ADVANCED ENERGY INDUSTRIES INC

Previous wording

These risks and uncertainties could cause actual results to differ materially and adversely from those expressed in any forward-looking statements, and readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update any forward-looking statements.

Current wording

These risks and uncertainties could cause actual results to differ materially and adversely from those expressed in any forward-looking statements, and readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update any forward-looking statements or provide reasons why our actual results may differ.

Previous wording

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell, and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

Current wording

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell, and service precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

Previous wording

We are organized on a global, functional basis and operate as a single segment of power electronics conversion products. Within this segment, our products are sold in the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.

Current wording

We are organized on a global, functional basis and operate as a single segment of power electronics conversion products. Within this segment, our products are sold in the Semiconductor Equipment, Data Center Computing, Industrial and Medical, and Telecom and Networking markets.

Previous wording

Our precision power products and solutions are designed to enable new process technologies, improve productivity, lower the cost of ownership, and provide critical power capabilities for our customers.

Current wording

Our precision power products and solutions are designed to enable process technologies, improve productivity, lower the cost of ownership, and/or provide critical power capabilities for our customers.

Previous wording

Our plasma power products enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data center computing, networking, and telecommunications.

Current wording

Our plasma power products enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, data center computing, industrial production, medical and life science equipment, aerospace and defense, networking, and telecommunications.

Previous wording

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”), distributors, and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Current wording

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”), distributors, and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, low noise emission, and lower power consumption as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Previous wording

The Semiconductor Equipment market supports and enables the long-term growing need for more production capacity and new process technologies to meet expanding demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification, and Internet of things (“IoT”).

Current wording

The Semiconductor Equipment market supports and enables the long-term need for production capacity and new process technologies to meet demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification, and Internet of things.

Previous wording

Our portfolio of power conversion and related products includes plasma power, high-voltage power, system power, and adjacent sensing solutions. Our plasma power solutions are used to create plasma-based etch and deposition processes. Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

Current wording

Our portfolio of power conversion and related products sold into this market includes plasma power, high-voltage power, system power, and adjacent sensing solutions. Our plasma power solutions are used to create plasma-based etch and deposition processes. Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

Previous wording

The Semiconductor Equipment market continued to be driven by demand for leading-edge devices in logic and memory used in AI applications, offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the potential impact of tariffs on the macroeconomic environment. We expect these mixed market trends to continue into early 2026, with potential acceleration of demand in the second half of 2026.

Current wording

The Semiconductor Equipment market continues to be driven by demand for leading-edge devices in logic and memory used in AI applications, partially offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the impact of tariffs. However, end market conditions started to improve in the fourth quarter of 2025. We expect these improving conditions to continue in 2026 and to accelerate demand for our products in the remainder of the year.

Previous wording

The Data Center Computing market is driven by the rapid growth of AI and related investments. The accelerated power rating of next-generation AI processors and increased density of AI processors in each IT rack have exponentially increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Current wording

The Data Center Computing market is being driven by the rapid growth of AI and related investments. The accelerated power rating of next-generation AI processors and increased density of AI processors in IT racks have significantly increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Previous wording

Our products are designed into data center server and storage systems and also used by cloud service providers and their partners in their custom designed server racks and power shelves.

Current wording

Our products are designed into data center server and storage systems and are also used by cloud service providers and their partners in their custom designed server racks and power shelves.

Previous wording

Increased investments in AI applications by leading hyperscale customers, along with adoption of our next- generation high-power solutions, more than doubled our revenue in the data center computing market during the first nine months of 2025. We expect robust end market demand and adoption of newer, higher power solutions will continue to support robust demand for the remainder of 2025 and into 2026.

Current wording

Due to increased investments in AI applications by leading hyperscale customers, along with adoption of our next-generation high-power solutions, revenue in the Data Center Computing market more than doubled in the first quarter of 2026 compared to the same quarter in the previous year.

Previous wording

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power. In addition, our sensing, control, and instrumentation products complement our power solutions. Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode lighting applications.

Current wording

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power. In addition, our sensing, control, and instrumentation products complement our power solutions. Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, life science, test and measurement equipment, robotics, industrial production, defense, aerospace, and large-scale lighting applications.

Previous wording

The Industrial and Medical market has started to recover starting in the second quarter of 2025 following a major industry downturn as a result of macro conditions and supply chain disruptions from prior years. The positive trend continued in the third quarter as customer inventories approached normalized levels. We expect this trend to continue in the coming quarters but be paced by uncertainty in the macroeconomic environment.

Current wording

We believe that the Industrial and Medical market began to recover starting in the second quarter of 2025 following a major industry downturn as a result of macroeconomic conditions and supply chain disruptions from prior years. The recovery continued in the first quarter of 2026 compared to the same quarter in the previous year. In addition, we expect demand to continue to improve in the remainder of 2026, paced by overall economic conditions.

Previous wording

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises

Current wording

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

Previous wording

We serve this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

Current wording

We serve this market by providing application-specific power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

Previous wording

Semiconductor Equipment revenue for the three months ended September 30, 2025 was relatively flat as compared to the same period in the prior year. The increase in revenue for the nine months ended September 30, 2025 was primarily due to increased demand for platforms used in leading-edge process tools.

Current wording

Semiconductor Equipment revenue for the three months ended March 31, 2026 was relatively flat as compared to the same period in the prior year, but increased sequentially from the fourth quarter on strengthening demand.

Previous wording

The increase in Data Center Computing revenue was due to growing hyperscale investments in new, AI-driven platforms and growth associated with design wins secured in 2024.

Current wording

The increase in Data Center Computing revenue was due to increased AI investments by leading hyperscale customers and growth associated with design wins secured previously.

Previous wording

The decrease in Industrial and Medical revenue was primarily due to lower demand as a result of customer inventory rebalancing.

Current wording

The increase in Industrial and Medical revenue was primarily due to recovery in the end markets as a result of ongoing customer inventory rebalancing and an improved demand environment.

Previous wording

The increase in gross profit and gross margin was largely due to an increase in revenue and manufacturing cost improvements. Manufacturing cost reduction programs positively impacted gross margin by 160 and 140 basis points, respectively, during the three and nine months ended September 30, 2025.

Current wording

The increase in gross profit was largely due to an increase in revenue and manufacturing cost improvements. Gross margin improved mainly due to the impact of higher volume, and approximately 60 basis points resulting from manufacturing cost reduction programs, partially offset by the impact of tariffs during the three months ended March 31, 2026.

Previous wording

The increase in research and development expense was related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same period in the prior year.

Current wording

The increase in research and development expense was driven by higher compensation costs related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same period in the prior year.

Previous wording

The increase in selling, general, and administrative expense was mainly due to higher compensation costs, related to stock-based compensation and annual merit increases, and professional services related to facility, infrastructure, and other transition costs.

Current wording

The increase in selling, general, and administrative expense was mainly due to higher compensation costs including stock-based compensation and annual merit increases.

Previous wording

Amortization expense declined primarily due to certain intangible assets reaching the end of their estimated useful life. This was partially offset by new intangible assets acquired in the Airity Acquisition in June 2024.

Current wording

Amortization expense declined primarily due to certain intangible assets reaching the end of their estimated useful life.

Previous wording

The decrease in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Current wording

The increase in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Previous wording

Interest Income, Interest Expense, and Other Income (Expenses), net

Current wording

Interest Income, Interest Expense, and Other Expense, Net

Previous wording

We experienced a decrease in interest income and expense caused by lower cash and debt balances as a result of using cash on hand to fully prepay our Term Loan in September 2024.

Current wording

We experienced a decrease in interest income caused by lower cash balances.

Previous wording

Other income (expense), net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three months ended September 30, 2025, we had a $4.8 million increase in unrealized foreign exchange gains and a $4.3 million improvement in other income (expense) compared to the same period in the prior year. The prior-year results included nonrecurring foreign currency translation adjustments related to the liquidation of certain foreign operations as well as the write-off of debt discount fees associated with the early repayment of our Term Loan Facility.

Current wording

Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three months ended March 31, 2026, we had a $3.4 million improvement in other expense, net compared to the same period in the prior year primarily as a result of foreign exchange gains.

Previous wording

SeeNote 15. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding our debt.

Current wording

Interest expense remained relatively flat compared to the same period in prior year. SeeNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding our debt.

Previous wording

The following table summarizes tax provision (benefit) and the effective tax rate for our income (loss) from continuing operations:

Current wording

The following table summarizes tax provision and the effective tax rate for our income from continuing operations:

Previous wording

Our effective tax rates differ from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations and the net effect of Pillar II top-up taxes. The effective tax rate for the three months ended September 30, 2025 was higher compared to the same period in 2024, primarily due to the absence of restructuring charges that were recorded in the prior-year period related to our Zhongshan, China factory closure resulting in an income tax benefit. The current quarter also included a net benefit from discrete tax items, consisting of a partial release of a valuation allowance, partially offset by the impact of tax law changes and other discrete adjustments.

Current wording

Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations. The effective tax rate as of March 31, 2026 is lower than the same period in 2025 primarily due to excess tax benefits recognized from stock-based compensation.

Previous wording

As of September 30, 2025, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential impact in the countries in which we operate. The impact of these changes may have a material impact on our cash tax expense and tax rate.

Current wording

As of March 31, 2026, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S. parented organizations, but will require adoption by member countries to implement. As countries continue to make revisions to legislation and release additional guidance with respect to the global minimum tax, we continue to monitor and evaluate potential cash tax expense and associated impacts to the effective tax rate in the jurisdictions in which the Company operates.

Previous wording

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for period ending September 30, 2025.

Current wording

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending March 31, 2026. The OBBB is expected to have an overall positive effect on the GAAP and non-GAAP effective tax rate of the Company, benefiting from revisions to foreign-derived intangible income (FDII) and the foreign tax credit rules.

Previous wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Finally, non-GAAP results also exclude non-recurring discrete tax expenses or benefits.

Current wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Non-GAAP results also exclude non-recurring discrete tax expenses or benefits. Finally, non-GAAP diluted weighted-average common shares are adjusted to reflect the dilutive impact of our convertible notes based on the higher note hedge strike price instead of the initial conversion price.

Previous wording

Adequate liquidity and cash generation are important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined inNote 15. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements”).

Current wording

Adequate liquidity and cash generation are important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined inNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements”).

Previous wording

As of September 30, 2025, our cash and cash equivalents totaled $758.6 million, while our available funding under our Revolving Facility was $600.0 million. Additionally, we generated $154.6 million of cash flow from continuing operations in the nine months ended September 30, 2025. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

Current wording

As of March 31, 2026, our cash and cash equivalents totaled $699.5 million, while our available funding under our undrawn Revolving Facility was $600.0 million. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

Previous wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives. In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

Current wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives. In the past year and through the first quarter, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system. In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

Previous wording

SeeNote 15. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding the Credit Agreement.

Current wording

SeeNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding the Credit Agreement.

Previous wording

During the nine months ended September 30, 2025, we paid quarterly cash dividends of $0.10 per share, totaling $11.6 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Current wording

During the three months ended March 31, 2026, we paid quarterly cash dividends of $0.10 per share, totaling $3.8 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $60.5 million primarily due to $44.0 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, $13.8 million for the Airity Acquisition, and $2.7 million in purchases of investments.

Current wording

Net cash used in investing activities for the three months ended March 31, 2026 was $38.0 million primarily due to $36.6 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, our new ERP system, and investments in other capabilities across multiple sites.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2025 was $71.9 million primarily due to $69.9 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, and $2.0 million in purchases of investments.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $15.1 million primarily due to $13.9 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.2 million in purchases of investments.