ADVANCED ENERGY INDUSTRIES INC

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 into 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

For the year ended December 31, 2024, our revenue was $1,482.0 million, representing a decline of 10.5% as compared to 2023. The decline was attributable to lower revenue from our Industrial and Medical and Telecom and Networking markets due to customer inventory rebalancing, resulting in a lower demand environment. These declines were partially offset by higher revenues in the Semiconductor Equipment market, from the 2023 trough level, and growing AI-related demand in the Data Center Computing market. For more details on the trends in our end markets, see “End Markets Summary and Trends” elsewhere in this Item 7.

Current wording

For the year ended December 31, 2025, our revenue was $1,798.8 million, representing an increase of 21.4% as compared to 2024. The increase was primarily attributable to more than doubling of revenue from the Data Center Computing market. For more details on the trends in our end markets, see “End Markets Summary and Trends” below.

Previous wording

Sales in the Data Center Computing market increased $34.3 million, or 13.7%, to $284.2 million, as compared to $249.9 million in the prior year. The increase was due to accelerated hyperscale investments in AI and growing adoption of next generation high power solutions.

Current wording

Sales in the Data Center Computing market increased $303.1 million, or 106.7%, to $587.3 million, as compared to $284.2 million in the prior year. The increase was due to growing hyperscale investments in new, AI-driven platforms and growth associated with new design wins secured in 2024.

Previous wording

Research and development expenses increased $9.4 million to $211.8 million, as compared to $202.4 million in the prior year. The increase is related to higher stock-based compensation expense as well as higher program and materials costs compared to the prior year. This was partially offset by lower variable compensation.

Current wording

Research and development expenses increased $20.6 million to $232.4 million, as compared to $211.8 million in the prior year. The increase is related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher engineering program and materials costs.

Previous wording

Selling, general and administrative expenses increased $3.5 million to $224.5 million, as compared to $221.0 million in the prior year. The increase is primarily driven by higher stock-based compensation expense, partially offset by actions taken to control costs, including headcount reduction and lower variable compensation.

Current wording

Selling, general and administrative expenses increased $17.8 million to $242.4 million, as compared to $224.6 million in the prior year. The increase is mainly due to higher compensation costs, related to stock-based compensation and annual merit increases.

Previous wording

Amortization expense decreased $2.2 million to $26.0 million, as compared to $28.3 million in the prior year. Certain intangible assets reached the end of their estimated useful life in the current year. This was partially offset by amortization of intangible assets acquired in the Airity acquisition. For additional information, seeNote 2. AcquisitionandNote 11. Intangible Assets and Goodwill in Part II, Item 8 “Financial Statements and Supplementary Data.”

Current wording

Amortization expense decreased $3.9 million to $22.1 million, as compared to $26.0 million in the prior year. The decrease is primarily due to certain intangible assets reaching the end of their estimated useful life. This was partially offset by amortization of intangible assets acquired in the Airity acquisition in 2024. For additional information, seeNote 2. AcquisitionandNote 5. Intangible Assets and Goodwill in Part II, Item 8 “Financial Statements and Supplementary Data.”

Previous wording

For additional information about this and prior year restructuring plans, seeNote 12. Restructuring, Asset Impairments, and Other Chargesin Part II, Item 8 “Financial Statements and Supplementary Data.”

Current wording

For additional information about this and prior-year restructuring plans, seeNote 11. Restructuring, Asset Impairments, and Other Chargesin Part II, Item 8 “Financial Statements and Supplementary Data.”

Previous wording

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

Current wording

Interest Income, Interest Expense, and Other Expense, Net

Previous wording

Other expense, net was $2.0 million in 2024, as compared to $1.8 million of expense in the prior year. Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. We had unrealized foreign exchange losses during the year 2024 compared to unrealized gains in the prior year. Additionally, in 2024, we incurred costs associated with foreign currency translation adjustments related to liquidated foreign operations and debt discount and fees associated with our Term Loan Facility prepayment. There were no such costs during the same periods in the prior year.

Current wording

Other expense, net was $9.2 million in 2025, as compared to $2.0 million of expense in the prior year. Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. During 2025, we recorded a $9.7 million increase in unrealized foreign exchange losses, while the prior year included $3.0 million of expense related to nonrecurring foreign currency translation adjustments. These prior-year 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 prior senior unsecured term loan facility. SeeNote 7. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding our debt.

Previous wording

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

Current wording

The following table summarizes tax provision (benefit) 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% for the years ended December 31, 2024 and 2023, primarily due to the intercompany transfer of intellectual property among certain of our subsidiaries in 2024 and a valuation allowance release in 2023. Additionally, both 2024 and 2023 included 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.

Current wording

Our effective tax rates differ from the U.S. federal statutory rate of 21% for the years ended December 31, 2025 and 2024, primarily due to valuation allowance releases partially offset by the impact of non-US tax law changes in 2025, and the intercompany transfer of intellectual property among certain of our subsidiaries in 2024. Additionally, both 2025 and 2024 included 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.

Previous wording

As of January 1, 2024, the Pillar II minimum global effective tax rate of 15% enacted by the Organization for Economic Cooperation and Development (“OECD”) was effectuated. More than 140 countries agreed to enact the Pillar II global minimum tax. However, the timing of the implementation for each country varies. For the year ended December 31, 2024, we included an estimate of global minimum tax liability as a result of those countries where we conduct business that have adopted Pillar II. 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 December 31, 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”). 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 their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential cash tax expense and tax rate impact in the countries in which we operate.

Previous wording

Management uses non-GAAP operating income and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods. In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. These non-GAAP measures are not prepared in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management. The presentation of this additional information should not be considered a substitute for results prepared in accordance with U.S. GAAP.

Current wording

Management uses non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods. In addition, management’s incentive plans include certain of these non-GAAP measures as criteria for achievements. These non-GAAP measures are not prepared in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management. The presentation of this additional information should not be considered a substitute for results prepared in accordance with U.S. GAAP.

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 non-recurring items such as acquisition-related costs, facility expansion and related 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 exclude one-time tax benefits and losses associated with changes in our legal entity structure or ownership of certain assets.

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 (refer toNote 18. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data”).

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 (refer toNote 7. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data”).

Previous wording

As of December 31, 2024, our cash and cash equivalents totaled $722.1 million, and our available funding under our Revolving Facility is $600.0 million. Additionally, we generated $132.9 million of cash flow from continuing operations in 2024. We believe our sources of liquidity will be adequate to meet anticipated debt service, share repurchase programs, and dividends. 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.

Current wording

As of December 31, 2025, our cash and cash equivalents totaled $791.2 million, and our available funding under our undrawn Revolving Facility is $600.0 million. Additionally, we generated $234.7 million of cash flow from continuing operations in 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. 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 recent year, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system.

Previous wording

As of December 31, 2024, our only outstanding debt is the $575.0 million Convertible Notes, which mature on September 15, 2028 and carry a 2.5% interest rate.

Current wording

As of December 31, 2025, our only outstanding debt is the $575.0 million Convertible Notes, which mature on September 15, 2028 and carry a 2.5% interest rate. As of December 31, 2025, our common stock traded above the conversion price for at least 20 trading days during a 30 consecutive trading-day period, which resulted in the Convertible Notes becoming convertible at the option of the holders. Accordingly, the Convertible Notes balance was reclassified from long-term to current debt as of December 31, 2025. Exclusive of any early conversion elections by the convertible noteholders, there are no scheduled debt maturities until 2028. SeeNote 7. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding the Convertible Notes.

Previous wording

The interest rate swap contracts previously entered into related to the Term Loan Facility expired on September 10, 2024. Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

Current wording

Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

Previous wording

During 2024, we paid quarterly cash dividends of $0.10 per share, totaling $15.4 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 the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Current wording

During 2025, we paid quarterly cash dividends of $0.10 per share, totaling $15.6 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 of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Previous wording

To repurchase shares of our common stock, we periodically enter into share repurchase agreements. The following table summarizes these repurchases:

Current wording

To repurchase shares of our common stock, we periodically enter into share repurchase agreements. During the year we repurchased $30.4 million of shares and during 2024, we repurchased $1.8 million of shares. At December 31, 2025, the remaining amount authorized by the Board for future share repurchases was $166.9 million with no time limitation.

Previous wording

Net cash used in investing activities in 2024 was $73.5 million, an increase of $8.7 million, compared to $64.8 million in the prior year. The increase was primarily due to our acquisition of Airity for $13.8 million and continued capital investments in our Mexico and Thailand manufacturing facilities.

Current wording

Net cash used in investing activities in 2025 was $109.8 million, an increase of $36.2 million, compared to $73.6 million in the prior year. The increase was primarily due to an increase of $50.6 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 financing activities in 2024 was $377.1 million, compared to a cash inflow of $445.7 million in the prior year. In 2024, we used existing cash on hand to make payments towards our Term Loan Facility for $355.0 million, including $10.0 million in principal payment made in the first half of the year and the September prepayment of the remaining $345.0 million outstanding principal balance, and repurchased common stock for $1.8 million. We do not have any scheduled debt maturities in the next twelve months.

Current wording

Net cash used in financing activities in 2025 was $56.1 million, compared to a cash outflow of $377.1 million in the prior year. In 2024, we used existing cash on hand to make payments towards our prior senior unsecured term loan facility for $355.0 million, including $10.0 million in principal payment made in the first half of the year and the September prepayment of the remaining $345.0 million outstanding principal balance, and repurchased common stock for $1.8 million. In 2025, we repurchased $30.2 million of our common stock.

Previous wording

For more details see Note 4. Income Taxes in Part II, Item 8 “Financial Statements and Supplementary Data.”

Current wording

For more details seeNote 14. Income Taxes in Part II, Item 8 “Financial Statements and Supplementary Data.”

Previous wording

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to income taxes, lease obligations, pension liabilities, and debt is provided inNote 4. Income Taxes,Note 14. Leases,Note 15. Employee Retirement Plans and Postretirement Benefits,andNote 18. Long-Term Debt, respectively, in Part II, Item 8 “Financial Statements and Supplementary Data.”

Current wording

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to income taxes, lease obligations, pension liabilities, and debt is provided inNote 14. Income Taxes,Note 6. Leases,Note 12. Employee Retirement Plans and Postretirement Benefits,andNote 7. Long-Term Debt, respectively, in Part II, Item 8 “Financial Statements and Supplementary Data.”