Advanced Energy CEO Discusses Q3 2010 Results – Earnings Call Transcript

Advanced Energy Industries, Inc. (

AEIS

)

Q3 2010 Earnings Call Transcript

November 1, 2010 8:30 am ET

Executives

Annie Leschin – IR

Hans Betz – CEO

Danny Herron – EVP and CFO

Analysts

Edwin Mok – Needham & Company

Weston Twigg – Pacific Crest Securities

Kate Kotlarsky – Goldman Sachs

Colin Rusch – ThinkEquity

Wenge Yang – Citi

Bill Ong – Merriman Capital

Krish Sankar – Bank of America/Merrill Lynch

Srini Sundara [ph] – Barclays Capital

Mehdi Hosseini – Susquehanna International

Presentation

Operator

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Welcome to the Advanced Energy’s Q3 2010 earnings conference call. My name is Don and I will be your operator

for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Annie Leschin, Investor Relations. Ms. Leschin, you may begin.

Annie Leschin

Thank you, Operator, and good morning. Thank you for joining us this morning for the third quarter 2010 earnings conference call. With me on today's call are Hans Betz, Chief Executive Officer; and Danny Herron, Executive Vice President and CFO. Both of them will present prepared remarks.

By now, you should have received a copy of the earnings press release that was issued last night. For a copy of the release, please visit our website at www.advancedenergy.com or contact us at 970-407-4670.

During the quarter, Advanced Energy will be participating in the Stifel Nicolaus Annual Cleantech Conference in New York on November 9th and the Barclays Capital Global Technology Conference in San Francisco on December 9th. We will make additional announcements as other events occur.

I’d like to remind everyone that except for historical financial information contained herein, matters discussed in this conference call contain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Statements that include the terms, believes, expects, plans, objectives, estimates, anticipates, intends, targets or the like, should be viewed as forward-looking and uncertain. Such risks and uncertainties include but are not limited to the volatility and cyclicality of the industries we serve, the timing of orders received from our customers and unanticipated changes in our estimates, reserves or allowances. These and other risks are described in Form 10-K and Form 10-Q and other reports filed with the SEC.

In addition, we assume no obligation to update the information that we provide you during this conference call, including the fourth quarter guidance provided during the call and in our press release dated today. Guidance will not be updated after today's call until our next scheduled quarterly financial release.

I’d now like to turn the call over to Hans Betz, CEO of Advanced Energy.

Hans Betz

Thank you, Annie, and welcome, everyone. I’d like to begin today by turning your attention to a new format of presenting earnings that we are using this quarter. We’ve developed a set of earnings slides posted in the IR section of our website to help walk through the quarterly results and outlook for our markets.

If you turn to slide number three, I'll begin with some of the highlights. The third quarter marked one of the strongest performances in the history of Advanced Energy. We extended our string of consecutive quarters of growth to six with record revenues of $141 million in the third quarter. Yet again, we demonstrated our ability to successfully execute on our strategy of focusing on power conversion.

With acceleration across the board in virtually all of our markets, exponential growth in our inverter business and leading market share in key areas, AE's goal of becoming the premier power supplier across the industries is becoming a reality.

Our leading position in the semiconductor market was evident once again as our revenues grew for the sixth consecutive quarter. The non-semiconductor revenue contributed to the business at record levels this quarter, in line with our strategy to diversify our markets and target high growth areas.

Our goal overtime has been to grow our non-semiconductor business to become a larger contributor to overall revenue than the semiconductor business. We accomplished that goal this quarter as non-semiconductor markets comprise more than 50% of our revenue as a result of our strength and our renewable energy markets of thin-film solar and inverters.

Nearly two quarters into our acquisition of PV Powered, our inverter business surged ahead in the third quarter as inverters climbed to 27% of total sales and are already sold out for the fourth quarter. Ahead of schedule, we achieved our goal of becoming number one in the three phase North American solar PV inverter market this quarter.

Our expansion efforts will make significant strides as we set up manufacturing capability in Ontario, Canada and Shanghai, China this quarter and begin to establish our market position in Europe, which accounted for 20% of our inverter sales this quarter.

From a financial perspective, the quarter exceeded even our own optimistic expectations. After excluding the flow business, total revenue grew 41% from the second quarter both the top of our guidance. Our bookings surpassed last quarter's record, reaching $160 million and positioning us well for the final quarter of 2010.

As you can see in slide number four, our bottom line is tracking extremely well with the upturn in revenue demonstrating our strong operating leverage. Even with the higher revenue volumes of the last several quarters and our ongoing investment in the business, we reduced operating expenses as a percentage of total sales and grew earnings per share 54% to $0.40 this quarter.

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