What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-13 compared with 2025-02-18 · 428 added, 394 removed, 717 unchanged (53% of the section changed)

74 unchanged sentences

Consolidated Balance Sheets

(In thousands, except per share amounts)

(In millions, except per share amounts)

Current assets:

35 unchanged sentences

Consolidated Statements of Operations

(In thousands, except per share amounts)

(In millions, except per share amounts)

Years Ended December 31,

9 unchanged sentences

Interest expense

Other income (expense), net

Other expense, net

Income from continuing operations, before income tax

2 unchanged sentences

Loss from discontinued operations, net of income tax

Income from continuing operations attributable to noncontrolling interest

Net income attributable to Advanced Energy Industries, Inc.

Basic weighted-average common shares outstanding

12 unchanged sentences

Consolidated Statements of Comprehensive Income

(In thousands)

(In millions)

Years Ended December 31,

4 unchanged sentences

Comprehensive income

Comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to Advanced Energy Industries, Inc.

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

(In thousands)

(In millions)

Advanced Energy Industries, Inc.

10 unchanged sentences

Dividends declared ($ 0.10 per share)

Other comprehensive income

Acquisition of non-controlling interest

Other comprehensive loss

Warrants and note hedges, net

Tax impact of convertible notes and note hedges

Balances, December 31, 2023

Stock issued from equity plans, net

Stock issuance (Note 2)

Stock-based compensation

2 unchanged sentences

Other comprehensive loss

Warrants and note hedges, net

Tax impact of convertible notes and note hedges

Deferred compensation

Common stock issued to deferred compensation plan ( 9,487 shares)

Balances, December 31, 2024

Stock issued from equity plans, net

Stock issuance (Note 2)

Stock-based compensation

1 unchanged sentence

Dividends declared ($ 0.10 per share)

Other comprehensive loss

Other comprehensive income

Deferred compensation

4 unchanged sentences

Consolidated Statements of Cash Flows

(In thousands)

(In millions)

Years Ended December 31,

6 unchanged sentences

Amortization and write off of debt issuance costs and debt discount

Deferred income tax benefit

Deferred income taxes

Changes in operating assets and liabilities, net of assets acquired

13 unchanged sentences

Proceeds from long-term borrowings

Payment of fees for long-term borrowings

Payments on long-term borrowings

Payment of debt issuance costs

Dividend payments

Payments on long-term borrowings

Payment for purchase of note hedges

Proceeds from sale of warrants

Payment of acquisition holdback

Purchase and retirement of common stock

10 unchanged sentences

Advanced Energy Industries, Inc., a Delaware corporation, and its consolidated subsidiaries (“we,” “us,” “our,” “Advanced Energy,” or the “Company”) 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.

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 .

2 unchanged sentences

Accordingly, the results of our inverter business are reflected as loss from discontinued operations, net of income taxes on our Consolidated Statements of Operations.

During 2025, we changed the presentation of our financial statements and accompanying footnote disclosures from thousands to millions.

This change did not materially impact previously reported financial information.

Principles of Consolidation

2 unchanged sentences

Our consolidated financial statements are stated in United States (“U.S.”) Dollars and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

Reclassifications

We reclassified certain prior period amounts to conform to the current year presentation.

Within the operating activities section of our Consolidated Statements of Cash Flows, we present activity associated with our operating leases separately in the caption “Operating lease right-of-use assets and operating lease liabilities, net.” Additionally, we separately present “Amortization and write-off of debt issuance costs and debt discount.” Previously the above activity was included within “Other liabilities and accrued expenses.”

Use of Estimates in the Preparation of the Consolidated Financial Statements

5 unchanged sentences

Accordingly, we determined we operate in a single reporting segment – 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.

Within this segment, our products are sold into the Semiconductor Equipment, Data Center Computing, Industrial and Medical, and Telecom and Networking markets.

Our CEO assesses performance and decides how to allocate resources primarily based on consolidated net income, which is reported on our Consolidated Statements of Operations.

Total assets on the Consolidated Balance Sheets represent our segment assets.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Foreign Currency Translation

1 unchanged sentence

Assets and liabilities of these foreign subsidiaries are translated to the United States Dollar at prevailing exchange rates on the balance sheet date.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Revenues and expenses are translated at the average exchange rates in effect for each period.

100 unchanged sentences

Each method is subjective in nature and involves the use of significant estimates and assumptions, which can include projected financial results, discount rates, long-term growth rates, and industry trends.

We determined that there were no indicators of impairment of our long-lived intangible assets or goodwill during the year ended December 31, 2025.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Debt Issuance Costs

4 unchanged sentences

Long-Term Debt for additional details.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Revenue Recognition

22 unchanged sentences

Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair value at the grant date.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

We estimate the fair value of restricted stock units (“RSUs”) on the grant date.

For RSUs that contain a time-based and/or performance-based vesting condition, we estimate fair value using the closing share price on the grant date.

For RSUs that contain a time-based and certain performance-based vesting condition, we calculate fair value using the closing share price on the grant date.

We record stock-based compensation expense for awards with time-based vesting conditions on a straight-line basis over the requisite service period.

1 unchanged sentence

If the awards are forfeited, we reverse the stock-based compensation expense.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Certain RSUs vest based on a market condition.

17 unchanged sentences

We have elected to account for GILTI in the year that the tax is incurred.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Commitments and Contingencies

5 unchanged sentences

We are not currently a party to any legal action that we believe would reasonably have a material adverse impact on our business, financial condition, results of operations or cash flows.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

New Accounting Standards

3 unchanged sentences

New Accounting Standards Adopted

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.” The amendments in ASU 2023-07 expand disclosure requirements.

In addition, the ASU enhances interim disclosures, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and provides new disclosures requirements for entities with a single reportable segment.

We adopted this guidance on December 31, 2024, and it was not material to our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional disclosure on income taxes paid.

We adopted this guidance for the year ending December 31, 2025 and have provided the required disclosures.

Income Taxes .

New Accounting Standards Issued But Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional disclosure on income taxes paid.

This guidance will be effective for us on January 1, 2025 for annual disclosures.

We do not expect the above guidance to materially impact our consolidated financial statements.

In March 2024, the SEC issued climate-related disclosure rules.

These rules do not change accounting treatment, but they significantly expand the climate-related information companies are required to disclose.

Several petitions were filed challenging these climate-related disclosure rules and, in April 2024, the SEC voluntarily stayed the rules, pending completion of judicial review.

Disclosure requirements, absent the results of pending legal challenges, may begin phasing in with our annual reporting for the year ending December 31, 2025.

We do not expect the above disclosure requirement to materially impact our consolidated financial statements.

We are evaluating the disclosure requirements and changes to our business processes, systems, and controls to support the additional disclosures.

In November 2024, the FASB issued ASU 2024-03 final standard on Income Statement:

Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of income statement expenses for public business entities.

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities.

The ASU does not change the expense captions an entity presents on the face of the income statement;

2 unchanged sentences

We do not expect the above guidance to materially impact our consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05 “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.” ASU 2025-05 permits the use of certain estimates and assumptions in developing forecasts used for determining expected credit losses on accounts receivable.

This guidance will be effective for us on January 1, 2026.

We do not expect the above guidance to materially impact our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06 “Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software.” ASU 2025-06 eliminates the consideration of project development stages in determining whether a cost is eligible for capitalization.

Instead, cost capitalization will be based on a “probable to complete” threshold.

This guidance will be effective for us on January 1, 2028.

We are evaluating the impact, if any, that the adoption of ASU 2025-06 may have on our consolidated financial statements.

ADVANCED ENERGY INDUSTRIES, INC.

5 unchanged sentences

Consideration

(in thousands)

(in millions)

Cash paid at closing

5 unchanged sentences

The following represents the final purchase price allocation.

(in thousands)

(in millions)

Current assets and liabilities, net

Property and equipment

Deferred tax liability

7 unchanged sentences

Stock-based Compensation .

During 2025, we paid $ 1.5 million in connection with the release of the indemnity holdback.

See our Consolidated Statements of Cash Flows.

ADVANCED ENERGY INDUSTRIES, INC.

4 unchanged sentences

Years Ended December 31,

(in thousands)

(in millions)

Semiconductor Equipment

Industrial and Medical

Data Center Computing

Industrial and Medical

Telecom and Networking

Revenue by Region

Years Ended December 31,

(in thousands)

North America

Revenue by Significant Countries

Years Ended December 31,

(in thousands)

(in millions)

United States

5 unchanged sentences

Years Ended December 31,

(in thousands)

(in millions)

Services and other

1 unchanged sentence

Significant Customers

During the year ended December 31, 2024, Applied Materials, Inc.

and Lam Research Corporation accounted for 26 % and 11 %, respectively, of our total revenue.

During the year ended December 31, 2023, Applied Materials, Inc.

accounted for 22 % of our total revenue.

During the year ended December 31, 2022, Applied Materials Inc.

and Lam Research Corporation accounted for 20 % and 14 %, respectively, of our total revenue.

As of December 31, 2024, the account receivable balance from Applied Materials, Inc.

and Lam Research Corporation accounted for 25 % and 14 %, respectively, of our total accounts receivable.

During the year ended December 31, 2023, Applied Materials, Inc.

accounted for 26 % of our total accounts receivable.

During the year ended December 31, 2025, three customers accounted for 23 %, 19 %, and 12 % of our total revenue, respectively.

During the year ended December 31, 2024, two customers accounted for 26 % and 11 % of our total revenue, respectively.

During the year ended December 31, 2023, one customer accounted for 22 % of our total revenue.

As of December 31, 2025, the account receivable balance from three customers accounted for 26 %, 10 %, and 20 %, respectively, of our total accounts receivable.

During the year ended December 31, 2024, two customers accounted for 25 % and 14 %, respectively, of our total accounts receivable.

No other customer’s account receivable exceeded 10% of our total accounts receivable in the periods presented.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

The geographic distribution of pretax income from continuing operations was as follows:

Years Ended December 31,

(in thousands)

Income from continuing operations, before income taxes

The income tax provision (benefit) from continuing operations is summarized as follows:

Years Ended December 31,

(in thousands)

Total current provision

Total deferred benefit

Total income tax provision (benefit)

Effective tax rate

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

BALANCE SHEET INFORMATION

Accounts Receivable, Net

We record accounts receivable at net realizable value.

Our accounts receivable, net balance on the Consolidated Balance Sheets was $ 325.2 million at December 31, 2025.

The following table summarizes the changes in expected credit losses related to receivables:

Years Ended December 31,

(in thousands)

Income taxes per federal statutory rate

State income taxes, net of federal deduction

tax on foreign operations

Foreign derived intangible income deduction

Tax effect of foreign operations

Uncertain tax positions

Change in valuation allowance assessment

Change in valuation allowance

Executive compensation limitation

Impact of intellectual property transfer

Other permanent items, net

Total income tax provision (benefit)

(in millions)

Balance at beginning of period

Deductions - write-offs and other adjustments

Balance at end of period

We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis.

Components of inventories were as follows:

(in millions)

Parts and raw materials

Work in process

Finished goods

Property and Equipment, Net

Property and equipment, net increased $ 87.2 million due to continued investment in our new ERP system, expanding capacity in our existing factories, and our new factory in Thailand.

Property and equipment, net is comprised of the following:

Estimated Useful

Life (in years)

(in millions)

Buildings, machinery, and equipment

Computer equipment, furniture, fixtures, and vehicles

Leasehold improvements

Capital projects in process

Accumulated depreciation

Property and equipment, net

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed.

Significant deferred tax assets and liabilities consist of the following:

(in thousands)

Deferred tax assets:

Net operating loss and tax credit carryforwards

Pension obligation

Bond hedge original issue discount

Operating lease liabilities

Total deferred tax assets

valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Unremitted earnings

Operating lease right-of-use assets

Operating lease liability

Total deferred tax liabilities

Net deferred tax assets

Of the $ 120.8 million and $ 100.5 million net deferred tax assets as of December 31, 2024 and 2023, respectively, $ 121.4 million and $ 107.9 million, respectively, were included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets.

$ 0.6 million and $ 7.4 million, respectively, were included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

During the fourth quarter of 2024, we completed the transfer of certain intellectual property between certain of our legal entities in connection with simplifying our corporate legal entity structure.

The tax impact of the transfer resulted in the recognition of deferred tax assets totaling approximately $ 23.0 million with a corresponding decrease to tax expense.

As of December 31, 2024, we have recorded a total valuation allowance on $ 2.9 million of our U.S.

domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions.

The remaining valuation allowance on deferred tax assets approximates $ 39.4 million and is associated primarily with operations in Hong Kong, Germany, China, and Switzerland.

As of December 31, 2024, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized.

The December 31, 2024 valuation allowance balance reflects an increase of $ 4.4 million during the year.

As of December 31, 2024, we had U.S., foreign and state tax loss carryforwards of $ 31.3 million, $ 277.7 million, and $ 107.2 million, respectively.

Additionally, we had $ 1.6 million and $ 30.5 million of capital loss and interest expense limitation carryforwards, respectively.

Finally, we had U.S.

and state tax credit carryforwards of $ 0.1 million and $ 2.3 million, respectively.

and state net operating losses, tax credits, and interest expense limitation are

The following table summarizes property and equipment, net by geographic area:

(in millions)

United States

Europe and other

The following table summarizes depreciation expense.

All depreciation expense is recorded in income from continuing operations:

Years Ended December 31,

(in millions)

Depreciation expense

Our sales agreements include customary product warranty provisions, which generally range from 12 to 36 months after shipment.

We record the estimated warranty obligations cost when we recognize revenue.

This estimate is based on historical experience by product.

Our estimated warranty obligation is included in other accrued expenses in our Consolidated Balance Sheets.

Changes in our product warranty obligation were as follows:

Years Ended December 31,

(in millions)

Balance at beginning of period

Net increases to accruals

Warranty expenditures

Effect of changes in exchange rates

Balance at end of period

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws.

These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period.

Much of the foreign loss carryforwards, and $ 9.7 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore, China, and Malaysia.

These tax holidays are in effect through June 30, 2027, December 31, 2025, and January 31, 2025, respectively.

The tax holidays are conditional upon our meeting certain employment and investment thresholds.

The expected benefit of these tax holidays may be limited by the impact of Pillar II global minimum tax or other actions taken by these countries.

For the years ended December 31, 2024, 2023 and 2022, the impact of the tax holidays decreased foreign taxes by $ 12.4 million, $ 14.3 million, and $ 19.4 million, respectively, and the benefit on earnings per diluted share was $ 0.33 , $ 0.38 , and $ 0.52 , respectively.

As of December 31, 2024, we have undistributed earnings in certain foreign subsidiaries of approximately $ 36.3 million that we have indefinitely invested, and on which we have not recognized deferred taxes.

Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements.

The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the following:

December 31, 2025

Gross Carrying

Weighted Average Remaining

Useful Life (in years)

(in millions)

Customer relationships

Trademarks and other

December 31, 2024

Gross Carrying

Weighted Average Remaining

Useful Life (in years)

(in millions)

Customer relationships

Trademarks and other

Amortization expense related to intangible assets was as follows:

Years Ended December 31,

(in thousands)

(in millions)

Amortization expense

Estimated future amortization expense related to intangibles is as follows:

Year Ending December 31,

(in millions)

The following table summarizes the changes in goodwill:

(in millions)

Balance at beginning of period

Additions based on tax positions taken during a prior period

Additions based on tax positions taken during a prior period - acquisitions

Additions based on tax positions taken during the current period

Reductions based on tax positions taken during a prior period

Reductions related to a lapse of applicable statute of limitations

Reductions related to a settlement with taxing authorities

Additions from acquisition

Foreign currency translation and other

Balance at end of period

The unrecognized tax benefits of $ 5.7 million, if recognized, will impact our effective tax rate.

In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.

We had $ 0.8 million and $ 0.7 million of accrued interest and penalties on December 31, 2024 and 2023, respectively.

With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2020.

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Components of total operating lease cost were as follows:

Years Ended December 31,

(in millions)

Operating lease cost

Short-term and variable lease cost

Total operating lease cost

Estimated future payments on our operating lease liabilities are as follows:

Year Ending December 31,

(in millions)

Total lease payments

Present value of lease liabilities

In addition to the above, we have a lease agreement with total payments of $ 6.4 million that commences in the first quarter of 2026 and extends through 2035.

The following tables present additional information about our lease agreements:

Weighted average remaining lease term (in years)

Weighted average discount rate

Years Ended December 31,

(in millions)

Cash paid for operating leases

Right-of-use assets obtained in exchange for operating lease liabilities

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

LONG-TERM DEBT

Long-term debt on our Consolidated Balance Sheets consists of the following:

(in millions)

Convertible Notes due 2028, 2.5 % interest

debt discount

Net long-term debt

current maturities

Net long-term debt

For all periods presented, we were in compliance with the covenants under all debt agreements.

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.

We reassess the classification of the Convertible Notes at each quarterly reporting period, considering the trading price of our common stock relative to the conversion criteria.

Exclusive of any early conversion elections by the convertible noteholders, there are no scheduled debt maturities until 2028

The following table summarizes interest expense related to our debt:

Years Ended December 31,

(in millions)

Interest expense

Amortization of debt issuance costs

Total interest expense related to debt

Credit Agreement

On May 8, 2025, we terminated our prior credit agreement, dated as of September 10, 2019 (and subsequently amended) and entered into a new credit agreement (the “Credit Agreement”) consisting of a senior unsecured term loan facility (“Term Loan Facility”) and a senior unsecured revolving facility (“Revolving Facility”), both maturing on May 8, 2030.

The maturity date may be accelerated to the date that is 91 days prior to the maturity date of our $ 575.0 million aggregate principal amount of 2.50 % convertible senior notes due September 15, 2028 (the “Convertible Notes”), if the sum of our consolidated cash and cash equivalents plus the undrawn balance on the Revolving Facility is less than 120 % of the redemption amount of the Convertible Notes.

The financing terms of the new Credit Agreement are substantially the same as the terms of the prior credit agreement.

As part of the new credit facility, HSBC Bank USA, N.A.

(“HSBC”) was appointed as the administrative agent for the lender group.

In connection with the Credit Agreement, we paid $ 1.9 million in lender and professional fees, which were capitalized and will be amortized over the term of the Credit Agreement.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

At the time of termination, no borrowings were outstanding under the prior credit agreement, and there have been no borrowings under the Credit Agreement to date.

As of December 31, 2025, we had $ 600.0 million available on the Revolving Facility.

(in millions)

Available capacity on Revolving Facility

In addition to our 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.

Should we have future borrowings under the Term Loan Facility or Revolving Facility, they will bear interest, at our option, at a rate based on the Base Rate or SOFR, as defined in the Credit Agreement, plus an applicable margin.

Convertible Senior Notes due 2028

On September 12, 2023, we completed a private, unregistered offering of the Convertible Notes.

The remaining outstanding principal amount of the Convertible Notes, amounting to $ 567.5 million, net of unamortized issuance costs, was classified as current as of December 31, 2025.

Pursuant to the indenture governing the Convertible Notes, because the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on December 31, 2025 was greater than or equal to $ 179.76 on each applicable trading day, the holders have the right to surrender any portion of their Convertible Notes (in minimum denominations of $ 1,000 in principal amount or an integral multiple thereof) for conversion during the calendar quarter ending March 31, 2026, and only during such calendar quarter.

The Convertible Notes mature on September 15, 2028, unless earlier repurchased, redeemed, or converted.

Interest is payable semi-annually in arrears in March and September.

We do not maintain a sinking fund.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after September 20, 2026 if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period).

The redemption price is 100 % of the principal amount plus accrued and unpaid interest.

Prior to May 15, 2028, holders have the option to convert all or a portion of their Convertible Notes under the following circumstances:

● during any calendar quarter if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days is greater than or equal to 130 % of the conversion price on each applicable trading day;

● during the five business day period immediately after any five consecutive trading day period in which the trading price per $ 1,000 principal amount of the Convertible Notes for each trading day was less than 98 % of the product of the last reported sale price of our common stock on each such trading day and the conversion rate on each such trading day;

● if Advanced Energy calls any or all of the Convertible Notes for redemption;

● upon the occurrence of specified corporate transactions or events described in the indenture.

From May 15, 2028 through the maturity date, holders have the option to convert at any time regardless of circumstances.

The initial conversion rate is 7.2747 shares of common stock per $ 1,000 principal amount, which is equivalent to an initial conversion price of approximately $ 137.46 per share of common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the indenture.

Upon conversion, Advanced Energy will do the following:

● pay cash up to the aggregate principal amount to be converted;

● pay or deliver cash, shares of our common stock, or a combination (at our election) with respect to the remainder, if any, of the conversion obligation in excess of the aggregate principal amount being converted.

Concurrent with the Convertible Notes issuance, we entered into hedges (“Note Hedges”) with respect to our common stock and sold warrants to purchase our common stock (“Warrants”) .

I n combination, the Note Hedges and Warrants synthetically increase the initial conversion price on the Convertible Notes from $ 137.46 to $ 179.76 , reducing the potential dilutive effect.

The Warrants provide the counterparties the option to acquire approximately 4.2 million aggregate shares of our common stock (subject to customary anti-dilution adjustments), which is the same number of shares of our common stock covered by the Note Hedges at a $ 179.76 per share initial exercise price, which represents a 70 % premium over the $ 105.74 closing price of our common stock on September 7, 2023.

The Warrants expire on July 7, 2029.

If the market value per share of our common stock exceeds the exercise price of the Warrants during the measurement period at the maturity of such Warrants, the Warrants will have a dilutive effect on our earnings per share as we will owe the counterparties a number of shares of common stock in an amount based on the excess of such market price per share of the common stock over the Warrants’ exercise price.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

The Note Hedge and Warrants are separate from the Convertible Notes.

The Convertible Notes holders have no rights with respect to the Note Hedges and Warrants.

Counterparties in the Note Hedge and Warrants transactions have no rights with respect to the Convertible Notes.

We use level 2 measurements to estimate the fair value of our debt.

As of December 31, 2025 and 2024, we estimated the fair value of our Convertible Notes to be $ 951.1 million and $ 624.6 million, respectively.

STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

4 unchanged sentences

Defined Employee Benefit Plan

(in thousands)

(in millions)

Balance at December 31, 2022

3 unchanged sentences

Other comprehensive income (loss) prior to reclassifications

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive loss

Balance at December 31, 2024

Other comprehensive income (loss) prior to reclassifications

Amounts reclassified from accumulated other comprehensive loss

Amounts reclassified from accumulated other comprehensive income (loss)

Balance at December 31, 2025

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Statements of Operations

(in thousands)

(in millions)

Foreign currency translation

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Years Ended December 31,

(in thousands, except per share amounts)

(in millions, except per share amounts)

Income from continuing operations

income from continuing operations attributable to noncontrolling interest

Income from continuing operations attributable to Advanced Energy Industries, Inc.

Basic weighted-average common shares outstanding

Dilutive effect of Convertible Notes

Dilutive effect of Warrants

Dilutive effect of stock awards

2 unchanged sentences

Anti-dilutive shares not included above

Total anti-dilutive shares

Anti-dilutive stock awards rounded to zero for the periods presented.

We compute basic earnings per share of common stock (“Basic EPS”) by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period.

6 unchanged sentences

When the stock price is lower than the strike price, there is no dilutive or anti-dilutive impact.

When the stock price is higher than the initial strike price, there is a dilutive impact associated with the Convertible Notes.

Prior to conversion, we do not consider the Note Hedges for purposes of Diluted EPS as their effect would be anti-dilutive.

1 unchanged sentence

● Dilutive effect of the Warrants issued concurrently with the Convertible Notes using the treasury stock method.

For all periods presented, the Warrants did not increase the weighted-average number of common shares outstanding because the $ 179.76 exercise price of the Warrants exceeded the average market price of our common stock.

For the fourth quarter of 2025, the Warrants increased the weighted-average number of common shares outstanding because the average market price of our common stock exceeded the $ 179.76 exercise price of the Warrants.

ADVANCED ENERGY INDUSTRIES, INC.

4 unchanged sentences

Years Ended December 31,

(in thousands, except per share amounts)

(in millions, except per share amounts)

Amount paid or accrued to repurchase shares

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Repurchased shares were retired and assumed the status of authorized and unissued shares.

At December 31, 2025, we had $ 0.2 million accrued in other accrued expenses in our Consolidated Balance Sheets for share repurchases.

At December 31, 2025, the remaining amount authorized by the Board of Directors (“our Board” or “the Board”) for future share repurchases was $ 166.9 million with no time limitation .

3 unchanged sentences

The following tables present information about our non-pension assets and liabilities measured at fair value on a recurring basis.

December 31, 2024

We classify all items below within level 2 of the fair value hierarchy.

Long-Term Debt for information regarding the fair value of our Convertible Notes.

Balance Sheet Classification

(in thousands)

(in millions)

Certificates of deposit

3 unchanged sentences

Deferred compensation liabilities

Other long-term liabilities

December 31, 2023

Balance Sheet Classification

(in thousands)

Certificates of deposit

Other current assets

Interest rate swaps

Deferred compensation liabilities

Other long-term liabilities

Other liabilities

ADVANCED ENERGY INDUSTRIES, INC.

8 unchanged sentences

Both are included as a component of other income (expense), net in our Consolidated Statements of Operations.

At December 31, 2024 we have $ 70.6 million foreign currency forward contracts outstanding.

There were no foreign currency forward contracts outstanding at December 31, 2023.

We had interest rate swap contracts that fixed a portion of the interest payments on our Term Loan Facility.

The interest rate swap contracts expired on September 10, 2024.

In connection with the expiration, there are no longer any related balances for these contracts within accumulated other comprehensive income (loss) on the Consolidated Balance Sheets as of December 31, 2024.

Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.”

As of December 31, 2025 and 2024, we had $ 60.5 million and $ 70.6 million, respectively, of foreign currency forward contracts outstanding.

Fair Value Measurements for information regarding the fair value of derivative instruments.

1 unchanged sentence

We manage this credit risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty.

ACCOUNTS RECEIVABLE, NET

We record accounts receivable at net realizable value.

Our accounts receivable, net balance on the Consolidated Balance Sheets was $ 265.3 million at December 31, 2024.

The following table summarizes the changes in expected credit losses related to receivables:

Years Ended December 31,

(in thousands)

Balance at beginning of period

Deductions - write-offs, net of recoveries

Foreign currency translation

Balance at end of period

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis.

Components of inventories were as follows:

(in thousands)

Parts and raw materials

Work in process

Finished goods

PROPERTY AND EQUIPMENT, NET

Property and equipment, net is comprised of the following:

Estimated Useful

Life (in years)

(in thousands)

Buildings, machinery, and equipment

Computer equipment, furniture, fixtures, and vehicles

Leasehold improvements

Capital projects in process

Accumulated depreciation

Property and equipment, net

The following table summarizes property and equipment, net by geographic area:

(in thousands)

United States

Europe and other

The following table summarizes depreciation expense.

All depreciation expense is recorded in income from continuing operations:

Years Ended December 31,

(in thousands)

Depreciation expense

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the following:

December 31, 2024

Gross Carrying

Weighted Average Remaining

Useful Life (in years)

(in thousands)

Customer relationships

Trademarks and other

December 31, 2023

Gross Carrying

Weighted Average Remaining

Useful Life (in years)

(in thousands)

Customer relationships

Trademarks and other

Amortization expense related to intangible assets was as follows:

Years Ended December 31,

(in thousands)

Amortization expense

Estimated future amortization expense related to intangibles is as follows:

Year Ending December 31,

(in thousands)

The following table summarizes the changes in goodwill:

(in thousands)

Balance at beginning of period

Additions from acquisition

Measurement period adjustments

Foreign currency translation and other

Balance at end of period

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES

1 unchanged sentence

Years Ended December 31,

(in thousands)

(in millions)

Restructuring

4 unchanged sentences

We have several restructuring plans in process.

On July 29, 2024, we approved actions in furtherance of our manufacturing consolidation initiatives intended to optimize our manufacturing footprint and cost structure, including the closure of our Zhongshan, China manufacturing facility (the “2024 Plan”).

In connection with the 2024 Plan, we recorded a $ 29.6 million charge primarily associated with expected employment-related charges for, among other things, one-time cash payments for severance, benefits expenses, payroll taxes, and other ancillary costs.

The charge includes estimated liabilities for lease termination and facility exit costs, which could be subject to further adjustments.

The remaining contractual rental obligations under the lease agreements are recorded in current portion of operating lease liabilities and operating lease liabilities on our Consolidated Balance Sheets.

The amounts incurred as a result of the approved actions are estimates, and actual results may differ, which could result in incremental restructuring charges in future periods.

We anticipate the 2024 Plan will be substantially completed by the end of second quarter of 2025, with final activities expected to conclude in 2026.

During the second quarter of 2025, we approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation (the “2025 Plan”).

We expect these actions to be substantially complete during 2027 and do not expect to incur significant additional charges.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

In 2024, we approved actions in furtherance of our manufacturing consolidation initiatives intended to optimize our manufacturing footprint and cost structure, including the closure of our Zhongshan, China manufacturing facility (the “2024 Plan”).

Manufacturing operations in Zhongshan ceased during the second quarter of 2025.

Final closure activities are in progress and expected to conclude in 2026.

We do not expect to incur significant additional charges.

In 2023, we approved a plan intended to optimize and further consolidate our manufacturing operations and functional support groups as well as a general reduction-in-force to align our expenses to revenue levels (the “2023 Plan”).

We expect to incur approximately $ 1.0 million in additional charges through the second quarter of 2025.

The 2023 Plan is substantially complete, with the final activities expected to conclude in 2026.

We expect final activities to conclude in the first quarter of 2027 and do not expect to incur significant additional charges.

This plan was approved to improve our operating efficiencies and drive the realization of synergies from our business combinations by consolidating our operations, optimizing our factory footprint, including moving certain production into our higher volume factories, reducing redundancies, and lowering our cost structure.

The 2022 Plan is now complete.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Changes in restructuring liabilities were as follows:

(in thousands)

2022 & Other Plans

(in millions)

December 31, 2023

Costs incurred and charged to expense

Costs paid or otherwise settled

Foreign currency translation

December 31, 2024

5 unchanged sentences

Years Ended December 31,

(in thousands)

(in millions)

Severance and related charges

1 unchanged sentence

Total restructuring charges

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Cumulative Cost Through

December 31, 2025

(in thousands)

(in millions)

Severance and related charges

1 unchanged sentence

Total restructuring charges

Asset Impairments

During 2025, we recorded $ 1.8 million of impairment charges in connection with vacating facilities.

Other Charges

Other charges relate to vacating and relocating facilities.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Our sales agreements include customary product warranty provisions, which generally range from 12 to 36 months after shipment.

We record the estimated warranty obligations cost when we recognize revenue.

This estimate is based on historical experience by product.

Our estimated warranty obligation is included in other accrued expenses in our Consolidated Balance Sheets.

Changes in our product warranty obligation were as follows:

Years Ended December 31,

(in thousands)

Balance at beginning of period

Net increases to accruals

Warranty expenditures

Effect of changes in exchange rates

Balance at end of period

Components of total operating lease cost were as follows:

Years Ended December 31,

(in thousands)

Operating lease cost

Short-term and variable lease cost

Total operating lease cost

Estimated future payments on our operating lease liabilities are as follows:

Year Ending December 31,

(in thousands)

Total lease payments

Present value of lease liabilities

In addition to the above, we have a lease agreement with total payments of $ 7.0 million that commences in the first quarter of 2025 and extends through 2040.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

In connection with the closure of our Zhongshan, China manufacturing facility under the 2024 Plan (see Note 12.

Restructuring, Asset Impairments, and Other Charges ), we expect to terminate the facility’s lease agreement before its expiration.

During 2024, we reduced both the operating lease right-of-use asset and operating lease liability by $ 20.7 million.

The following tables present additional information about our lease agreements:

Weighted average remaining lease term (in years)

Weighted average discount rate

Years Ended December 31,

(in thousands)

Cash paid for operating leases

Right-of-use assets obtained in exchange for operating lease liabilities

Other charges relate to vacating and relocating facilities and personnel transition costs.

EMPLOYEE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

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Each plan is managed locally and in accordance with respective local laws and regulations.

In light of the United Kingdom’s High Court ruling in the case of Virgin Media Ltd v.

NTL Pension Trustees II Ltd & Ors, we reviewed past amendments made to our United Kingdom pension plans.

We continue to account for our United Kingdom pension plans in accordance with the plan agreements and amendments.

To measure the expense and related benefit obligation, we make various assumptions, including discount rates used to value the obligation, expected return on plan assets used to fund these expenses, and estimated future inflation rates.

6 unchanged sentences

Our projected benefit obligation and plan assets for defined benefit pension plans and the related assumptions used to determine the related liabilities are as follows:

(in thousands)

(in millions)

Projected benefit obligation, beginning of year

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Funded status of plan

(in thousands)

(in millions)

Accumulated benefit obligation

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The current portion of the liability is included in accrued payroll and employee benefits.

(in thousands)

(in millions)

Total pension benefit obligation

1 unchanged sentence

Years Ended December 31,

(in thousands)

(in millions)

Interest cost

11 unchanged sentences

December 31, 2025

(in thousands)

(in millions)

Diversified Growth Fund

2 unchanged sentences

December 31, 2024

(in thousands)

(in millions)

Diversified Growth Fund

3 unchanged sentences

Year Ending December 31,

(in thousands)

(in millions)

As of December 31, 2025 and 2024, accumulated other comprehensive income (loss) on the Consolidated Balance Sheets includes net actuarial gains and other deferred items, net of related taxes of $ 13.3 million and $ 10.5 million, respectively, that have not yet been recognized in net periodic pension cost.

10 unchanged sentences

December 31, 2025

(in thousands)

(in millions)

Shares available for future issuance under the 2023 Incentive Plan

2 unchanged sentences

We recognize stock-based compensation expense based on the fair value of the awards issued and the functional area of the employee receiving the award.

For the year ended December 31, 2024, stock-based compensation expense includes $ 1.8 million related to a modification for accounting purposes of prior awards and $ 1.9 million related to the Airity acquisition (see Note 2.

For the year ended December 31, 2025, stock-based compensation expense includes $ 3.7 million related to the Airity acquisition (see Note 2.

Acquisition ).

1 unchanged sentence

Years Ended December 31,

(in thousands)

(in millions)

Stock-based compensation expense

3 unchanged sentences

RSUs are generally granted with a grant date fair value based on the market price of our stock on the date of grant.

For RSUs that vest based on our relative total shareholder return over the performance period to a predetermined peer group, fair value is predetermined based on a Monte Carlo simulation as of the date of the grant.

Changes in our RSUs were as follows:

Year Ended December 31, 2025

(in thousands)

(in millions)

RSUs outstanding at beginning of period

1 unchanged sentence

RSUs outstanding at end of period

For vested RSUs, employees withheld shares for income tax totaling $ 9.1 million.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

For vested RSUs, employees withheld shares for income tax totaling $ 14.5 million.

The weighted-average grant date fair value for RSUs granted in the years ended December 31, 2025, 2024, and 2023 was $ 119.54 , $ 104.84 , and $ 100.04 , respectively.

8 unchanged sentences

Contractual Life

(in thousands)

(in millions)

Options outstanding at beginning of period

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As of December 31, 2025, the aggregate intrinsic value of options outstanding and exercisable was $ 4.4 million and $ 4.4 million, respectively.

As of December 31, 2024, there was $ 0.2 million of total unrecognized compensation cost, net of expected forfeitures, related to the unvested options that we expect to recognize over a remaining period of 0.2 years.

As of December 31, 2025, there were no stock options outstanding or exercisable, and no remaining unrecognized compensation cost related to stock options.

Employee Stock Purchase Plan

4 unchanged sentences

As of December 31, 2025, there was $ 0.6 million of total unrecognized compensation cost related to the ESPP that we expect to recognize over a remaining period of five months .

Deferred Compensation Plan

We offer certain employees the opportunity to defer compensation and stock awards and maintain a rabbi trust in connection with this deferred compensation plan.

Assets of the rabbi trust are consolidated as we are the primary beneficiary.

Although we cannot use the rabbi trust’s assets for any purpose other than meeting our obligations under the deferred compensation plan, the trust’s assets, liabilities, and activity are included in our consolidated financial statements.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Deferred Compensation Plan

We offer certain employees the opportunity to elect to defer compensation for salary, bonus, commission, and stock awards.

The Company maintains a rabbi trust in connection with the deferred compensation plan.

Assets of the rabbi trust not held in Company shares are presented in other assets, and the fair value of the Company shares held in the rabbi trust is classified in stockholders’ equity.

2 unchanged sentences

The stock awards recorded in temporary equity are recognized at fair value, with any difference from stock based compensation recorded in retained earnings.

COMMITMENTS AND CONTINGENCIES

We are involved in disputes and legal actions arising in the normal course of our business.

While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict.

In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations.

An unfavorable decision in intellectual property litigation also could require material changes in production processes and products or result in our inability to ship products or components found to have violated third party intellectual property rights.

We accrue loss contingencies in connection with our commitments and contingencies, including litigation, when it is probable that a loss has occurred, and the amount of such loss can be reasonably estimated.

We are not currently a party to any legal action that we believe would have a material adverse impact on our business, financial condition, results of operations or cash flows.

We maintain defined benefit pension plans for certain of our non-U.S.

employees, including those in the United Kingdom.

In light of the United Kingdom’s High Court ruling in the case of Virgin Media Ltd v.

NTL Pension Trustees II Ltd & Ors, we reviewed past amendments made to our United Kingdom pension plans.

While unlikely, should there be a challenge to any previous amendments, we could face potential litigation and compliance risks.

We continue to account for our United Kingdom pension plans in accordance with the plan agreements and amendments, as we believe they represent a mutual understanding and agreement among all parties.

LONG-TERM DEBT

Long-term debt on our Consolidated Balance Sheets consists of the following:

(in thousands)

Convertible Notes due 2028, 2.5 % interest

Term Loan Facility

Gross long-term debt, including current maturities

debt discount

Net long-term debt, including current maturities

current maturities

Net long-term debt

For all periods presented, we were in compliance with the covenants under all debt agreements.

The following table summarizes information regarding the rabbi trust’s assets and liabilities:

Balance Sheet Classification

(in millions)

Deferred compensation liabilities

Other liabilities

Stock awards elected for deferral

Temporary equity

Company shares of common stock

Stockholders equity

The geographic distribution of pretax income from continuing operations was as follows:

Years Ended December 31,

(in millions)

Income from continuing operations, before income taxes

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

The following table summarizes interest expense related to our debt:

The income tax provision (benefit) from continuing operations is summarized as follows:

Years Ended December 31,

(in thousands)

Interest expense

Amortization of debt issuance costs

Total interest expense related to debt

Credit Agreement

Our credit agreement dated as of September 10, 2019, as amended (the “Credit Agreement”) consists of a senior unsecured term loan facility (“Term Loan Facility”) and a senior unsecured revolving facility (“Revolving Facility”), both maturing on September 9, 2026.

On September 9, 2024, we entered into an amendment to the Credit Agreement to increase the capacity on the Revolving Facility from $ 200.0 million to $ 600.0 million.

This amendment was in connection with the concurrent prepayment, using existing cash on hand, of the full $ 345.0 million outstanding principal balance under our Term Loan Facility.

For all periods presented, no amounts were outstanding on the Revolving Facility.

The following table summarizes our availability to withdraw on the Revolving Facility:

(in thousands)

Available capacity on Revolving Facility

Any requested increase is subject to lender approval.

The interest rate swap contracts previously entered into relative to the Term Loan Facility expired on September 10, 2024.

Convertible Senior Notes due 2028

On September 12, 2023, we completed a private, unregistered offering of $ 575.0 million aggregate principal amount of 2.50 % convertible senior notes due 2028 (“Convertible Notes”).

The $ 564.7 million remaining outstanding principal amount of the Convertible Notes, net of unamortized issuance costs, continues to be classified as long-term debt as none of the conversion triggers occurred as of December 31, 2024.

The Convertible Notes mature on September 15, 2028, unless earlier repurchased, redeemed, or converted.

Interest is payable semi-annually in arrears in March and September.

We do not maintain a sinking fund.

(in millions)

Total current provision

Total deferred benefit

Total income tax provision (benefit)

Effective tax rate

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

Years Ended December 31,

(in millions)

Income taxes per federal statutory rate

State income taxes, net of federal deduction

tax on foreign operations

Foreign derived intangible income deduction

Tax effect of foreign operations

Uncertain tax positions

Change in valuation allowance assessment

Change in valuation allowance

Executive compensation limitation

Impact of intellectual property transfer

Other permanent items, net

Total income tax provision (benefit)

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

The redemption price is 100 % of the principal amount plus accrued and unpaid interest.

Prior to May 15, 2028, holders have the option to convert all or a portion of their Convertible Notes under the following circumstances:

● if Advanced Energy calls any or all of the Convertible Notes for redemption;

● upon the occurrence of specified corporate transactions or events described in the indenture.

From May 15, 2028 through the maturity date, holders have the option to convert at any time regardless of circumstances.

The initial conversion rate is 7.2747 shares of common stock per $ 1,000 principal amount, which is equivalent to an initial conversion price of approximately $ 137.46 per share of common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the indenture.

Upon conversion, Advanced Energy will do the following:

● pay cash up to the aggregate principal amount to be converted;

Concurrent with the Convertible Notes issuance, we entered into hedges (“Note Hedges”) with respect to our common stock and sold warrants to purchase our common stock (“Warrants”) .

I n combination, the Note Hedges and Warrants synthetically increase the initial conversion price on the Convertible Notes from $ 137.46 to $ 179.76 , reducing the potential dilutive effect.

The Warrants expire on July 7, 2029.

Years Ended December 31,

(in millions)

Federal Statutory Tax Rate

State and Local Income Taxes, Net of Federal Income Tax Effect

Effect of Cross-Border Tax Laws

Global intangible low-taxed income

Foreign tax credit

Research and development tax credits

Nontaxable or Nondeductible Items

Executive compensation limitation

Other Adjustments

Change in prepaid tax on intercompany profit

Foreign Tax Effects

Effect of tax rate changes in the year

Changes in valuation allowances

Statutory rate difference

Changes in valuation allowances

Non-taxable income

Withholding tax

Enterprise zone benefit

Statutory rate difference

Other Jurisdictions

Changes in Unrecognized Tax Benefits

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

The Note Hedge and Warrants are separate from the Convertible Notes.

The Convertible Notes holders have no rights with respect to the Note Hedges and Warrants.

Counterparties in the Note Hedge and Warrants transactions have no rights with respect to the Convertible Notes.

We use level 2 measurements to estimate the fair value of our debt.

As of December 31, 2024, we estimate the fair value of our Convertible Notes to be $ 624.6 million.

The income taxes paid (net of refunds) is summarized as follows:

December 31, 2025

(in millions)

State & Local

From the above amounts, income taxes paid (net of refunds) exceed the 5% of taxes paid threshold in the following foreign jurisdictions.

state and local jurisdictions did not exceed the 5% threshold.

December 31, 2025

(in millions)

From the above amounts, states that equal more than 50% of our state income taxes paid (net of refunds) but do not exceed the 5% of taxes paid include the following jurisdictions.

December 31, 2025

(in millions)

State & Local:

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

Significant deferred tax assets and liabilities consist of the following:

(in millions)

Deferred tax assets:

Net operating loss and tax credit carryforwards

Pension obligation

Bond hedge original issue discount

Operating lease liabilities

Total deferred tax assets

valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Unremitted earnings

Operating lease right-of-use assets

Operating lease liabilities

Total deferred tax liabilities

Net deferred tax assets

Of the $ 137.1 million and $ 120.8 million net deferred tax assets as of December 31, 2025 and 2024, respectively, $ 137.7 million and $ 121.4 million, respectively, were included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets.

$ 0.6 million for both years were included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

During 2025, we completed a series of intercompany restructuring actions that created additional future taxable income that was previously not available in certain tax jurisdictions.

Based on updated financial projections and planned business integration steps, these activities provided sufficient positive evidence to support the realization of deferred tax assets for which valuation allowances had previously been recorded.

As a result, in 2025, we released deferred tax valuation allowances totaling $ 9.8 million with a corresponding decrease to tax expense.

We will continue to update financial projections and integration plans on a periodic basis, and additional adjustments to the valuation allowance may be required in future periods.

As of December 31, 2025, we have recorded a total valuation allowance on $ 2.6 million of our U.S.

domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions.

The remaining valuation allowance on deferred tax assets approximates $ 34.0 million and is associated primarily with operations in Hong Kong, China, and Switzerland.

As of December 31, 2025, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized.

For the year ended December 31, 2025, the valuation allowance decreased by $ 5.8 million.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

As of December 31, 2025, we had U.S., foreign and state tax loss carryforwards of $ 28.4 million, $ 347.7 million, and $ 105.2 million, respectively.

Additionally, we had $ 1.9 million and $ 30.5 million of capital loss and interest expense limitation carryforwards, respectively.

Finally, we had U.S.

and state tax credit carryforwards of $ 4.8 million and $ 2.0 million, respectively.

and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws.

These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period.

Much of the foreign loss carryforwards, and $ 8.1 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore.

This tax holiday is in effect through June 30, 2027.

The tax holiday is conditional upon our meeting certain employment and investment thresholds.

The expected benefit of the tax holidays may be limited by the impact of Pillar II global minimum tax or other actions taken by these countries.

For the years ended December 31, 2025, 2024 and 2023, the impact of the tax holidays decreased foreign taxes by $ 31.0 million, $ 12.4 million, and $ 14.3 million, respectively, and the benefit on earnings per diluted share was $ 0.82 , $ 0.33 , and $ 0.38 , respectively.

We have undistributed earnings in certain foreign subsidiaries that we have indefinitely invested, and on which we have not recognized deferred taxes.

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements.

The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

Years Ended December 31,

(in millions)

Balance at beginning of period

Additions based on tax positions taken during a prior period

Additions based on tax positions taken during the current period

Reductions based on tax positions taken during a prior period

Reductions related to a lapse of applicable statute of limitations

Reductions related to a settlement with taxing authorities

Balance at end of period

The unrecognized tax benefits of $ 4.9 million, if recognized, will impact our effective tax rate.

In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.

We had $ 0.9 million and $ 0.8 million of accrued interest and penalties on December 31, 2025 and 2024, respectively.

With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2022.

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.

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending December 31, 2025.

COMMITMENTS AND CONTINGENCIES

We are involved in disputes and legal actions arising in the normal course of our business.

While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict.

In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations.

We are not currently a party to any legal action that we believe would have a material adverse impact on our business, financial condition, results of operations or cash flows.

SUPPLEMENTAL CASH FLOW INFORMATION

Years Ended December 31,

(in thousands)

(in millions)

Non-cash investing activities:

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What changed 10-K

Item 8. Financial Statements and Supplementary Data