Summary of Advanced Energy Industries (AEIS) Conference Call Company Overview - **Company**: Advanced Energy Industries (AEIS) - **Event**: Citi Global TMT Conference - **Date**: September 04, 2025 Key Points Industry and Market Performance - **Data Center Market**: - Experienced a significant growth of nearly 50% sequentially in Q2, driven by AI data center demand [6][7] - Expected to grow 80% year-on-year, primarily due to AI data center buildouts [7] - **Semiconductor Market**: - Mid-single-digit growth anticipated, with some reductions in customer forecasts for the second half of the year [9][17] - New product revenue from EVOS and Everest platforms expected to double, reaching over $10 million [10] - **Industrial Medical Market**: - After seven quarters of decline, growth is expected to continue into Q3 and Q4, indicating a recovery trend [6][28] - **Telecom and Networking**: - Market remains relatively flat, with no significant growth expected [7] Financial Performance - **Revenue Growth**: - Total company revenue projected to grow 17% year-on-year [7] - **CapEx**: - Increased to approximately 6% of revenue to support data center product demand [24] - **Gross Margins**: - Expected to improve to mid-38% in Q3 and between 39% and 40% in Q4, despite tariff impacts [40][41] Product Development and Competitive Position - **New Products**: - EVOS, Everest, and NAVEX products are positioned to gain market share in both conductor and dielectric etch applications [10][12] - Focus on customized solutions for hyperscale applications, particularly in AI data centers [18][21] - **Competitive Landscape**: - Advanced Energy has a strong position in conductor etch but aims to expand its presence in dielectric etch, where competitors include Daihen Corporation and MKS Instruments [12][14] Strategic Outlook - **Market Trends**: - Anticipated continued demand from AI applications will drive growth in the semiconductor market [32] - **Engineering Capacity**: - The company is expanding its engineering workforce and capabilities to meet increasing demand [38][39] - **M&A Strategy**: - Focus on acquiring companies in the industrial medical sector to build critical mass and enhance market share [46][48] Risks and Challenges - **Tariff Impacts**: - Increased tariffs from approximately 10% to around 19% in Southeast Asia are expected to affect gross margins, though mitigative actions are in place [40][41] - **Supply Chain and Inventory**: - The company has been monitoring inventory levels closely, particularly in the industrial medical sector, to ensure a return to equilibrium [27][28] Additional Insights - **Customer Engagement**: - Strong collaboration with hyperscalers and a focus on engineering bandwidth to prioritize high-potential projects [18][19] - **Long-term Vision**: - The company aims to leverage its technology across different applications to enhance efficiency and speed to market [21][23] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting Advanced Energy Industries' performance, market outlook, and future growth strategies.

Group 1: Stride (LRN) - Stride is a premier provider of K-12 education, including career learning services, and has a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for Stride's current year earnings increased by 10.6% over the last 60 days [1] - Stride's shares gained 10.4% over the last three months, outperforming the S&P 500's gain of 8.5% [2] - The company possesses a Momentum Score of A [2] Group 2: Magic Software Enterprises (MGIC) - Magic Software Enterprises develops and supports software development and deployment technology, and has a Zacks Rank 1 [3] - The Zacks Consensus Estimate for Magic Software's current year earnings increased by 10.1% over the last 60 days [3] - Magic Software's shares gained 20.5% over the last three months, significantly outperforming the S&P 500's gain of 8.5% [4] - The company possesses a Momentum Score of A [4] Group 3: Advanced Energy Industries (AEIS) - Advanced Energy Industries is a leading supplier of power subsystems and process-control technologies to the semiconductor industry, and has a Zacks Rank 1 [4] - The Zacks Consensus Estimate for Advanced Energy's current year earnings increased by 10.1% over the last 60 days [4] - Advanced Energy's shares gained 21.5% over the last three months, also outperforming the S&P 500's gain of 8.5% [5] - The company possesses a Momentum Score of A [5]

Core Insights - Advanced Energy Industries (AEIS) reported strong second-quarter 2025 results with non-GAAP earnings of $1.50 per share, exceeding the Zacks Consensus Estimate by 17.2% and reflecting a year-over-year increase of 76.5% [1][7] - Revenues reached $441.5 million, surpassing the Zacks Consensus Estimate by 5.35% and showing a 21% year-over-year growth [1][7] Revenue Breakdown - Semiconductor Equipment revenues, accounting for 47.5% of total revenues, increased by 11.3% year over year to $209.5 million, slightly above the Zacks Consensus Estimate by 0.96% [2] - Data Center Computing revenues, making up 32.1% of total revenues, surged 94% year over year to $141.6 million, significantly beating the consensus mark by 67.99% [3] - Industrial & Medical revenues fell 13.3% year over year to $68.6 million, missing the Zacks Consensus Estimate by 18.6% [2] - Telecom & Networking revenues decreased by 11% year over year to $21.8 million, but still exceeded the Zacks Consensus Estimate by 5.49% [3] Operating Results - Non-GAAP gross margin improved to 38.1%, up 270 basis points year over year [4] - Non-GAAP operating expenses rose 9% year over year to $103.6 million, but as a percentage of revenues, it declined by 260 basis points to 23.5% [4] - Non-GAAP operating margin expanded to 17.2%, an increase of 900 basis points year over year [4] Balance Sheet & Cash Flow - As of June 30, 2025, cash and cash equivalents stood at $713.5 million, a slight decrease from $723 million as of March 31 [5] - Cash flow from operations was $46.5 million, up from $29.2 million in the first quarter of 2025 [5] - The company paid dividends of $3.9 million and repurchased $22.8 million of common stock at an average price of $83.83 per share [5] Guidance - For Q3 2025, AEIS expects non-GAAP earnings of $1.45 per share (+/- 25 cents) and revenues of $440 million (+/- $20 million) [8] - Semiconductor revenues are anticipated to decline slightly sequentially, while Industrial & Medical revenues are expected to grow modestly [8] - Gross margin for Q3 2025 is projected to improve to approximately 38.5% [8] 2025 Outlook - AEIS forecasts overall revenue growth of approximately 17% for 2025, with Data Center revenues expected to grow over 80% and mid-single-digit growth in Semiconductor revenues [9] - The company aims to more than double revenues from its eVoS, eVerest, and NavX platforms in the semiconductor segment in 2025 [9] - Gross margin is expected to approach 40% by the end of 2025 [9]

Core Insights - Advanced Energy Industries (AEIS) reported strong Q2 2025 earnings, with GAAP revenue of $441.5 million, exceeding both its guidance and analyst estimates [1][2] - Non-GAAP EPS was $1.50, surpassing expectations by $0.19, reflecting significant growth in AI-driven Data Center Computing solutions and Semiconductor Equipment [1][2] - The company achieved substantial gains in gross margin and net income compared to the prior year, indicating effective manufacturing optimization [1] Financial Performance - Q2 2025 Non-GAAP EPS was $1.50, up 76.5% from $0.85 in Q2 2024 [2] - GAAP revenue reached $441.5 million, a 21.0% increase from $364.9 million in Q2 2024 [2] - Gross margin improved to 38.1%, up 2.8 percentage points from 35.3% in Q2 2024 [2] - Operating income rose to $31.6 million, a 144.9% increase from $12.9 million in Q2 2024 [2] Business Overview - Advanced Energy Industries specializes in power conversion technologies for semiconductor equipment, data centers, and industrial and medical devices [3] - The company focuses on ensuring reliable performance in mission-critical applications through its power systems [3] Strategic Focus - The company is expanding its presence in AI data center power supplies and next-generation plasma power products for semiconductor manufacturing [4] - Strategic acquisitions, such as Airity Technologies, and investments in manufacturing optimization are key to growth [4] - Success factors include winning new design slots with major customers and maintaining cost control through global manufacturing shifts [4] Segment Performance - Data Center Computing revenue nearly doubled to $141.6 million, accounting for 32% of total revenue, driven by strong demand for AI solutions [5] - Semiconductor Equipment remained the largest revenue driver at $209.5 million, or 47.5% of total revenue, with rapid customer adoption of new plasma power products [6] - Industrial and Medical revenue was $68.6 million, down 13% year-over-year but showing signs of recovery [7] - Telecom and Networking contributed $21.8 million, marking an 11% decline compared to Q2 2024 [8] Operational Efficiency - The company is investing in manufacturing optimization, with operations expanded in Mexico and a new facility in Thailand [10] - Restructuring and transition charges were $7.0 million, reflecting ongoing investments in global manufacturing [10] - Operating expenses grew at a rate below revenue growth, demonstrating a commitment to innovation [10] Capital Returns and Guidance - The company returned $22.8 million in share repurchases and paid $3.9 million in dividends [11] - For Q3 2025, management provided guidance for revenue of $420 million, with non-GAAP EPS expected at $1.45 [12] - The forecast indicates flat GAAP revenue compared to Q2 2025 but higher than prior analyst expectations [12]

Core Viewpoint - Advanced Energy Industries (AEIS) reported quarterly earnings of $1.5 per share, exceeding the Zacks Consensus Estimate of $1.28 per share, and showing a significant increase from $0.85 per share a year ago, indicating strong performance in the power-conversion products sector [1][2]. Financial Performance - The company achieved revenues of $441.5 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.35% and up from $364.95 million year-over-year [2]. - Over the last four quarters, Advanced Energy has consistently exceeded consensus EPS estimates, achieving this four times [2]. Stock Performance - Advanced Energy shares have increased approximately 21.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 7.6% [3]. - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.24 on revenues of $415.02 million, while for the current fiscal year, the estimate is $5.15 on revenues of $1.66 billion [7]. - The trend of earnings estimate revisions is mixed ahead of the earnings release, which may influence future stock movements [6][7]. Industry Context - Advanced Energy operates within the Semiconductor Equipment - Wafer Fabrication industry, which is currently ranked in the bottom 15% of over 250 Zacks industries, suggesting potential challenges ahead [8].

Financial Data and Key Metrics Changes - Second quarter revenue reached $442 million, exceeding the high end of guidance, representing a 21% year-over-year growth and a 9% sequential increase [19][20] - Earnings per share (EPS) was $1.50, up 76% from the previous year, marking the highest level since 2022 [19] - Gross margin improved to 38.1%, up 20 basis points sequentially, despite increased tariff expenses [22][19] Business Line Data and Key Metrics Changes - Semiconductor revenue was $210 million, up 11% year-over-year but down 6% sequentially [20] - Data center computing revenue surged to $142 million, up 47% quarter-over-quarter and 94% year-over-year [21] - Industrial and medical revenue increased 7% sequentially to $69 million but was down 13% year-over-year [21] Market Data and Key Metrics Changes - The semiconductor market showed double-digit year-over-year growth, although it faced sequential declines due to customer delivery schedule shifts [10][20] - Data center computing market demand is expected to remain strong, with revenue growth projected to exceed 80% for 2025 [16][29] - Industrial and medical markets are showing signs of recovery, with total backlog growing for the first time since early 2023 [13][21] Company Strategy and Development Direction - The company is focused on a diversification strategy across three distinct target markets to mitigate cycle risk and enhance profitability [7][8] - Investments in technology and capacity are being made to support long-term growth, particularly in data center and semiconductor markets [8][18] - The closure of the last factory in China is expected to improve gross margins, targeting 40% by the end of 2025 [10][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining data center revenue growth into 2026, driven by high investment rates from hyperscalers [36] - The company anticipates overall revenue growth of approximately 17% for 2025, with specific growth expectations for data center and semiconductor markets [16][28] - Management highlighted the importance of mitigating tariff impacts through various strategies, including optimizing supply chains [10][27] Other Important Information - The company repurchased $23 million of its common stock during the quarter, reflecting a strong cash position with total cash and equivalents at $714 million [24][25] - Free cash flow grew 21% sequentially, indicating robust cash generation capabilities [25] Q&A Session Summary Question: Sustainability of data center demand - Management believes data center revenues are sustainable into 2026 due to continued high investment from hyperscalers [36] Question: Content per server for AI data centers - AI data centers have significantly higher power consumption, leading to increased revenue potential, although not on a linear basis [42][44] Question: Changes in semiconductor growth projections - The semiconductor growth projection was adjusted to mid-single digits for 2025 due to tariff impacts and market conditions [48][50] Question: Impact of new design wins in industrial and medical - New design wins are expected to contribute to revenue growth in the second half of the year, alongside market recovery [70] Question: Inventory levels and customer behavior - There is no significant overstocking observed in data center customers, with a cautious approach to inventory management in industrial and medical sectors [75]

Financial Data and Key Metrics Changes - Second quarter revenue reached $442 million, exceeding guidance and reflecting a 21% year-over-year growth, marking the third consecutive quarter of growth [5][18][19] - Earnings per share (EPS) was $1.50, up 76% from the previous year, the highest level since 2022 [18][19] - Gross margin improved slightly to 38.1%, with operating margin increasing by 110 basis points sequentially [18][21] Business Line Data and Key Metrics Changes - Semiconductor revenue was $210 million, up 11% year-over-year but down 6% sequentially due to customer delivery schedule shifts [19][20] - Data center computing revenue surged to $142 million, up 47% quarter-over-quarter and nearly doubled year-over-year [20][11] - Industrial and medical revenue was $69 million, a 7% sequential increase but down 13% year-over-year [20][12] Market Data and Key Metrics Changes - The semiconductor market showed solid year-over-year growth despite a sequential decline, influenced by tariff impacts and customer inventory management [19][51] - Data center demand is expected to remain strong, with projections for over 80% growth in 2025 [15][28] - Industrial and medical markets are showing signs of recovery, with increased backlog and improved customer inventory levels [12][20] Company Strategy and Development Direction - The company is focused on a diversification strategy across three distinct markets to mitigate cycle risks and enhance profitability [6][15] - Investments in technology and capacity are being made to support long-term growth, particularly in data center and semiconductor markets [7][16] - The closure of the last China factory is expected to contribute to gross margin improvements, targeting 40% by the end of 2025 [9][28] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining data center revenue growth into 2026, driven by high investment from hyperscalers [36] - The company anticipates modest sequential growth in industrial and medical markets, with a stronger order book driving higher revenue in the second half of the year [15][72] - Tariff impacts are being actively managed through various mitigation strategies, with expectations for continued operational improvements [25][26] Other Important Information - Total cash and cash equivalents at the end of Q2 were $714 million, with net cash of $147 million [22][24] - The company repurchased $23 million of common stock during the quarter [22][24] - Free cash flow grew 21% sequentially, indicating strong cash generation capabilities [24] Q&A Session Summary Question: Sustainability of data center demand - Management believes data center revenues are sustainable into 2026 due to continued high investment from hyperscalers [36] Question: Content per server for AI data centers - AI data centers have significantly higher power consumption, leading to increased revenue potential, though not on a linear basis [42][45] Question: Changes in semiconductor growth projections - The semiconductor growth projection was adjusted to mid-single digits for 2025 due to tariff impacts and market conditions [49][51] Question: Impact of tariffs on gross margin - Tariff costs are expected to remain at current levels, with mitigation strategies in place to offset impacts [53][55] Question: Design wins in industrial and medical - Recent design wins are expected to contribute to revenue growth in the second half, alongside market recovery [71][72]

Financial Performance - Revenue reached $442 million, a 21% year-over-year increase[4,9] - Non-GAAP gross margin was 38.1%, showing a sequential increase[4,9] - Non-GAAP EPS was $1.50, up 76% year-over-year[4,9] - Operating cash flow was $47 million[4] - Total cash was $714 million[4] Revenue Breakdown by Market - Semiconductor Equipment revenue was $209.5 million, up 11.3% year-over-year[17] - Industrial & Medical revenue was $68.6 million, down 13.3% year-over-year[17] - Data Center Computing revenue was $141.6 million, up 94% year-over-year[17] - Telecom & Networking revenue was $21.8 million, down 11% year-over-year[17] Future Outlook - The company forecasts approximately 17% total revenue growth for 2025[7] - Data Center Computing revenue is projected to grow more than 80% in 2025[9] - Q3 2025 revenue guidance is $440 million ± $20 million[21] - Q3 2025 non-GAAP EPS guidance is $1.45 ± $0.25[21]

[PART I FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for Advanced Energy Industries, Inc [ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Advanced Energy Industries, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a slight decrease in cash and cash equivalents but an overall increase in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, indicating growth in the company's asset base and financial strength | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :-------------------------- | :---------------------------- | :------------------- | :------- | | Cash and cash equivalents | $713.5 | $722.1 | $(8.6) | -1.19% | | Accounts receivable, net | $304.0 | $265.3 | $38.7 | 14.59% | | Inventories | $397.9 | $360.4 | $37.5 | 10.40% | | Total current assets | $1,459.5 | $1,389.3 | $70.2 | 5.05% | | Total assets | $2,379.6 | $2,261.9 | $117.7 | 5.20% | | Total current liabilities | $356.9 | $314.3 | $42.6 | 13.55% | | Total liabilities | $1,117.0 | $1,055.3 | $61.7 | 5.85% | | Total stockholders' equity | $1,257.3 | $1,203.1 | $54.2 | 4.51% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported significant year-over-year growth in revenue, gross profit, and operating income for both the three and six months ended June 30, 2025, demonstrating improved operational efficiency and profitability, despite a decrease in interest income | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Revenue, net | $441.5 | $364.9 | 21.0% | $846.1 | $692.4 | 22.2% | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Operating income | $31.6 | $12.9 | 145.0% | $62.2 | $13.6 | 357.4% | | Interest income | $6.6 | $12.1 | -45.5% | $13.5 | $24.8 | -45.6% | | Net income | $25.2 | $14.8 | 70.3% | $49.9 | $20.2 | 147.0% | | Diluted EPS | $0.67 | $0.39 | 71.8% | $1.31 | $0.54 | 142.6% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily driven by higher net income and a positive impact from foreign currency translation, which shifted from a loss in the prior year to a gain in the current period | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Net income | $25.2 | $14.8 | 70.3% | $49.9 | $20.2 | 147.0% | | Foreign currency translation | $16.2 | $(2.6) | N/A | $20.8 | $(9.2) | N/A | | Comprehensive income | $41.3 | $9.8 | 321.4% | $70.5 | $7.2 | 879.2% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from $1,203.1 million at December 31, 2024, to $1,257.3 million at June 30, 2025, primarily due to net income and stock-based compensation, partially offset by share repurchases and dividend payments | Metric (in millions) | December 31, 2024 | June 30, 2025 | | :------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $1,203.1 | $1,257.3 | | Net income | N/A | $25.2 | | Stock-based compensation | N/A | $12.2 | | Share repurchases | N/A | $(22.8) | | Dividends declared | N/A | $(3.9) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to $74.1 million for the six months ended June 30, 2025, compared to $14.0 million in the prior year, driven by higher net income. Investing activities saw a slight decrease in cash used, while financing activities used more cash due to share repurchases and debt-related payments | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :----------------------------- | :----------------------------- | :------------- | | Net cash from operating activities | $74.1 | $14.0 | 429.3% | | Net cash used in investing activities | $(43.6) | $(47.6) | -8.4% | | Net cash used in financing activities | $(42.8) | $(23.2) | 84.5% | | Net change in cash and cash equivalents | $(8.6) | $(58.5) | -85.3% | | Cash and cash equivalents, end of period | $713.5 | $986.1 | -27.7% | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies, revenue disaggregation, income tax, equity, fair value, derivatives, receivables, inventories, intangibles, restructuring, warranties, leases, stock compensation, commitments, debt, and cash flow information [NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Advanced Energy Industries, Inc. provides precision power solutions globally, with financial statements prepared under U.S. GAAP, and recent accounting standard updates are not expected to have a material impact - Advanced Energy Industries, Inc. specializes in precision power conversion, measurement, and control solutions for global customers, focusing on transforming raw electrical power into highly controllable, usable power for complex equipment[18](index=18&type=chunk) - The company adopted a change in financial statement presentation from thousands to millions during 2025, which did not materially impact previously reported financial information[21](index=21&type=chunk) - New accounting standards, ASU 2023-09 (Income Tax Disclosures, effective Dec 31, 2025) and ASU 2024-03 (Expense Disaggregation Disclosures, effective Jan 1, 2027), are not expected to materially impact the consolidated financial statements upon adoption[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 2. REVENUE](index=10&type=section&id=NOTE%202.%20REVENUE) Total revenue increased significantly for both the three and six months ended June 30, 2025, driven primarily by strong growth in the Data Center Computing and Semiconductor Equipment markets. Geographically, Japan showed the most substantial growth, while Taiwan experienced a decline Revenue by Market (in millions) | Market | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :-------------------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | Semiconductor Equipment | $209.5 | $188.3 | 11.3% | $431.7 | $368.2 | 17.2% | | Industrial and Medical | $68.6 | $79.1 | -13.3% | $132.9 | $162.5 | -18.2% | | Data Center Computing | $141.6 | $73.0 | 94.0% | $237.8 | $114.9 | 107.0% | | Telecom and Networking | $21.8 | $24.5 | -11.0% | $43.7 | $46.8 | -6.6% | | **Total Revenue** | **$441.5**| **$364.9**| **21.0%** | **$846.1** | **$692.4** | **22.2%** | Revenue by Significant Countries (in millions) | Country | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | United States | $141.7 | $129.5 | 9.4% | $285.9 | $237.3 | 20.5% | | Mexico | $41.1 | $42.9 | -4.2% | $82.8 | $68.8 | 20.3% | | Taiwan | $28.6 | $39.1 | -26.9% | $57.5 | $78.6 | -26.9% | | Japan | $64.6 | $12.7 | 408.7% | $95.9 | $25.0 | 283.6% | Revenue by Category (in millions) | Category | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | Product | $396.1 | $325.4 | 21.7% | $756.3 | $611.6 | 23.7% | | Services and other | $45.4 | $39.5 | 14.9% | $89.8 | $80.8 | 11.1% | [NOTE 3. INCOME TAX](index=11&type=section&id=NOTE%203.%20INCOME%20TAX) The effective tax rate for the three and six months ended June 30, 2025, decreased compared to the prior year, primarily due to a more favorable mix of earnings in foreign jurisdictions with lower tax rates. The company is assessing the potential impact of the Pillar II minimum global effective tax rate regime and the recently signed OBBB Act, but currently does not expect a material impact on its 2025 effective tax rate | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Income from continuing operations, before income tax (in millions) | $29.3 | $18.6 | $59.2 | $26.3 | | Income tax provision (in millions) | $3.8 | $3.2 | $8.8 | $5.0 | | Effective tax rate | 13.0% | 17.2% | 14.9% | 19.0% | - The effective tax rate for 2025 was lower than 2024 primarily due to a more favorable mix of earnings in foreign jurisdictions subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations and Pillar II top-up taxes[31](index=31&type=chunk) - The company is assessing the potential impact of the Pillar II minimum global effective tax rate regime and the One Big Beautiful Bill (OBBB) Act, but currently does not expect a material impact on its estimated annual effective tax rate in 2025[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 4. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE](index=12&type=section&id=NOTE%204.%20STOCKHOLDERS'%20EQUITY%20AND%20EARNINGS%20PER%20SHARE) Accumulated other comprehensive income (loss) shifted from a loss of $(11.8) million at December 31, 2024, to a gain of $8.8 million at June 30, 2025, primarily due to foreign currency translation. Diluted EPS from continuing operations increased significantly to $0.67 for Q2 2025 and $1.33 for YTD 2025. The company repurchased 0.3 million shares for $23.7 million during the six months ended June 30, 2025, with $173.4 million remaining authorized for future repurchases Accumulated Other Comprehensive Income (Loss) (in millions) | Component | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Foreign Currency Translation | $(22.3) | $(1.5) | | Defined Employee Benefit Plan | $10.5 | $10.3 | | **Total Accumulated Other Comprehensive Income (Loss)** | **$(11.8)** | **$8.8** | Earnings Per Share (EPS) from Continuing Operations | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Basic EPS | $0.68 | $0.41 | $1.34 | $0.57 | | Diluted EPS | $0.67 | $0.41 | $1.33 | $0.56 | Share Repurchases (in millions, except per share amounts) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Amount paid to repurchase shares | $23.7 | $0 | | Number of shares repurchased | 0.3 | 0 | | Average repurchase price per share | $84.19 | $0 | | Remaining authorized for future repurchases | $173.4 | N/A | [NOTE 5. FAIR VALUE MEASUREMENTS](index=15&type=section&id=NOTE%205.%20FAIR%20VALUE%20MEASUREMENTS) The company's non-pension assets and liabilities measured at fair value on a recurring basis, primarily certificates of deposit, investments, and deferred compensation liabilities, are classified within Level 2 of the fair value hierarchy. Foreign currency forward contracts decreased from $0.3 million to $0 | Description | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Certificates of deposit | $0.2 | $0.2 | | Foreign currency forward contracts | $0 | $0.3 | | Investments | $12.1 | $9.9 | | Deferred compensation liabilities | $10.9 | $10.1 | [NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS](index=15&type=section&id=NOTE%206.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) The company uses derivative financial instruments, primarily one-month foreign currency forward contracts, to manage exchange rate risk associated with nonfunctional currency assets and liabilities. These are not designated as accounting hedges but economically offset foreign exchange fluctuations. The total outstanding foreign currency forward contracts decreased from $70.6 million at December 31, 2024, to $59.7 million at June 30, 2025 - Advanced Energy uses one-month foreign currency forward contracts to manage exchange rate risk on assets and liabilities denominated in nonfunctional currencies, with gains and losses included in other income (expense), net[41](index=41&type=chunk) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------------------ | :-------------------------- | :---------------------------- | | Foreign currency forward contracts outstanding | $59.7 | $70.6 | [NOTE 7. ACCOUNTS RECEIVABLE, NET](index=17&type=section&id=NOTE%207.%20ACCOUNTS%20RECEIVABLE,%20NET) Accounts receivable, net, increased to $304.0 million as of June 30, 2025. The expected credit losses related to receivables decreased slightly from $0.9 million at December 31, 2024, to $0.7 million at June 30, 2025, due to write-offs | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | | :------------------------------------ | :---------------------------- | :-------------------------- | | Accounts receivable, net | N/A | $304.0 | | Expected credit losses related to receivables | $0.9 | $0.7 | [NOTE 8. INVENTORIES](index=17&type=section&id=NOTE%208.%20INVENTORIES) Total inventories increased to $397.9 million as of June 30, 2025, from $360.4 million at December 31, 2024, primarily driven by an increase in parts and raw materials | Component | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------- | :-------------------------- | :---------------------------- | | Parts and raw materials | $296.1 | $255.1 | | Work in process | $23.3 | $20.6 | | Finished goods | $78.5 | $84.7 | | **Total Inventories** | **$397.9** | **$360.4** | [NOTE 9. INTANGIBLE ASSETS AND GOODWILL](index=18&type=section&id=NOTE%209.%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) Net intangible assets decreased to $128.7 million as of June 30, 2025, from $139.4 million at December 31, 2024, due to amortization, partially offset by new acquisitions. Goodwill increased slightly to $300.9 million due to foreign currency translation and other factors Intangible Assets (Net Carrying Amount in millions) | Component | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Technology | $26.8 | $29.9 | | Customer relationships | $91.7 | $98.0 | | Trademarks and other | $10.2 | $11.5 | | **Total** | **$128.7** | **$139.4** | Amortization Expense (in millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30, | $6.8 | $5.6 | | Six Months Ended June 30, | $11.1| $13.7| Goodwill (in millions) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :------------ | | Goodwill | $296.0 | $300.9 | [NOTE 10. RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES](index=19&type=section&id=NOTE%2010.%20RESTRUCTURING,%20ASSET%20IMPAIRMENTS,%20AND%20OTHER%20CHARGES) Total restructuring, asset impairments, and other charges significantly increased to $7.0 million for Q2 2025 and $8.2 million for YTD 2025, primarily due to new restructuring plans in 2025 and ongoing activities from 2024 and 2023 plans, including manufacturing footprint optimization and functional support consolidation. A $1.6 million asset impairment charge was recorded in Q2 2025 related to vacating facilities Restructuring, Asset Impairments, and Other Charges (in millions) | Charge Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Restructuring | $4.0 | $0.1 | $4.6 | $0.1 | | Asset impairments | $1.6 | $0 | $1.6 | $0 | | Other charges | $1.4 | $0.5 | $2.0 | $0.8 | | **Total** | **$7.0**| **$0.6**| **$8.2** | **$0.9** | Restructuring Liabilities (in millions) | Plan | December 31, 2024 | June 30, 2025 | | :---------- | :---------------- | :------------ | | 2025 Plan | $0 | $2.9 |\n| 2024 Plan | $25.0 | $13.0 |\n| 2023 Plan | $5.0 | $4.4 |\n| **Total** | **$30.0** | **$20.3** | - During Q2 2025, the company approved a new restructuring plan (2025 Plan) to consolidate R&D, sales, and administrative functions, expected to be substantially complete by end of 2026[50](index=50&type=chunk) - A **$1.6 million** impairment charge was recorded during Q2 2025 related to remeasuring operating lease right-of-use assets and leasehold improvements due to vacating facilities[54](index=54&type=chunk) [NOTE 11. WARRANTIES](index=20&type=section&id=NOTE%2011.%20WARRANTIES) The estimated product warranty obligation increased to $6.3 million as of June 30, 2025, from $5.7 million at December 31, 2024, reflecting net increases to accruals partially offset by warranty expenditures | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | | :-------------------------- | :---------------------------- | :-------------------------- | | Estimated warranty obligation | $5.7 | $6.3 | [NOTE 12. LEASES](index=21&type=section&id=NOTE%2012.%20LEASES) Total operating lease cost increased for both the three and six months ended June 30, 2025. The present value of lease liabilities is $121.4 million, with estimated future payments extending through 2029 and thereafter. The weighted average remaining lease term is 8.3 years with a weighted average discount rate of 6.3% Total Operating Lease Cost (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Operating lease cost | $6.5 | $5.9 | $13.0 | $11.7 | | Short-term and variable lease cost | $1.7 | $0.9 | $3.1 | $1.6 | | **Total** | **$8.2**| **$6.8**| **$16.1**| **$13.3**| Estimated Future Payments on Operating Lease Liabilities (in millions) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2025 (remaining) | $13.6 | | 2026 | $22.7 | | 2027 | $19.4 | | 2028 | $19.1 | | 2029 | $16.0 | | Thereafter | $68.7 | | **Total lease payments** | **$159.5** | | Less: Interest | $(38.1)| | **Present value of lease liabilities** | **$121.4** | Lease Agreement Information | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Weighted average remaining lease term (in years) | 8.3 | 8.4 | | Weighted average discount rate | 6.3% | 6.1% | [NOTE 13. STOCK-BASED COMPENSATION](index=22&type=section&id=NOTE%2013.%20STOCK-BASED%20COMPENSATION) Stock-based compensation expense increased to $13.6 million for Q2 2025 and $26.6 million for YTD 2025, partly due to the Airity Technologies acquisition. The company has 1.4 million shares available for future issuance under the 2023 Incentive Plan and 0.5 million under the ESPP. Restricted Stock Units (RSUs) outstanding at June 30, 2025, totaled 1.0 million with a weighted average grant date fair value of $110.88 Stock-Based Compensation Expense (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Stock-based compensation expense | $13.6 | $11.4 | $26.6 | $22.4 | Shares Available for Future Issuance (in millions) | Plan | June 30, 2025 | | :-------------------------- | :------------ | | 2023 Incentive Plan | 1.4 | | ESPP | 0.5 | Restricted Stock Units (RSUs) (in millions, except fair value) | Metric | Six Months Ended June 30, 2025 | | :-------------------------- | :----------------------------- | | RSUs outstanding at end of period | 1.0 | | Weighted Average Grant Date Fair Value | $110.88 | [NOTE 14. COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=NOTE%2014.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal disputes and actions in the normal course of business. While the outcome is difficult to predict, management believes any ultimate loss would not be material to its financial position. Loss contingencies are accrued when probable and estimable - The company is involved in legal actions arising in the normal course of business, but management believes the results will not have a material adverse effect on its financial position, results of operations, or cash flows[64](index=64&type=chunk) [NOTE 15. LONG-TERM DEBT](index=23&type=section&id=NOTE%2015.%20LONG-TERM%20DEBT) Long-term debt consists primarily of $575.0 million in 2.5% Convertible Notes due 2028, with a net balance of $566.1 million as of June 30, 2025. The company terminated its prior credit agreement and entered into a new one on May 8, 2025, consisting of a Term Loan Facility and a $600.0 million Revolving Facility, both maturing on May 8, 2030. No borrowings were outstanding under the new Credit Agreement as of June 30, 2025. The fair value of the Convertible Notes was estimated at $693.2 million as of June 30, 2025 Long-Term Debt (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Convertible Notes due 2028, 2.5% interest | $575.0 | $575.0 |\n| Less: debt discount | $(8.9) | $(10.3) |\n| **Net long-term debt** | **$566.1** | **$564.7** | Interest Expense Related to Debt (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Interest expense | $3.4 | $6.1 | $6.9 | $12.4 | | Amortization of debt issuance costs | $0.8 | $0.9 | $1.5 | $1.7 | | **Total** | **$4.2**| **$7.0**| **$8.4** | **$14.1**| Credit Agreement Details | Metric | June 30, 2025 | | :-------------------------- | :------------ | | Available on Revolving Facility | $600.0 | | Estimated fair value of Convertible Notes | $693.2 | - On May 8, 2025, the company entered into a new credit agreement, including a senior unsecured term loan facility and a senior unsecured revolving facility, both maturing on May 8, 2030. No borrowings were outstanding under the new Credit Agreement as of June 30, 2025[67](index=67&type=chunk)[70](index=70&type=chunk) - Concurrent with the Convertible Notes issuance, the company entered into Note Hedges and sold Warrants, synthetically increasing the initial conversion price from **$137.46** to **$179.76** to reduce potential dilutive effects[75](index=75&type=chunk) [NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION AND OTHER DISCLOSURES](index=24&type=section&id=NOTE%2016.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION%20AND%20OTHER%20DISCLOSURES) Supplemental cash flow information for the six months ended June 30, 2025, includes $22.0 million in capital expenditures in accounts payable and other accrued expenses. Cash paid for interest was $7.2 million, and for income taxes was $14.7 million, with $2.9 million received from income taxes Supplemental Cash Flow Information (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Capital expenditures in accounts payable and other accrued expenses | $22.0 | $8.1 | | Cash paid for interest | $7.2 | $12.4 | | Cash paid for income taxes | $14.7 | $23.6 | | Cash received from income taxes | $2.9 | $0.7 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting significant revenue growth driven by Data Center Computing and Semiconductor Equipment markets, improved gross margins, and increased operating expenses due to compensation and restructuring. It also discusses liquidity, debt, dividends, share repurchases, and cash flow dynamics, along with forward-looking statements and critical accounting policies [Special Note on Forward-Looking Statements](index=25&type=section&id=Special%20Note%20on%20Forward-Looking%20Statements) This section cautions readers that the report contains forward-looking statements based on management's current estimates and assumptions, which involve risks and uncertainties that could cause actual results to differ materially. Key risks include market volatility, customer demand, global economic conditions, currency fluctuations, cybersecurity, supply chain disruptions, and the ability to integrate acquisitions - The report contains forward-looking statements based on management's current estimates, forecasts, and assumptions, which are subject to risks and uncertainties that could cause actual results to differ materially[79](index=79&type=chunk)[80](index=80&type=chunk) - Key risks include volatility in competing industries, ability to meet customer demand, global economic conditions (tariffs, conflicts, inflation), customer price sensitivity, U.S. Dollar value changes, customer base concentration, information security breaches, ERP implementation difficulties, loss of key personnel, manufacturing footprint optimization risks, supply chain disruptions, acquisition integration challenges, quality issues, international operation risks, intellectual property enforcement, regulatory risks, debt obligations, pension obligations, intangible asset valuation, and potential dilution from convertible debt[81](index=81&type=chunk)[83](index=83&type=chunk) [BUSINESS AND MARKET OVERVIEW](index=28&type=section&id=BUSINESS%20AND%20MARKET%20OVERVIEW) Advanced Energy provides precision power conversion, measurement, and control solutions across Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. The company is executing a manufacturing consolidation plan, including closing its Zhongshan, China facility, and is monitoring tariff impacts. Growth is driven by AI, energy efficiency, and automation trends, with strong demand in Data Center Computing and Semiconductor Equipment, a recovery in Industrial and Medical, and stable conditions in Telecom and Networking - Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions, operating as a single segment of power electronics conversion products across four key markets: Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking[84](index=84&type=chunk)[85](index=85&type=chunk) - The company is continuing its manufacturing consolidation plan, including the shutdown of its Zhongshan, China facility, with final closure activities expected by early 2026[86](index=86&type=chunk) - The Semiconductor Equipment market is driven by AI, energy efficiency, and automobile electrification, with strong demand for leading-edge devices offset by lower trailing-edge demand and U.S. export restrictions to China[91](index=91&type=chunk)[94](index=94&type=chunk) - The Data Center Computing market is experiencing meaningful growth due to rapid AI investments, accelerated adoption of next-generation AI processors, and the transition to high-power 48-volt power shelf infrastructure[98](index=98&type=chunk)[99](index=99&type=chunk) - The Industrial and Medical market resumed sequential growth in Q2 2025 as customer inventories normalized after a major downturn, with this trend expected to continue, potentially limited by tariff impacts[97](index=97&type=chunk) [Results of Continuing Operations](index=32&type=section&id=Results%20of%20Continuing%20Operations) The company achieved substantial growth in revenue, gross profit, and operating income for both the three and six months ended June 30, 2025, primarily driven by strong performance in Data Center Computing and Semiconductor Equipment. Gross margin improved due to increased revenue and manufacturing cost reductions. Operating expenses rose due to higher compensation and restructuring charges, while the effective tax rate decreased due to a favorable mix of foreign earnings. Non-GAAP results also showed significant improvements | Metric (in millions) | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | Revenue | $441.5 | $364.9 | 21.0% | $846.1 | $692.4 | 22.2% | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Operating income from continuing operations | $31.6 | $12.9 | 145.0% | $62.2 | $13.6 | 357.4% | | Income from continuing operations, before income tax | $29.3 | $18.6 | 57.5% | $59.2 | $26.3 | 125.1% | | Income tax provision | $3.8 | $3.2 | 18.8% | $8.8 | $5.0 | 76.0% | | Income from continuing operations | $25.5 | $15.4 | 65.6% | $50.4 | $21.3 | 136.6% | [Revenue](index=33&type=section&id=Revenue) Total revenue increased by 21.0% for Q2 2025 and 22.2% for YTD 2025, primarily driven by significant growth in Data Center Computing (94.0% for Q2, 107.0% for YTD) and Semiconductor Equipment (11.3% for Q2, 17.2% for YTD). Industrial and Medical, and Telecom and Networking markets experienced declines | Market | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (YoY) | YTD 2025 (in millions) | YTD 2024 (in millions) | % Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Semiconductor Equipment | $209.5 | $188.3 | 11.3% | $431.7 | $368.2 | 17.2% | | Industrial and Medical | $68.6 | $79.1 | -13.3% | $132.9 | $162.5 | -18.2% | | Data Center Computing | $141.6 | $73.0 | 94.0% | $237.8 | $114.9 | 107.0% | | Telecom and Networking | $21.8 | $24.5 | -11.0% | $43.7 | $46.8 | -6.6% | | **Total** | **$441.5** | **$364.9** | **21.0%** | **$846.1** | **$692.4** | **22.2%** | - The increase in Semiconductor Equipment revenue was due to continued cyclical recovery and strong demand for leading-edge process tools, while Data Center Computing revenue surged from hyperscale investments in AI-driven platforms and design wins[106](index=106&type=chunk) - Industrial and Medical revenue decreased due to customer inventory rebalancing, and Telecom and Networking revenue saw a modest decrease due to slowing mobile data traffic, partially offset by increased networking infrastructure spending[106](index=106&type=chunk)[107](index=107&type=chunk) [Gross Profit and Gross Margin](index=33&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit increased by 28.0% for Q2 2025 and 30.5% for YTD 2025, with gross margin improving to 37.0% and 37.1% respectively. This improvement was largely driven by increased revenue and manufacturing cost reduction programs, which positively impacted gross margin by 110 and 190 basis points for the three and six months ended June 30, 2025 | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (YoY) | YTD 2025 (in millions) | YTD 2024 (in millions) | % Change (YoY) | | :---------- | :-------------------- | :-------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Gross margin | 37.0% | 35.0% | 2.0 pp | 37.1% | 34.7% | 2.4 pp | - Manufacturing cost reduction programs positively impacted gross margin by **110 basis points** during the three months ended June 30, 2025, and **190 basis points** during the six months ended June 30, 2025[109](index=109&type=chunk) [Operating Expenses](index=35&type=section&id=Operating%20Expenses) Total operating expenses increased for both the three and six months ended June 30, 2025, primarily due to higher compensation costs in R&D and SG&A, and increased restructuring, asset impairments, and other charges. Amortization of intangible assets declined as some assets reached the end of their useful life | Operating Expense (in millions) | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | Research and development | $59.0 | $52.3 | 12.8% | $113.2 | $102.2 | 10.8% | | Selling, general, and administrative | $60.2 | $55.1 | 9.3% | $119.2 | $110.1 | 8.3% | | Amortization of intangible assets | $5.6 | $6.8 | -17.6% | $11.1 | $13.7 | -19.0% | | Restructuring, asset impairments, and other charges | $7.0 | $0.6 | 1066.7% | $8.2 | $0.9 | 811.1% | | **Total operating expenses** | **$131.8**| **$114.8**| **14.8%**

Financial Performance Overview [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) Advanced Energy reported strong Q2 2025 results, exceeding guidance due to robust AI data center demand and early market recovery Q2 2025 Key Financial Metrics | Financial Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Revenue | $441.5M | $404.6M | $364.9M | | GAAP Net Income (cont. ops) | $25.5M | $24.9M | $15.4M | | GAAP EPS (cont. ops) | $0.67 | $0.65 | $0.41 | | Non-GAAP Net Income | $56.6M | $46.9M | $32.0M | | Non-GAAP EPS | $1.50 | $1.23 | $0.85 | - The strong quarterly results were driven by **high customer demand for AI data center solutions**[3](index=3&type=chunk) - **Data Center Computing revenue** achieved a quarterly record, nearly doubling on a year-over-year basis[6](index=6&type=chunk) [Third Quarter 2025 Guidance](index=2&type=section&id=Third%20Quarter%202025%20Guidance) The company projects Q3 2025 revenue between $420 million and $460 million, with Non-GAAP EPS ranging from $1.20 to $1.70 Q3 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $440M +/- $20M | | GAAP EPS (cont. ops) | $0.82 +/- $0.25 | | Non-GAAP EPS | $1.45 +/- $0.25 | [Shareholder Returns](index=1&type=section&id=Shareholder%20Returns) Advanced Energy generated **$46.5 million** in Q2 cash flow from operations, returning capital via **$3.9 million** in dividends and **$22.8 million** in stock repurchases Q2 2025 Cash Flow and Capital Allocation | Activity | Amount (in millions) | | :--- | :--- | | Cash Flow from Continuing Operations | $46.5M | | Quarterly Dividends Paid | $3.9M | | Common Stock Repurchased | $22.8M | Consolidated Financial Statements [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue increased to **$441.5 million**, with gross margin improving to **37.0%**, driving operating income to **$31.6 million** Statement of Operations Highlights (Q2 2025 vs. Q2 2024) | Metric (in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue, net | $441.5 | $364.9 | | Gross profit | $163.4 | $127.7 | | Gross margin % | 37.0% | 35.0% | | Operating income | $31.6 | $12.9 | | Income from continuing operations | $25.5 | $15.4 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$2.38 billion** by June 30, 2025, driven by receivables and inventories, with liabilities at **$1.12 billion** and equity at **$1.26 billion** Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $713.5 | $722.1 | | Total current assets | $1,459.5 | $1,389.3 | | Total assets | $2,379.6 | $2,261.9 | | Total liabilities | $1,117.0 | $1,055.3 | | Total stockholders' equity | $1,257.3 | $1,203.1 | [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Net cash from operating activities significantly improved to **$74.1 million** for H1 2025, with **$43.6 million** used in investing and **$42.8 million** in financing Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $74.1 | $14.0 | | Net cash from investing activities | $(43.6) | $(47.6) | | Net cash from financing activities | $(42.8) | $(23.2) | | Net change in cash | $(8.6) | $(58.5) | Supplemental Information and Non-GAAP Reconciliations [Net Revenue by Market](index=8&type=section&id=Net%20Revenue%20by%20Market) **Data Center Computing** revenue nearly doubled to **$141.6 million** in Q2 2025, while Industrial & Medical and Telecom & Networking segments declined Net Revenue by Market (in millions) | Market Segment | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Semiconductor Equipment | $209.5 | $188.3 | +11.3% | | Industrial and Medical | $68.6 | $79.1 | -13.3% | | Data Center Computing | $141.6 | $73.0 | +94.0% | | Telecom and Networking | $21.8 | $24.5 | -11.0% | | **Total** | **$441.5** | **$364.9** | **+21.0%** | [Reconciliation of Non-GAAP Measures](index=3&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Reconciliations from GAAP to non-GAAP measures exclude non-cash and non-operational items, providing a clearer view of core performance - Management uses non-GAAP measures to evaluate business performance, excluding non-cash charges and non-operational items like **stock-based compensation**, **amortization**, and **acquisition costs**[12](index=12&type=chunk)[13](index=13&type=chunk) [Reconciliation of Operating Income and Margin](index=9&type=section&id=Reconciliation%20of%20Operating%20Income%20and%20Margin) Q2 2025 Non-GAAP operating income was **$64.5 million** (**14.6% margin**), significantly higher than GAAP due to adjustments for non-cash items GAAP vs. Non-GAAP Operating Margin (Q2 2025) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Gross Margin | 37.0% | 38.1% | | Operating Income | $31.6M | $64.5M | | Operating Margin | 7.2% | 14.6% | [Reconciliation of Net Income and EPS](index=10&type=section&id=Reconciliation%20of%20Net%20Income%20and%20EPS) Q2 2025 Non-GAAP net income reached **$56.6 million** (**$1.50 per share**), exceeding GAAP due to adjustments for amortization and other costs GAAP vs. Non-GAAP Net Income & EPS (Q2 2025) | Metric | GAAP (cont. ops) | Non-GAAP | | :--- | :--- | :--- | | Net Income | $25.5M | $56.6M | | Diluted EPS | $0.67 | $1.50 | [Reconciliation of Q3 2025 Guidance](index=11&type=section&id=Reconciliation%20of%20Q3%202025%20Guidance) Q3 2025 GAAP EPS guidance is adjusted for items like stock-based compensation and amortization to derive the Non-GAAP EPS range Q3 2025 EPS Guidance Reconciliation (Midpoint) | Metric | Per Share Amount | | :--- | :--- | | GAAP EPS | $0.82 | | Stock-based compensation | $0.38 | | Amortization of intangible assets | $0.15 | | Restructuring & other costs | $0.24 | | Tax effects | $(0.14) | | **Non-GAAP EPS** | **$1.45** | Other Information [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to risks including industry volatility, global economic conditions, and supply chain disruptions - The report contains forward-looking statements regarding the company's beliefs, expectations, and plans, which are not historical facts[14](index=14&type=chunk) - Identified risks include business fluctuations, ability to meet customer demand, global economic conditions, **supply chain disruptions**, and integration of acquisitions[15](index=15&type=chunk)[16](index=16&type=chunk) [About Advanced Energy](index=2&type=section&id=About%20Advanced%20Energy) Advanced Energy is a global leader in precision power conversion, measurement, and control solutions for mission-critical applications across diverse industries - Advanced Energy is a global leader in highly engineered, precision power conversion, measurement, and control solutions for mission-critical applications[9](index=9&type=chunk)