ADVANCED ENERGY INDUSTRIES INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42 ) 44 Consolidated Balance Sheets 48 Consolidated Statements of Operations 49 Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Stockholders’ Equity 51 Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements 53 ​ ​ ​ 43 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Advanced Energy Industries, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ 44 Table of Contents ​ ​ ​ ​ Inventory valuation Description of the Matter ​ As more fully described in Notes 1 and 9 to the consolidated financial statements, the Company has inventories with a carrying value of $360.4 million as of December 31, 2024. The Company adjusts its inventory carrying value for estimated excess or obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected customer demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. Auditing management’s inventory valuation was complex and involved judgment because a critical factor in determining excess and obsolete inventory requires management to determine projected customer demand, which could be impacted by future market and economic conditions. How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls related to the Company’s process for evaluating inventory valuation inclusive of controls related to the development of and management’s review of the underlying data, including historical usage and the estimation of projected customer demand. We evaluated certain inventories for excess or obsolescence by testing key inputs, including historical usage and projected customer demand, and by testing the completeness and accuracy of the underlying data supporting management’s inventory valuation assessment. Specifically, we compared the Company’s projected customer demand to historical sales and inventory usage. We assessed historical trends of management’s estimates and performed analyses to evaluate management’s excess and obsolete inventory estimates and underlying assumptions. We also performed a retrospective review of the prior year valuation assumptions, including inventory write-off history. ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. Denver, Colorado February 18, 2025 ​ ​ ​ 45 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc. Opinion on Internal Control Over Financial Reporting We have audited Advanced Energy Industries, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Advanced Energy Industries, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 18, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 46 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Denver, Colorado February 18, 2025 ​ 47 Table of Contents ​ ADVANCED ENERGY INDUSTRIES, INC. Consolidated Balance Sheets (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2024 2023 ​ ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 722,086 ​ $ 1,044,556 ​ Accounts receivable, net ​ 265,315 ​ 282,430 ​ Inventories ​ 360,411 ​ 336,137 ​ Other current assets ​ ​ 41,511 ​ ​ 48,771 ​ Total current assets ​ 1,389,323 ​ 1,711,894 ​ Property and equipment, net ​ 185,604 ​ 167,665 ​ Operating lease right-of-use assets ​ ​ 96,305 ​ ​ 95,432 ​ Other assets ​ 155,269 ​ 136,448 ​ Intangible assets, net ​ 139,391 ​ 161,478 ​ Goodwill ​ 296,002 ​ 283,840 ​ TOTAL ASSETS ​ $ 2,261,894 ​ $ 2,556,757 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ Accounts payable ​ $ 143,502 ​ $ 141,850 ​ Accrued payroll and employee benefits ​ 67,874 ​ 73,595 ​ Other accrued expenses ​ 73,552 ​ 66,662 ​ Customer deposits and other ​ 11,468 ​ 15,997 ​ Current portion of long-term debt ​ ​ — ​ ​ 20,000 ​ Current portion of operating lease liabilities ​ ​ 17,826 ​ ​ 17,744 ​ Total current liabilities ​ 314,222 ​ 335,848 ​ Long-term debt, net ​ ​ 564,695 ​ ​ 895,679 ​ Operating lease liabilities ​ ​ 89,178 ​ ​ 89,330 ​ Defined employee benefit pension plan ​ ​ 49,555 ​ ​ 49,135 ​ Other long-term liabilities ​ ​ 37,534 ​ ​ 42,583 ​ Total liabilities ​ 1,055,184 ​ 1,412,575 ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred compensation ​ ​ 3,539 ​ ​ — ​ Commitments and contingencies (Note 17) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value, 1,000 shares authorized, none issued and outstanding ​ — ​ — ​ Common stock, $ 0.001 par value, 70,000 shares authorized; 37,711 and 37,318 issued and outstanding at December 31, 2024 and December 31, 2023, respectively ​ 38 ​ 37 ​ Common stock associated with deferred compensation plan ​ ​ ( 911 ) ​ ​ — ​ Additional paid-in capital ​ 189,144 ​ 148,300 ​ Accumulated other comprehensive income (loss) ​ ( 11,784 ) ​ 6,114 ​ Retained earnings ​ 1,026,684 ​ 989,731 ​ Total stockholders' equity ​ 1,203,171 ​ 1,144,182 ​ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 2,261,894 ​ $ 2,556,757 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 48 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Operations (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 Revenue, net ​ $ 1,482,042 ​ $ 1,655,810 ​ $ 1,845,422 Cost of revenue ​ 952,699 ​ 1,063,412 ​ 1,169,916 Gross profit ​ 529,343 ​ 592,398 ​ 675,506 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 211,834 ​ 202,439 ​ 191,020 Selling, general, and administrative ​ 224,538 ​ 221,034 ​ 218,463 Amortization of intangible assets ​ 26,046 ​ 28,254 ​ 26,114 Restructuring, asset impairments, and other charges ​ 30,318 ​ 26,977 ​ 6,814 Total operating expenses ​ 492,736 ​ 478,704 ​ 442,411 Operating income ​ 36,607 ​ 113,694 ​ 233,095 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ 42,860 ​ ​ 27,092 ​ ​ 4,147 Interest expense ​ ​ ( 25,105 ) ​ ​ ( 16,566 ) ​ ​ ( 7,325 ) Other income (expense), net ​ ( 1,985 ) ​ ( 1,759 ) ​ 11,824 Income from continuing operations, before income tax ​ 52,377 ​ 122,461 ​ 241,741 Income tax provision (benefit) ​ ( 3,929 ) ​ ( 8,288 ) ​ 39,850 Income from continuing operations ​ 56,306 ​ 130,749 ​ 201,891 Loss from discontinued operations, net of income tax ​ ( 2,092 ) ​ ( 2,465 ) ​ ( 2,215 ) Net income ​ $ 54,214 ​ $ 128,284 ​ $ 199,676 Income from continuing operations attributable to noncontrolling interest ​ - ​ - ​ 16 Net income attributable to Advanced Energy Industries, Inc. ​ $ 54,214 ​ $ 128,284 ​ $ 199,660 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding ​ 37,476 ​ 37,480 ​ 37,463 Diluted weighted-average common shares outstanding ​ 37,839 ​ 37,750 ​ 37,721 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per share: ​ ​ ​ ​ ​ Continuing operations: ​ ​ ​ ​ ​ Basic earnings per share ​ $ 1.50 ​ $ 3.49 ​ $ 5.39 Diluted earnings per share ​ $ 1.49 ​ $ 3.46 ​ $ 5.35 Discontinued operations: ​ ​ ​ ​ ​ ​ Basic loss per share ​ $ ( 0.06 ) ​ $ ( 0.07 ) ​ $ ( 0.06 ) Diluted loss per share ​ $ ( 0.06 ) ​ $ ( 0.07 ) ​ $ ( 0.06 ) Net income: ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 1.45 ​ $ 3.42 ​ $ 5.33 Diluted earnings per share ​ $ 1.43 ​ $ 3.40 ​ $ 5.29 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 49 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Comprehensive Income (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 Net income ​ ​ $ 54,214 ​ $ 128,284 ​ $ 199,676 Other comprehensive income (loss), net of income tax ​ ​ ​ ​ Foreign currency translation ​ ​ ( 11,541 ) ​ 2,027 ​ ( 10,543 ) Cash flow hedges ​ ​ ( 5,474 ) ​ ( 6,374 ) ​ 9,741 Defined employee benefit plan ​ ​ ( 883 ) ​ ( 5,859 ) ​ 18,338 Comprehensive income ​ ​ ​ 36,316 ​ ​ 118,078 ​ ​ 217,212 Comprehensive income attributable to noncontrolling interest ​ ​ — ​ — ​ 16 Comprehensive income attributable to Advanced Energy Industries, Inc. ​ ​ $ 36,316 ​ $ 118,078 ​ $ 217,196 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 50 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Stockholders’ Equity (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Advanced Energy Industries, Inc. Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Associated with ​ Additional ​ Other ​ ​ ​ ​ Non- ​ Total ​ ​ ​ ​ ​ ​ ​ Deferred ​ Paid-in ​ Comprehensive ​ Retained ​ controlling ​ Stockholders' ​ ​ Shares ​ Amount ​ Compensation Plan ​ Capital ​ Income (loss) ​ Earnings ​ Interest ​ Equity Balances, December 31, 2021 37,589 $ 38 ​ — $ 115,706 $ ( 1,216 ) $ 756,323 $ 645 $ 871,496 Stock issued from equity plans, net ​ 196 ​ ​ — ​ ​ — ​ ​ ( 26 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 26 ) Stock-based compensation ​ — ​ ​ — ​ ​ — ​ ​ 19,624 ​ ​ — ​ ​ — ​ ​ — ​ ​ 19,624 Share repurchases ​ ( 356 ) ​ ​ ( 1 ) ​ ​ — ​ ​ ( 1,125 ) ​ ​ — ​ ​ ( 25,509 ) ​ ​ — ​ ​ ( 26,635 ) Dividends declared ($ 0.10 per share) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 15,204 ) ​ ​ — ​ ​ ( 15,204 ) Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 17,536 ​ ​ — ​ ​ — ​ ​ 17,536 Acquisition of non-controlling interest ​ — ​ ​ — ​ ​ — ​ ​ 461 ​ ​ — ​ ​ — ​ ​ ( 661 ) ​ ​ ( 200 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 199,660 ​ ​ 16 ​ ​ 199,676 Balances, December 31, 2022 ​ 37,429 ​ ​ 37 ​ ​ — ​ ​ 134,640 ​ ​ 16,320 ​ ​ 915,270 ​ ​ — ​ ​ 1,066,267 Stock issued from equity plans, net ​ 267 ​ ​ 1 ​ ​ — ​ ​ ( 80 ) ​ ​ — ​ ​ — ​ ​ — ​ ( 79 ) Stock-based compensation ​ — ​ ​ — ​ ​ — ​ ​ 29,314 ​ ​ — ​ ​ — ​ ​ — ​ 29,314 Share repurchases ​ ( 378 ) ​ ​ ( 1 ) ​ ​ — ​ ​ ( 1,530 ) ​ ​ — ​ ​ ( 38,601 ) ​ ​ — ​ ​ ( 40,132 ) Dividends declared ($ 0.10 per share) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 15,222 ) ​ ​ — ​ ​ ( 15,222 ) Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10,206 ) ​ ​ — ​ ​ — ​ ( 10,206 ) Warrants and note hedges, net ​ — ​ ​ — ​ ​ — ​ ​ ( 40,135 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 40,135 ) Tax impact of convertible notes and note hedges ​ — ​ ​ — ​ ​ — ​ ​ 26,091 ​ ​ — ​ ​ — ​ ​ — ​ ​ 26,091 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 128,284 ​ ​ — ​ 128,284 Balances, December 31, 2023 ​ 37,318 ​ ​ 37 ​ ​ — ​ ​ 148,300 ​ ​ 6,114 ​ ​ 989,731 ​ ​ — ​ ​ 1,144,182 Stock issued from equity plans, net ​ 268 ​ ​ — ​ ​ — ​ ​ ( 4,849 ) ​ ​ — ​ ​ — ​ ​ — ​ ( 4,849 ) Stock issuance (Note 2) ​ 144 ​ ​ 1 ​ ​ — ​ ​ 4,463 ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,464 Stock-based compensation ​ — ​ ​ — ​ ​ — ​ ​ 43,384 ​ ​ — ​ ​ — ​ ​ — ​ 43,384 Share repurchases ​ ( 19 ) ​ ​ — ​ ​ — ​ ​ ( 89 ) ​ ​ — ​ ​ ( 1,681 ) ​ ​ — ​ ​ ( 1,770 ) Dividends declared ($ 0.10 per share) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 15,369 ) ​ ​ — ​ ​ ( 15,369 ) Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 17,898 ) ​ ​ — ​ ​ — ​ ( 17,898 ) Deferred compensation ​ — ​ ​ — ​ ​ — ​ ​ ( 2,065 ) ​ ​ — ​ ​ ( 211 ) ​ ​ — ​ ​ ( 2,276 ) Common stock issued to deferred compensation plan ( 9,487 shares) ​ — ​ ​ — ​ ​ ( 911 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 911 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 54,214 ​ ​ — ​ 54,214 Balances, December 31, 2024 ​ 37,711 ​ $ 38 ​ $ ( 911 ) ​ $ 189,144 ​ $ ( 11,784 ) ​ $ 1,026,684 ​ $ — ​ $ 1,203,171 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 51 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 54,214 ​ $ 128,284 ​ $ 199,676 Less: loss from discontinued operations, net of income tax ​ ( 2,092 ) ​ ( 2,465 ) ​ ( 2,215 ) Income from continuing operations, net of income tax ​ 56,306 ​ 130,749 ​ 201,891 Adjustments to reconcile net income to net cash from operating activities: ​ ​ ​ Depreciation and amortization ​ 68,455 ​ 66,533 ​ 60,296 Stock-based compensation ​ 45,940 ​ 31,001 ​ 19,849 Amortization and write off of debt issuance costs and debt discount ​ ​ 3,771 ​ ​ 1,330 ​ ​ 547 Deferred income tax benefit ​ ( 20,505 ) ​ ( 33,940 ) ​ ( 5,736 ) Other ​ ​ 1,165 ​ ​ 439 ​ ​ ( 3,962 ) Changes in operating assets and liabilities, net of assets acquired ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ 14,622 ​ 23,282 ​ ( 59,630 ) Inventories ​ ( 27,899 ) ​ 39,300 ​ ( 32,244 ) Other assets ​ ( 2,134 ) ​ 5,015 ​ ( 19,673 ) Accounts payable ​ ( 558 ) ​ ( 26,080 ) ​ ( 28,703 ) Operating lease right-of-use assets and operating lease liabilities, net ​ ​ ( 943 ) ​ ​ 588 ​ ​ 1,800 Other liabilities and accrued expenses ​ ( 5,296 ) ​ ( 25,292 ) ​ 49,296 Net cash from operating activities from continuing operations ​ 132,924 ​ 212,925 ​ 183,731 Net cash from operating activities from discontinued operations ​ ( 2,177 ) ​ ( 3,988 ) ​ ( 144 ) Net cash from operating activities ​ 130,747 ​ 208,937 ​ 183,587 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Purchases of long-term investments ​ ​ ( 2,991 ) ​ ​ ( 3,746 ) ​ ​ — Purchases of property and equipment ​ ( 56,788 ) ​ ( 61,005 ) ​ ( 58,885 ) Acquisitions, net of cash acquired ​ ​ ( 13,762 ) ​ ​ — ​ ​ ( 149,387 ) Net cash from investing activities ​ ( 73,541 ) ​ ( 64,751 ) ​ ( 208,272 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from long-term borrowings ​ ​ — ​ ​ 575,000 ​ ​ — Payment of fees for long-term borrowings ​ ​ ( 105 ) ​ ​ ( 13,880 ) ​ ​ — Payments on long-term borrowings ​ ​ ( 355,000 ) ​ ​ ( 20,000 ) ​ ​ ( 20,000 ) Dividend payments ​ ​ ( 15,369 ) ​ ​ ( 15,222 ) ​ ​ ( 15,204 ) Payment for purchase of note hedges ​ ​ — ​ ​ ( 115,000 ) ​ ​ — Proceeds from sale of warrants ​ ​ — ​ ​ 74,865 ​ ​ — Purchase and retirement of common stock ​ ​ ( 1,770 ) ​ ​ ( 40,000 ) ​ ​ ( 26,635 ) Net payments related to stock-based awards ​ ( 4,849 ) ​ ( 79 ) ​ ( 26 ) Net cash from financing activities ​ ( 377,093 ) ​ 445,684 ​ ( 61,865 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS ​ ( 2,583 ) ​ ( 4,132 ) ​ 996 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NET CHANGE IN CASH AND CASH EQUIVALENTS ​ ( 322,470 ) ​ 585,738 ​ ( 85,554 ) CASH AND CASH EQUIVALENTS, beginning of period ​ 1,044,556 ​ 458,818 ​ 544,372 CASH AND CASH EQUIVALENTS, end of period ​ $ 722,086 ​ $ 1,044,556 ​ $ 458,818 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 52 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ NOTE 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES 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. 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 . In December 2015, we completed the wind down of engineering, manufacturing, and sales of our solar inverter product line. We have continuing involvement with regard to certain warranty obligations. Accordingly, the results of our inverter business are reflected as loss from discontinued operations, net of income taxes on our Consolidated Statements of Operations. Principles of Consolidation Our consolidated financial statements include the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. 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. GAAP”). 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 The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The significant estimates, assumptions, and judgments include, but are not limited to, excess and obsolete inventory, income taxes and other provisions, and acquisitions and asset valuation. Segment Information Our Chief Executive Officer (“CEO”) is the chief operating decision maker who reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. 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. 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. 53 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Foreign Currency Translation The functional currency of certain of our foreign subsidiaries is the local currency. Assets and liabilities of these foreign subsidiaries are translated to the United States Dollar at prevailing exchange rates on the balance sheet date. Revenues and expenses are translated at the average exchange rates in effect for each period. Translation adjustments resulting from this process are reported as a separate component of other comprehensive income. For certain other subsidiaries, the functional currency is the U.S. Dollar. Foreign currency transactions are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates for foreign currency denominated monetary assets and liabilities result in foreign currency transaction gains and losses, which are reflected as unrealized (based on period end remeasurement) or realized (upon settlement of the transactions) in other income (expense), net in our Consolidated Statements of Operations. Derivatives We use derivative financial instruments to manage risks associated with foreign currency. Unless we meet specific hedge accounting criteria, changes in the fair value of derivative financial instruments are recognized in the Consolidated Statements of Operations within other income (expense), net. Fair Value We value certain financial assets and liabilities using fair value measurements. U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows: ● Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access on the measurement date. ● Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. ● Level 3 — Unobservable inputs for the asset or liability. We categorize fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. 54 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) We have various assets and liabilities measured at fair value on a recurring basis, including: ​ ​ ​ ​ ​ ​ ​ ​ Category of Asset or Liability ​ Fair Value Hierarchy ​ Methodology for Estimating Fair Value Certificates of deposit and investments ​ ​ Level 2 ​ Observable market data for similar assets Foreign currency forward contracts ​ ​ Level 2 ​ Forecasted movement in the forward rates of foreign currency for the applicable duration in which the hedging instrument is denominated Deferred compensation liability ​ Level 2 ​ Observable market data for participants’ notional funds Pension benefit obligations ​ ​ Level 2 ​ Actuarial analysis, which includes various estimates and assumptions including, but not limited to, discount rates, expected return on plan assets, and future inflation rates ​ The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate fair value as recorded due to the short-term nature of these instruments. Our non-financial assets, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value. See Note 11. Intangible Assets and Goodwill for further discussion and presentation of these amounts. Cash and Cash Equivalents We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist primarily of short-term money market instruments and demand deposits with insignificant interest rate risk. In some instances, we invest excess cash in money market funds not insured by the Federal Deposit Insurance Corporation. The investments in money market funds are on deposit with credit-worthy financial institutions and the funds are highly liquid. These investments are reported at fair value and included in cash and cash equivalents. We classify investments with stated maturities of greater than three months at time of purchase in other current assets on the Consolidated Balance Sheets. Concentrations of Credit Risk Financial instruments with potential credit risk include cash and cash equivalents and trade accounts receivable. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of high quality and sound financial condition. Our investments are in low-risk instruments, and we limit our credit exposure in any one institution or type of investment instrument based upon criteria, including creditworthiness. 55 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Allowance for Credit Losses We evaluate collection risk and establish expected credit loss primarily through a combination of the following: continuous monitoring of customer credit, analysis of historical aging and credit loss experience, current economic conditions, and customer specific information. Our standard payment terms are net 30 days. Certain large volume customers have longer payment terms. Generally, we do not require collateral from customers. Inventories We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis. General market conditions, as well as our design activities, can cause certain products to become obsolete and we adjust our inventory carrying value for estimated excess and obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions. The determination of projected end-user demand requires the use of estimates and assumptions related to projected unit sales for each product. Demand for our products can fluctuate significantly. A significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand. Property and Equipment Property and equipment are stated at cost or estimated fair value if acquired in a business combination. We compute depreciation over the estimated useful lives using the straight-line method. Additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group containing the property and equipment may not be recoverable. When depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gains or losses are included in other income (expense), net, in our Consolidated Statements of Operations. Internal-Use Software Development Costs We capitalize qualifying costs associated with software applications developed for internal use. We begin capitalization after meeting two criteria: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in significant additional functionality. We cease capitalization when the software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities, post-implementation operating activities, maintenance, and minor upgrades are expensed as incurred. We classify capitalized software development costs within property and equipment, net and other assets on the Consolidated Balance Sheets. These costs are amortized on a straight-line basis over the software’s estimated useful life. Amortization is included in both cost of revenue and operating expenses. We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. 56 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Leases We lease manufacturing and office space under non-cancelable operating leases. Some of these leases contain provisions for landlord funded leasehold improvements, which we record as a reduction to right-of-use (“ROU”) assets and the related operating lease liabilities. Our lease agreements generally contain lease and non-lease components, and we combine fixed payments for non-lease components with lease payments and account for them together as a single lease component. Certain lease agreements may contain variable payments, which are expensed as incurred and not included in the right-of-use lease assets and operating lease liabilities. When renewal options are reasonably certain of exercise, we include the renewal period in the lease term. In many cases, we have leases with a term of less than one year. We elected the practical expedient to exclude these short-term leases from our ROU assets and operating lease liabilities. On an ongoing basis, we negotiate and execute new leases to meet business objectives. Right-of-use assets and operating lease liabilities are recognized at the present value of the future lease payments on the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. We have a centrally managed treasury function; therefore, we apply a portfolio approach for determining the incremental borrowing rate applicable to the lease term. Operating lease expense is recognized on a straight-line basis over the lease term. We evaluate the useful life and test for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group containing the right-of-use assets may not be recoverable. Intangible Assets and Goodwill Our intangible assets consist of customer relationships, developed technology, trademarks, patents, and intellectual property, which are stated at cost less accumulated amortization. Intangible assets, which are considered long-lived assets, are amortized over their estimated useful lives and reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset group containing these assets may not be recoverable. Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. We evaluate goodwill for impairment as a single reporting unit annually during the fourth quarter or when events or changes in circumstances indicate the carrying value may not be recoverable. Our goodwill impairment evaluation consists of a qualitative assessment. If this assessment indicates it is more likely than not that the Company’s estimated fair value exceeds the carrying value of our net assets, we do not consider goodwill to be impaired. Otherwise, we perform a quantitative assessment by comparing the Company’s fair value to the carrying value of our net assets, including goodwill. If the carrying value of our net assets exceeds the fair value, we consider goodwill to be impaired. Based on the facts and circumstances, we determine the fair value based on an income, market, or cost approach. 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. Debt Issuance Costs We capitalize costs associated with issuing debt. Depending on the nature of the agreement, we record these costs on the Consolidated Balance Sheets either in other assets or as a direct deduction from the carrying amount of the debt. We amortize the costs over the term of the agreement using the effective interest method. Amortization expense is reflected within interest expense on the Consolidated Statements of Operations. See Note 18. Long-Term Debt for additional details. 57 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Revenue Recognition Net revenue consists of products and support services. We recognize substantially all revenue at a point in time when we satisfy our performance obligations. Typically, this occurs on shipment of goods because, at that point, we transfer control to our customer. The transaction price is based upon the standalone selling price. In most transactions, we have no obligations to our customers after the date products are shipped, other than pursuant to warranty obligations. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Surcharges, cost recoveries, and shipping and handling fees billed to customers, if any, are recognized as revenue. The related cost for shipping and handling fees is recognized in cost of revenue. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell. Repairs covered under our standard warranty do not generate revenue. We recognize substantially all non-warranty revenue upon completion of the service because that is the point in time when we satisfy our performance obligation. As part of our ongoing service business, we satisfy our service obligations under preventative maintenance contracts and extended warranties. Up-front fees received for extended warranties or maintenance plans are deferred and recorded in customer deposits and other on the Consolidated Balance Sheets. Revenue under these arrangements is recognized ratably over the underlying terms, as we do not have historical information that would allow us to project the estimated service usage pattern at this time. We expense the incremental costs of obtaining contracts when the amortization period of the costs is less than one year. These costs are included in selling, general, and administrative expenses in our Consolidated Statements of Operations. Our remaining performance obligations primarily relate to customer purchase orders for products we have not yet shipped. We expect to fulfill the majority of these performance obligations within one year. Research and Development Expenses Costs incurred to advance, test, or otherwise modify our technology or develop new technologies are considered research and development costs and are expensed when incurred. These costs are primarily comprised of costs associated with the operation of our laboratories and research facilities, including internal labor, materials, and overhead. Stock-Based Compensation 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. 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. We record stock-based compensation expense for awards with time-based vesting conditions on a straight-line basis over the requisite service period. For awards with a performance-based vesting condition, we record stock-based compensation expense (based on our assessment of the probability of meeting the performance conditions) over the estimated period to achieve the performance conditions. If the awards are forfeited, we reverse the stock-based compensation expense. 58 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Certain RSUs vest based on a market condition. Our stock-based compensation expense is based on an estimate of the fair value and probability of achievement for each tranche of these awards using a Monte Carlo simulation. For these RSUs, we recognize stock-based compensation expense over each tranche’s estimated achievement period even if some or all of the shares never vest. For all stock awards, we estimate forfeitures at the grant date and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. Income Taxes We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for future tax consequences. A deferred tax asset or liability is computed for both the expected future impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. Tax rate changes are reflected in the period such changes are enacted. We assess the recoverability of our net deferred tax assets and the need for a valuation allowance on a quarterly basis. Our assessment includes several factors, including historical results and taxable income projections for each jurisdiction. The ultimate realization of deferred income tax assets is dependent on the generation of taxable income in appropriate jurisdictions during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in determining the amount of the valuation allowance. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, we determine if we will more likely than not realize the benefits of these deductible differences. Accounting for income taxes requires a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining, if based on the technical merits, it is more likely than not that the position will be sustained upon audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Under U.S. GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-tax income (“GILTI”) in future years, or to provide for the tax expense related to GILTI in the year that the tax is incurred as a period expense only. We have elected to account for GILTI in the year that the tax is incurred. 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 reasonably have a material adverse impact on our business, financial condition, results of operations or cash flows. 59 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) New Accounting Standards From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, will not have a material impact on the consolidated financial statements upon adoption. 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. 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. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance will be effective for us on January 1, 2027. We do not expect the above guidance to materially impact our consolidated financial statements. ​ ​ 60 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 2. ACQUISITION On June 20, 2024, we acquired 100 % of the issued and outstanding shares of capital stock of Airity Technologies, Inc. (“Airity”). We accounted for this transaction as a business combination. 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. The following table summarizes the consideration paid: ​ ​ ​ ​ ​ ​ ​ Consideration ​ ​ (in thousands) Cash paid at closing ​ $ 14,301 Advanced Energy common stock ​ ​ 4,463 Settlement of payables ​ ​ ( 654 ) Indemnity holdback payable on the one-year anniversary ​ ​ 1,500 Total fair value of purchase consideration ​ $ 19,610 ​ We allocated the purchase price consideration to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess allocated to goodwill. The following represents the final purchase price allocation. ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ (in thousands) Cash ​ $ 539 Current assets and liabilities, net ​ ​ 457 Property and equipment ​ ​ 42 Deferred tax liability ​ ​ ( 1,748 ) Intangible assets ​ ​ 4,200 Goodwill (not deductible for tax purposes) ​ ​ 16,120 Total fair value of net assets acquired ​ $ 19,610 ​ We included Airity’s results of operations in our consolidated financial statements from the date of acquisition, which were not material. In connection with the acquisition, we entered into agreements with certain former Airity employees. On the closing date, these individuals received a total of 0.1 million shares of Advanced Energy common stock valued at $ 15.6 million based on the June 20, 2024 closing price, of which $ 4.5 million was allocated to purchase consideration and $ 11.1 million will be future compensation. We will record the $ 11.1 million as stock-based compensation expense over the three-year expected vesting period. See Note 16. Stock-based Compensation . ​ 61 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 3. REVENUE Disaggregation of Revenue The following tables present additional information regarding our revenue: ​ Revenue by Market ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands) Semiconductor Equipment ​ ​ $ 792,559 ​ $ 743,794 ​ $ 930,809 Industrial and Medical ​ ​ 316,177 ​ 474,449 ​ 426,763 Data Center Computing ​ ​ ​ 284,192 ​ ​ 249,874 ​ ​ 327,466 Telecom and Networking ​ ​ ​ 89,114 ​ ​ 187,693 ​ ​ 160,384 Total ​ ​ $ 1,482,042 ​ $ 1,655,810 ​ $ 1,845,422 ​ Revenue by Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands) ​ North America ​ ​ $ 669,946 ​ 45.1 % $ 724,481 ​ 43.8 % $ 857,490 ​ 46.5 % Asia ​ ​ ​ 661,854 ​ 44.7 ​ ​ 713,571 ​ 43.1 ​ ​ 754,997 ​ 40.9 ​ Europe ​ ​ ​ 147,560 ​ 10.0 ​ ​ 212,368 ​ 12.8 ​ ​ 219,119 ​ 11.9 ​ Other ​ ​ 2,682 0.2 ​ 5,390 0.3 ​ 13,816 0.7 ​ Total ​ ​ $ 1,482,042 100.0 % $ 1,655,810 100.0 % $ 1,845,422 100.0 % ​ Revenue by Significant Countries ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands) ​ United States ​ ​ $ 508,713 ​ 34.3 % $ 598,359 ​ 36.1 % $ 723,564 ​ 39.2 % Mexico ​ ​ ​ 160,063 ​ 10.8 ​ ​ 123,466 ​ 7.5 ​ ​ 132,313 ​ 7.2 ​ Taiwan ​ ​ ​ 159,587 ​ 10.8 ​ ​ 124,216 ​ 7.5 ​ ​ 112,252 ​ 6.1 ​ China ​ ​ ​ 109,883 ​ 7.4 ​ ​ 165,940 ​ 10.0 ​ ​ 180,355 ​ 9.8 ​ All others ​ ​ ​ 543,796 ​ 36.7 ​ ​ 643,829 ​ 38.9 ​ ​ 696,938 ​ 37.7 ​ Total ​ ​ $ 1,482,042 100.0 % $ 1,655,810 100.0 % $ 1,845,422 100.0 % ​ We attribute revenue to individual countries and regions based on the customer’s ship to location. Aside from the specific countries listed above, no individual country exceeded 10% of our total consolidated revenues during the periods presented. ​ 62 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Revenue by Category ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands) Product ​ ​ $ 1,315,723 ​ $ 1,484,007 ​ $ 1,686,053 Services and other ​ ​ ​ 166,319 ​ 171,803 ​ 159,369 Total ​ ​ $ 1,482,042 $ 1,655,810 $ 1,845,422 ​ Other revenue includes certain spare parts and products sold by our service group. ​ 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. No other customer’s account receivable exceeded 10% of our total accounts receivable in the periods presented. ​ 63 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 4. INCOME TAXES The geographic distribution of pretax income from continuing operations was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Domestic ​ $ ( 43,223 ) ​ $ ( 17,458 ) ​ $ 5,969 Foreign ​ 95,600 ​ 139,919 ​ 235,772 Income from continuing operations, before income taxes ​ $ 52,377 ​ $ 122,461 ​ $ 241,741 ​ The income tax provision (benefit) from continuing operations is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) ​ Current: ​ ​ ​ ​ Federal ​ $ 3,760 ​ $ 13,402 ​ $ 23,370 ​ State ​ 459 ​ 589 ​ 1,949 ​ Foreign ​ 12,357 ​ 11,661 ​ 20,267 ​ Total current provision ​ ​ 16,576 ​ ​ 25,652 ​ ​ 45,586 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ ​ ​ Federal ​ ​ ( 1,444 ) ​ ​ ( 5,455 ) ​ ​ ( 6,742 ) ​ State ​ ( 61 ) ​ ( 955 ) ​ ( 1,030 ) ​ Foreign ​ ( 19,000 ) ​ ( 27,530 ) ​ 2,036 ​ Total deferred benefit ​ ( 20,505 ) ​ ( 33,940 ) ​ ( 5,736 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total income tax provision (benefit) ​ $ ( 3,929 ) ​ $ ( 8,288 ) ​ $ 39,850 ​ Effective tax rate ​ ​ ( 7.5 ) % ​ ( 6.8 ) % ​ 16.5 % ​ 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, ​ 2024 2023 2022 ​ ​ (in thousands) Income taxes per federal statutory rate ​ $ 10,999 ​ $ 25,850 ​ $ 50,766 State income taxes, net of federal deduction ​ ​ 302 ​ ​ ( 490 ) ​ ​ 510 U.S. tax on foreign operations ​ ​ 18,944 ​ ​ 20,451 ​ ​ 28,726 Foreign derived intangible income deduction ​ ​ ( 1,423 ) ​ ​ ( 2,868 ) ​ ​ ( 6,259 ) Tax effect of foreign operations ​ ​ ( 14,934 ) ​ ​ ( 27,959 ) ​ ​ ( 28,432 ) Uncertain tax positions ​ ​ ( 1,101 ) ​ ​ 1,291 ​ ​ 1,080 Change in valuation allowance assessment ​ ​ 616 ​ ​ ( 25,636 ) ​ ​ — Tax credits ​ ​ ( 7,805 ) ​ ​ ( 7,289 ) ​ ​ ( 5,857 ) Change in valuation allowance ​ ​ 3,616 ​ ​ 12,927 ​ ​ 268 Executive compensation limitation ​ ​ 2,348 ​ ​ 1,955 ​ ​ 641 Impact of intellectual property transfer ​ ​ ( 22,950 ) ​ ​ — ​ ​ — Other permanent items, net ​ ​ 7,459 ​ ​ ( 6,520 ) ​ ​ ( 1,593 ) Total income tax provision (benefit) ​ $ ( 3,929 ) ​ $ ( 8,288 ) ​ $ 39,850 ​ 64 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Deferred tax assets: ​ ​ Net operating loss and tax credit carryforwards ​ $ 72,027 ​ $ 73,954 Pension obligation ​ 9,206 ​ 9,960 Bond hedge original issue discount ​ 20,168 ​ 24,755 Amortization ​ 43,011 ​ 23,609 Operating lease liabilities ​ ​ 12,253 ​ ​ 12,054 Other ​ 56,424 ​ 43,782 Total deferred tax assets ​ 213,089 ​ 188,114 Less: valuation allowance ​ ( 42,355 ) ​ ( 37,999 ) Deferred tax assets, net of valuation allowance ​ 170,734 ​ 150,115 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ Depreciation ​ 2,545 ​ 3,826 Amortization ​ ​ 26,802 ​ ​ 28,853 Unremitted earnings ​ 2,821 ​ 3,277 Operating lease right-of-use assets ​ ​ 9,862 ​ ​ 9,520 Operating lease liability ​ ​ 5,265 ​ ​ 1,069 Other ​ 2,650 ​ 3,038 Total deferred tax liabilities ​ 49,945 ​ 49,583 ​ ​ ​ ​ ​ ​ ​ Net deferred tax assets ​ $ 120,789 ​ $ 100,532 ​ 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. The U.S. and state net operating losses, tax credits, and interest expense limitation are 65 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Balance at beginning of period ​ $ 8,452 ​ $ 7,467 ​ $ 5,513 Additions based on tax positions taken during a prior period ​ — ​ 199 ​ 245 Additions based on tax positions taken during a prior period - acquisitions ​ — ​ — ​ 1,025 Additions based on tax positions taken during the current period ​ 536 ​ 1,070 ​ 836 Reductions based on tax positions taken during a prior period ​ ( 2,102 ) ​ — ​ — Reductions related to a lapse of applicable statute of limitations ​ ( 1,151 ) ​ ( 139 ) ​ ( 152 ) Reductions related to a settlement with taxing authorities ​ — ​ ( 145 ) ​ — Balance at end of period ​ $ 5,735 ​ $ 8,452 ​ $ 7,467 ​ 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. ​ 66 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 5. STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE Accumulated Other Comprehensive Income (Loss) The following table summarizes the components of, and changes in, accumulated other comprehensive income (loss), net of income taxes. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign Currency Translation ​ Change in Fair Value of Cash Flow Hedges ​ Defined Employee Benefit Plan ​ Total ​ ​ (in thousands) Balance at December 31, 2021 ​ $ ( 2,280 ) ​ $ 2,107 ​ $ ( 1,043 ) ​ $ ( 1,216 ) Other comprehensive income (loss) prior to reclassifications ​ ​ ( 10,543 ) ​ ​ 12,625 ​ ​ 18,016 ​ ​ 20,098 Amounts reclassified from accumulated other comprehensive income ​ ​ - ​ ​ ( 2,884 ) ​ ​ 322 ​ ​ ( 2,562 ) Balance at December 31, 2022 ​ ​ ( 12,823 ) ​ ​ 11,848 ​ ​ 17,295 ​ ​ 16,320 Other comprehensive income (loss) prior to reclassifications ​ ​ 2,027 ​ ​ 4,502 ​ ​ ( 5,455 ) ​ ​ 1,074 Amounts reclassified from accumulated other comprehensive income ​ ​ - ​ ​ ( 10,876 ) ​ ​ ( 404 ) ​ ​ ( 11,280 ) Balance at December 31, 2023 ​ ​ ( 10,796 ) ​ ​ 5,474 ​ ​ 11,436 ​ ​ 6,114 Other comprehensive income (loss) prior to reclassifications ​ ​ ( 13,126 ) ​ ​ 2,244 ​ ​ ( 673 ) ​ ​ ( 11,555 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ 1,585 ​ ​ ( 7,718 ) ​ ​ ( 210 ) ​ ​ ( 6,343 ) Balance at December 31, 2024 ​ $ ( 22,337 ) ​ $ — ​ $ 10,553 ​ $ ( 11,784 ) ​ Amounts reclassified from accumulated other comprehensive income (loss) to the specific caption within the Consolidated Statements of Operations were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ To Caption on Consolidated ​ 2024 2023 2022 Statements of Operations ​ ​ (in thousands) ​ ​ Foreign currency translation ​ $ 1,585 ​ $ — ​ $ — ​ Other income (expense), net Cash flow hedges ​ ​ ( 7,718 ) ​ ​ ( 10,876 ) ​ ​ ( 2,884 ) ​ Interest expense Defined employee benefit plan ​ ( 210 ) ​ ( 404 ) ​ 322 ​ Other income (expense), net Total reclassifications ​ $ ( 6,343 ) ​ $ ( 11,280 ) ​ $ ( 2,562 ) ​ ​ ​ 67 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Earnings Per Share The following table summarizes our earnings per share (“EPS”): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands, except per share amounts) Income from continuing operations ​ ​ $ 56,306 ​ $ 130,749 ​ $ 201,891 Less: income from continuing operations attributable to noncontrolling interest ​ ​ — ​ — ​ 16 Income from continuing operations attributable to Advanced Energy Industries, Inc. ​ ​ $ 56,306 ​ $ 130,749 ​ $ 201,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding ​ ​ 37,476 ​ 37,480 ​ 37,463 Dilutive effect of stock awards ​ ​ 363 ​ 270 ​ 258 Diluted weighted-average common shares outstanding ​ ​ 37,839 ​ 37,750 ​ 37,721 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EPS from continuing operations ​ ​ ​ ​ Basic EPS ​ ​ $ 1.50 ​ $ 3.49 ​ $ 5.39 Diluted EPS ​ ​ $ 1.49 ​ $ 3.46 ​ $ 5.35 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Anti-dilutive shares not included above ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock awards ​ ​ ​ - ​ ​ 95 ​ ​ 67 Warrants ​ ​ ​ 3,046 ​ ​ 3,486 ​ ​ — Total anti-dilutive shares ​ ​ ​ 3,046 ​ ​ 3,581 ​ ​ 67 ​ 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. See Note 18. Long-Term Debt for information regarding our Convertible Notes, Note Hedges, and Warrants. For diluted earnings per share of common stock (“Diluted EPS”), we increase the weighted-average number of common shares outstanding during the period, as needed, to include the following: ● Additional common shares that would have been outstanding if our outstanding stock awards had been converted to common shares using the treasury stock method. We exclude any stock awards that have an anti-dilutive effect; ● Dilutive impact associated with the Convertible Notes using the if-converted method. The Convertible Notes are repayable in cash up to par value and in cash or shares of common stock for the excess over par value. When the stock price is lower than the strike price, there is no dilutive or anti-dilutive impact. Prior to conversion, we do not consider the Note Hedges for purposes of Diluted EPS as their effect would be anti-dilutive. Upon conversion, we expect the Note Hedges to offset the dilutive effect of the Convertible Notes when the stock price is above $ 137.46 but below $ 179.76 ; and ● 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. 68 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Share Repurchases To repurchase shares of our common stock, we periodically enter into share repurchase agreements. The following table summarizes these repurchases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands, except per share amounts) Amount paid or accrued to repurchase shares ​ $ 1,770 ​ $ 40,132 ​ $ 26,635 Number of shares repurchased ​ 19 ​ 378 ​ 356 Average repurchase price per share ​ $ 93.58 ​ $ 105.74 ​ $ 74.90 ​ There were no shares repurchased from related parties. Repurchased shares were retired and assumed the status of authorized and unissued shares. At December 31, 2024, the remaining amount authorized by the Board of Directors (“our Board” or “the Board”) for future share repurchases was $ 197.4 million with no time limitation . ​ NOTE 6. FAIR VALUE MEASUREMENTS Refer to Note 15. Employee Retirement Plans and Post Retirement Benefits for information on fair value of our pension asset and liabilities. The following tables present information about our non-pension assets and liabilities measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 Description ​ Balance Sheet Classification ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair Value ​ ​ ​ ​ (in thousands) Certificates of deposit ​ Other current assets ​ $ — ​ $ 211 ​ $ — ​ $ 211 Foreign currency forward contracts ​ Other accrued expenses ​ $ — ​ $ 311 ​ $ — ​ $ 311 Investments ​ Other assets ​ $ — ​ $ 9,895 ​ $ — ​ $ 9,895 Deferred compensation liabilities ​ Other long-term liabilities ​ $ — ​ $ 10,135 ​ $ — ​ $ 10,135 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 Description ​ Balance Sheet Classification ​ Level 1 Level 2 Level 3 Total Fair Value ​ ​ ​ ​ (in thousands) Certificates of deposit ​ Other current assets ​ $ — ​ $ 163 ​ $ — ​ $ 163 Interest rate swaps ​ Other assets ​ $ — ​ $ 6,995 ​ $ — ​ $ 6,995 Investments ​ Other assets ​ $ — ​ $ 5,952 ​ $ — ​ $ 5,952 Deferred compensation liabilities ​ Other long-term liabilities ​ $ — ​ $ 6,068 ​ $ — ​ $ 6,068 ​ ​ ​ 69 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS Changes in foreign currency exchange rates impact our results of operations and cash flows. We may manage these risks through the use of derivative financial instruments, primarily forward contracts with banks. These forward contracts manage the exchange rate risk associated with assets and liabilities denominated in nonfunctional currencies. Typically, we execute these derivative instruments for one-month periods and do not designate them as hedges for accounting purposes; however, they do partially offset the economic fluctuations of certain of our assets and liabilities due to foreign exchange rate changes. The gains and losses related to these foreign currency exchange contracts are intended to offset the corresponding gains and losses on the revaluation of the underlying assets and liabilities. 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. See Note 18. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” See Note 6. Fair Value Measurements for information regarding the fair value of derivative instruments. As a result of using derivative financial instruments, we are exposed to the risk that counterparties to contracts could fail to meet their contractual obligations. We manage this credit risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty. ​ NOTE 8. 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, ​ 2024 2023 2022 ​ ​ (in thousands) Balance at beginning of period $ 1,762 ​ $ 1,814 ​ $ 5,784 Additions ​ 94 ​ ​ 220 ​ 441 Deductions - write-offs, net of recoveries ​ ​ ( 932 ) ​ ​ ( 281 ) ​ ​ ( 4,381 ) Foreign currency translation ​ ​ — ​ ​ 9 ​ ​ ( 30 ) Balance at end of period ​ $ 924 ​ $ 1,762 ​ $ 1,814 ​ ​ ​ 70 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 9. INVENTORIES 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Parts and raw materials ​ $ 255,100 ​ $ 249,698 Work in process ​ 20,581 ​ 14,595 Finished goods ​ 84,730 ​ 71,844 Total ​ $ 360,411 ​ $ 336,137 ​ ​ NOTE 10. PROPERTY AND EQUIPMENT, NET Property and equipment, net is comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated Useful ​ December 31, ​ December 31, ​ Life (in years) 2024 2023 ​ ​ ​ ​ (in thousands) Buildings, machinery, and equipment ​ 5 to 25 ​ $ 196,564 ​ $ 191,744 Software ​ 3 to 10 ​ ​ 35,616 ​ ​ 24,526 Computer equipment, furniture, fixtures, and vehicles ​ 3 to 5 ​ 25,977 ​ 19,281 Leasehold improvements ​ 2 to 10 ​ 93,023 ​ 79,764 Capital projects in process ​ ​ ​ 35,392 ​ 21,721 ​ ​ ​ ​ 386,572 ​ 337,036 Less: Accumulated depreciation ​ ​ ​ ( 200,968 ) ​ ( 169,371 ) Property and equipment, net ​ ​ ​ $ 185,604 ​ $ 167,665 ​ The following table summarizes property and equipment, net by geographic area: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 ​ ​ (in thousands) United States ​ $ 83,773 ​ $ 63,222 Asia ​ ​ 87,771 ​ ​ 96,045 Europe and other ​ ​ 14,060 ​ ​ 8,398 Total ​ $ 185,604 ​ $ 167,665 ​ The following table summarizes depreciation expense. All depreciation expense is recorded in income from continuing operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 ​ ​ ​ (in thousands) Depreciation expense ​ ​ $ 42,409 ​ $ 38,279 ​ $ 34,182 ​ ​ ​ 71 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 11. INTANGIBLE ASSETS AND GOODWILL Intangible assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Gross Carrying Accumulated Net Carrying Weighted Average Remaining ​ ​ Amount ​ Amortization ​ Amount Useful Life (in years) ​ ​ (in thousands) ​ ​ Technology ​ $ 99,875 ​ $ ( 69,979 ) ​ $ 29,896 ​ 7.0 Customer relationships ​ 168,908 ​ ​ ( 70,913 ) ​ 97,995 ​ 8.5 Trademarks and other ​ 27,062 ​ ​ ( 15,562 ) ​ 11,500 ​ 4.6 Total ​ $ 295,845 ​ $ ( 156,454 ) ​ $ 139,391 ​ 7.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Gross Carrying Accumulated Net Carrying ​ Weighted Average Remaining ​ ​ Amount ​ Amortization ​ Amount ​ Useful Life (in years) ​ ​ (in thousands) ​ ​ Technology ​ $ 97,961 ​ $ ( 60,412 ) ​ $ 37,549 ​ 6.8 Customer relationships ​ 168,685 ​ ​ ( 58,835 ) ​ 109,850 ​ 9.5 Trademarks and other ​ 27,141 ​ ​ ( 13,062 ) ​ 14,079 ​ 5.6 Total ​ $ 293,787 ​ $ ( 132,309 ) ​ $ 161,478 ​ 8.5 ​ Amortization expense related to intangible assets was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Amortization expense ​ $ 26,046 ​ $ 28,254 ​ $ 26,114 ​ Estimated future amortization expense related to intangibles is as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ (in thousands) 2025 ​ $ 22,051 2026 ​ 19,967 2027 ​ 17,745 2028 ​ 16,524 2029 ​ ​ 14,939 Thereafter ​ 48,165 Total ​ $ 139,391 ​ ​ The following table summarizes the changes in goodwill: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2024 2023 ​ ​ (in thousands) Balance at beginning of period ​ $ 283,840 ​ $ 281,433 Additions from acquisition ​ ​ 16,120 ​ ​ — Measurement period adjustments ​ ​ — ​ ​ 353 Foreign currency translation and other ​ ​ ( 3,958 ) ​ ​ 2,054 Balance at end of period $ 296,002 ​ $ 283,840 ​ ​ ​ 72 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 12. RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES Details of restructuring, asset impairments, and other charges are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 ​ ​ (in thousands) Restructuring $ 28,074 ​ $ 25,134 ​ $ 6,814 Asset impairments ​ ​ — ​ ​ 1,446 ​ ​ — Other charges ​ 2,244 ​ 397 ​ — Total restructuring, asset impairments, and other charges ​ $ 30,318 ​ $ 26,977 ​ $ 6,814 ​ Restructuring We have several restructuring plans in process: 2024 Plan 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. ​ 2023 Plan 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. ​ 2022 Plan 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. ​ ​ 73 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Changes in restructuring liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 Plan 2023 Plan 2022 Plan 2018 Plan Total ​ ​ (in thousands) December 31, 2022 ​ $ — ​ $ — ​ $ 5,788 ​ $ 1,422 ​ $ 7,210 Costs incurred and charged to expense ​ ​ — ​ ​ 17,103 ​ ​ 8,199 ​ ​ ( 168 ) ​ ​ 25,134 Costs paid or otherwise settled ​ ​ — ​ ​ ( 2,879 ) ​ ​ ( 11,057 ) ​ ​ ( 1,066 ) ​ ​ ( 15,002 ) December 31, 2023 ​ ​ — ​ ​ 14,224 ​ ​ 2,930 ​ ​ 188 ​ ​ 17,342 Costs incurred and charged to expense ​ ​ 29,649 ​ ​ ( 1,663 ) ​ ​ 88 ​ ​ — ​ ​ 28,074 Costs paid ​ ​ ( 5,057 ) ​ ​ ( 7,593 ) ​ ​ ( 3,018 ) ​ ​ ( 188 ) ​ ​ ( 15,856 ) Foreign currency translation ​ ​ 457 ​ ​ — ​ ​ — ​ ​ — ​ ​ 457 December 31, 2024 ​ $ 25,049 ​ $ 4,968 ​ $ — ​ $ — ​ $ 30,017 ​ The above restructuring liability of $ 30.0 million is comprised of $ 23.9 million in other accrued expenses and $ 6.1 million included in other long-term liabilities on our Consolidated Balance Sheets. Charges related to our restructuring plans are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 ​ ​ (in thousands) Severance and related charges $ 27,977 ​ $ 25,134 ​ $ 6,469 Facility relocation and closure charges ​ 97 ​ — ​ 345 Total restructuring charges ​ $ 28,074 ​ $ 25,134 ​ $ 6,814 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Cost Through ​ ​ December 31, 2024 ​ 2024 Plan 2023 Plan 2022 Plan Total ​ ​ (in thousands) Severance and related charges $ 29,552 ​ $ 15,440 ​ $ 14,075 ​ $ 59,067 Facility relocation and closure charges ​ ​ 97 ​ ​ — ​ ​ — ​ ​ 97 Total restructuring charges ​ $ 29,649 ​ $ 15,440 ​ $ 14,075 ​ $ 59,164 ​ ​ Other Charges Other charges relate to vacating and relocating facilities. ​ ​ 74 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 13. WARRANTIES 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, ​ 2024 2023 ​ ​ ​ (in thousands) Balance at beginning of period ​ ​ $ 4,007 ​ $ 5,702 Net increases to accruals ​ ​ 3,532 ​ 2,317 Warranty expenditures ​ ​ ( 2,014 ) ​ ( 4,017 ) Effect of changes in exchange rates ​ ​ 128 ​ 5 Balance at end of period ​ ​ $ 5,653 ​ $ 4,007 ​ ​ NOTE 14. LEASES Components of total operating lease cost were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 ​ ​ ​ (in thousands) Operating lease cost ​ ​ $ 23,772 ​ $ 22,571 ​ $ 22,626 Short-term and variable lease cost ​ ​ ​ 3,134 ​ ​ 4,150 ​ ​ 4,838 Total operating lease cost ​ ​ $ 26,906 ​ $ 26,721 ​ $ 27,464 ​ Estimated future payments on our operating lease liabilities are as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ (in thousands) 2025 ​ $ 23,840 2026 ​ 18,723 2027 ​ 15,392 2028 ​ ​ 15,033 2029 ​ ​ 11,728 Thereafter ​ ​ 55,394 Total lease payments ​ ​ 140,110 Less: Interest ​ ​ ( 33,106 ) Present value of lease liabilities ​ $ 107,004 ​ ​ 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. 75 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2024 2023 ​ Weighted average remaining lease term (in years) ​ ​ 8.4 ​ ​ 8.3 ​ Weighted average discount rate ​ ​ 6.1 % ​ 5.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 ​ 2022 ​ (in thousands) Cash paid for operating leases $ 23,671 ​ $ 22,988 ​ $ 22,287 Right-of-use assets obtained in exchange for operating lease liabilities $ 41,070 ​ $ 14,321 ​ $ 17,022 ​ ​ NOTE 15. EMPLOYEE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS Defined Contribution Plans We have a 401(k) profit-sharing and retirement savings plan covering substantially all full-time U.S. employees. Participants may defer up to the maximum amount permitted by law. Participants are immediately vested in both their own contributions and profit-sharing contributions. Profit-sharing contributions, which are discretionary, are approved by the Board. For all periods presented, we based our profit-sharing contribution on matching 100 % of employee contributions up to 3 % of compensation plus an additional match of 50 % on the next 2 % of compensation. During the years ended December 31, 2024, 2023, and 2022 we recognized total defined contribution plan costs of $ 5.0 million, $ 5.1 million, and $ 4.5 million, respectively. Defined Benefit Plans We maintain defined benefit pension plans for certain of our non-U.S. employees in the United Kingdom, Germany, and Philippines. Each plan is managed locally and in accordance with respective local laws and regulations. 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. We base these assumptions on historical experience as well as current facts and circumstances. We use an actuarial analysis to measure the expense and liability associated with pension benefits. The information provided below includes one pension plan which is part of discontinued operations. As such, for all periods presented, all related expenses are reported in discontinued operations in the Consolidated Statements of Operations. 76 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Projected benefit obligation, beginning of year ​ $ 65,653 ​ $ 56,520 Service cost ​ 1,022 ​ 1,016 Interest cost ​ 2,799 ​ 2,909 Actuarial loss (gain) ​ ( 409 ) ​ 4,808 Benefits paid ​ ( 1,934 ) ​ ( 1,452 ) Translation adjustment ​ ( 2,790 ) ​ 1,852 Projected benefit obligation, end of year ​ ​ 64,341 ​ ​ 65,653 ​ ​ ​ ​ ​ ​ ​ Fair value of plan assets, beginning of year ​ $ 14,115 ​ $ 12,489 Expected return ​ 714 ​ 654 Contributions ​ 1,556 ​ 1,443 Benefits paid ​ ( 1,363 ) ​ ( 1,140 ) Actuarial gain (loss) ​ ( 564 ) ​ 17 Translation adjustment ​ ( 404 ) ​ 652 Fair value of plan assets, end of year ​ ​ 14,054 ​ ​ 14,115 Funded status of plan ​ $ ( 50,287 ) ​ $ ( 51,538 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Accumulated benefit obligation ​ $ 55,918 ​ $ 58,968 ​ The following table summarizes classification of our net pension benefit obligation on our Consolidated Balance Sheets. The current portion of the liability is included in accrued payroll and employee benefits. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Current ​ $ 732 ​ $ 2,403 Long-term ​ 49,555 ​ 49,135 Total pension benefit obligation ​ $ 50,287 ​ $ 51,538 ​ The components of net periodic pension benefit cost recognized in our Consolidated Statements of Operations for the periods presented are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Service cost ​ $ 1,022 ​ $ 1,016 ​ $ 1,133 Interest cost ​ ​ 2,799 ​ ​ 2,909 ​ ​ 1,819 Expected return on plan assets ​ ( 714 ) ​ ( 654 ) ​ ( 535 ) Amortization of actuarial gains and losses ​ ( 210 ) ​ ( 404 ) ​ 322 Net periodic pension cost ​ $ 2,897 ​ $ 2,867 ​ $ 2,739 ​ 77 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) Assumptions used in the determination of the net periodic pension cost are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 Discount rate used for net periodic pension costs 4.4 % 5.1 % 2.6 % Discount rate used for pension benefit obligations ​ 5.0 % 4.4 % 5.1 % Expected long-term return on plan assets 5.9 % 5.2 % 3.2 % ​ The fair value of our qualified pension plan assets by category was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Level 1 Level 2 Level 3 Total ​ ​ (in thousands) Diversified Growth Fund ​ $ — ​ $ 11,510 ​ $ — ​ $ 11,510 Corporate Bonds ​ — ​ ​ 1,334 ​ ​ — ​ ​ 1,334 Insurance Contracts ​ ​ — ​ ​ — ​ ​ 697 ​ ​ 697 Cash ​ 513 ​ ​ — ​ ​ — ​ ​ 513 Total ​ $ 513 ​ $ 12,844 ​ $ 697 ​ $ 14,054 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Level 1 Level 2 Level 3 Total ​ ​ (in thousands) Diversified Growth Fund ​ $ — ​ $ 11,606 ​ $ — ​ $ 11,606 Corporate Bonds ​ — ​ 1,212 ​ — ​ 1,212 Insurance Contracts ​ ​ — ​ — ​ 799 ​ 799 Cash ​ 498 ​ — ​ — ​ 498 Total ​ $ 498 ​ $ 12,818 ​ $ 799 ​ $ 14,115 ​ Expected future payments during the next ten years for our defined benefit pension plans are as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ (in thousands) 2025 ​ $ 2,420 2026 ​ ​ 3,943 2027 ​ ​ 3,389 2028 ​ ​ 3,578 2029 ​ ​ 5,125 2029 to 2034 ​ ​ 23,509 ​ As of December 31, 2024 and 2023, accumulated other comprehensive income (loss) on the Consolidated Balance Sheets includes net actuarial gains and other deferred items, net of related taxes of $ 10.6 million and $ 11.4 million, respectively, that have not yet been recognized in net periodic pension cost. ​ ​ ​ ​ 78 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) NOTE 16. STOCK-BASED COMPENSATION The Compensation Committee of our Board of Directors administers our stock plans. As of December 31, 2024, we have two active stock-based incentive compensation plans: the Amended and Restated 2023 Omnibus Incentive Plan (the “2023 Incentive Plan”) and the Employee Stock Purchase Plan (“ESPP”). We issue all new equity compensation grants under the 2023 Incentive Plan. Outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans. The 2023 Incentive Plan provides for the grant of awards including stock options, stock appreciation rights, performance stock units, performance units, stock, restricted stock, restricted stock units, and cash incentive awards. The following table summarizes information related to our stock-based incentive compensation plans: ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ (in thousands) Shares available for future issuance under the 2023 Incentive Plan ​ 1,828 Shares available for future issuance under the ESPP ​ 535 ​ Stock-based Compensation Expense 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. Acquisition ). Stock-based compensation expense was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ ​ (in thousands) Stock-based compensation expense ​ ​ $ 45,940 ​ $ 31,001 ​ $ 19,849 ​ Restricted Stock Units Generally, we grant restricted stock units (“RSUs”) with a three year time-based vesting schedule. Certain RSUs contain performance-based or market-based vesting conditions in addition to the time-based vesting requirements. RSUs are generally granted with a grant date fair value based on the market price of our stock on the date of grant. Changes in our RSUs were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2024 ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ RSUs ​ Fair Value ​ ​ (in thousands) ​ ​ RSUs outstanding at beginning of period 917 ​ $ 85.96 RSUs granted 548 ​ $ 104.84 RSUs vested ( 314 ) ​ $ 90.04 RSUs forfeited ( 107 ) ​ $ 81.97 RSUs outstanding at end of period 1,044 ​ $ 95.05 ​ For vested RSUs, employees withheld shares for income tax totaling $ 9.1 million. 79 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) The weighted-average grant date fair value for RSUs granted in the years ended December 31, 2024, 2023, and 2022 was $ 104.84 , $ 100.04 , and $ 74.62 , respectively. The fair value of RSUs vested for the years ended December 31, 2024, 2023 and 2022 was $ 28.2 million, $ 19.5 million, and $ 13.5 million, respectively. As of December 31, 2024, there was $ 53.4 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested RSUs, that we expect to recognize through December 2027, with a weighted-average remaining vesting period of 1.0 years . Stock Options Generally, we grant stock option awards with an exercise price equal to the market price of our stock at the date of grant and with either a three or four-year vesting schedule or performance-based vesting. Stock option awards generally have a term of ten years . Changes in our stock options were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2024 ​ ​ Weighted- Weighted- ​ ​ ​ ​ Average ​ Average ​ ​ Number of ​ Exercise Price ​ Remaining ​ ​ Options ​ per Share ​ Contractual Life ​ ​ (in thousands) ​ ​ ​ ​ Options outstanding at beginning of period 89 ​ $ 76.69 ​ 7.10 years Options exercised ( 10 ) ​ $ 26.32 ​ ​ Options outstanding at end of period 79 ​ $ 83.05 ​ 6.86 years Options vested at end of period 54 ​ $ 81.70 ​ 6.70 years ​ The total intrinsic value of options exercised for the years ended December 31, 2024, 2023 and 2022 was $ 0.8 million, $ 4.6 million, and $ 2.6 million, respectively. As of December 31, 2024, the aggregate intrinsic value of options outstanding and exercisable was $ 2.6 million and $ 1.8 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. Employee Stock Purchase Plan The ESPP is a stockholder-approved plan that allows eligible employees to purchase our common stock at a discount. Employees who meet the eligibility criteria may contribute up to the lesser of 15 % of their eligible earnings or $ 5,000 during each plan period. Currently, the plan period is six months. The purchase price of common stock purchased under the ESPP is currently equal to the lower of 1) 85 % of the fair market value of our common stock on the commencement date of each plan period or 2) 85 % of the fair market value of our common shares on each plan period purchase date. As of December 31, 2024, there was $ 0.5 million of total unrecognized compensation cost related to the ESPP that we expect to recognize over a remaining period of five months . 80 Table of Contents 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. After a holding period, employees have the option to diversify the Company shares into other funds. Stock awards that have been elected for deferral but have not yet vested and are probable of vesting are reported as deferred compensation in the temporary equity section of the Consolidated Balance Sheets. The stock awards recorded in temporary equity are recognized at fair value, with any difference from stock-based compensation recorded in retained earnings. ​ ​ NOTE 17. 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. ​ NOTE 18. LONG-TERM DEBT Long-term debt on our Consolidated Balance Sheets consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Convertible Notes due 2028, 2.5 % interest ​ $ 575,000 ​ $ 575,000 Term Loan Facility ​ ​ — ​ ​ 355,000 Gross long-term debt, including current maturities ​ ​ 575,000 ​ ​ 930,000 Less: debt discount ​ ​ ( 10,305 ) ​ ​ ( 14,321 ) Net long-term debt, including current maturities ​ ​ 564,695 ​ ​ 915,679 Less: current maturities ​ ​ — ​ ​ ( 20,000 ) Net long-term debt ​ $ 564,695 ​ $ 895,679 ​ For all periods presented, we were in compliance with the covenants under all debt agreements. 81 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) The following table summarizes interest expense related to our debt: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Interest expense ​ $ 21,997 ​ $ 15,186 ​ $ 6,607 Amortization of debt issuance costs ​ ​ 3,219 ​ ​ 1,330 ​ ​ 547 Total interest expense related to debt ​ $ 25,216 ​ $ 16,516 ​ $ 7,154 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Available capacity on Revolving Facility ​ $ 600,000 ​ $ 200,000 ​ 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. The interest rate swap contracts previously entered into relative to the Term Loan Facility expired on September 10, 2024. 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 $ 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. 82 Table of Contents 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; or ● 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; and ● 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. 83 Table of Contents 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. ​ NOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Non-cash investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditures in accounts payable and other accrued expenses ​ $ 9,723 ​ $ 8,962 ​ $ 11,669 Common stock used as consideration in business combination ​ $ 4,463 ​ $ — ​ $ — Cash paid for: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest ​ $ 17,266 ​ $ 14,429 ​ $ 6,608 Income taxes ​ $ 33,313 ​ $ 47,937 ​ $ 17,546 Cash received from income taxes ​ $ 3,752 ​ $ 2,368 ​ $ 7,122 ​ ​ ​ ​ ​ 84 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.