Summary

• Advanced Energy Industries, Inc. produces precision power products that transform raw electrical power into controllable, predictable, repeatable, and customizable power for complex equipment.
• Advanced Energies Inc. was founded in 1981 and has its headquarters in Fort Collins, Colorado, USA.
• Advanced Energy operates a global power electronics conversion segment, selling products in Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.
• The 52-week price range of Advanced Energies is 81.86 to 126.38, and the trailing PE ratio is 29.25, the gross margin is 35.78%, the operating margin is 6.87%, the net margin is 7.75% including income from interest and the return on assets is 5.02% as on 31 December 2023.
• The company's net revenues for the year ended 31 December 2023 were $1655.81 million, a 10.27% decrease from the previous year's $1,845.42 million.

Brief Company Overview

Advanced Energy Industries, Inc. (NASDAQ: AEIS) is an American multinational technology company that provides highly engineered, critical, precision power conversion, measurement, and control solutions. The company produces precision power products that transform raw electrical power into controllable, predictable, repeatable, and customizable power for complex equipment. Advanced Energies Inc. was founded in 1981 and has its headquarters in Fort Collins, Colorado, USA.¹ With over 40 years of experience, Advanced Energy operates globally, with regional centers in North America, Asia, and Europe, and offers sales and support through direct offices, representatives, and distributors. In 2022, The company acquired 100% of the capital stock of SL Power Electronics Corporation which is based in Calabasas, California. This acquisition added complementary products to Advanced Energy’s medical power offerings and extended its presence in several advanced industrial markets.

Advanced Energy is organized on a global, functional basis and operates as a single segment of power electronics conversion products. Within this segment, the products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.

The CEO of Advanced Energies Inc. is Steve Kelley. He has been serving as the President and Chief Executive Officer since March 2021. The company has a globally diverse workforce with approximately 10,000 employees as of  December 31, 2023. The company had 37,318 shares outstanding, and the company paid dividends amounting to $15.2 million for the year ended on 31 December 2023. The company has 405 institutional shareholders, and Blackrock Inc. is the largest shareholder with 15.67% shareholding. The 52-week price range of Advanced Energies is 81.86 to 126.38, and the trailing PE ratio is 29.25. The earnings per share of the company are 3.42 for the year that ended on 31 December 2023; the gross margin is 35.78%, the operating margin is 6.87%, the net margin is 7.75% including income from interest and the return on assets is 5.02% as on 31 December 2023.

Recent Business Developments

• On December 14, 2023, Advanced Energy Industries, Inc. launched a new configurable power supply that delivers optimized, application-specific power conversion in a small form factor with up to four times higher power density than conventional solutions.²
• On October 05, 2023, Advanced Energy Industries expanded its ultra-high-density front-end power supplies with a 3200W unit in CPRS 1U form factor to meet the power demands of AI and ML applications.³
• On October 03, 2023, Advanced Energy Industries, Inc. established a new state-of-the-art factory near Bangkok, Thailand which marks the next phase of Advanced Energy’s global capacity expansion, as it executes its strategy to support future revenue growth.⁴
• On September 13, 2023, Advanced Energy Industries, Inc. introduced a high-power, liquid-cooled configurable power solution at the Battery Show, offering flexible power for various industrial, lighting, horticulture, medical, and semiconductor applications.⁵
• On July 06, 2023, Advanced Energy Industries, Inc. extended its Luxtron® FluorOptic® Thermometry (FOT) family with a highly integrated converter platform that provides high-accuracy sensing from extremely low to extremely high temperatures.⁶

Recent Financing Activities

• On September 12, 2023, Advanced Energy received $561.2 million in net proceeds from its senior notes offering, after deducting initial purchasers' discounts and offering expenses. The funds will fund future growth plans, repay outstanding debt, repurchase common stock, and general corporate purposes, including strategic acquisitions and share repurchase plans.⁷
• On December 31, 2023, for the year ended, Advanced Energy received $74.9 million in net proceeds from its sale of share warrants which are utilized in dividend payments and stock repurchases.⁸

Financial Performance Highlights

Q3 2023 Highlights

Net revenues for the third quarter as of 30 September 2023, were $409.99 million, declined by 21% compared with the prior year's third quarter revenue, which amounted to $516.27 million. In Q3, the revenue declined by $106.28 million compared to the prior year quarter due to the impact of market downturns in all of the markets, particularly the Semiconductor Equipment and Data Center Computing markets. The Semiconductor Equipment market experienced a 30.6% decrease in sales to $185.0 million in Q3 2023, primarily due to a cyclical downturn in the semiconductor industry and U.S. export controls restricting Chinese semiconductor equipment shipments. The Data Center Computing market also experienced a 22.0% decrease to $68.3 million, partly offset by increased demand for advanced computing applications by some customers. Both markets experienced a decline in sales compared to the previous year. In Q3 2023, gross profit decreased $43.9 million to $147.3 million, or 35.9% of revenue, as compared to $191.2 million, or 37.0% of revenue, in the same period in the prior year. The decrease in gross profit as a percentage of revenue for the three ended September 30, 2023, was largely due to the decline in sales, unfavorable product mix, and higher operating costs based on investments made in 2022, partially offset by lower premiums and related recoveries for securing critical parts. The earnings per share for Q3 2023 was 0.87 compared to the 1.98 EPS in Q3 2022. During the quarter, the company declared dividends amounting to $3.83 million.

Annual Performance Highlights

Net revenues for the year ended on 31 December 2023 were $1655.81 million, which declined by 10.27% compared with the prior year's revenue ended on 31 December 2022, which amounted to $1,845.42 million, resulting in a decline in the net revenue by $189.61 million. The revenue decreased due to market downturns in the Semiconductor Equipment and Data Center Computing markets, which were partially offset by revenue increases in the Industrial Medical and Telecom and Networking markets. Semiconductor Equipment revenue declined due to a cyclical downturn and U.S. export controls restricting Chinese semiconductor shipments. However, strong service revenues and growth in high-voltage power supplies partially offset the decline. Data Center Computing revenue decreased due to a cyclical downturn, but some customers' increased demand for advanced computing applications offsets it.

Gross Profit for the year ended on 31 December 2023 was $592.39 million, which declined by 12% compared with the prior year's gross profit ended on 31 December 2022, which amounted to $675.50 million, resulting in a decrease in the gross profit by $83.11 million. The Gross Margin for the year ended on 31 December 2023 was 35.78%, which declined by 0.83% compared with the prior year's gross margin that ended on 31 December 2022, which amounted to 36.60%, resulting in a decline in profitability. The decrease in gross profit as a percentage of revenue was largely due to the decline in revenue, unfavorable product mix, and higher operating costs based on investments made in 2023, partially offset by lower premiums and related recoveries for securing critical parts.

Net profit for the year ended on 31 December 2023 was $128.28 million. However, the company experienced a net profit for the year ended on 31 December 2022, which amounted to $199.67 million indicating a decline of 36%. The Net Margin for the year ended on 31 December 2023 was 7.75%, which declined by 3.07% compared with the prior year's net margin that ended on 31 December 2022, which amounted to 10.82%, resulting in a decline in profitability. Earnings Per Share (EPS) for the year ended on 31 December 2023 was $2.73, a decline of 59% compared with the prior year's EPS ended on 31 December 2022, which amounted to $6.65 resulting in a decline in the EPS by $3.92. The company paid cash dividends amounting to $15.22 million for the year ended 31 December 2023 which is higher than the prior year’s cash dividends amounting to $15.20 million for the year ended 31 December 2022.

Advanced Energy operates a global power electronics conversion segment, selling products in Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. The Semiconductor Equipment market experienced a 20.1% decrease in sales to $743.79 million in 2023, primarily due to a cyclical downturn in the semiconductor industry and U.S. export controls restricting Chinese semiconductor equipment shipments. The Data Center Computing market also experienced a 23.7% decrease to $249.87 million, partly offset by increased demand for advanced computing applications by some customers. The Industrial and Medical market experienced an 11.2% increase in sales to $474.45 million in 2023. The Telecom and Networking market experienced a 17% increase in sales to $187.69 million in 2023. The net cash generated from operating activities was $208.94 million and 183.59 million in 2023 and 2022, respectively. The net cash used was $64.75 million and $208.27 million in 2023 and 2022, respectively. The net cash received from financing activities was $445.68 million in 2023 and the net cash paid in financing activities was $61.86 million in 2022.

Business Overview

Advanced Energy offers precision power conversion, measurement, and control solutions, transforming raw electrical power into predictable, repeatable, and customizable power for complex equipment, ensuring reliable and predictable power. The company has operations in more than 20 countries including the US, UK, Germany, Hong Kong, Israel, Thailand, China, Japan, South Korea and South Korea. With over 40 years of experience, Advanced Energy operates globally, with regional centers in North America, Asia, and Europe, and offers sales and support through direct offices, representatives, and distributors. The business of the company is conducted through wholly owned subsidiaries and other entities. The company is a global leader in highly engineered, precision power conversion, measurement, and control solutions.

Segmental (Power Electronics Conversion) Analysis

Advanced Energy operates globally in a single power electronics conversion product segment, selling products in Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. The company offers: AC-DC Power Supply Units such as Front End PSUs AC-input, Front End PSUs DC-input, Power Shelves, Configurable/Modular Industrial & Medical PSUs, Open Frame Low Power PSUs, Capacitor Chargers, Conduction Cooled IP Sealed PSUs, DIN Rail PSUs, AC Input PCB Mount, Enclosed PSUs, External Adapters, Programmable Lab PSUs; (ii) DC-DC Conversion Products such as 400Vdc input DC-DC PCB Mount, AC Input PCB Mount, UltraVolt High Voltage PCB Mount, Industrial DC-DC PCB Mount, Medical DC-DC PCB Mount, Non-Isolated PCB Mount, Railway DC-DC PCB Mount, Telecom 48V Input PCB Mount Bricks; (iii) High Voltage Amplifiers such as Systems Up To 5 kV, Systems Greater than 5 kV; (iv) High Voltage Power Supplies such as E-Chuck, High Power, Low Power Modules, UltraVolt High Voltage PCB Mount ; (v) Plasma Power Products such as Power Delivery Systems, Pulsed and DC Power Systems, Remote Plasma Sources, RF Match Networks, RF Plasma Generators; (vi) SCR Power Controllers such as Thyro Family; (vii) Sense and Measurement Products such as Electrostatic Voltmeters, ESD Instrumentation, Gas Sensors, Strain Sensors and Temperature Sensing; (viii) Other Products such as NeoPower NP08 Series, FlexiCharge Series, AEQ Series, ORV3 Shelf.

The Semiconductor Equipment market generates 44.9% of the total revenue.  The semiconductor equipment market is bolstered by the demand for production capacity and new technologies, driven by trends like AI, IoT, and automobile electrification. The market experienced a 20.1% decrease in sales to $743.79 million in 2023, primarily due to a cyclical downturn in the semiconductor industry and U.S. export controls restricting Chinese semiconductor equipment shipments. The Industrial and Medical market generates 28.7% of the total revenue.  The growth in the industrial and medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life sciences equipment. The Industrial and Medical market experienced an 11.2% increase in sales to $474.45 million in 2023. The Data Center Computing market generates 15.1% of the total revenue. The market is influenced by the rise of cloud computing, artificial intelligence, and machine learning, leading to increased demand for higher power in servers and racks, accelerating the transition to 48 Volt infrastructure. The market experienced a 23.7% decrease to $249.87 million, partly offset by increased demand for advanced computing applications by some customers. The Telecommunication and Networking market generates 11.3% of the total revenue. The Telecommunication and Networking market is fueled by advanced mobile standards like 5G, telecommunication service provider investments, network upgrades, and data center bandwidth expansion. Advanced Energy offers application-specific AC-DC and DC-DC power conversion products to leading OEMs. The Telecom and Networking market experienced a 17% increase in sales to $187.69 million in 2023.

Other Business Information

In 2022, The company acquired 100% of the capital stock of SL Power Electronics Corporation which is based in Calabasas, California. This acquisition added complementary products to Advanced Energy’s medical power offerings and extended its presence in several advanced industrial markets. In September 2023, Advanced Energy received $561.2 million in net proceeds from its senior notes offering, after deducting initial purchasers' discounts and offering expenses. The funds will fund future growth plans, repay outstanding debt, repurchase common stock, and general corporate purposes, including strategic acquisitions and share repurchase plans.

Advanced Energy encounters substantial competition from foreign and domestic companies for each of the product lines. Some of its competitors have greater financial and other resources. Other competitors are smaller but may be well-established in specific product niches. In the Semiconductor Equipment Market, the key competitors are COMET Holding AG., Daihen Corp., MKS Instruments, Inc., and TRUMPF Hüttinger GmbH + Co. KG. In the Industrial and Medical market, the key competitors are Cosel Co., Ltd., Delta Electronics, Inc., MEAN WELL Enterprises, TDK-Lambda Americas Inc., and TRUMPF Hüttinger GmbH + Co. KG. In the Data Center Computing Market, the key competitors are XP Power Ltd. Acbel Polytech Inc. Delta Electronics, Inc. Flex Ltd. Lite-On Technology Corp. In the Telecom and Networking Market, the key competitors are Acbel Polytech Inc., Delta Electronics, Inc., and Lite-On Technology Corp.

Advanced Energy sells products through direct and indirect sales channels. The sales operations are primarily located in China, Germany, Hong Kong, India, Ireland, Israel, Japan, South Korea, the Philippines, Singapore, Taiwan, the United Kingdom, and the United States. In addition to a direct sales force, the company has independent sales representatives, channel partners, and distributors that support the selling efforts. The company has two large customers such as Applied Materials, Inc. and Lam Research Corporation. During  2023, Applied Materials, Inc. accounted for 22% of the total revenue. During 2022, Applied Materials, Inc. and Lam Research Corporation accounted for 20% and 14%, respectively, of the total revenue.

Company History

Advanced Energy Industries, Inc. is an American multinational technology company headquartered in Denver, Colorado that develops precision power conversion, measurement, and control technologies for the manufacture of semiconductors, flat panel displays, data storage products, telecommunications network equipment, industrial coatings, medical devices, solar cells and architectural glass. In 1981, Advanced Energy was established, and it has since devoted decades to perfecting power for its global customers. The company operates in regional centers across North America, Asia, and Europe, providing global sales and support through direct offices, representatives, and distributors. In 1987, Advanced Energy Industries, Inc., an American multinational technology company, expanded its global presence by opening an office in Japan. This strategic move allowed them to better serve their customers in the region and strengthen their foothold in the Japanese market. In 1990, the company established an office in Germany. In 1993, established its office in the United Kingdom. In 1995, Advanced Energy Industries, Inc. made its debut on the Nasdaq stock exchange.⁹ Since then, it has been a prominent player in the market and experienced significant growth through business acquisitions. In 2000, Advanced Energy Industries completed its acquisition of Sekidenko Inc., a Vancouver-based supplier of Optical Fiber Thermometers (OFTs). The deal was valued at approximately $100 million and involved a stock exchange. In 2001, Advanced Energy Industries, Inc. acquired Aera Corporation for $48 million in cash. In 2002, Advanced Energy Industries, Inc. acquired Litmas, a move that expanded its portfolio of plasma power products and technologies. In 2002, Advanced Energy Industries Inc. made a significant acquisition by purchasing Dressler HF Technik GmbH, a company based in Stolberg, Germany. The acquisition was valued at $20.0 million, and it initially paid $16.8 million for this privately held supplier of RF power devices used in plasma-based applications. On November 14, 2012, Advanced Energy Industries, Inc. acquired Solvix SA for $24.5 million on November 8, 2012. Under the terms of the deal, Advanced Energy paid approximately $21.2 million consisting of cash payments totaling $16.0 million, net of cash acquired. In 2013, Advanced Energy Industries Inc. made a significant move by acquiring REFUsol Holding GmbH, a leading provider of three-phase string solar PV inverters for commercial applications. In 2014, Advanced Energy Industries, Inc. made a significant move by acquiring HiTek Power Group, a privately held provider of high-voltage power solutions based in the United Kingdom. In 2017, Advanced Energy Industries, Inc. acquired Excelsys Holdings Limited, a privately held company based in Cork, Ireland. In 2018, Advanced Energy Industries, Inc. completed the acquisition of Trek Holding Co. Ltd., a privately held company with locations in Tokyo, Japan, and Lockport, New York. The acquisition was an all-cash transaction valued at approximately $12 million. In 2019, Advanced Energy Industries, Inc. completed the acquisition of Artesyn Embedded Technologies’ Embedded Power business for approximately $400 million. In 2021, Advanced Energy Industries, Inc. expanded its portfolio by acquiring Tegam Inc., a leading provider of metrology and calibration instrumentation used in semiconductor and advanced industrial markets.  In 2021, Advanced Energy Industries, Inc. expanded its portfolio by acquiring Versatile Power, a Campbell, California-based provider of radio frequency (RF) and programmable power supplies for medical and industrial applications. In 2022, The company acquired 100% of the capital stock of SL Power Electronics Corporation which is based in Calabasas, California.¹⁰ This acquisition added complementary products to Advanced Energy’s medical power offerings and extended its presence in several advanced industrial markets. In 2023, Advanced Energy Industries, Inc. established a new state-of-the-art factory near Bangkok, Thailand which marks the next phase of Advanced Energy’s global capacity expansion, as it executes its strategy to support future revenue growth. The company has a wide range of products and services through which the company has the vision to drive sustainable growth as the recognized world leader & trusted partner in precision power technology and applications.

References

1. ^ https://www.forbes.com/companies/advanced-energy-industries/
2. ^ https://ir.advancedenergy.com/news/advanced-energy-unveils-up-to-4000-w-configurable-power-supply-with-4x-the-power-density/3f9407fb-4c6e-4891-a9ec-6050c3280b42/
3. ^ https://finance.yahoo.com/news/advanced-energy-extends-ultra-high-110000851.html
4. ^ https://in.marketscreener.com/quote/stock/ADVANCED-ENERGY-INDUSTRIE-8274/news/Advanced-Energy-Breaks-Ground-on-Flagship-Factory-in-Thailand-44971727/
5. ^ https://finance.yahoo.com/news/advanced-energy-launches-liquid-cooled-110000949.html
6. ^ https://finance.yahoo.com/news/advanced-energy-announces-high-accuracy-120000884.html
7. ^ https://www.publicnow.com/view/FCA5641A263EAD524079E4935A22404871FB503D
8. ^ https://finance.yahoo.com/news/advanced-energy-reports-fourth-quarter-210500889.html
9. ^ https://www.wisesheets.io/roe/AEIS
10. ^ https://slpower.com/archives/12147