What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-02-18 compared with 2024-02-20 · 76 added, 65 removed, 96 unchanged (59% of the section changed)

Company Overview

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.

We design, manufacture, sell and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment.

Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications .

Advanced Energy is organized on a global, functional basis and operates in the single segment of power electronics conversion products.

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.

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.

1 unchanged sentence

Our executive offices are located at 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202, and our telephone number is 970-407-6555.

Recent Acquisitions

On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power Electronics Corporation (“SL Power”), which is based in Calabasas, California.

This acquisition added complementary products to Advanced Energy’s medical power offerings and extends our presence in several advanced industrial markets.

For additional information, see Note 2.

Acquisitions in Part II, Item 8 “Financial Statements and Supplementary Data.”

Recent Events

Airity Acquisition

On June 20, 2024, we acquired Airity Technologies, Inc.

This acquisition added high voltage power conversion technologies and products, broadening our range of targeted applications within the Semiconductor Equipment and Industrial and Medical markets.

Acquisition in Part II, Item 8 “Financial Statements and Supplementary Data.”

2024 Restructuring Plan

In 2024, we approved further manufacturing consolidation initiatives, 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 and facility exit costs.

Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.”

Credit Agreement Amendment

On September 9, 2024, we used existing cash on hand to prepay the full $345.0 million outstanding principal balance of the senior unsecured term loan facility (the “Term Loan Facility”) under the credit agreement dated as of September 10, 2019, as amended (the “Credit Agreement”).

On the same date, we entered into an additional amendment to the Credit Agreement to increase the capacity on our senior unsecured revolving facility (the “Revolving Facility”) from $200.0 million to $600.0 million.

As a result, as of December 31, 2024, our only outstanding debt was the Convertible Notes due in 2028.

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

Products and Services

1 unchanged sentence

These products are designed to meet our customers’ demanding requirements in efficiency, flexibility, performance, and reliability.

The majority of Advanced Energy’s products are capable of meeting various customer requirements.

We also provide repair and maintenance services for our products.

Our plasma power products offer solutions to enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition.

We have a broad portfolio of high and low voltage power products used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications.

Our plasma power products enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition.

Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data center computing, networking, and telecommunications.

We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets.

Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.

Our service group offers warranty and after-market repair services, providing our customers with preventive maintenance opportunities to support a lower cost of ownership and higher utilization for their capital equipment.

We offer comprehensive repair service and customer support through our worldwide support organization in the United States, China, Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and the United Kingdom.

Support services include warranty and non-warranty repair services, calibration, upgrades, and refurbishments of our products.

Advanced Energy generates revenue from the sale of a broad range of advanced and embedded power products and services to global original equipment manufacturers (“OEM”) and end customers.

Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to customize our solutions to meet the unique requirements of a wide range of critical applications.

Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies that use our products.

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”) and end customers.

Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications.

The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Semiconductor Equipment Market

The semiconductor equipment market supports and enables the long-term growing need for more production capacity and new process technologies to meet expanding demand for semiconductors across many applications driven by megatrends such as artificial intelligence, Internet of Things (IoT) and automobile electrification.

Advanced Energy is a critical technology leader in the industry and provides one of the broadest portfolios of power conversion and related products, including plasma power, high-voltage power, embedded power, and adjacent sensing solutions.

Our plasma power solutions are used to create plasma-based etch and deposition processes, and transition to advanced technology nodes typically require higher content of our advanced power solutions per tool.

Our other semiconductor market products are incorporated in a wide range of applications including ion implant, inspection, metrology, thermal, epitaxy, and back-end test and packaging.

Our strategy is to strengthen our proprietary positions in our core applications with leading market share, such as conductor etch and deposition, grow our market position in targeted applications with lower market share, such as dielectric etch and remote plasma source, and leverage our broad product portfolio to expand our content at our OEM customers.

The Semiconductor Equipment market supports and enables the long-term growing need for more production capacity and new process technologies to meet expanding demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification and Internet of things (“IoT”).

We believe long-term growth in the market will be driven by increased demand for wafer capacity, an increased number of etch and deposition process steps with new technology inflections, and the transition to advanced technology nodes requiring higher content of advanced power solutions per tool.

Our portfolio of power conversion and related products includes plasma power, high-voltage power, system power, and adjacent sensing solutions.

Our plasma power solutions are used to create plasma-based etch and deposition processes.

Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

Our strategy is to outgrow the wafer fabrication equipment (“WFE”) market by developing products for applications that are growing faster than market and through market share gains in both plasma power and adjacent semiconductor applications.

We believe the plasma power market will grow faster than WFE due to increasing number of plasma etch and deposition process steps and growing demand for more complex and high power content.

In addition, we are targeting to win customer adoptions of our new products to strengthen our positions in our core applications with leading market share, such as conductor etch and deposition, and to grow our market position in targeted applications with lower market share, such as dielectric etch.

Finally, we are targeting to leverage our broad portfolio of system power, thermal and sensing, remote plasma source, and high voltage products to gain share in these adjacent semiconductor applications.

Industrial and Medical Market

The growth in the industrial and medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life sciences equipment.

The Industrial and Medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life science equipment.

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power.

1 unchanged sentence

Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode applications.

We serve our broad customer base through both our direct sales force and indirect sales channels including independent sales representatives, channel partners, and distributors.

Our strategy in the market is to expand our product offerings and channel reach, leveraging common platforms, providing platform derivatives, and offering customizations to further penetrate a broader set of applications.

We serve our broad customer base through both our direct sales force and indirect sales channels including independent sales representatives and distributors.

Our strategy in the market is to penetrate a broader set of applications by expanding our product offerings, leveraging common platforms, providing platform derivatives, and offering customizations.

In addition, our strategy is to expand our customer reach in this large, fragmented market through a focused direct sales team on larger and strategic accounts, optimize and leverage our distribution channel, and expand visibility and access to our products through our digital footprint and website.

Data Center Computing Market

The Data Center Computing Market is driven by the growing adoption of cloud computing, as the market shifts from traditional enterprise on-premises computing to the data center.

In addition, the rapid growth of artificial intelligence and machine learning are driving increased demand for substantially higher power in servers and racks, which has increased the importance of power efficiency and power density and accelerated the transition from 12 Volt to 48 Volt infrastructure in data center server racks.

Advanced Energy benefits from these trends as one of the leading providers of high-efficiency, high-density, 48 Volt server power conversion solutions and technologies.

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 higher power for next generation AI processors has increased the power requirement for AI-based servers and racks, accelerated the transition to high-power 48 volt power shelf infrastructure, and amplified the importance of high power efficiency, density, and reliability for server rack power solutions.

Advanced Energy serves as a leading provider of high-efficiency, high-density, server power conversion solutions and technologies with a proven track record of delivering production-ready products.

Our products are designed into data center server and storage systems, as well as used by cloud service providers and their partners in their custom designed server racks and power shelves.

Our strategy in the market is to penetrate selected customers and applications based on our differentiated capabilities and competitive strengths in power density, efficiency, and controls.

Our strategy in the market is to target high-end, high power, differentiated applications based on our competitive strengths in power density, efficiency, reliability, and speed in delivering next-generation, production-ready products.

Telecom and Networking Market

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for increased bandwidth.

Advanced Energy serves this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

We serve this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

Our solutions are often customized with unique features such as ruggedization for mobile radio in the field.

Our strategy in the market is to optimize our portfolio of power conversion products to more differentiated applications, and to focus on 5G infrastructure applications.

Our strategy in the market is to optimize our power conversion products to more differentiated applications and leverage investments across our power portfolio to maintain a position in the most attractive customers and applications.

Our products are sold worldwide to OEMs, distributors, and directly to end users.

During the year ended December 31, 2024, 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 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.

We expect that the sale of products to our largest customers will continue to account for a significant percentage of our revenue for the foreseeable future.

The loss of a large customer could have a material adverse effect on our results of operations .

For more information related to our expectations for the markets we serve, see Business Environment and Trends in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For a discussion of our backlog, see Results of Continuing Operations in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

For more information related to our significant customers, see Note 3.

Revenue in Part II, Item 8 “Financial Statements and Supplementary Data” and Part I, Item 1A “Risk Factors.”

Marketing, Sales, and Distribution

We sell our products through direct and indirect sales channels.

Our sales operations are primarily located in China, Germany, Hong Kong, India, Ireland, Israel, Japan, South Korea, Philippines, Singapore, Taiwan, the United Kingdom, and United States.

In addition to a direct sales force, we have independent sales representatives, channel partners and distributors that support our selling efforts.

We maintain customer service offices at many of the locations listed above, as well as other sites near our customers’ locations.

Our primary direct sales operations are located in the United States (“U.S.”), Asia, and Europe.

In addition to a direct sales force, we have distributors that support our selling efforts.

We maintain customer service offices in many of the locations listed above, as well as other sites near our customers’ locations.

We believe that customer service and technical support are important competitive factors and are essential to building and maintaining close, long-term relationships with our customers.

5 unchanged sentences

We also perform limited specialty manufacturing for some of our products in the U.S., the United Kingdom, and Europe.

In 2023, we announced that we would be expanding our presence in our Mexico factory and beginning construction of a new factory located near Bangkok, Thailand as part of our multi-year factory optimization and consolidation plans.

Our manufacturing requires raw materials, mainly a wide variety of mechanical and electrical components, which are often made to our specifications.

In 2024, as part of our multi-year factory optimization and consolidation initiatives, we announced the closure of our Zhongshan, China manufacturing facility and several smaller manufacturing sites, expanded capacity in our Mexico factory, and progress on a new factory near Bangkok, Thailand, which we expect to be operational in 2026.

Our manufacturing requires a wide variety of mechanical and electrical components, which are often made to our specifications.

We use numerous companies, including contract manufacturers, to supply parts for the manufacture and support of our products.

6 unchanged sentences

Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products.

Our investments in research and development enable us to create intellectual property, including patents, know-how and trade secrets.

Our investments in research and development enable us to create intellectual property, including patents and trade secrets.

We hold numerous U.S.

4 unchanged sentences

Significant competitive factors in our markets include product performance, compatibility with adjacent products, price, quality, reliability, meeting customer demand, and level of customer service and support.

We encounter substantial competition from foreign and domestic companies for each of our product lines.

We encounter substantial competition from foreign and domestic companies for each of our markets.

Some of our competitors have greater financial and other resources than we do.

Other competitors are smaller than we are but may be well established in specific product niches.

Overall, our Industrial and Medical competitors tend to be smaller, and in other product markets we encounter mostly larger competitors.

Competitors in each of our market verticals include, but are not limited to, the following:

19 unchanged sentences

Research and Development

We perform research and development to develop products to address new or emerging applications, technological advances to provide higher performance, lower cost, or other attributes that we may expect to appeal to current or potential customers.

We perform research and development to develop products to address new or emerging applications, make technological advances to provide higher performance, lower cost, or create other attributes that we may expect to appeal to current or potential customers.

We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve.

Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue.

The following table summarizes research and development expenses and the percentage of these expenses as compared to total revenue (in thousands):

Years Ended December 31,

Research and development

Accordingly, we devote significant personnel and financial resources to developing new products and enhancing existing products, and we expect these investments to continue.

For the years ended December 31, 2024, 2023, and 2022 our research and development expenses were $211.8 million, $202.4 million, and $191.0 million, respectively and have ranged from 10.4% to 14.3% of our total revenue.

Human Capital

Our people are our strength, and we are committed to sustaining a culture grounded in our core values:

innovation, integrity, empowerment, partnership, accountability, and execution.

These core values are the foundation of how we operate.

Our people are our strength.

We have a globally diverse workforce with approximately 10,000 employees as of December 31, 2024.

Our employees are located across the globe in more than 20 countries and are comprised of approximately 55% male and 45% female employees.

Our employees are located across the globe in 16 countries and are comprised of approximately 56% male and 44% female employees.

Our employees are not represented by unions, except for statutory organization rights applicable to our employees in China, Germany, and Mexico.

Diversity, Equity, and Inclusion

We are committed to creating an inclusive work environment where all of our employees feel respected, valued, and empowered.

We remain committed to expanding our diversity through targeted hiring and development initiatives.

Through a combination of internal promotions and external hiring, we continue to see increases in the number of female employees represented at the director and above level, as compared with 2022.

We also have an active Corporate Diversity & Inclusion Steering Committee to further increase our commitment to gender, ethnic and racial diversity.

We have an active Women’s Leadership Forum that is focused on career development and internal networking.

We are committed to nurturing a culture grounded in our core values:

innovation, integrity, empowerment, partnership, accountability, and execution.

These core values are the foundation of how we operate.

We stive to provide an inclusive work environment where all of our employees feel respected, valued, and empowered.

We recognize that diverse perspectives and collaboration enable us to drive innovation and future growth for our global customers and we remain committed to diversity.

Through a combination of merit-based internal promotions and external hiring, we have continued to see increases in the number of diverse employees represented at the director and above level, as compared with 2023.

We have a Corporate Diversity & Inclusion Steering Committee which provides guidance, coordination, and support to local diversity and inclusion activities.

We also have an active Women’s Leadership Forum focused on career development and internal networking.

Health and Safety

2 unchanged sentences

Employee Engagement

We believe that our continued success depends, in part, on our ability to attract and retain qualified personnel.

In 2022, we conducted our biennial confidential employee survey on topics relating to confidence in company leadership, ethical conduct, career growth opportunities, and suggestions on how we can make our company a great place to work.

In 2023 we communicated the results of the employee survey with our employees, leaders, executive team, and Board of Directors.

We continue to invest in improving our employee experience through strategies targeted at improving communication, providing internal career development opportunities, and simplifying our internal business processes.

We are committed to providing a collaborative and productive work environment for our employees.

We periodically conduct confidential employee surveys to solicit feedback on confidence in Company leadership, ethical conduct, work environment, career growth opportunities, and we continually evaluate suggestions on how we can make Advanced Energy a great place to work.

We communicate the results of these confidential employee surveys with our employees, leaders, executive team, and Board of Directors and use the feedback to identify opportunities to drive improvements across our Company.

In 2024, we launched Powering Technology Together, our employee value proposition, to highlight our commitment to providing a best-in-class employee experience for our people across the globe and to differentiate ourselves as an employer of choice.

We believe our employee value proposition will help us build our employer brand and attract and retain the best talent.

Total Rewards

1 unchanged sentence

Our compensation programs are focused on equitable and fair pay practices, including market-based compensation.

Additionally, we offer a discounted employee stock purchase plan.

Learning and Development

1 unchanged sentence

We also perform internal talent reviews and succession planning.

In 2023, Advanced Energy continued our 10-week leadership essential training program for our people leaders across all corporate levels.

We provide a 10-week leadership essential training program for our people leaders across all corporate levels.

We also have internship and graduate development programs designed to develop a talent pipeline.

Community Involvement

We have an active Community Investment Steering Committee and offer employees paid time off to participate in company-organized initiatives and volunteer with a non-profit organization of their choice.

Our Educational Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals.

We also offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Scholarship in the United States to support and develop emerging talent in STEM.

We have an active Community Investment Steering Committee and offer employees paid time off to participate in Company organized initiatives and volunteer with non-profit organizations of their choice.

Our Child of Employee Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals.

We also offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Scholarship in the U.S.

to support and develop emerging talent in STEM.

Environmental Matters

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business