Advanced Energy (AEIS) Q1 2025 Financial Results APRIL 30, 2025 Safe Harbor global economic conditions, such as the impact of escalating global conflicts on macroeconomic Q1 2025 Financial Highlights $405 million 37.9% $29 million $1.23 13.5% $723 million REVENUE NON-GAAP GROSS MARGIN(1) OPERATING CASH FLOW(2) NON-GAAP EPS NON-GAAP OPS MARGIN(1) TOTAL CASH (1) Detailed explanations of non-GAAP financials and reconciliations of GAAP to non-GAAP financials can be found at the end of this presentation (2) Cash ...

Financial Data and Key Metrics Changes - In Q1 2025, total revenue was $405 million, a 24% increase year over year but a 3% decrease sequentially [14][15] - Gross margin was 37.9%, slightly down 10 basis points from the previous quarter but up 280 basis points year over year [16] - Earnings per share were $1.23, compared to $1.30 in the previous quarter and $0.58 a year ago [18] Business Line Data and Key Metrics Changes - Semiconductor revenue was $222 million, down 2% sequentially but up 23% year over year, driven by strong demand in AI-related leading-edge foundry logic and memory [15][16] - Data center computing revenue reached a record $96 million, up 9% sequentially and 30% year over year, with multiple new hyperscale programs ramping [15][16] - Industrial and medical revenue was $64 million, down 16% sequentially and 23% year over year, primarily due to ongoing inventory destocking [15][16] - Telecom and networking revenue declined 5% sequentially and 2% year over year to $22 million, in line with expectations [15] Market Data and Key Metrics Changes - The semiconductor market is expected to grow around 10% for the year, supported by initial production ramps of new products [22][23] - Industrial and medical revenue is anticipated to recover in Q2, although the pace may be tempered by economic uncertainty and tariffs [23] - Data center revenue is expected to grow in Q2 and into the second half of the year, driven by high demand for AI data centers [7][22] Company Strategy and Development Direction - The company is focused on delivering value through superior technology, in-house manufacturing, and best-in-class service, with heavy investments in R&D and new product capabilities [2][11] - The closure of the last China factory is expected to drive further gross margin improvement in the second half of the year [3][25] - The company aims to maintain new product momentum and complete its factory consolidation plan while exploring inorganic growth opportunities [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue outlook for Q2, supported by solid customer demand in data center and semiconductor markets [3][20] - Despite macroeconomic uncertainties, the company believes it is well-positioned to mitigate tariff impacts and maintain gross and operating margin targets [21][25] - The company anticipates continued strong demand for new products, particularly in data center and semiconductor sectors [11][20] Other Important Information - The company repurchased $22.7 million worth of common stock in April at an average price of $83.78 per share [14] - Inventory increased by $8 million, with inventory days rising from 126 to 132 [19] - The company expects Q2 gross margin to be around 38%, with operating expenses projected to increase to $99 million to $101 million [23][24] Q&A Session Summary Question: What is the underlying view for the semiconductor equipment market? - Management believes the market is expected to be flat, with a projected growth of 10% for the company, driven by strong demand in leading-edge processes and new products [28][30] Question: Are there any risks of delays in the rollout of new systems? - Management indicated that while there are challenges, there is a high degree of urgency from customers to incorporate new solutions due to issues with older technology [54][56] Question: What steps are being taken to improve the industrial and medical business? - Management noted that the industrial medical segment has been challenging, but they are optimistic about long-term growth due to a strong design win pipeline and potential acquisitions [41][45] Question: How is the company positioned regarding tariffs? - Management stated that the company is relatively well-positioned to mitigate tariff impacts, with most products compliant with USMCA and a favorable manufacturing footprint [4][34] Question: What is the margin profile of the backlog? - Management indicated that while the backlog is not particularly meaningful, they expect higher margins from new products and improved product mix [70][71]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $405 million, a 24% increase year over year but a 3% decrease sequentially [15][16] - Gross margin improved to 37.9%, up 280 basis points year over year, despite a slight decrease from the previous quarter [19][21] - Earnings per share for Q1 was $1.23, compared to $1.30 in the previous quarter and $0.58 a year ago [21] Business Line Data and Key Metrics Changes - Semiconductor revenue was $222 million, down 2% sequentially but up 23% year over year, driven by strong demand in AI-related leading-edge foundry logic and memory [17] - Data center computing revenue reached a record $96 million, up 9% sequentially and 30% year over year, with multiple new hyperscale programs ramping [17][9] - Industrial and medical revenue was $64 million, down 16% sequentially and 23% year over year, primarily due to ongoing inventory destocking [18][10] - Telecom and networking revenue declined 5% sequentially and 2% year over year to $22 million, in line with expectations [19] Market Data and Key Metrics Changes - The semiconductor market is expected to grow around 10% for the year, supported by new product ramps [26] - Data center computing is projected to continue strong growth, particularly driven by AI investments [25] - Industrial and medical markets are anticipated to recover in Q2, although the pace may be affected by economic uncertainty and tariffs [26][10] Company Strategy and Development Direction - The company is focused on delivering value through superior technology, in-house manufacturing, and best-in-class service, with significant investments in R&D and new product capabilities [3][14] - The closure of the last factory in China is expected to enhance gross margins in the second half of the year [4][28] - The company aims to capture market share through new product introductions and strategic acquisitions, particularly in the fragmented industrial and medical markets [14][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue outlook for Q2, supported by solid customer demand in data center and semiconductor markets [4][25] - Despite macroeconomic uncertainties, the company believes it is well-positioned to mitigate tariff impacts and maintain growth [5][28] - The management highlighted strong customer pull for next-generation products and a robust design win pipeline [7][11] Other Important Information - The company repurchased $22.7 million worth of common stock in April at an average price of $83.78 per share [16] - The company expects Q2 revenue to be approximately $420 million, with a gross margin around 38% [26] Q&A Session Summary Question: What is the underlying view for the semiconductor equipment market? - Management believes the market is expected to be flat, with their growth projection of 10% indicating outperformance due to strong demand in leading-edge processes and new products [32][33] Question: Are there any risks of delays in the rollout of new systems? - Management acknowledged potential delays but emphasized the urgency from customers to incorporate new solutions due to challenges with older technology [57] Question: What steps are being taken to improve the industrial and medical business? - Management indicated that while the current state is challenging, they are optimistic about long-term growth due to a strong design win pipeline and potential acquisitions in the fragmented market [46][48] Question: How significant is the impact of tariffs on costs? - Management stated that while there are some costs associated with tariffs, they are manageable and have been factored into their guidance [109] Question: What is the outlook for gross margins moving into 2026? - Management expects continued improvement in gross margins driven by new product traction and operational efficiencies, with a goal to approach 40% by the end of the year [90][78]

Revenue and Profitability - Revenue for Q1 2025 was $404.6 million, a 23.5% increase from $327.5 million in Q1 2024[104] - Gross profit for Q1 2025 was $150.5 million, with a gross margin of 37.2%, up from $112.9 million and 34.5% in Q1 2024[107] - Operating income from continuing operations rose to $30.6 million, compared to $0.9 million in Q1 2024[103] - Non-GAAP operating income for Q1 2025 was $54.8 million, compared to $21.4 million in Q1 2024, reflecting improved operational efficiency[120] Revenue Breakdown by Segment - Semiconductor Equipment revenue increased by 23.5% to $222.2 million, driven by strong demand for leading-edge process tools[104] - Data Center Computing revenue surged by 129.6% to $96.2 million, attributed to increased investments in AI-driven platforms[104] - Industrial and Medical revenue decreased by 22.9% to $64.3 million due to lower demand and customer inventory rebalancing[104] - Telecom and Networking revenue slightly declined by 1.8% to $21.9 million, reflecting current market conditions[104] Expenses and Cost Management - Total operating expenses for Q1 2025 were $119.9 million, representing 29.6% of revenue, compared to $112.0 million and 34.2% in Q1 2024[108] - Research and development expenses increased to $54.2 million (13.4% of revenue) in Q1 2025 from $49.8 million (15.2% of revenue) in Q1 2024, driven by higher compensation and program costs[108][109] - Selling, general, and administrative expenses rose to $59.0 million (14.6% of revenue) in Q1 2025, up from $55.1 million (16.8% of revenue) in Q1 2024, primarily due to professional services costs[108][110] Cash Flow and Financial Position - Cash and cash equivalents as of March 31, 2025, totaled $723.0 million, with an additional $600.0 million available under the Revolving Facility[123] - Net cash from operating activities for continuing operations was $29.2 million in Q1 2025, significantly up from $8.0 million in Q1 2024, attributed to higher net income and favorable changes in working capital[130] - The company paid quarterly cash dividends of $0.10 per share, totaling $3.8 million during Q1 2025, with plans to maintain this dividend rate[127] - Net cash used in financing activities for Q1 2025 was $13.4 million, including $3.8 million for dividend payments and $9.1 million in net payments related to stock-based award activities[133] Debt and Taxation - The company’s only outstanding debt as of March 31, 2025, was $575.0 million in Convertible Notes with a 2.5% interest rate, maturing on September 15, 2028[125] - The effective tax rate for Q1 2025 was 16.7%, down from 23.1% in Q1 2024, primarily due to a more favorable mix of earnings[116] Future Outlook and Market Trends - Future growth is expected in the Semiconductor Equipment market, driven by megatrends such as AI and IoT[89] - The Industrial and Medical market is anticipated to gradually recover as customer inventories normalize[94] Risk Management and Accounting Estimates - The company is exposed to interest rate risk from investments and the Credit Agreement, but current debt is at a fixed 2.5% interest rate[144] - Significant accounting estimates include assessing excess and obsolete inventories and accounting for income taxes[136] - Actual results may differ materially from reported amounts due to variability in factors affecting accounting estimates[137] - The company does not engage in derivatives for trading or speculative purposes, focusing solely on risk management[143]

Financial Performance - Revenue for Q1 2025 was $404.6 million, a 23.5% increase year-over-year from $327.5 million in Q1 2024[4] - GAAP net income from continuing operations was $24.9 million, or $0.65 per diluted share, compared to $6.0 million, or $0.16 per diluted share in Q1 2024[5] - Non-GAAP net income was $46.9 million, or $1.23 per diluted share, up from $22.0 million, or $0.58 per diluted share in Q1 2024[6] - Net income for Q1 2025 increased to $24.7 million, compared to $5.4 million in Q1 2024, representing a significant growth of 357.4%[24] - Total net revenue for Q1 2025 was $404.6 million, up 23.5% from $327.5 million in Q1 2024[25] - Semiconductor Equipment revenue rose to $222.2 million in Q1 2025, a 23.3% increase from $179.9 million in Q1 2024[25] Cash Flow and Dividends - Cash flow from continuing operations was $29.2 million, with $3.8 million paid in quarterly dividends[7] - The company repurchased $0.9 million of common stock at an average price of $94.26 per share during the quarter[7] - Cash and cash equivalents at the end of Q1 2025 were $723.0 million, a slight increase from $722.1 million at the beginning of the period[24] Guidance and Expectations - For Q2 2025, the company expects revenue in the range of $420 million, plus or minus $20 million[10] - GAAP EPS guidance for Q2 2025 is $0.74, plus or minus $0.25, while Non-GAAP EPS guidance is $1.30, plus or minus $0.25[10] - The company expects Q2 2025 revenue guidance between $400 million and $440 million[29] Margins and Profitability - Gross margin for Q1 2025 was 37.2%, consistent with Q4 2024[22] - Non-GAAP gross profit for Q1 2025 was $153.4 million, compared to $115.0 million in Q1 2024, reflecting a 33.4% increase[26] - GAAP operating income for Q1 2025 was $30.6 million, significantly up from $0.9 million in Q1 2024[26] - The company reported a GAAP gross margin of 37.2% for Q1 2025, compared to 34.5% in Q1 2024[26] - Non-GAAP operating income for Q1 2025 was $54.8 million, compared to $21.4 million in Q1 2024, indicating a 156.5% increase[26] Assets - Total assets increased to $2,302.2 million as of March 31, 2025, compared to $2,261.9 million at the end of 2024[23]

Group 1 - Advanced Energy Industries (AEIS) is well-positioned to maintain its earnings-beat streak, particularly in the semiconductor equipment industry [1] - The company has a history of exceeding earnings estimates, with an average surprise of 12.89% over the past two quarters [1] - In the last reported quarter, Advanced Energy achieved earnings of $1.30 per share, surpassing the Zacks Consensus Estimate of $1.09 per share by 19.27% [2] Group 2 - Estimates for Advanced Energy have been trending higher, supported by its earnings surprise history [5] - The stock has a positive Zacks Earnings ESP of +8.24%, indicating bullish sentiment among analysts regarding its earnings prospects [8] - The next earnings report for Advanced Energy is expected to be released on April 30, 2025 [8] Group 3 - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [6] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, reflecting the latest analyst revisions [7] - A negative Earnings ESP does not necessarily indicate an earnings miss but reduces the predictive power of the metric [9]

Group 1 - Advanced Energy Industries (NASDAQ: AEIS) experienced growth in its consolidated top line after over a year of decline, driven by strong double-digit growth in the data center and semiconductor sectors [1] Group 2 - The company has a focus on strong foundational businesses within the technology, industrial, and conglomerate sectors, indicating a long-term positive outlook [1] - The analysis emphasizes the importance of understanding financial details and market dynamics to provide insights into company performance [1]

Revenue and Customer Concentration - Applied Materials, Inc. and Lam Research Corporation accounted for 26% and 11% of total revenue for the year ended December 31, 2024, compared to 22% for Applied Materials, Inc. in 2023[37]. - A significant portion of revenue and accounts receivable is concentrated among a few large customers, which poses risks if these customers reduce or cancel orders[76]. - The company expects revenue from a few large customers to continue to account for a significant percentage of total revenue, emphasizing the need to maintain and diversify customer relationships[77]. - Revenue from customers outside the United States represented 66% of total revenue for the year ended December 31, 2024[93]. - Total revenue for 2024 was $1,482,042, a decrease of 10.5% from $1,655,810 in 2023[319]. - The company reported a significant decline in total revenue compared to 2022, which was $1,845,422[319]. Financial Performance - Net revenue for 2024 decreased to $1,482,042 thousand, down 10.4% from $1,655,810 thousand in 2023[248]. - Gross profit for 2024 was $529,343 thousand, representing a decline of 10.6% compared to $592,398 thousand in 2023[248]. - Operating income significantly dropped to $36,607 thousand in 2024, a decrease of 67.8% from $113,694 thousand in 2023[248]. - Net income for 2024 was $54,214 thousand, down 57.7% from $128,284 thousand in 2023[250]. - Basic earnings per share for continuing operations fell to $1.50 in 2024, a decrease of 57.0% from $3.49 in 2023[248]. - Comprehensive income for 2024 was $36,316 thousand, down 69.3% from $118,078 thousand in 2023[250]. Expenses and Costs - Research and development expenses for the years ended December 31, 2024, 2023, and 2022 were $211.8 million, $202.4 million, and $191.0 million, respectively, representing 10.4% to 14.3% of total revenue[49]. - Total operating expenses rose to $492,736 thousand in 2024, an increase of 2.6% compared to $478,704 thousand in 2023[248]. - The company has experienced increasing costs to attract and retain skilled personnel, which may impact its ability to capitalize on market opportunities[83]. - The company has implemented pricing strategies to reflect higher supply chain costs, but future price increases could affect competitiveness[75]. Manufacturing and Operations - The company announced the closure of its Zhongshan, China manufacturing facility and several smaller sites, while expanding capacity in Mexico and progressing on a new factory near Bangkok, Thailand, expected to be operational in 2026[41]. - The company is consolidating its manufacturing footprint, which may lead to operational risks and inefficiencies during transitional periods[87]. - The company is in the process of implementing a global enterprise resource planning (ERP) system, with potential risks related to delays or failures in achieving implementation goals[82]. Market and Industry Conditions - The semiconductor industry is recovering from a cyclical downturn, while the Industrial and Medical market and Telecom and Networking market are rebalancing elevated inventory levels[64]. - Significant competitive factors in the markets include product performance, compatibility, price, quality, reliability, and customer service[47]. Risks and Compliance - The company is subject to various business and industry risks, including unpredictable fluctuations in demand and supply chain disruptions[62]. - Cybersecurity threats pose significant risks, and breaches could lead to legal liabilities and operational disruptions[80]. - The company faces risks associated with acquisitions and strategic investments, including integration challenges and the potential for impairment of acquired assets[89]. - The company is subject to complex global trade regulations that could further impact competitiveness and operational forecasting[98]. - The company faces risks associated with international operations, including supply chain interruptions and compliance with varying local laws[95]. - Changes in tax laws and rates could impact future tax liabilities and corporate profitability, with potential increases in effective tax rates[110]. Assets and Liabilities - The company's total assets decreased from $2,556.8 million in 2023 to $2,261.9 million in 2024, a decline of approximately 11.5%[245]. - Cash and cash equivalents dropped significantly from $1,044.6 million in 2023 to $722.1 million in 2024, representing a decrease of about 30.9%[245]. - The company's long-term debt decreased from $895.7 million in 2023 to $564.7 million in 2024, a reduction of about 37%[245]. - The company reported a total stockholders' equity of $1,203.2 million in 2024, up from $1,144.2 million in 2023, indicating an increase of about 5.2%[245]. Acquisitions and Investments - The company acquired 100% of Airity Technologies, Inc. for a total fair value of purchase consideration of $19.61 million, which includes $14.30 million in cash and $4.46 million in common stock[314][315]. - The purchase price allocation includes $4.20 million in intangible assets and $16.12 million in goodwill, which is not deductible for tax purposes[316]. - Stock-based compensation expense related to the acquisition of Airity includes $11.1 million to be recorded over a three-year vesting period[317]. Global Workforce and Diversity - The company has a globally diverse workforce of approximately 10,000 employees as of December 31, 2024, with a gender distribution of approximately 56% male and 44% female[50].

Core Insights - Advanced Energy Industries (AEIS) reported total revenue of $415.4 million for the quarter ending December 2024, reflecting a 2.5% increase from the previous year [4] International Revenue Trends - Revenue from Europe was $32.3 million, accounting for 7.78% of total revenue, which was a significant decline of 31.8% compared to the expected $47.36 million [5] - Asia contributed $194.74 million, representing 46.88% of total revenue, with a positive surprise of 21.13% over the expected $160.77 million [6] - Other countries generated $0.98 million, making up 0.23% of total revenue, which was a decrease of 12.16% from the projected $1.11 million [7] Future Revenue Forecasts - For the current fiscal quarter, total revenue is projected to reach $383.75 million, a 17.2% increase year-over-year, with Europe expected to contribute $49.32 million (12.9%), Asia $161.13 million (42%), and Other countries $1.51 million (0.4%) [8] - For the full year, total revenue is anticipated to be $1.62 billion, indicating a 9.5% rise from the previous year, with regional contributions of Europe at $192.4 million (11.9%), Asia at $694.08 million (42.8%), and Other countries at $4.1 million (0.3%) [9] Conclusion - The reliance on international markets presents both opportunities and challenges for Advanced Energy, making the analysis of international revenue trends crucial for forecasting future performance [10]

Advanced Energy Industries (AEIS) reported fourth-quarter 2024 non-GAAP earnings of $1.30 per share, surpassing the mid-point of its guidance and beating the Zacks Consensus Estimate by 19.27%. The bottom line rose 4.8% year over year.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Revenues of $415.4 million beat the Zacks Consensus Estimate by 6.45% and grew 2.5% year over year, driven by increased semiconductor demand and strength in data center computing.AEIS expects data center de ...