ADVANCED ENERGY INDUSTRIES INC

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, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.

Previous wording

We continue to execute our previously announced manufacturing consolidation plan which includes the shutdown of our Zhongshan, China manufacturing site to be completed in 2025 and a focus on the introduction and launch of our new product initiatives. Additionally, we are monitoring tariffs announced by the U.S. government and the impact of any additional tariffs or other trade policy measures on our supply chain or to our customers. While the tariff impact was not material to our results in the first quarter of 2025, the effects could be material in future periods based on further tariff or other policy measures, retaliatory responses by other countries to the U.S. tariff announcements, or any related macroeconomic effects that could impact our product demand.

Current wording

We continue to execute our previously announced manufacturing consolidation plan which includes the shutdown of our Zhongshan, China manufacturing site. Manufacturing operations have ceased with final closure activities remaining to be completed by early 2026. We remain focused on the introduction and launch of our new product initiatives. Additionally, we are monitoring tariffs announced by the U.S. government and the impact of any additional tariffs or other trade policy measures on our supply chain or to our customers. While the tariff impact was not material to our results in the first half of 2025, the effects could be material in future periods as any further tariff or other trade policy measures, retaliatory responses to the U.S. trade policy announcements, or any related macroeconomic effects could adversely impact our product demand, production costs, or ability to sell our products and provide services.

Previous wording

The Semiconductor Equipment market continued to be driven by pockets of strength as growing demand for leading-edge devices in logic and memory used in AI applications offset headwinds in trailing-edge, U.S. export restrictions to China, and the potential impact of tariffs on the macroeconomic environment. We expect these trends to continue into 2025.

Current wording

The Semiconductor Equipment market continued to be driven by growing demand for leading-edge devices in logic and memory used in AI applications, largely 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 the second half of 2025.

Previous wording

The Industrial and Medical market has been going through a downturn that started in mid-2023 driven by weakening end demand due to macroeconomic conditions and customer rebalancing elevated inventories as a result of supply chain disruptions in the prior years. These factors continued into the first quarter of 2025, but we believe growth will gradually return to this market as customer inventories approach normalized levels, potentially offset by the impact of tariffs on the macroeconomic environment.

Current wording

The Industrial and Medical market has been going through a major downturn that started in mid-2023 driven by macroeconomic conditions and customer rebalancing elevated inventories as a result of supply chain disruptions in prior years. These factors continued into the first quarter of 2025, but in the second quarter of 2025, sequential growth resumed as customer inventories began to approach normalized levels. We expect this trend to continue in the second half of 2025 but potentially be limited by the impact of tariffs on the macroeconomic environment.

Previous wording

The Data Center Computing market is driven by shifts from traditional enterprise, on-premise computing to cloud computing, as well as the rapid growth of AI and related investments. The accelerated pace of next generation AI processors has increased the power requirements for AI-based servers and racks, accelerated the transition to high-power 48 volt power shelf infrastructure, and increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Current wording

The Data Center Computing market is driven by the rapid growth of AI and related investments. The accelerated pace of introduction of next generation AI processors has increased the power requirements for AI-based servers and racks, accelerated the transition to high-power 48-volt power shelf infrastructure, and increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Previous wording

End demand in the Telecom and Networking market weakened during 2024 but reached a stable level exiting the year. The market remained stable in the first quarter of 2025, and we expect current market conditions to continue for several quarters.

Current wording

End demand in the Telecom and Networking market remained stable in the first half of 2025, and we expect current market conditions to continue for several quarters.

Previous wording

The increase in Semiconductor Equipment revenue was primarily due to a continued cyclical recovery and strong demand for platforms used in leading-edge process tools.

Current wording

The increase in Semiconductor Equipment revenue was primarily due to continued cyclical recovery and strong demand for platforms used in leading-edge process tools.

Previous wording

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

Current wording

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

Previous wording

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

Previous wording

The modest decrease in Telecom and Networking revenue reflected the current market environment.

Current wording

The modest decrease in Telecom and Networking revenue was due to slowing growth in mobile data traffic within the telecom sector. This is partially offset by increased spending on networking infrastructure.

Previous wording

The increase in gross profit was largely due to increase in revenue and manufacturing cost improvements. Gross margin improved mainly due to the impact of higher volume, and approximately 170 basis points resulting from manufacturing cost reduction programs.

Current 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 110 and 190 basis points, respectively, during the three and six months ended June 30, 2025.

Previous wording

The increase in R&D was related to higher compensation costs, including stock-based compensation and higher program and materials costs compared to the same period in the prior year.

Current wording

The increase in R&D was related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher 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 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, related to stock-based compensation and annual merit increases, and professional services related to facility, infrastructure, and other transition costs.

Previous wording

For additional information about this and prior year restructuring plans, seeNote 10. Restructuring, Asset Impairments, and Other Chargesin Part I, Item 1 “Unaudited Consolidated Financial Statements.”

Current wording

For additional information about this and prior restructuring plans, seeNote 10. Restructuring, Asset Impairments, and Other Chargesin Part I, Item 1 “Unaudited Consolidated Financial Statements.”

Previous wording

We experienced a decrease in interest income on lower cash balances as a result of using cash on hand to fully prepay our Term Loan in September 2024, which also resulted in the lower interest expense.

Current wording

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

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. The effective tax rate for 2025 was lower than the same period in 2024 primarily due to a more favorable mix of earnings.

Current 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 2025 was lower than the same period in 2024 primarily due to a more favorable mix of earnings.

Previous wording

As of March 31, 2025, our cash and cash equivalents totaled $723.0 million, while our available funding under our Revolving Facility was $600.0 million. Additionally, we generated $29.2 million of cash flow from continuing operations in the three months ended March 31, 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 June 30, 2025, our cash and cash equivalents totaled $713.5 million, while our available funding under our Revolving Facility was $600.0 million. Additionally, we generated $75.7 million of cash flow from continuing operations in the six months ended June 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.

Previous wording

As of March 31, 2025, no amounts were outstanding under the Revolving Facility, and we had $600.0 million in available funding. In addition to the available capacity on the Revolving Facility, prior to the maturity date of our Credit Agreement, we may request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. Any requested increase is subject to lender approval.

Current wording

As of June 30, 2025, no amounts were outstanding under the Revolving Facility, and we had $600.0 million in available funding. In addition to the available capacity on the Revolving Facility, prior to the maturity date of the Credit Agreement, we may request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. Any requested increase is subject to lender approval.

Previous wording

During the three months ended March 31, 2025, 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.

Current wording

During the six months ended June 30, 2025, we paid quarterly cash dividends of $0.10 per share, totaling $7.7 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

During the three months ended March 31, 2025, we paid $0.5 million and accrued an additional $0.4 million to repurchase 9,636 shares of our common stock at an average share price of $94.26. During the period from April 1, 2025 through April 29, 2025, we paid a total of $22.7 million to repurchase 0.3 million shares of our common stock at an average price per share of $83.78.

Current wording

During the six months ended June 30, 2025, we paid $23.7 million to repurchase 282,232 shares of our common stock at an average share price of $84.19.

Previous wording

Net cash from operating activities from continuing operations for the three months ended March 31, 2025 was $29.2 million, as compared to $8.0 million for the same period in the prior year. This $21.2 million increase was primarily due to higher net income from continuing operations. Additionally, we had favorable changes in inventories, accounts payable, accrued expenses, and other liabilities. This was partially offset by an increase in accounts receivable.

Current wording

Net cash from operating activities from continuing operations for the six months ended June 30, 2025 was $75.7 million, as compared to $14.9 million for the same period in the prior year. This $60.8 million increase was primarily due to higher net income from continuing operations. Additionally, we had favorable changes in accounts payable. This was partially offset by unfavorable changes in inventories, accounts receivable, and other liabilities and accrued expenses.

Previous 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.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was $43.6 million primarily due to $42.0 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.6 million in purchases of investments.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $18.7 million primarily due to $16.6 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $2.1 million in purchases of investments.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $47.6 million primarily due to $31.4 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 $2.4 million in purchases of investments.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2025 was $13.4 million and included $3.8 million for dividend payments; $0.5 million for repurchase of common stock; and $9.1 million in net payments related to stock-based award activities.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 was $42.8 million and included $23.7 million for repurchase of common stock, $8.0 million in net payments related to stock-based award activities, and $7.7 million for dividend payments. In addition, we paid $1.9 million in fees related to entering the Credit Agreement and $1.5 million for the release of the holdback associated with the Airity Acquisition.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $14.1 million and included $5.0 million for repayment of long-term debt; $3.8 million for dividend payments; and $5.3 million in net payments related to stock-based award activities.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $23.2 million and included $10.0 million for repayment of long-term debt, $7.7 million for dividend payments, and $5.5 million in net payments related to stock-based award activities.

Previous wording

During the three months ended March 31, 2025, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**

Current wording

During the six months ended June 30, 2025, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**