Advanced Energy Industries, Inc.

Advanced Energy Industries, Inc. (Nasdaq: AEIS) designs and manufactures precision power-conversion, measurement and control equipment. It serves semiconductor-equipment manufacturers, data centers, industrial and medical customers, and telecommunications markets.

September-quarter results

Amounts are USD millions except per-share figures, for the three months ended September 30. Profit and earnings-per-share figures below relate to continuing operations.

Adjusted net income was $149.8 million. It removes stock compensation, acquired-asset accounting charges, specified transition costs and other items, with tax adjustments. Adjusted earnings per share also use a different diluted share count to reflect convertible-note hedges.

Earlier forecasts and the next quarter

On August 3, management forecast third-quarter revenue of $620 million to $660 million, reported continuing earnings of $2.13 to $2.63 per share and adjusted earnings of $2.75 to $3.25. Actual results exceeded all three ranges.

Fourth-quarter guidance is $710 million to $760 million of revenue, $3.00 to $3.60 of reported continuing earnings per share and $3.60 to $4.20 adjusted. Management says its Thailand factory ramp is on track and expects new products to contribute more revenue in 2027.

Working capital and investment

For the nine months ended September 30, consolidated operating cash flow was $144.1 million, versus $152.8 million. Capital spending was $117.2 million, versus $69.9 million. Our calculation of operating cash flow less capital spending therefore fell to $26.9 million from $82.9 million.

Inventory and customer receivables used $234.0 million and $149.1 million of cash. Higher supplier payables partly offset those uses. Management links the inventory build to expected demand and the receivables increase to growing sales. Capital investment supports factories, the new planning system and capabilities across multiple sites.

Debt refinancing and subsequent settlement

At September 30, cash was $1.425 billion. The balance-sheet value of debt totaled $1.266 billion: $136.4 million current and $1.130 billion long-term. In the second quarter, it issued $1.15 billion of convertible notes due in 2031 with no regular interest payments.

On October 2, Advanced Energy settled the remaining $136.4 million principal of its 2028 notes in cash and issued approximately 0.5 million shares for the additional conversion value. The September cash balance predates that payment. During October, it also repurchased $30 million of common stock.

Future reports can test whether inventory and receivables convert into operating cash as higher sales and new capacity develop.