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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Advanced Energy Industries, Inc.    AEIS

ADVANCED ENERGY INDUSTRIES, INC.

(AEIS)
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Advanced Energy Industries : Q3 2020 Earnings Presentation

11/19/2020 | 03:55pm EST

Q3 2020

Earnings Presentation

NOVEMBER 5, 2020

Copyright © 2020 Advanced Energy

SAFE HARBOR

The company's guidance with respect to anticipated financial results for future periods, potential future growth and profitability, future business mix, expectations regarding future market trends, future performance within specific markets and other statements herein or made on the 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 risks and uncertainties related to the acquisition and integration of Artesyn Embedded Power including the optimization and reduction of our global manufacturing sites; (e) the continuing spread of COVID-19 and its potential adverse impact on our product manufacturing, supply chain and operations, (f) the accuracy of the company's estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (g) the company's ability to realize its plan to avoid additional costs after the solar inverter wind- down; (h) the accuracy of the company's assumptions on which its financial statement projections are based; (i) the impact of product price changes, which may result from a variety of factors; (j) the timing of orders received from customers; (k) the company's ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (l) the company's ability to obtain in a timely manner the materials necessary to manufacture its products; (m) unanticipated changes to management's estimates, reserves or allowances; (n) changes and adjustments to the tax expense and benefits related to the U.S. tax reform that was enacted in late 2017; and (o) the impact of escalating political, economic and policy tensions and conflicts between China and the United States including, but not limited to, trade wars and export restrictions between the two countries, China's national security law for Hong Kong, and China's expansion of control over the South China Sea, any of which could negatively impact our customers' and our presence,

operations, and financial results. 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 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 presentation.

Copyright © 2020 Advanced Energy

2

KEY MESSAGES

  • Record revenue, earnings, and cash flow on strong execution
  • Solid demand as we continue to grow faster than our markets
  • Pure Play Power strategy drives leadership, innovation and synergies
  • Artesyn integration progressing ahead of plan with record accretion
  • We expect to continue to grow earnings even with near-term variation

Copyright © 2020 Advanced Energy

3

SOLID EXECUTION TO MEET STRONG DEMAND

Paramount® HFi RF power system, with integrated

high-speedsolid-state matching technology

  • Q3 2020 results above high ends of guidance ranges
    • Record revenue of $390 million and non-GAAP(1) earnings of $1.66 per share
    • Record operating cash flow of $67.5 million
  • Strong demand drove sequential revenue growth across all four markets
    • Growing faster than our market verticals
    • Share gains with strong growth in multiple focused areas
    • Aggressive R&D investments, driving design wins and six new product launches
  • Solid execution delivered on our customer needs
    • Allowed us to catch up on backlog and respond to last minute acceleration in demand
    • Leveraging our diversified footprint, agile supply chain and operational excellence
    • Achieved annualized Artesyn synergies of >$30 million and cumulative non-GAAP(1) earnings accretion of >$1.00 per share
  • On track to meet or exceed our long-term aspirational goals
    • Q3 results validate our strategy and long-term business model
    • Investor event on December 14 where we will provide our updated aspirational goals

(1) non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets and unrealized foreign exchange gain or

Copyright © 2020 Advanced Energy

4

losses on long term facility lease and pension obligations, as well as discontinued operations, and non-recurring items such as acquisition-related costs and restructuring expenses.

SEQUENTIAL GROWTH IN ALL FOUR MARKET VERTICALS

SEMICONDUCTOR

EQUIPMENT

$167M, up 15% QoQ

  • Outgrowing WFE and our peers with >70% YoY(1) growth
  • RF Match momentum continues and grew >120% YoY
  • RPS on track to double in 2020
  • New dielectric etch design win
  • Several design wins for deposition processes in Korea

INDUSTRIAL &

MEDICAL

$87M, up 23% QoQ

  • Modest improvement in the industrial markets
  • Catch up on Q2 backlog
  • Medical critical care demand remains strong
  • Multiple design wins, including a diagnostic blood analyzer
  • Powering new filtration system for coronavirus prevention

DATA CENTER

COMPUTING

$88M, up 5% QoQ

  • Revenue up 91% YoY(1) and Hyperscale grew 380% YoY(1)
  • Outperforming a market that faces data center digestion and weak IT spending
  • 3rd hyperscaler revenue grew, and good progress in winning additional hyperscalers
  • High Performance Computing becoming a secular driver

TELECOM &

NETWORKING

$48M, up 18.5% QoQ

  • Markets coming off the bottom seen in 1H 2020
  • Benefited by catch-up shipments from Q2 backlog
  • Data center networking a bright spot, with a key win supporting migration to 400G network
  • Mix of 5G has risen considerably

(1) Revenue comparisons on a pro-forma basis include full historical revenues of the Artesyn acquisition in prior periods

Copyright © 2020 Advanced Energy

5

Q3 RESULTS VALIDATE OUR LONG-TERM ASPIRATIONAL GOALS

Generate &

Deploy Cash

Aspirational Goals(1) :

Revenue:

> $1.5B

  • Non-GAAPEPS(2) : > $6.50

ROIC(3) :

> 23%

  1. Please note that hypothetical scenarios regarding revenue growth, EBITDA, EPS, (GAAP or non-GAAP), ROIC, cash generation, acquisitions, aspirational goals and targets and similar statements illustrate various possible outcomes of our different strategies if they are successful. These hypothetical scenarios and illustrations should not be treated as forecasts or projections or financial guidance. We cannot assure you that we will be able to accomplish any of these goals, metrics or opportunities at any point in the future (if at all), all of which are subject to significant risks and uncertainties.
  2. Refer to the non-GAAP reconciliation for additional detail.
  3. ROIC calculated as Non-GAAP Operating Income After Tax divided by Invested Capital, which is defined as Total Assets less Cash, Payables, Accrued Expenses

Drive Strong Profitability

Grow & Diversify

Copyright © 2020 Advanced Energy

6

Q3 2020 FINANCIAL HIGHLIGHTS

REVENUE

$390 million

Up 14.6% QoQ

NON-GAAP EPS(1)

$1.66

Up 41% QoQ

NON-GAAP GROSS MARGIN(1)

39.8%

Up 110bps QoQ

NON-GAAP OP MARGIN(1)

19.5%

Up 370bps QoQ

OPERATING CASH FLOW

$67.5 million

Record high

TOTAL CASH

$432 million

Up $48 million QoQ

(1) non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets and unrealized foreign exchange gain or

Copyright © 2020 Advanced Energy

7

losses on long term facility lease and pension obligations, as well as discontinued operations, and non-recurring items such as acquisition-related costs and restructuring expenses.

Q3 REVENUE BY MARKETS

ACTUAL RESULTS

GROWTH RATES

(figures in $ thousands)

Q3 2020

Q2 2020

Q3 2019

Q/Q

Y/Y

Semiconductor Equipment

$167,058

$145,424

$96,426

14.9%

73.2%

Industrial & Medical

$87,013

$70,886

$55,187

22.8%

57.7%

Data Center Computing

$87,741

$83,316

$13,498

5.3%

550.0%

Telecom & Networking

$47,709

$40,254

$10,016

18.5%

376.3%

Total Revenue

$389,521

$339,880

$175,127

14.6%

122.4%

PRO FORMA

GROWTH RATES(1)

Q/Q Y/Y

14.9% 70.4%

22.8% -10.7%

5.3% 91.4%

18.5% -1.0%

14.6% 34.6%

(1) Revenue comparisons on a pro-forma basis include full historical revenues of the Artesyn acquisition in prior periods

Copyright © 2020 Advanced Energy

8

Q3 REVENUE BY MARKETS - ORGANIC(1)

(figures in $ thousands)

Q3 2020

Q2 2020

Q3 2019

Q/Q

Y/Y

Semiconductor Equipment

$166,120

$144,226

$95,468

15.2%

74.0%

Industrial & Medical

$34,596

$35,864

$38,751

-3.5%

-10.7%

Total Revenue

$200,716

$180,090

$134,219

11.5%

49.5%

(1) Revenue comparisons on an organic basis exclude the revenue contribution of the Artesyn acquisition in all periods

Copyright © 2020 Advanced Energy

9

Q3 2020 INCOME STATEMENT

(figures in $ millions, except percentage & EPS) Revenue GAAP gross margin GAAP operating expenses

GAAP operating margin from continuing ops

GAAP EPS from continuing ops Non-GAAP* gross margin Non-GAAP* operating expenses Non-GAAP* operating margin Non-GAAP* EPS

Q3 2020

Q2 2020

Q3 2019

Q/Q

Y/Y

$389.5

$339.9

$175.1

14.6%

122.4%

39.5%

38.3%

42.0%

$94.8

$94.8

$64.1

0.0%

47.9%

15.1%

10.4%

5.4%

$1.18

$0.76

$0.19

55.3%

521.1%

39.8%

38.7%

43.6%

$78.9

$77.8

$53.5

1.4%

47.6%

19.5%

15.8%

13.1%

$1.66

$1.18

$0.54

40.7%

207.4%

* non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets and unrealized foreign exchange

gain or losses on long term facility lease and pension obligations, as well as discontinued operations, and non-recurring items such as acquisition-related costs andCopyright © 2020 Advanced Energy10 restructuring expenses.

Q3 2020 BALANCE SHEET & CASH FLOW

  • Cash and investments rose by $48.2 million
  • Receivables increased to $240.1 million
    • DSO improved 7 days to 55 days
  • Inventory decreased to $257.4 million
    • Turns were 3.7 times
  • Operating cash flow from continuing operations was a record $67.5 million
  • Free cash flow(1) was $55.7 million
    • Year-to-datefree cash flow(1) was $110 million
  • Total debt at $326.3 million
    • Gross debt leverage now at 1.3x(2)
  • Repurchased $4.3 million of stock at $59.70 per share

(figures in $ millions)

Q3 2020

Q2 2020

Q4 2019

Cash &

$431.6

$383.4

$349.1

Investments

Accounts

$240.1

$235.6

$246.6

Receivable

Inventory

$257.4

$260.0

$230.0

Total Assets

$1,642.5

$1,594.3

$1,532.4

Total Debt

$326.3

$330.5

$339.0

Liabilities

$873.8

$875.9

$855.1

Shareholders'

$768.7

$718.4

$677.3

Equity

(1)

Operating cash flow from continuing operations minus capital expenditures

Copyright © 2020 Advanced Energy

11

(2)

Gross debt of 330.5 million divided by L4Q adjusted EBITDA of $187.2 million. Adjusted EBITDA is calculated as non-GAAP operating income plus depreciation.

Q4 2020 GUIDANCE

Q4 2020

Revenue

$360M +/- $20M

GAAP EPS from continuing operations

$1.03 +/- $0.21

Non-GAAP* EPS

$1.30 +/- $0.20

* non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets and unrealized foreign exchange

gain or losses on long term facility lease and pension obligations, as well as discontinued operations, and non-recurring items such as acquisition-related costs and

Copyright © 2020 Advanced Energy

12

restructuring expenses.

NON-GAAP MEASURES

Advanced Energy's non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets, and unrealized foreign exchange gain or loss on long-term facility lease and pension obligations, as well as discontinued operations and non-recurring items such as acquisition-related costs and restructuring expenses. 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 cash 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.

Copyright © 2020 Advanced Energy

13

NON-GAAP RECONCILIATION

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,

2020

2019

2020

2020

2019

Gross profit from continuing operations,

as reported

$

153,785

$ 73,491

$

130,304

$ 396,320

$

203,357

Adjustments to gross profit:

Stock-based compensation

67

77

156

445

365

Facility expansion, relocation costs and

other

1,095

1,342

970

3,608

1,662

Acquisition-related costs

-

1,506

215

5,356

1,506

Non-GAAP gross profit

154,947

76,416

131,645

405,729

206,890

Non-GAAP gross margin

39.8%

43.6%

38.7%

38.8%

45.9%

Operating expenses from continuing

operations, as reported

94,831

64,101

94,828

276,082

171,171

Adjustments:

Amortization of intangible assets

(5,049)

(3,002)

(5,009)

(15,064)

(6,849)

Stock-based compensation

(3,714)

(840)

(2,681)

(9,221)

(4,688)

Acquisition-related costs

(5,214)

(6,398)

(2,978)

(10,597)

(9,440)

Facility expansion, relocation costs and

other

(415)

(223)

(539)

(1,770)

(297)

Restructuring charges

(1,494)

(152)

(5,790)

(7,940)

(3,620)

Non-GAAP operating expenses

78,945

53,486

77,831

231,490

146,277

Non-GAAP operating income

$

76,002

$ 22,930

$

53,814

$ 174,239

$

60,613

Non-GAAP operating margin

19.5%

13.1%

15.8%

16.7%

13.4%

Reconciliation of Non-GAAP measure -

income excluding certain items

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2020

2019

2020

2020

2019

Income from continuing operations, less

noncontrolling interest, net of income taxes

$ 45,577

$

7,246

$ 29,295

$

93,255

$

45,987

Adjustments:

Amortization of intangible assets

5,049

3,002

5,009

15,064

6,849

Acquisition-related costs(1)

5,565

7,875

3,193

16,304

10,917

Facility expansion, relocation costs and

other(2)

1,784

1,565

1,509

5,652

1,959

Restructuring charges

1,494

152

5,790

7,940

3,620

Unrealized foreign currency (gain) loss

3,540

-

1,058

4,598

-

Central inverter services business sale

-

-

-

-

(14,804)

Tax effect of Non-GAAP adjustments

(2,115)

326

(2,595)

(6,080)

2,011

Non-GAAP income, net of income taxes,

excluding stock-based compensation

60,894

20,166

43,259

136,733

56,539

Stock-based compensation, net of taxes

2,892

702

2,170

7,425

3,887

Non-GAAP income, net of income taxes

$ 63,786

$

20,868

$ 45,429

$

144,158

$

60,426

  1. For the three and nine months ended September 30, 2020, and 2019, Acquisition-related costs include an expense of $351 and a gain of $29, respectively, which was recognized in Other income (expense), net.
  2. For the three and nine months ended September 30, 2020 and 2019, Facility expansion, relocation costs and other includes a $274 noncash fixed asset write-off, which was recognized in Other income (expense), net.

Reconciliation of Non-GAAP measure - per

share earnings excluding certain items

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2020

2019

2020

2020

2019

Diluted earnings per share from continuing

operations, as reported

$

1.18

$

0.19

$

0.76

$

2.42

$

1.20

Add back (subtract):

Per share impact of Non-GAAP adjustments,

net of tax

0.48

0.35

0.42

1.32

0.37

Non-GAAP per share earnings

$

1.66

$

0.54

$

1.18

$

3.74

$

1.57

Copyright © 2020 Advanced Energy

14

RECONCILIATION OF Q4 2020 GUIDANCE

Low End

High End

Revenue

$340M

-

$380M

Reconciliation of non-GAAP* earnings per share

GAAP earnings per share

$0.82

-

$1.24

Stock-based compensation

$0.08

-

$0.08

Amortization of intangible assets

$0.13

-

$0.13

Restructuring and other

$0.11

-

$0.09

Tax effects of excluded items

-$0.04

-

-$0.04

Non-GAAP* earnings per share

$1.10

-

$1.50

* non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation, amortization of intangible assets and unrealized foreign exchange

gain or losses on long term facility lease and pension obligations, as well as discontinued operations, and non-recurring items such as acquisition-related costs and

Copyright © 2020 Advanced Energy

15

restructuring expenses.

Disclaimer

AE - Advanced Energy Industries Inc. published this content on 05 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2020 20:54:06 UTC


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Financials (USD)
Sales 2020 1 410 M - -
Net income 2020 140 M - -
Net cash 2020 64,0 M - -
P/E ratio 2020 33,1x
Yield 2020 -
Capitalization 4 596 M 4 596 M -
EV / Sales 2020 3,21x
EV / Sales 2021 2,92x
Nbr of Employees 10 917
Free-Float 98,6%
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Technical analysis trends ADVANCED ENERGY INDUSTRIES, INC.
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TrendsBullishBullishBullish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 10
Average target price 112,44 $
Last Close Price 120,09 $
Spread / Highest target 6,59%
Spread / Average Target -6,37%
Spread / Lowest Target -23,4%
EPS Revisions
Managers and Directors
NameTitle
Yuval Wasserman President, Chief Executive Officer & Director
Grant H. Beard Chairman
Paul R. Oldham Chief Financial Officer & Executive Vice President
Isabel Yang Chief Technology Officer & Senior Vice President
Thomas M. Rohrs Independent Director
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