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Advanced Energy (AEIS) Q3 Earnings & Revenues Beat Estimates

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Advanced Energy Industries, Inc. (AEIS - Free Report) reported third-quarter 2021 non-GAAP earnings of $0.89 per share, beating the Zacks Consensus Estimate by 5.9%. Yet, the bottom line declined 46.4% from the year-ago quarter and 28.8% sequentially.

Revenues of $346.1 million surpassed the Zacks Consensus Estimate by 0.7%. The top line, however, decreased 11.1% from the year-ago quarter and 4.2% from the second quarter.

The results were driven by robust demand for its highly engineered power delivery systems. Strong momentum in the semiconductor equipment end market also aided the quarterly performance.

Yet, coronavirus-induced supply-chain constraints acted as headwinds in the quarter. Softness in data center, industrial & medical, and telecom & networking markets were other concerns.

End Market in Detail

Semiconductor Equipment: Revenues generated from this market grew 3.8% year over year to $173.4 million (50% of total revenues) driven by strategic wins in Korea and China, and an important remote plasma source design. The growing clout of MAXstream and eVoS contributed well.

Industrial & Medical: Revenues from this market declined 7.1% year over year to $80.8 million (23% of revenues) for the reported quarter.

Nonetheless, the medical vertical witnessed several wins in life science and therapeutic applications, and a strategic win in ultrasound. Also, the industrial vertical secured wins in thin-film application and indoor farming. It also won proprietary power control and sensing designs.

Data Center Computing: Revenues from the market were $62.2 million (18% of revenues), down 29.1% from the year-ago quarter, driven by supply constraints.

Nevertheless, the company secured a next-gen hyperscale design win and a high-value design in storage.

Telecom & Networking: Revenues generated from this market were $29.6 million (9% of revenues), down 37.9% from the prior-year quarter. Supply-chain disruptions impacted telecom & networking revenues.

Nevertheless, strong investments in 5G infrastructure hold promise. In the reported quarter, the company secured high-value designs for telecom edge and network routing applications.

Operating Results

For the third quarter, non-GAAP gross margin was 36.1%, which contracted 370 basis points (bps) from the year-ago period.

Non-GAAP operating expenses were $83.6 million, up 5.9% year over year. As a percentage of revenues, the figure expanded 390 bps year over year to 24.2% for the reported quarter.

Non-GAAP operating margin was 11.9%, contracting 760 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash, cash equivalents and marketable securities were $550.8 million compared with $510 million on Jun 30, 2021.

Total debt was $397.6 million at third quarter-end, up from $313.5 million at second quarter-end.

For the third quarter, cash flow from operations was $18.3 million compared with $33.8 million in the second quarter.

The company made dividend payments of $3.9 million and repurchased shares worth $52.6 million.

Guidance

For fourth-quarter 2021, Advanced Energy expects non-GAAP earnings of 92 cents per share (+/- 25 cents). The Zacks Consensus Estimate is pegged at $1.14 per share.

Further, the company anticipates revenues of $355 million (+/- $20 million). The Zacks Consensus Estimate for the same is projected at $374.7 million.

Zacks Rank & Stocks to Consider

Currently, Advanced Energy has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include Advanced Micro Devices (AMD - Free Report) , ASE Technology (ASX - Free Report) and Mimecast Limited (MIME - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Advanced Micro Devices, Mimecast and ASE are currently projected at 46.2%, 35% and 26.9%, respectively.