufacturing, including data storage and decorative, hard and optical
coatings. These applications employ similar technologies to those used in the
Semiconductor Equipment market to deposit films on non-semiconductor substrates.
Our strategy around these applications is to leverage our thin film deposition
technologies into an expanded set of new materials and applications in adjacent
markets.
Advanced Energy serves the Industrial and Medical market with mission-critical
power components that deliver high reliability, precise, low noise or
differentiated power to the equipment they serve. Examples of products sold into
the Industrial and Medical market includes high voltage products for analytical
instrumentation, medical equipment, low voltage power supplies used in
applications for medical devices, test and measurement, medical lasers,
scientific instrumentation and industrial equipment, and power control modules
and thermal instrumentation products for material fabrication, processing, and
treatment. Our gas monitoring products serve multiple applications in the energy
market, air quality monitoring and automobile emission monitoring and testing.
Our strategy in the Industrial and Medical market is to grow and expand our
addressable market both organically through our global distribution channels and
through acquisitions of products and technologies that are complimentary and
adjacent to our core power conversion applications.
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Revenue for Industrial and Medical products improved in the second half of 2020 after lower revenues in the first half of 2020 primarily due to recessionary macroeconomic conditions, and production and supply chain delays related to COVID-19 that pushed shipments into the third and fourth quarter of 2020. Additionally, we saw modest improvement in industrial markets as global economic growth resumed and our customers were able to increase capacity after governmental restrictions were relaxed during the second half of 2020. Demand for medical products during 2020 was driven by critical care applications, offset by lower investment related to discretionary procedures. More recently, critical applications have saturated while other demand is only beginning to improve. In the first quarter of 2021, overall customer demand remained near the elevated levels from the fourth quarter of 2020, but supply chain constraints limited the Company's ability to ship product at the level of customer demand. We expect this condition to extend into the second quarter of 2021.
Data Center Computing Markets
Following the acquisition of Artesyn inSeptember 2019 , Advanced Energy entered the Data Center Computing market with industry-leading products and low-voltage power conversion technologies. We sell to many data center server and storage manufacturers, as well as cloud service providers and their partners. Driven by the growing adoption of cloud computing, market demand for server and storage equipment has shifted from enterprise on-premise computing to the data center. Nevertheless, with a growing presence at both cloud service providers and industry-leading data center server and storage vendors, we believe Advanced Energy is well positioned to continue to capitalize on the ongoing shift towards cloud computing. In late 2019 and through 2020, demand for our embedded power products in the Data Center Computing market increased significantly driven by share gains and a capacity ramp at hyperscale customers. In addition, we believe as a consequence of COVID-19, hyperscale demand has risen in the near term given the increased need for cloud and network applications in the current environment. Demand for hyperscale products declined sequentially during the latter half of 2020, as a result of market digestion at our existing customers following a ramp of investment earlier in the year. This digestion period continued into the first quarter of 2021 but is expected to improve as we move through the remainder of 2021.
Telecom and Networking Markets
The acquisition of Artesyn inSeptember 2019 provided Advanced Energy with a portfolio of products and technologies that are used across the Telecom and Networking market. Our customers include many leading vendors of wireless infrastructure equipment, telecommunication equipment and computer networking. The wireless telecom market continues to evolve with more advanced mobile standards. 5G wireless technology promises to drive substantial growth opportunities for the telecom industry as it enables new advanced applications such as autonomous vehicles and virtual/augmented reality. Telecom service providers have started to invest in 5G, and this trend is expected to drive demand of our products into the Telecom and Networking market. In datacom, demand is driven by networking investments by telecom service providers and enterprises upgrading of their network, as well as cloud data center networking investments for increased bandwidth. Demand in late 2019 and the first half of 2020 was lower as geopolitical issues and consolidation of wireless telecom providers drove slower global investment in cellular and network infrastructure. Revenue increased sequentially in the third and fourth quarters primarily as a result of modest improvement in market conditions and improved manufacturing capacity amid COVID-19. In the first quarter of 2021, revenue declined as a result of both declining investment in legacy LTE infrastructure and our internal decision to optimize our portfolio toward higher margin applications.
Results of Continuing Operations
The analysis presented below is organized to provide the information we believe will be helpful for understanding our historical performance and relevant trends going forward. This discussion should be read in conjunction with our "Unaudited Consolidated Financial Statements" in Part I, Item 1 of this report, including the notes thereto. Also included in the following analysis are measures that are not in accordance withU.S. GAAP. A reconciliation of the non-GAAP measures
toU.S. GAAP is provided below. 27 Table of Contents The following tables set forth certain data, and the percentage of sales each item reflects, derived from our Unaudited Consolidated Statements of Operations (in thousands): Three Months Ended March 31, 2021 2020 Sales$ 351,620 $ 315,456 Gross profit 137,503 112,231 Operating expenses 93,321 86,423 Operating income from continuing operations 44,182 25,808 Other income (expense), net (507) (3,510) Income from continuing operations before income taxes 43,675 22,298 Provision for income taxes 5,284 3,900 Income from continuing operations, net of income taxes$ 38,391 $ 18,398 Three Months Ended March 31, 2021 2020 Sales 100.0 % 100.0 % Gross profit 39.1 35.6 Operating expenses 26.5 27.4 Operating income from continuing operations 12.6 8.2 Other income (expense), net (0.1) (1.1) Income from continuing operations before income taxes 12.4 7.1 Provision for income taxes 1.5 1.2 Income from continuing operations, net of income taxes 10.9 % 5.8 % SALES, NET The following tables summarize net sales and percentages of net sales, by market (in thousands): Three Months Ended March 31, Change 2021 v. 2020 2021 2020 Dollar Percent Semiconductor Equipment$ 180,716 $ 133,625 $ 47,091 35.2 % Industrial and Medical 78,415 61,979 16,436 26.5 Data Center Computing 59,154 86,183 (27,029) (31.4) Telecom and Networking 33,335 33,669 (334) (1.0) Total$ 351,620 $ 315,456 $ 36,164 11.5 % Three Months Ended March 31, 2021 2020 Semiconductor Equipment 51.4 % 42.4 % Industrial and Medical 22.3 19.6 Data Center Computing 16.8 27.3 Telecom and Networking 9.5 10.7 Total 100.0 % 100.0 % Total Sales Sales increased$36.2 million , or 11.5%, to$351.6 million for the three months endedMarch 31, 2021 as compared to the same period in 2020 primarily due to increased demand in the Semiconductor Equipment and Industrial and Medical markets offset by lower sales from Data Center Computing products due to market digestion after a year of strong investment. Sales in the Semiconductor Equipment market increased$47.1 million , or 35.2%, for the three months endedMarch 31, 2021 as compared to the same period in 2020 when semiconductor equipment volume was recovering from the cyclical downturn in 2019. The increase in sales during 2021 is primarily due to an overall increase in demand for 28 Table of Contents semiconductor equipment used in deposition and etch applications, increasing power content in semiconductor manufacturing tools, and market share gains in RF match and remote plasma sources. Sales in the Industrial and Medical market increased$16.4 million , or 26.5%, for the three months endedMarch 31, 2021 as compared to the same period in 2020. Our customers in this market are primarily global and regional original equipment and device manufacturers. The increase in sales was primarily due to improving macroeconomic conditions and the continued recovery from the COVID-19 pandemic within general industrial markets. Sales in the Data Center Computing market decreased($27.0) million , or (31.4)%, for the three months endedMarch 31, 2021 as compared to the same period in 2020. The decrease in Data Center Computing market sales is primarily due to digestion of products at our primary customers, compared to a strong ramp of revenue as a result of market share gains a year ago. Sales in the Telecom and Networking market decreased($0.3) million , or (1.0)%, for the three months endedMarch 31, 2021 as compared to the same period in 2020. The flat sales were due to in part to our decision to optimize our product portfolio towards higher margin applications and to the pace of 5G investment by network operators outside ofChina . Over time, we expect that 5G infrastructure investments and upgrades to enterprise networks should drive growth in this market.
Backlog
Our backlog was$405.7 million atMarch 31, 2021 as compared to$290.7 million atDecember 31, 2020 , reflecting strong demand for our products as our markets and macro economies recover. In addition, many customers have placed demand into future quarters to accommodate the constraints in the supply chain for certain components. GROSS PROFIT For the three months endedMarch 31, 2021 , gross profit increased$25.3 million to$137.5 million , or 39.1% of sales. For the three months endedMarch 31, 2020 , gross profit was$112.2 million , or 35.6% of sales, and included$5.2 million in additional costs related to the increase in fair market value of Artesyn acquired inventory. The remaining increase in gross profit as a percent of revenue is largely related the sales mix and increased volume, partially offset by higher freight costs and productivity inefficiencies as we transition ourShenzhen , PRC manufacturing intoPenang, Malaysia .
OPERATING EXPENSES
Operating expenses increased$6.9 million to$93.3 million , or 26.5% of sales, for the three months endedMarch 31, 2021 from$86.4 million , or 27.4% of sales, for the same period in 2020. The increase in operating expenses is primarily due to increased investment in research and development, IT infrastructure and common tools, and stock compensation costs, partially offset by decreased compensation principally associated with synergy activities.
The following tables summarize our operating expenses (in thousands) and as a percentage of sales for the periods indicated:
Three Months Ended March 31,
2021 2020
Research and development $ 40,168 11.4 % $ 34,770 11.0 %
Selling, general, and administrative 46,731 13.3 45,991 14.6
Amortization of intangible assets 5,384 1.5 5,006 1.6
Restructuring charges 1,038 0.3 656 0.2
Total operating expenses $ 93,321 26.5 % $ 86,423 27.4 %
Research and Development
We perform research and development ("R&D") of products to develop new or emerging applications, technological advances to provide higher performance, lower cost, or other attributes that we may expect to advance our
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customers' products. We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue. Research and development expenses increased$5.4 million for the three months endedMarch 31, 2021 compared to the same period in 2020. The increase in research and development expense is related to increased headcount and associated costs, outside technical services, and material costs as we invested in new programs to maintain and increase our technological leadership and provide solutions to our customers' evolving needs.
Selling, General and Administrative
Our selling expenses support domestic and international sales and marketing
activities that include personnel, trade shows, advertising, third-party sales
representative commissions, and other selling and marketing activities. Our
general and administrative expenses support our worldwide corporate, legal, tax,
financial, governance, administrative, information systems, and human resource
functions in addition to our general management, including acquisition-related
activities.
Selling, general and administrative ("SG&A") expenses increased $0.7 million for
the three months ended March 31, 2021 compared to the same period in 2020. The
increase in SG&A costs were related to increased stock compensation due
primarily to timing of expense in the first quarter from the accelerated
recognition of compensation related to our change in CEO, partially offset by
decreased compensation costs principally associated with synergy activities.
Amortization of Intangibles
Amortization expense increased$0.4 million to$5.4 million during the three months endedMarch 31, 2021 compared to the same period in 2020. The increase during the three months endedMarch 31, 2021 is primarily driven by incremental amortization of new intangible assets. Refer to Note 12. Intangible Assets.
Restructuring
Restructuring charges relate to previously announced management plans to optimize our manufacturing footprint to lower cost regions, improvements in operating efficiencies, and synergies related to acquisitions. For the three months endedMarch 31, 2021 , restructuring charges primarily related to severance costs for the transition and exit of our facility inShenzhen , PRC. Refer to Note 13. Restructuring Costs.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of interest income and expense, foreign exchange gains and losses, gains and losses on sales of fixed assets, and other miscellaneous items. For the three months endedMarch 31, 2021 , other income (expense), net was($0.5) million compared to other income (expense), net of($3.5) million for the same period in 2020. The change between periods is primarily due to decreased interest expense related to ourSeptember 2019 term note resulting from our interest rate swap agreement executed inApril 2020 and scheduled principal reductions, reduced interest income resulting from lower interest rates, and recorded discount from a facility draw byBold Renewables Holdings, LLC in the prior period. 30 Table of Contents PROVISION FOR INCOME TAXES
Our effective tax rates differ from theU.S. federal statutory rate of 21% for the three months endedMarch 31, 2021 and 2020, respectively, primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, partially offset by netU.S. tax on foreign operations and withholding taxes. The effective tax rate for the first three months of 2021 was lower than the same period in 2020 primarily due to the mix of discrete events between the two periods. Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.
Non-GAAP Results
Management uses non-GAAP operating income and non-GAAP EPS to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, make business decisions, including developing budgets and forecasting future periods. In addition, management's incentive plans include these non-GAAP measures as criteria for achievements. These non-GAAP measures are not in accordance withU.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management. The presentation of this additional information should not be considered a substitute for results prepared in accordance withU.S. GAAP. The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation and amortization of intangible assets. In addition, they exclude discontinued operations and other non-recurring items such as acquisition-related costs and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments and effect of adoption of the Tax Cuts and Jobs Act.
Reconciliation of Non-GAAP measure - operating expenses and operating income from continuing operations, excluding certain items (in thousands)
Three Months
Ended
2021 2020
Gross profit from continuing operations, as reported
$ 112,231 Adjustments to gross profit: Stock-based compensation 350 222 Facility expansion, relocation costs and other 1,838
1,543
Acquisition-related costs 8 5,141
Non-GAAP gross profit $ 139,699 $ 119,137
Non-GAAP gross margin 39.7% 37.8%
Operating expenses from continuing operations, as
reported $ 93,321 $ 86,423
Adjustments:
Amortization of intangible assets (5,384)
(5,006)
Stock-based compensation (5,351) (2,826)
Acquisition-related costs (2,028) (2,836)Facility expansion, relocation costs and other (51)
(385)
Restructuring charges (1,038) (656)
Non-GAAP operating expenses 79,469 74,714
Non-GAAP operating income $ 60,230 $ 44,423
Non-GAAP operating margin 17.1% 14.1%
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Reconciliation of Non-GAAP measure - income from continuing operations, excluding certain items (in thousands)
Three Months
Ended
2021 2020
Income from continuing operations, less non-controlling interest, net of income taxes
$ 38,358 $ 18,383 Adjustments: Amortization of intangible assets 5,384 5,006 Acquisition-related costs 2,036 7,977 Facility expansion, relocation costs and other 1,889 1,928 Restructuring charges 1,038 656 Unrealized foreign currency (gain) loss (2,202) - Acquisition-related and other costs included in Other income (expense), net 87 - Tax effect of non-GAAP adjustments (1,284) (1,370) Non-GAAP income, net of income taxes, excluding stock-based compensation 45,306 32,580 Stock-based compensation, net of taxes 4,362 2,363 Non-GAAP income, net of income taxes$ 49,668 $ 34,943 Non-GAAP diluted earnings per share $ 1.29
$ 0.91
Impact of Inflation
In recent years, inflation has not had a significant impact on our operations.
However, we continuously monitor operating price increases, particularly in
connection with the supply of component parts used in our manufacturing process.
To the extent permitted by competition, we pass increased costs on to our
customers by increasing sales prices over time. From time to time, we may also
reduce prices to customers to decrease sales prices due to reductions in the
cost structure of our products from cost improvement initiatives and decreases
in component part prices.
Liquidity and Capital Resources
LIQUIDITY
We believe that adequate liquidity and cash generation is important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity are our available cash, investments, and cash generated from current operations.
At
Credit Facility
In connection with the Artesyn acquisition in 2019, the Company entered into a credit agreement (the "Credit Agreement") that provided aggregate financing of$500.0 million , consisting of a$350.0 million senior unsecured term loan facility (the "Term Loan Facility") and a$150.0 million senior unsecured revolving facility (the "Revolving Facility"). Both the Term Loan Facility and the Revolving Facility mature onSeptember 10, 2024 . AtMarch 31, 2021 , we had$150.0 million in available funding under the Revolving Facility. The Term Loan Facility requires quarterly repayments of$4.4 million , plus accrued interest, with the remaining balance due inSeptember 2024 . For more information on the Credit Facility, see Note 19. Credit Facility and Note 7. Derivative Financial Instruments in Part I, Item 1 "Unaudited Consolidated Financial Statements." 32 Table of Contents Stock Repurchase To execute the repurchase of shares of common stock, the Company periodically enters into stock repurchase agreements. The following table summarizes these repurchases: Three Months Ended March 31, (in thousands, except per share amounts) 2021 2020 Amount paid to repurchase shares $ -$ 7,248 Number of shares repurchased - 170 Average repurchase price per share $ -$ 42.59
Remaining authorized by Board of Directors for future repurchases as of period end
We believe our current cash levels, available borrowing capacity under the Revolving Facility, as well as expected cash generation from future operations, will be adequate to meet our working capital requirements, debt repayment and capital expenditures, contractual obligations, share repurchase programs, and additional acquisitions on long-term and short-term basis. We may, however, depending upon the number or size of additional acquisitions, seek additional financing from time to time.
Dividends
InDecember 2020 , the Board of Directors ("the Board") of the Company approved a cash dividend program under which we intend to pay a quarterly cash dividend of$0.10 per share of capital stock. InMarch 2021 , we paid the first quarterly cash dividend since our inception as a public company. Future dividend payments are subject to the Board's approval.
CASH FLOWS
A summary of our cash provided by and used in operating, investing, and financing activities is as follows (in thousands):
Three Months Ended March 31,
2021 2020
Net cash from operating activities from continuing
operations $ 54,264
(185) (418)
Net cash from operating activities 54,079 28,522
Net cash from investing activities from continuing
operations (12,415) (7,124)
Net cash from financing activities from continuing
operations (12,443) (13,794)
Effect of currency translation on cash 321 (1,505)
Increase in cash and cash equivalents 29,542 6,099
Cash and cash equivalents, beginning of period 480,368 346,441
Cash and cash equivalents, end of period $ 509,910 $ 352,540
2021 CASH FLOWS COMPARED TO 2020
Net cash from operating activities
Net cash from operating activities from continuing operations for the three months endedMarch 31, 2021 was$54.3 million , as compared to$28.9 million for the same period in 2020. The increase of$25.4 million in net cash flows from operating activities, as compared to the same period in 2020, is due to increased profitability as a result of increased sales. 33
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Net cash from investing activities
Net cash from investing activities for the three months endedMarch 31, 2021 was($12.4) million and predominantly related to investment in capacity and facilities as we continue to integrate certain locations. In addition, during the three months endedMarch 31, 2021 , we paid($3.6) million to acquire intangible assets. Net cash from investing activities for the three months endedMarch 31, 2020 was($7.1) million and primarily related to investment in facilities and capacity.
Net cash from financing activities
Net cash from financing activities for the three months endedMarch 31, 2021 was($12.4) million and included($4.4) million for repayment of long-term debt,($4.2) million net payments related to stock-based award activities and($3.9) million for the payment of dividends. Net cash from financing activities for the three months endedMarch 31, 2020 was($13.8) million and included($7.2) million related to repurchases of our common stock,($4.4) million for repayment of long-term debt, and($2.2) million net payments related to stock-based award activities.
Effect of currency translation on cash
During the three months ended
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity withU.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1. Operation and Summary of Significant Accounting Policies and Estimates to the consolidated financial statements in our Annual Report on Form 10-K for the year endedDecember 31, 2020 describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Our critical accounting estimates, discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 , include estimates for allowances for doubtful accounts, determining useful lives for depreciation and amortization, the valuation of assets and liabilities acquired in business combinations, assessing the need for impairment charges for identifiable intangible assets and goodwill, establishing warranty reserves, accounting for income taxes, and assessing excess and obsolete inventories. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the consolidated financial statements and actual results could differ materially from the amounts reported based on variability in factors affecting these estimates.
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