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What changed in ADVANCED ENERGY INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ADVANCED ENERGY INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+247 added−250 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-20)

Top changes in ADVANCED ENERGY INDUSTRIES INC's 2024 10-K

247 paragraphs added · 250 removed · 179 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+16 added−12 removed8 unchanged
Biggest changeThe following table summarizes research and development expenses and the percentage of these expenses as compared to total revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Research and development ​ $ 202,439 ​ $ 191,020 ​ $ 161,831 % of Revenue ​ 12.2% ​ 10.4% ​ 11.1% ​ Human Capital Our people are our strength, and we are committed to sustaining a culture grounded in our core values: innovation, integrity, empowerment, partnership, accountability, and execution.
Biggest changeFor the years ended December 31, 2024, 2023, and 2022 our research and development expenses were $211.8 million, $202.4 million, and $191.0 million, respectively and have ranged from 10.4% to 14.3% of our total revenue. Human Capital Our people are our strength. We have a globally diverse workforce with approximately 10,000 employees as of December 31, 2024.
Significant competitive factors in our markets include product performance, compatibility with adjacent products, price, quality, reliability, meeting customer demand, and level of customer service and support. We encounter substantial competition from foreign and domestic companies for each of our product lines. Some of our competitors have greater financial and other resources than we do.
Significant competitive factors in our markets include product performance, compatibility with adjacent products, price, quality, reliability, meeting customer demand, and level of customer service and support. We encounter substantial competition from foreign and domestic companies for each of our markets. Some of our competitors have greater financial and other resources than we do.
ITEM 1. BUSINESS Overview Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.
ITEM 1. BUSINESS Company Overview Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.
Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products. Our investments in research and development enable us to create intellectual property, including patents, know-how and trade secrets. We hold numerous U.S. and foreign patents and have multiple patent applications pending in the U.S., Europe, and Asia.
Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products. Our investments in research and development enable us to create intellectual property, including patents and trade secrets. We hold numerous U.S. and foreign patents and have multiple patent applications pending in the U.S., Europe, and Asia.
See Part I, Item 1A, “Risk Factors” for a discussion of certain risks related to our reliance on our intellectual property. ​ 7 Table of Contents Competition The markets we serve are highly competitive and characterized by rapid technological development and changing customer requirements. We face a wide variety of competitors, and no single company dominates any of our markets.
See Part I, Item 1A, “Risk Factors” for a discussion of certain risks related to our reliance on our intellectual property. Competition The markets we serve are highly competitive and characterized by rapid technological development and changing customer requirements. We face a wide variety of competitors, and no single company dominates any of our markets.
We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue.
We believe that continued development of technological applications, as well as enhancements to existing products and related software to support customer requirements, are critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to developing new products and enhancing existing products, and we expect these investments to continue.
Acquisitions in Part II, Item 8 “Financial Statements and Supplementary Data.” Products and Services Our precision power products and solutions are designed to enable new process technologies, improve productivity, lower the cost of ownership, and provide critical power capabilities for our customers. These products are designed to meet our customers’ demanding requirements in efficiency, flexibility, performance, and reliability.
Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” Products and Services Our precision power products and solutions are designed to enable new process technologies, improve productivity, lower the cost of ownership, and provide critical power capabilities for our customers. These products are designed to meet our customers’ demanding requirements in efficiency, flexibility, performance, and reliability.
Industrial and Medical Market The growth in the industrial and medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life sciences equipment.
Industrial and Medical Market The Industrial and Medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life science equipment.
We have a broad portfolio of high and low voltage power products used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets.
Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data center computing, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets.
Advanced Energy serves this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment. Our solutions are often customized with unique features such as ruggedization for mobile radio in the field.
We serve this market by providing application-specific AC-DC and DC-DC power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment. Our solutions are often customized with unique features such as ruggedization for mobile radio in the field.
The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows: Semiconductor Equipment Market The semiconductor equipment market supports and enables the long-term growing need for more production capacity and new process technologies to meet expanding demand for semiconductors across many applications driven by megatrends such as artificial intelligence, Internet of Things (IoT) and automobile electrification.
The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows: Semiconductor Equipment Market The Semiconductor Equipment market supports and enables the long-term growing need for more production capacity and new process technologies to meet expanding demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification and Internet of things (“IoT”).
Lite-On Technology Corp. ​ ​ Research and Development We perform research and development to develop products to address new or emerging applications, technological advances to provide higher performance, lower cost, or other attributes that we may expect to appeal to current or potential customers.
Lite-On Technology Corp. ​ ​ 8 Table of Contents Research and Development We perform research and development to develop products to address new or emerging applications, make technological advances to provide higher performance, lower cost, or create other attributes that we may expect to appeal to current or potential customers.
Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to customize our solutions to meet the unique requirements of a wide range of critical applications.
Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications.
Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications . Advanced Energy is organized on a global, functional basis and operates in the single segment of power electronics conversion products.
Our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications. We are organized on a global, functional basis and operate as a single segment of power electronics conversion products.
Although we make reasonable efforts to ensure that parts are available from multiple qualified suppliers and at the lowest possible cost, some key parts may only be obtained from a sole supplier or a limited group of suppliers.
We use numerous companies, including contract manufacturers, to supply parts for the manufacture and support of our products. Although we make reasonable efforts to ensure that parts are available from multiple qualified suppliers and at the lowest possible cost, some key parts may only be obtained from a sole supplier or a limited group of suppliers.
TRUMPF Hüttinger GmbH + Co. KG XP Power Ltd. Acbel Polytech Inc. Delta Electronics, Inc. Flex Ltd. Lite-On Technology Corp. ​ Acbel Polytech Inc. Delta Electronics, Inc.
KG Cosel Co., Ltd. Delta Electronics, Inc. MEAN WELL Enterprises TDK-Lambda Americas Inc. TRUMPF Hüttinger GmbH + Co. KG XP Power Ltd. Acbel Polytech Inc. Delta Electronics, Inc. Flex Ltd. Lite-On Technology Corp. ​ Acbel Polytech Inc. Delta Electronics, Inc.
Our plasma power solutions are used to create plasma-based etch and deposition processes, and transition to advanced technology nodes typically require higher content of our advanced power solutions per tool. Our other semiconductor market products are incorporated in a wide range of applications including ion implant, inspection, metrology, thermal, epitaxy, and back-end test and packaging.
Our plasma power solutions are used to create plasma-based etch and deposition processes. Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.
Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode applications.
Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, analytical instrumentation, test and measurement equipment, robotics, industrial production, and large-scale connected light-emitting diode applications. We serve our broad customer base through both our direct sales force and indirect sales channels including independent sales representatives and distributors.
Competitors in each of our market verticals include, but are not limited to, the following: ​ ​ ​ ​ Semiconductor Equipment Industrial and Medical Data Center Computing Telecom and Networking COMET Holding AG. Daihen Corp. MKS Instruments, Inc. TRUMPF Hüttinger GmbH + Co. KG Cosel Co., Ltd. Delta Electronics, Inc. MEAN WELL Enterprises TDK-Lambda Americas Inc.
Other competitors are smaller than we are but may be well established in specific product niches. Competitors in each of our market verticals include, but are not limited to, the following: ​ ​ ​ ​ Semiconductor Equipment Industrial and Medical Data Center Computing Telecom and Networking COMET Holding AG. Daihen Corp. MKS Instruments, Inc. TRUMPF Hüttinger GmbH + Co.
Advanced Energy benefits from these trends as one of the leading providers of high-efficiency, high-density, 48 Volt server power conversion solutions and technologies. Our products are designed into data center server and storage systems, as well as used by cloud service providers and their partners in their custom designed server racks and power shelves.
Advanced Energy serves as a leading provider of high-efficiency, high-density, server power conversion solutions and technologies with a proven track record of delivering production-ready products. Our products are designed into data center server and storage systems, as well as used by cloud service providers and their partners in their custom designed server racks and power shelves.
Environmental Matters We are subject to federal, state, and local environmental laws and regulations, as well as the environmental laws and regulations of the foreign federal and local jurisdictions in which we have manufacturing and service facilities.
Environmental Matters We are subject to federal, state, and local environmental laws and regulations, as well as the environmental laws and regulations of the foreign federal and local jurisdictions in which we have manufacturing and service facilities. We believe we are in material compliance with all such laws and regulations. Available Information Our website address is www.advancedenergy.com .
For more information related to our expectations for the markets we serve, see Business Environment and Trends in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For a discussion of our backlog, see Results of Continuing Operations in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Marketing, Sales, and Distribution We sell our products through direct and indirect sales channels.
For more information related to our expectations for the markets we serve, see Business Environment and Trends in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Customers Our products are sold worldwide to OEMs, distributors, and directly to end users.
Data Center Computing Market The Data Center Computing Market is driven by the growing adoption of cloud computing, as the market shifts from traditional enterprise on-premises computing to the data center.
Data Center Computing Market The Data Center Computing market is driven by shifts from traditional enterprise, on-premise computing to cloud computing, as well as the rapid growth of AI and related investments.
The majority of Advanced Energy’s products are capable of meeting various customer requirements. We also provide repair and maintenance services for our products. 4 Table of Contents Our plasma power products offer solutions to enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition.
We also provide repair and maintenance services for our products. Our plasma power products enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition.
Revenue in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding our revenue by geographic area. See Part I, Item 1A “Risk Factors” for a discussion of certain risks related to our sales and marketing operations. Manufacturing We manufacture our products primarily in the Philippines, Malaysia, Mexico, and China.
See Part I, Item 1A “Risk Factors” for a discussion of certain risks related to our sales and marketing operations. Manufacturing We manufacture our products primarily in the Philippines, Malaysia, Mexico, and China. We also perform limited specialty manufacturing for some of our products in the U.S., the United Kingdom, and Europe.
Telecom and Networking Market Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for increased bandwidth.
Our strategy in the market is to target high-end, high power, differentiated applications based on our competitive strengths in power density, efficiency, reliability, and speed in delivering next-generation, production-ready products. 6 Table of Contents Telecom and Networking Market Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for increased bandwidth.
We also strive to follow the standards of the Responsible Business Alliance Code of Conduct at selected manufacturing sites, which promotes labor, health, safety, environmental, and ethics best practices. Employee Engagement We believe that our continued success depends, in part, on our ability to attract and retain qualified personnel.
We also strive to follow the standards of the Responsible Business Alliance Code of Conduct at selected manufacturing sites, which promotes labor, health, safety, environmental, and ethics best practices. Employee Engagement We are committed to providing a collaborative and productive work environment for our employees.
We also have an active Corporate Diversity & Inclusion Steering Committee to further increase our commitment to gender, ethnic and racial diversity. We have an active Women’s Leadership Forum that is focused on career development and internal networking.
We have a Corporate Diversity & Inclusion Steering Committee which provides guidance, coordination, and support to local diversity and inclusion activities. We also have an active Women’s Leadership Forum focused on career development and internal networking.
We continue to invest in improving our employee experience through strategies targeted at improving communication, providing internal career development opportunities, and simplifying our internal business processes. Total Rewards We provide market-competitive compensation and benefits to our employees to attract and retain a talented, highly engaged workforce. Our compensation programs are focused on equitable and fair pay practices, including market-based compensation.
Total Rewards We provide market-competitive compensation and benefits to our employees to attract and retain a talented, highly engaged workforce. Our compensation programs are focused on equitable and fair pay practices, including market-based compensation. 9 Table of Contents Learning and Development We create growth and development opportunities to support our employees and offer internal and external learning and development opportunities.
End Markets Advanced Energy generates revenue from the sale of a broad range of advanced and embedded power products and services to global original equipment manufacturers (“OEM”) and end customers.
Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies that use our products. End Markets Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”) and end customers.
We remain committed to expanding our diversity through targeted hiring and development initiatives. Through a combination of internal promotions and external hiring, we continue to see increases in the number of female employees represented at the director and above level, as compared with 2022.
We recognize that diverse perspectives and collaboration enable us to drive innovation and future growth for our global customers and we remain committed to diversity. Through a combination of merit-based internal promotions and external hiring, we have continued to see increases in the number of diverse employees represented at the director and above level, as compared with 2023.
Additionally, we offer a discounted employee stock purchase plan. Learning and Development We create growth and development opportunities to support our employees and offer internal and external learning and development opportunities. We also perform internal talent reviews and succession planning. In 2023, Advanced Energy continued our 10-week leadership essential training program for our people leaders across all corporate levels.
We also perform internal talent reviews and succession planning. We provide a 10-week leadership essential training program for our people leaders across all corporate levels. We also have internship and graduate development programs designed to develop a talent pipeline.
We serve our broad customer base through both our direct sales force and indirect sales channels including independent sales representatives, channel partners, and distributors. 5 Table of Contents Our strategy in the market is to expand our product offerings and channel reach, leveraging common platforms, providing platform derivatives, and offering customizations to further penetrate a broader set of applications.
Our strategy in the market is to penetrate a broader set of applications by expanding our product offerings, leveraging common platforms, providing platform derivatives, and offering customizations.
Our Educational Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals. We also offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Scholarship in the United States to support and develop emerging talent in STEM.
We also offer an annual Advanced Energy STEM (science, technology, engineering, and mathematics) Scholarship in the U.S. to support and develop emerging talent in STEM.
Our strategy is to strengthen our proprietary positions in our core applications with leading market share, such as conductor etch and deposition, grow our market position in targeted applications with lower market share, such as dielectric etch and remote plasma source, and leverage our broad product portfolio to expand our content at our OEM customers.
In addition, we are targeting to win customer adoptions of our new products to strengthen our positions in our core applications with leading market share, such as conductor etch and deposition, and to grow our market position in targeted applications with lower market share, such as dielectric etch.
We also have internship and graduate development programs designed to develop a talent pipeline. Community Involvement We have an active Community Investment Steering Committee and offer employees paid time off to participate in company-organized initiatives and volunteer with a non-profit organization of their choice.
Community Involvement We have an active Community Investment Steering Committee and offer employees paid time off to participate in Company organized initiatives and volunteer with non-profit organizations of their choice. Our Child of Employee Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals.
We maintain customer service offices at many of the locations listed above, as well as other sites near our customers’ locations. We believe that customer service and technical support are important competitive factors and are essential to building and maintaining close, long-term relationships with our customers. Refer to Note 3.
We believe that customer service and technical support are important competitive factors and are essential to building and maintaining close, long-term relationships with our customers. Refer to Note 3. Revenue in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding our revenue by geographic area.
During the year ended December 31, 2022, Applied Materials, Inc. and Lam Research Corporation accounted for 20% and 14%, respectively, of our total revenue. We expect that the sale of products to our largest customers will continue to account for a significant percentage of our revenue for the foreseeable future.
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.
In 2022, we conducted our biennial confidential employee survey on topics relating to confidence in company leadership, ethical conduct, career growth opportunities, and suggestions on how we can make our company a great place to work. In 2023 we communicated the results of the employee survey with our employees, leaders, executive team, and Board of Directors.
We periodically conduct confidential employee surveys to solicit feedback on confidence in Company leadership, ethical conduct, work environment, career growth opportunities, and we continually evaluate suggestions on how we can make Advanced Energy a great place to work.
In addition, the rapid growth of artificial intelligence and machine learning are driving increased demand for substantially higher power in servers and racks, which has increased the importance of power efficiency and power density and accelerated the transition from 12 Volt to 48 Volt infrastructure in data center server racks.
The accelerated pace of higher power for next generation AI processors has increased the power requirement for AI-based servers and racks, accelerated the transition to high-power 48 volt power shelf infrastructure, and amplified the importance of high power efficiency, density, and reliability for server rack power solutions.
The loss of a large customer could have a material adverse effect on our results of operations .
We expect that the sale of products to our largest customers will continue to account for a significant percentage of our revenue for the foreseeable future. The loss of a large customer could have a material adverse effect on our results of operations . For more information related to our significant customers, see Note 3.
Our employees are not represented by unions, except for statutory organization rights applicable to our employees in China, Germany, and Mexico. 8 Table of Contents Diversity, Equity, and Inclusion We are committed to creating an inclusive work environment where all of our employees feel respected, valued, and empowered.
Our employees are located across the globe in 16 countries and are comprised of approximately 56% male and 44% female employees. Our employees are not represented by unions, except for statutory organization rights applicable to our employees in China, Germany, and Mexico.
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Recent Acquisitions On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power Electronics Corporation (“SL Power”), which is based in Calabasas, California. This acquisition added complementary products to Advanced Energy’s medical power offerings and extends our presence in several advanced industrial markets. For additional information, see Note 2.
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Recent Events Airity Acquisition On June 20, 2024, we acquired Airity Technologies, Inc. (“Airity”). 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. See Note 2.
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Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products. Our service group offers warranty and after-market repair services, providing our customers with preventive maintenance opportunities to support a lower cost of ownership and higher utilization for their capital equipment.
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Acquisition in Part II, Item 8 “Financial Statements and Supplementary Data.” 4 Table of Contents 2024 Restructuring Plan In 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility (the “2024 Plan”). In connection with the 2024 Plan, we recorded a $29.6 million charge primarily associated with expected employment-related charges and facility exit costs.
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We offer comprehensive repair service and customer support through our worldwide support organization in the United States, China, Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and the United Kingdom. Support services include warranty and non-warranty repair services, calibration, upgrades, and refurbishments of our products.
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Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.” Credit Agreement Amendment On September 9, 2024, we used existing cash on hand to prepay the full $345.0 million outstanding principal balance of the senior unsecured term loan facility (the “Term Loan Facility”) under the credit agreement dated as of September 10, 2019, as amended (the “Credit Agreement”).
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Advanced Energy is a critical technology leader in the industry and provides one of the broadest portfolios of power conversion and related products, including plasma power, high-voltage power, embedded power, and adjacent sensing solutions.
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On the same date, we entered into an additional amendment to the Credit Agreement to increase the capacity on our senior unsecured revolving facility (the “Revolving Facility”) from $200.0 million to $600.0 million. As a result, as of December 31, 2024, our only outstanding debt was the Convertible Notes due in 2028. See Note 18.
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Our strategy in the market is to penetrate selected customers and applications based on our differentiated capabilities and competitive strengths in power density, efficiency, and controls.
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We believe long-term growth in the market will be driven by increased demand for wafer capacity, an increased number of etch and deposition process steps with new technology inflections, and the transition to advanced technology nodes requiring higher content of advanced power solutions per tool. ​ 5 Table of Contents Our portfolio of power conversion and related products includes plasma power, high-voltage power, system power, and adjacent sensing solutions.
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Our strategy in the market is to optimize our portfolio of power conversion products to more differentiated applications, and to focus on 5G infrastructure applications. Customers Our products are sold worldwide to OEMs, distributors, and directly to end users. During the year ended December 31, 2023, Applied Materials, Inc. accounted for 22% of our total revenue.
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Our strategy is to outgrow the wafer fabrication equipment (“WFE”) market by developing products for applications that are growing faster than market and through market share gains in both plasma power and adjacent semiconductor applications.
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Our sales operations are primarily located in China, Germany, Hong Kong, India, Ireland, Israel, Japan, South Korea, Philippines, Singapore, Taiwan, the United Kingdom, and United States. 6 Table of Contents In addition to a direct sales force, we have independent sales representatives, channel partners and distributors that support our selling efforts.
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We believe the plasma power market will grow faster than WFE due to increasing number of plasma etch and deposition process steps and growing demand for more complex and high power content.
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We also perform limited specialty manufacturing for some of our products in the U.S., the United Kingdom, and Europe. In 2023, we announced that we would be expanding our presence in our Mexico factory and beginning construction of a new factory located near Bangkok, Thailand as part of our multi-year factory optimization and consolidation plans.
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Finally, we are targeting to leverage our broad portfolio of system power, thermal and sensing, remote plasma source, and high voltage products to gain share in these adjacent semiconductor applications.
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Our manufacturing requires raw materials, mainly a wide variety of mechanical and electrical components, which are often made to our specifications. We use numerous companies, including contract manufacturers, to supply parts for the manufacture and support of our products.
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In addition, our strategy is to expand our customer reach in this large, fragmented market through a focused direct sales team on larger and strategic accounts, optimize and leverage our distribution channel, and expand visibility and access to our products through our digital footprint and website.
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Other competitors are smaller than we are but may be well established in specific product niches. Overall, our Industrial and Medical competitors tend to be smaller, and in other product markets we encounter mostly larger competitors.
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Our strategy in the market is to optimize our power conversion products to more differentiated applications and leverage investments across our power portfolio to maintain a position in the most attractive customers and applications.
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These core values are the foundation of how we operate. We have a globally diverse workforce with approximately 10,000 employees as of December 31, 2023. Our employees are located across the globe in more than 20 countries and are comprised of approximately 55% male and 45% female employees.
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Revenue in Part II, Item 8 “Financial Statements and Supplementary Data” and Part I, Item 1A “Risk Factors.” Marketing, Sales, and Distribution We sell our products through direct and indirect sales channels. Our primary direct sales operations are located in the United States (“U.S.”), Asia, and Europe.
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We believe we are in material compliance with all such laws and regulations. 9 Table of Contents Available Information Our website address is www.advancedenergy.com .
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In addition to a direct sales force, we have distributors that support our selling efforts. We maintain customer service offices in many of the locations listed above, as well as other sites near our customers’ locations.
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In 2024, as part of our multi-year factory optimization and consolidation initiatives, we announced the closure of our Zhongshan, China manufacturing facility and several smaller manufacturing sites, expanded capacity in our Mexico factory, and progress on a new factory near Bangkok, Thailand, which we expect to be operational in 2026. 7 Table of Contents Our manufacturing requires a wide variety of mechanical and electrical components, which are often made to our specifications.
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Culture We are committed to nurturing a culture grounded in our core values: innovation, integrity, empowerment, partnership, accountability, and execution. These core values are the foundation of how we operate. We stive to provide an inclusive work environment where all of our employees feel respected, valued, and empowered.
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We communicate the results of these confidential employee surveys with our employees, leaders, executive team, and Board of Directors and use the feedback to identify opportunities to drive improvements across our Company.
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In 2024, we launched Powering Technology Together, our employee value proposition, to highlight our commitment to providing a best-in-class employee experience for our people across the globe and to differentiate ourselves as an employer of choice. We believe our employee value proposition will help us build our employer brand and attract and retain the best talent.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+16 added−10 removed98 unchanged
Biggest changeAdditionally, our success producing goods internationally and competing in international markets is subject to our ability to manage various operational risks and difficulties, including, but not limited to: ● our ability to effectively manage our employees at remote locations who are operating in different business environments from the United States; ● our ability to develop and maintain relationships with suppliers and other local businesses; ● interruptions to our and/or our suppliers’ supply chain; ● compliance with product safety requirements and standards that are different from those of the United States; ● variations and changes in laws applicable to our operations in different jurisdictions, including enforceability of contract rights; ● ineffective or inadequate legal and physical protection of intellectual property rights in certain countries; ● global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations for certain exports to China and any retaliatory measures; ● delays or restrictions on personnel travel and in shipping materials or finished products between and within countries; ● political instability, natural disasters, health epidemics, disruptions in financial markets, and deterioration of economic conditions; ● our ability to maintain appropriate business processes, procedures, and internal controls, and comply with environmental, health and safety, anti-corruption, and other regulatory requirements; ● customs regulations including customs audits in various countries that occur from time to time; ● the ability to provide enough levels of technical support in different locations; ● our ability to obtain business licenses that may be needed in international locations to support expanded operations; ● changes in tariffs, income tax, value added tax, and foreign currency exchange rates; and ● laws and regulations regarding privacy, data use and processing, data privacy and protection, cybersecurity, and network security . ​ ​ 17 Table of Contents Our operations in the Asia Pacific region, including China, are subject to significant political and economic uncertainties over which we have little or no control and we may be unable to alter our business practice in time to avoid reductions in revenues.
Biggest changeAdditionally, our success producing goods internationally and competing in international markets is subject to our ability to manage various operational risks and difficulties, including, but not limited to: ● our ability to effectively manage our employees at remote locations who are operating in different business environments from the United States; ● our ability to develop and maintain relationships with suppliers and other local businesses; ● interruptions to our and/or our suppliers’ supply chain; ● global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including export regulations for certain exports to China and any retaliatory measures; ● compliance with product safety requirements and standards that are different from those of the United States; ● variations and changes in laws applicable to our operations in different jurisdictions, including enforceability of contract rights; ● ineffective or inadequate legal and physical protection of intellectual property rights in certain countries; ● delays or restrictions on personnel travel and in shipping materials or finished products between and within countries; ● political instability, international hostilities, natural disasters, health epidemics, disruptions in financial markets, and deterioration of economic conditions; ● our ability to maintain appropriate business processes, procedures, and internal controls, and comply with environmental, health and safety, anti-corruption, and other regulatory requirements; ● customs regulations including customs audits in various countries that occur from time to time; ● the ability to provide enough levels of technical support in different locations; ● our ability to obtain business licenses that may be needed in international locations to support expanded operations; ● changes in tariffs, income tax, value added tax, and foreign currency exchange rates; and ● laws and regulations regarding privacy, data use and processing, data privacy and protection, cybersecurity, and network security . ​ ​ 17 Table of Contents Our operations in the Asia Pacific region, including China, are subject to significant political and economic uncertainties over which we have little or no control and we may be unable to alter our business practice in time to avoid reductions in revenues.
As a supplier to the global semiconductor equipment, telecommunication, networking, data center computing, industrial, and medical industries, we are subject to business fluctuations, the timing, length, and volatility of which can be difficult to predict.
As a supplier to the global semiconductor equipment, industrial, medical, data center computing, telecommunication, and networking industries, we are subject to business fluctuations, the timing, length, and volatility of which can be difficult to predict.
In addition, to assure availability of certain components or to obtain priority pricing, we have entered into contracts with some of our suppliers that require us to purchase a specified number of components and subassemblies each quarter, even if we are not able to use such components or subassemblies.
In addition, to assure availability of certain components or obtain priority pricing, we have entered into contracts with some of our suppliers that require us to purchase a specified number of components and subassemblies each quarter, even if we are not able to use such components or subassemblies.
Additionally, tightening of credit markets, turmoil in the financial markets, and a weakening global economy have in the past contributed and could again contribute to slowdowns in the industries in which we operate and adversely impact the global demand for our products. Some of our key markets ultimately depend on a combination of consumer and business spending.
Additionally, tightening of credit markets, turmoil in the financial markets, and a weakening global economy have contributed in the past and could again contribute to slowdowns in the industries in which we operate and adversely impact the global demand for our products. Some of our key markets ultimately depend on a combination of consumer and business spending.
A cybersecurity event or other breach, disruption, or failure of our information and operational systems, could: ● result in the disclosure, misuse, corruption, or loss of our or our customers’ data, confidential business information, or intellectual property, including trade secrets; ● damage our reputation; ● lead to a loss of confidence by our current and potential customers; ● adversely impact our future revenue; ● disrupt our business; ● divert management attention; and ● expose us to significant remediation costs, legal liability, and litigation risk.
A cybersecurity event or other breach, disruption, or failure of our information and operational systems, could: ● result in the disclosure, misuse, corruption, or loss of our confidential business information, intellectual property including trade secrets, or our customers’ data; ● damage our reputation; ● lead to a loss of confidence by our current and potential customers; ● adversely impact our future revenue; ● disrupt our business; ● divert management attention; and ● expose us to significant remediation costs, legal liability, and litigation risk.
Regulatory, Legal, Tax, and Compliance Related Risks Continued restrictive global trade regulatory environment, coupled with increasingly complex rules have adversely impacted and could further impact our business, and could erode the competitiveness of our products compared to local and global competitors.
Regulatory, Legal, Tax, and Compliance Related Risks Continued restrictive global trade regulatory environment coupled with increasingly complex rules have adversely impacted our business, could further impact our business, and could erode the competitiveness of our products compared to local and global competitors .
Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes, regulations, and interpretations of research and development capitalization and tax credit regulations, foreign-derived intangible income (“FDII”), global intangible low-tax income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) laws; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules.
Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes, regulations, and interpretations of research and development capitalization and tax credit regulations, foreign-derived intangible income (“FDII”), global intangible low-tax income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) laws; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs and related tax effects from intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules.
We can provide no assurance of the outcome of these legal proceedings, enforcement actions or claims or that the insurance we maintain will be adequate to cover them. Changes in tax laws, tax rates, or mix of earnings in tax jurisdictions in which we do business, could impact our future tax liabilities and related corporate profitability.
We can provide no assurance of the outcome of these legal proceedings, enforcement actions, or claims or that the insurance we maintain will provide coverage or be adequate to cover them. Changes in tax laws, tax rates, or mix of earnings in tax jurisdictions in which we do business could impact our future tax liabilities and related corporate profitability.
In addition, the counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and sell our common stock prior to the maturity of the Convertible Notes (and are likely to do in connection with any conversion or redemption).
In addition, the counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and sell our common stock prior to the maturity of the Convertible Notes (and are likely to do so in connection with any conversion or redemption).
Risks associated with these transactions are many, including the following which could adversely affect our financial results: ● the inability to source or complete transactions timely or at all; ● any obligation to pay a termination fee or undergo litigation resulting from failed deals; ● the failure to perform adequate due diligence on target companies; ● the failure to realize expected revenues, gross and operating margins, net income, and other returns from acquired businesses; ● the inability to successfully integrate product and/or service offerings to realize anticipated benefits from business combinations; ● the inability to integrate acquired business into our existing enterprise resource planning and other global information technology systems to realize productivity improvement and cost efficiencies; ● we have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination and investment transaction becomes impaired, we may be required to incur additional material charges related to impairment of those assets; ● deterioration in our effective tax rate; ● a failure to retain and motivate key employees of acquired businesses; ● our ability to maintain appropriate business processes, procedures, and internal controls at the acquired business; ● litigation or claims associated with a proposed or completed transaction; and ● unknown, underestimated, undisclosed or undetected commitments or liabilities or non-compliance by acquired business with laws, regulations, or policies.
Risks associated with these transactions are many, including the following which could adversely affect our financial results: ● the inability to source or complete transactions timely or at all; ● any obligation to pay a termination fee or undergo litigation resulting from failed deals; ● the failure to perform adequate due diligence on target companies; ● the failure to realize expected revenues, gross and operating margins, net income, and other returns from acquired businesses; ● the inability to successfully integrate product and/or service offerings to realize anticipated benefits from business combinations; ● the inability to integrate acquired business into our existing enterprise resource planning and other global information technology systems to realize productivity improvement and cost efficiencies; ● we have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and, to the extent that the value of 15 Table of Contents goodwill or intangible assets acquired in connection with a business combination becomes impaired, we may incur additional material charges related to impairment of those assets; ● deterioration in our effective tax rate; ● a failure to retain and motivate key employees of acquired businesses; ● our ability to maintain appropriate business processes, procedures, and internal controls at the acquired business; ● litigation or claims associated with a proposed or completed transaction; and ● unknown, underestimated, undisclosed or undetected commitments or liabilities or non-compliance by acquired business with laws, regulations, or policies.
We place orders with many of our suppliers based on our expectations as to demand for our products and our customers’ forecasts. As the quarter and the year progress, such demand can change rapidly or we may realize that our customers’ expectations were overly optimistic or pessimistic, especially when industry or general economic conditions change.
We place orders with many of our suppliers based on our expectations as to demand for our products and our customers’ forecasts. As the quarter and the year progress, such demand and product mix can change rapidly or we may realize that our customers’ expectations were overly optimistic or pessimistic, especially when industry or general economic conditions change.
These include limitations or restrictions, among other things, on our ability and the ability of our subsidiaries to: ● incur additional indebtedness; 22 Table of Contents ● pay dividends or make distributions on our capital stock or certain other restricted payments or investments; ● conduct stock buybacks; ● make domestic and foreign investments and extend credit; ● engage in transactions with affiliates; ● transfer and sell assets; ● effect a consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all our assets; and ● create liens on our assets to secure debt.
These include limitations or restrictions, among other things, on our ability and the ability of our subsidiaries to: ● incur additional indebtedness; ● pay dividends or make distributions on our capital stock or certain other restricted payments or investments; ● conduct stock buybacks; ● make domestic and foreign investments and extend credit; ● engage in transactions with affiliates; ● transfer and sell assets; ● effect a consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all our assets; and ● create liens on our assets to secure debt.
We are subject to ongoing data security threats, including phishing attempts, denial of service attacks, ransomware, viruses, and other malware, employee error or malfeasance, theft, natural disasters, and hardware or software malfunctions, any one of which could compromise our data security, cause the loss of critical data, or disrupt operations, which could materially adversely affect our business and results of operations.
We are subject to ongoing data security threats, including phishing attempts, denial of service attacks, ransomware, viruses, and other malware, employee error or malfeasance, theft, natural disasters, and hardware or software malfunctions, any one of which could compromise our data security, cause the loss of critical data, or disrupt operations, which could materially adversely 13 Table of Contents affect our business and results of operations.
Although 24 Table of Contents we have declared cash dividends on our common stock since 2021, we are not required to do so, and we may reduce or eliminate our cash dividend in the future. This could adversely affect the market price of our common stock. For information on our Credit Agreement, see Note 18. Long-Term Debt and Note 7.
Although we have declared cash dividends on our common stock since 2021, we are not required to do so, and we may reduce or eliminate our cash dividend in the future. This could adversely affect the market price of our common stock. For information on our Credit Agreement, see Note 18. Long-Term Debt and Note 7.
We have experienced, and may continue to experience, increasing costs to attract and retain needed talent, driven by macroeconomic conditions and a highly competitive labor market. In addition, the loss or retirement of key employees presents particular challenges to the extent the departing employee had particularly valuable knowledge or experiences.
We have experienced, and may continue to experience, increasing costs to attract and retain needed talent, driven by macroeconomic conditions and a highly competitive labor market. 14 Table of Contents In addition, the loss or retirement of key employees presents particular challenges to the extent the departing employee had particularly valuable knowledge or experiences.
Given the global nature of our business, we have both domestic and international concentrations of cash and 16 Table of Contents investments. The value of our cash, cash equivalents, and marketable securities can be adversely affected by liquidity, credit deterioration, inflation, foreign currency exchange rate fluctuations, financial results, economic risk, political risk, sovereign risk, or other factors.
Given the global nature of our business, we have both domestic and international concentrations of cash and investments. The value of our cash, cash equivalents, and marketable securities can be adversely affected by liquidity, credit deterioration, inflation, foreign currency exchange rate fluctuations, financial results, economic risk, political risk, sovereign risk, or other factors.
There can be no assurance that these changes, once adopted by countries, will not have an adverse impact on our provision for income taxes. Further, because of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates.
There can be no assurance that these changes, once adopted by countries in which we operate, will not have an adverse impact on our provision for income taxes. Further, because of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates.
Any such incidents and claims could severely harm our business and reputation, result in significant expenses, harm our competitive position, and prevent us from selling certain products, all of which could have a material and adverse impact on our business and results of operations. Our supply chain is subject to regulatory risk .
Any such incidents and claims could severely harm our business and reputation, result in significant expenses, harm our competitive position, and prevent us from selling certain products, all of which could have a material and adverse impact on our business and results of operations. 19 Table of Contents Our supply chain is subject to regulatory risk .
In recent years, there has been a shortage of critical components caused by a variety of factors, including increased demand for electronic components used in a wide variety of industries, the pandemic-driven rise in consumer demand for technology goods, logistics-related disruptions in shipping, capacity limitations at some suppliers, and labor shortages.
In recent years, there was a shortage of critical components caused by a variety of factors, including increased demand for electronic components used in a wide variety of industries, the pandemic-driven rise in consumer demand for technology goods, logistics-related disruptions in shipping, capacity limitations at some suppliers, and labor shortages.
This activity could cause fluctuations in the market price of our common stock. We are subject to counterparty default risk with respect to the Note Hedges. The counterparties are financial institutions, and we are subject to the risk that any or all of them might default. Our exposure is not secured by any collateral.
This activity could cause fluctuations in the market price of our common stock. ​ 24 Table of Contents We are subject to counterparty default risk with respect to the Note Hedges. The counterparties are financial institutions, and we are subject to the risk that any or all of them might default. Our exposure is not secured by any collateral.
Our success depends significantly on our proprietary technology. We attempt to protect our intellectual property rights through a variety of methods including trade secrets, patents, and non-disclosure agreements; however, we might not be able to protect our technology, and customers or competitors might be able to develop similar technology independently.
We are highly dependent on our intellectual property. Our success depends significantly on our proprietary technology. We attempt to protect our intellectual property rights through a variety of methods including trade secrets, patents, and non-disclosure agreements; however, we might not be able to protect our technology, and customers or competitors might be able to develop similar technology independently.
As we are subject to examination by tax authorities in every jurisdiction where we do business, an unfavorable audit outcome could adversely affect us. 20 Table of Contents Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.
As we are subject to examination by tax authorities in every jurisdiction where we do business, an unfavorable audit outcome could adversely affect us. Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.
Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related goals could adversely impact our reputation or performance. As governments impose greenhouse gas emission reporting requirements and other ESG-related laws, we are subject to at least some of these rules and concomitant regulatory risk exposure.
Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related goals could adversely impact our reputation or performance. As governments impose greenhouse gas emission reporting and climate risk assessment requirements, along with other ESG-related laws, we are subject to at least some of these rules and concomitant regulatory risk exposure.
Our customers continually exert pressure on us to reduce our prices and extend payment terms and we may be required to enter into long term reduced pricing agreements, extended payment terms, exclusivity arrangements, and other unfavorable contract terms. In addition, we compete in markets in which customers may dual or multi-source their power.
Our customers continually exert pressure on us to reduce our prices and extend payment terms and we have been and may be required to enter into long term reduced pricing agreements, extended payment terms, exclusivity arrangements, and other unfavorable contract terms. In addition, we compete in markets in which customers may dual or multi-source their power supply products.
The design win process is highly competitive, the design windows may be narrow, and there is no assurance we will succeed with new design wins for our existing 11 Table of Contents customers or new customers’ next generations of equipment.
The design win process is highly competitive, the design windows may be narrow, and there is no assurance we will succeed with new design wins for our existing customers or new customers’ next generations of equipment.
Significant judgment is required to determine the recognition and measurement attribute prescribed in the accounting guidance for uncertainty in income taxes. The Organization for Economic Co-operation and Development (“OECD”), an international association comprised of 36 countries, including the U.S., has made changes to numerous long-standing tax principles.
Significant judgment is required to determine the recognition and measurement attribute prescribed in the accounting guidance for uncertainty in income taxes. The Organization for Economic Co-operation and Development (“OECD”), an international association, including the U.S., has made changes to numerous long-standing tax principles.
As both domestic and foreign governments contemplate or make changes in tax law to raise more revenues, our results could be adversely affected. Further, there are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.
As both domestic and foreign governments contemplate or make changes in tax law, our results could be adversely affected. Further, there are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.
Any breach of the covenants or other event of default could cause a default on our credit agreement, which could result in the entire outstanding balance being immediately due and payable.
Any breach of the covenants or other event of default could cause a default on our Credit Agreement, which could result in the entire outstanding balance at that time being immediately due and payable.
We must work with these manufacturers early in their design cycles to modify, enhance, and upgrade our products or design new products that meet the requirements of their new systems.
We must work with these manufacturers early in their design cycles to modify, enhance, and upgrade our products or 11 Table of Contents design new products that meet the requirements of their new systems.
Such breach or default may also constitute a default of our 2.50% convertible senior notes (“Convertible Notes”), which could also result in the entire outstanding balance being immediately due and payable. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default.
Such breach or default may also constitute a default of our Convertible Notes, which could also result in the entire outstanding balance being immediately due and payable. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default.
ESG compliance and reporting could be costly, and we could be at a disadvantage compared to companies that do not have similar reporting requirements. ​ Commercial and Financial Related Risks Our debt obligations and the restrictive covenants in certain of the agreements governing our debt could limit our ability to operate our business or pursue our business strategies, could adversely affect our business, financial condition, results of operations, and cash flows, and could significantly reduce stockholder benefits from a change of control event.
ESG compliance and reporting costly, and we could be at a disadvantage compared to companies that do not have similar reporting requirements or that have more resources to devote to ESG efforts. ​ ​ ​ 22 Table of Contents Commercial and Financial Related Risks Our debt obligations and the restrictive covenants in certain of the agreements governing our debt could limit our ability to operate our business or pursue our business strategies, could adversely affect our business, financial condition, results of operations, and cash flows, and could significantly reduce stockholder benefits from a change of control event.
We are subject to environmental, health, and safety regulations in connection with our global business operations, such as regulations related to the development, manufacture, sale, shipping, and use of our products; handling, discharge, recycling and disposal of hazardous materials used in our products or in producing our products; the operation of our facilities; and the use of our real property.
We are subject to environmental, health, and safety regulations in connection with our global business operations, such as regulations related to the development, manufacture, sale, shipping, and use of our products; handling, discharge, recycling and disposal of hazardous materials used in our products or in producing our products; restrictions on the presence of certain substances in our products; the operation of our facilities; and the use of our real property.
These changes could increase our effective tax rate and cash tax payments could increase in future years, create additional compliance burdens, and/or require changes to our tax compliance processes. Increased governmental action on income tax regulations could adversely impact our business.
These changes could increase our effective tax rate and cash tax payments could increase in future years, create additional compliance burdens, and/or require changes to our tax compliance processes. 20 Table of Contents Increased governmental action on income tax regulations could adversely impact our business.
If we do not comply with current or future regulations, directives, and standards: ● we could be subject to fines and penalties; ● our production or shipments could be suspended; and 21 Table of Contents ● we could be prohibited from offering particular products in specified markets.
If we do not comply with current or future regulations, directives, and standards: ● we could be subject to fines and penalties; ● our production or shipments could be suspended; and ● we could be prohibited from offering particular products in specified markets.
If our earnings do not meet the expectations of securities analysts or investors, the price of our stock could decline. ​ ITEM 1B. UNRESOLVED STAFF COMMENTS None. ​
If our earnings do not meet the expectations of securities analysts or investors, the price of our stock could decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ​ ​ ​ 25 Table of Contents
We are impacted by sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on technology transitions, capacity utilization, demand for customers’ products, inventory levels relative to demand, and access to affordable capital.
We are impacted by sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on technology transitions, capacity utilization, demand for customers’ products, inventory levels relative to demand, access to affordable capital, and changes in geopolitical factors, including tariffs.
The failure or inability to comply with existing or future environmental, health and safety regulations could result in significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipping, or use of certain of our products; limitations on the operation of our facilities or ability to use our real property; and a decrease in the value of our real property.
The failure or inability to comply with existing or future environmental, health and safety regulations, including with respect to energy consumption and climate change, could result in significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipping, or use of certain of our products; limitations on the operation of our facilities or ability to use our real property; and a decrease in the value of our real property.
Such risks and uncertainties may also impact the accuracy of forward-looking statements included in this Form 10-K and other reports we file with the Securities and Exchange Commission. Business and Industry Risks The industries in which we compete are subject to volatile and unpredictable fluctuation or cycles.
Such risks and uncertainties may also impact the accuracy of forward-looking statements included in this Form 10-K and other reports we file with the SEC. Business and Industry Risks The industries in which we compete are subject to unpredictable fluctuation or cycles, which may be volatile.
A significant decline in revenue from this or our other large customers, the loss of this or another large customer, or any inability to collect from large customers could materially and adversely impact our business, results of operations, and financial condition.
A significant decline in revenue from these or our other large customers, the loss of these or other large customers, or any inability to collect from large customers could materially and adversely impact our business, results of operations, and financial condition.
In addition, through recent acquisitions, we expanded our presence in the medical market to include more highly regulated applications and added a medical-certified manufacturing center to our operating footprint. We may encounter increased costs to maintain compliance with the quality systems and other regulations and requirements that apply to the acquired business.
In addition, through previous acquisitions, we expanded our presence in the medical market to include more highly regulated applications and added a medical-certified manufacturing center to our operating footprint. We may encounter 21 Table of Contents increased costs to maintain compliance with the quality systems and other regulations and requirements that apply to the acquired business.
Goods suspected of being manufactured with forced labor could be blocked from importation into the 19 Table of Contents U.S., which could impact revenue.
Goods suspected of being manufactured with forced labor could be blocked from importation into the U.S., which could impact revenue.
Conversely, in 2022, we increased prices and implemented surcharges across many of our products to reflect our higher supply chain costs. Although these price changes were generally accepted by our customers, we did experience some loss of business.
Conversely, in 2022, we not only increased prices but also implemented surcharges across many of our products to reflect our higher supply chain costs. Although these price changes were generally accepted by our customers, we did experience some loss of business.
We continue to devote significant resources to network security, data encryption, network redundancy, and other measures to protect our systems and data from unauthorized external access or internal misuse, 13 Table of Contents and we may be required to expend greater resources in the future for cybersecurity protection, compliance, and remediation, especially in the face of continuously evolving and increasingly sophisticated cybersecurity threats and privacy and data protection laws.
We continue to devote significant resources to cybersecurity, IP protection, data encryption, and other measures to protect our systems and data from unauthorized external access or internal misuse, and we may be required to expend greater resources in the future for cybersecurity protection, compliance, and remediation, especially in the face of continuously evolving and increasingly sophisticated cybersecurity threats and privacy and data protection laws.
The Organization for Economic Cooperation and Development is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.
The Organization for Economic Cooperation and Development is coordinating negotiations with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.
As a result of the technical 15 Table of Contents complexity of these products, design defects, skilled labor turnover, changes in our or our suppliers’ manufacturing processes or the inadvertent use of defective or nonconforming materials or components by us or our suppliers could adversely affect our manufacturing quality and product reliability.
The production of many of our products also requires highly skilled labor. As a result of the technical complexity of these products, design defects, skilled labor turnover, changes in our or our suppliers’ manufacturing processes or the inadvertent use of defective or nonconforming materials or components by us or our suppliers could adversely affect our manufacturing quality and product reliability.
Our products may suffer from defects or errors leading to increased costs, damages, or warranty claims. Our products use complex system designs and components that may contain errors or defects. The manufacture of these products often involves a highly complex and precise process and the utilization of specially qualified components.
Our products may suffer from defects or errors leading to increased costs, damages, or warranty claims. Our products use complex system designs and components that may contain errors or defects in designs, manufacturing, firmware, software, component parts, or other materials. The manufacture of these products often involves a highly complex and precise process and the utilization of specially qualified components.
Additionally, we have restructuring plans in place to optimize and consolidate our manufacturing operations and improve operating efficiencies, and we continue to evaluate our manufacturing facilities 14 Table of Contents and may decide to conduct additional optimization and consolidation initiatives. These plans and any future initiatives may or may not be successful in achieving our intended results.
Additionally, we are currently restructuring to optimize and consolidate our manufacturing operations and improve operating efficiencies, and we continue to evaluate our manufacturing facilities and may decide to conduct additional optimization and consolidation initiatives. These plans and any future initiatives may or may not be successful in achieving our intended results.
We are a global organization. We have employees in more than 20 countries, our manufacturing facilities are located across the globe (mainly in the Asia-Pacific region), and revenue from customers outside the United States represented 64% of our total revenue during the year ended December 31, 2023.
We are a global organization. We have employees in 16 countries, our manufacturing facilities are located across the globe (mainly in the Asia-Pacific region), and revenue from customers outside the United States represented 66% of our total revenue during the year ended December 31, 2024.
Our legacy inverter products (of which we discontinued the manufacture, engineering, and sale in December 2015 and which are reflected as discontinued operations in this filing) contain components that may contain errors or defects and were sold with original product warranties ranging from one to ten years with an option to purchase additional warranty coverage for up to 20 years.
Our legacy inverter products (of which we discontinued the manufacture, engineering, and sale in December 2015 and which are reflected as discontinued operations in this filing) contain components that may contain errors or defects and were sold with product warranties ranging from one to 20 years.
There is no certainty that these contracts can be performed profitably, and our business could be adversely affected by higher than anticipated product failure rates, loss of critical service technician skills, an inability to obtain service parts, customer demands and disputes, and the cost of repair parts, among other factors.
There is no certainty that these contracts can be performed profitably, and our business could be adversely affected by higher than anticipated product failure rates, loss of critical service technician skills, an inability to obtain service parts, customer demands and disputes, and the cost of repair parts, among other factors. 16 Table of Contents International Operations Risks We are subject to risks inherent in international operations.
We may be involved in legal proceedings, litigation, enforcement actions, or claims regarding product performance, product warranty, product certification, product liability, patent infringement, misappropriation of trade secrets, other intellectual property rights, antitrust, environmental regulations, securities, contracts, unfair competition, employment, workplace safety, and other matters.
We may be involved in legal proceedings, litigation, enforcement actions, or claims arising from our business, including, but not limited to, those regarding product performance, product warranty, product certification, product liability, patent infringement, misappropriation of trade secrets, other intellectual property rights, antitrust, environmental regulations, securities, contracts, unfair competition, employment, workplace safety, and other matters.
If a counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor. Our exposure will depend on many factors but, generally, an increase in our exposure will correlate to an increase in the market price and in the volatility of our common stock.
If a counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor. Our exposure will depend on many factors but, generally, an increase in our exposure will correlate to an increase in the market price and in the volatility of our common stock. In addition, counterparties may not be financially stable or viable.
Our sales are primarily made on a purchase order basis, or are pulled from “just in time” bins or hubs by our customers, and we generally have no long-term purchase commitments from our customers, which is typical in the industries we serve.
Our sales are primarily made on a purchase order basis or are pulled from “just in time” bins or hubs by our customers, and we generally do not have long-term purchase commitments from our customers.
In addition, even if holders do not elect to convert, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as current rather than long-term liability, which would result in a material reduction of our net working capital. 23 Table of Contents Conversion of the Convertible Notes may dilute the ownership interest of our stockholders and the existence of the Convertible Notes may depress the price of our common stock.
In addition, even if holders do not elect to convert, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as current rather than long-term liability, which would result in a material reduction of our net working capital.
Throughout 2023, we returned to the normal course of business with respect to our pricing strategy; however, any future widespread price increases could make our products less competitive in the market over time and could have an adverse effect on our results of operations. A significant portion of our revenue and accounts receivable are concentrated among a few customers.
We continue to execute our pricing strategies and practices; however, any future price increases could make our products less competitive in the market over time and could have an adverse effect on our results of operations. A significant portion of our revenue and accounts receivable are concentrated among a few customers.
We periodically review the carrying value of our goodwill and the estimated useful lives of our intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value, or for intangible assets, a revised useful life. The events and circumstances include significant changes in the business climate, legal factors, operating performance indicators, and competition.
We consider any events or circumstances that might result in either a diminished fair value, and for intangible assets, a revised useful life. The events and circumstances include significant changes in the business climate, legal factors, operating performance indicators, and competition.
If we are unable to maintain our pricing strategy or adjust our business strategy successfully for some of our product lines to reflect our customers’ price sensitivity, our business and financial condition could be harmed. Our business strategy for many of our product lines is focused on product performance and technology innovation to provide enhanced efficiencies and productivity.
If we are unable to maintain our pricing strategy or adjust our business strategy successfully for some of our product lines to reflect our customers’ price sensitivity, our business and financial condition could be harmed.
Disruptions to our manufacturing operations or the operations of our customers or suppliers, due to natural or other disasters, uncontrollable events or other issues could affect our results of operations. Certain of our manufacturing and other operations are in locations subject to natural disasters, such as severe weather and geological events, including earthquakes or tsunamis, that could disrupt operations.
Certain of our manufacturing and other operations are in locations subject to natural disasters, such as severe weather and geological events, including earthquakes or tsunamis, which could disrupt operations.
We are exposed to risks associated with worldwide financial markets and the global economy. Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, rising inflation and interest rates, economic recession, national debt, and fiscal or monetary concerns, could materially adversely impact our operating results and financial condition.
Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, rising inflation and interest rates, economic recession, national debt, and fiscal or monetary concerns, could 12 Table of Contents materially adversely impact our operating results and financial condition.
The U.S., many countries in the European Union, and several other countries are actively considering changes in this regard. Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that could harm our financial condition and operating results.
Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that could harm our financial condition and operating results.
A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our operations or the operations of our customers or suppliers, may materially adversely affect our business, results of operations, or financial condition.
In addition, our suppliers and customers are also subject to natural and other disaster risk exposure. A natural disaster, fire, explosion, pandemic, or other event that results in a prolonged disruption to our operations or the operations of our customers or suppliers, may materially adversely affect our business, workforce, supply chain, results of operations, financial condition, or cash flows.
If we fail to have succession plans in place or our succession plans do not operate effectively, we may not be able to maintain continuity and our business could be adversely affected. Our manufacturing footprint is consolidated, which brings risks. Our manufacturing facilities are located globally, and the majority of our products are manufactured in a select few key facilities.
If we fail to have succession plans in place or our succession plans do not operate effectively, we may not be able to maintain continuity and our business could be adversely affected. We are consolidating our manufacturing footprint, which brings risks.
The implementation and interpretation of these complex rules and other regulatory actions taken by the U.S. and other governments is uncertain and evolving, trending towards continued increasing restrictions, and this is both deleterious to our business and challenging for us to manage our operations and forecast our operating results. We are highly dependent on our intellectual property.
The implementation and interpretation of these complex rules and other regulatory actions is uncertain and evolving, trending towards continued increasing restrictions, which is deleterious to our business and challenging for us to manage our operations and forecast our operating results.
The conversion of some or all of the Convertible Notes may dilute the ownership interests of our stockholders.
Conversion of the Convertible Notes may dilute the ownership interest of our stockholders and the existence of the Convertible Notes may depress the price of our common stock. The conversion of some or all of the Convertible Notes may dilute the ownership interests of our stockholders.
Our credit agreement, dated as of September 10, 2019, as amended, imposes financial covenants on us and our subsidiaries that require us to maintain a certain leverage ratio.
Our Credit Agreement, including the associated revolving line of credit, imposes financial covenants on us and our subsidiaries that require us to maintain a certain leverage ratio.
Our failure to maintain appropriate environmental, social, and governance (“ESG”) practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results. Governments, customers, investors, and employees are enhancing their focus on ESG practices and disclosures, and expectations in this area are rapidly evolving and increasing.
Our failure to maintain appropriate environmental, social, and governance (“ESG”) practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results.
If our information security measures are breached, disrupted, or fail, we may incur significant legal and financial exposure and liabilities. As part of our day-to-day business, we process, transmit and store our own confidential data and certain data about our customers and employees in our global information technology system.
As part of our day-to-day business, we process, transmit and store our own confidential data and certain data about our customers and employees in our global information technology system.
Changes to those assumptions could have a significant effect on future contributions. Additionally, a material deterioration in the funded status of the plan could increase pension expenses and reduce our profitability. See Note 15. Employee Retirement Plans and Postretirement Benefits in Part II, Item 8 “Financial Statements and Supplementary Data” contained herein. Our intangible assets may become impaired.
Changes to those assumptions could have a significant effect on future contributions. Additionally, a material deterioration in the funded status of the plan could increase pension expenses and reduce our profitability. See Note 15.
Natural disasters, uncontrollable occurrences, or other operational issues at any of our manufacturing facilities could significantly reduce or disrupt our productivity at such site and could prevent us from meeting our customers’ requirements in a timely manner, or at all. In addition, our suppliers and customers are also subject to natural and other disaster risk exposure.
Natural disasters, uncontrollable occurrences (including the emergence of pandemics, epidemics, or widespread outbreaks of infectious disease), or other operational issues at any of our manufacturing or other facilities could significantly reduce or disrupt our productivity and could prevent us from meeting our customers’ requirements in a timely manner, or at all.
Prices of securities of technology companies are especially volatile and have often fluctuated for reasons that are unrelated to their operating performance. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation.
The stock market has from time to time experienced, and is likely to continue to experience, extreme price and volume fluctuations. Prices of securities of technology companies are especially volatile and have often fluctuated for reasons that are unrelated to their operating performance.
If we were the subject of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources. We may not pay dividends on our common stock. Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of Directors.
In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources. We may not pay dividends on our common stock.
As a global company, we are subject to the rules of the U.S. and other government authorities, and we should expect continued activity in both the promulgation and enforcement of global trade regulations. Since October 2022, we have been particularly affected by U.S. government-imposed export regulations on U.S. semiconductor and supercomputing technology sold in China, and related parts and services.
Since October 2022, we have been particularly affected by U.S. government-imposed export regulations on U.S. semiconductor and supercomputing technology and related parts and services sold in China.
If the length, severity, and/or volatility of these downturns exceeds our expectations, if we fail to achieve further growth in our other markets, or if we are unable to sufficiently respond to reduced demand in these markets, our results of operations could be adversely impacted.
If the semiconductor industry’s recovery does not continue as anticipated, if the length, severity, and/or volatility of the lower demand environments in the Industrial and Medical market and Telecom and Networking market exceeds our expectations, if we fail to achieve further growth in our other markets, our results of operations could be adversely impacted.
Obtaining export licenses may be difficult, costly, and time-consuming, and there is no assurance we will be issued licenses in time to meet customer requirements or at all. 18 Table of Contents Other current or future regulatory changes could materially and adversely affect our business as well, such as additional tariffs; additions or updates to various restricted party lists; further restrictions on selling products to entities in certain countries whose actions or functions are intended to support policies contrary to U.S. national security; new customs rules or requirements.
Future regulatory changes that could materially and adversely affect our business include but are not limited to additional or increased tariffs, additions or updates to various restricted party lists, further restrictions on selling products to entities in certain countries whose actions or functions are intended to support policies contrary to U.S. national security, new customs rules or requirements, and retaliatory trade actions or trade wars.
Consistent with prior years, a limited number of customers accounted for a significant portion of our business. In 2023, one customer represented over 10% of our total revenue, and our ten largest customers, in the aggregate, accounted for over half of our total revenue. At December 31, 2023, the same customer accounted for over 10% of our total accounts receivable.
Consistent with prior years, a limited number of customers accounted for a significant portion of our business, revenue and accounts receivable.
Difficulties or increased costs in obtaining capital and uncertain market conditions may also lead to customer liquidity constraints, a reduction of revenue, and greater instances of nonpayment or other failures to perform their obligations. Adverse or uncertain economic conditions may similarly affect our key suppliers, which could affect their ability to deliver parts and result in delays for our products.
Economic uncertainty exacerbates negative trends in consumer and business spending and may cause our customers to delay, cancel, or refrain from placing orders. Difficulties or increased costs in obtaining capital and uncertain market conditions may also lead to customer liquidity constraints, a reduction of revenue, and greater instances of nonpayment or other failures to perform their obligations.
In addition, upon a default by a counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the counterparties .
Upon a default by a counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. Risks Relating to Ownership of Our Common Stock The market price of our common stock has fluctuated and may continue to fluctuate for reasons over which we have no control.
These supply constraints led to longer lead times in procuring materials and subcomponents and, in some cases, meaningfully higher costs for the subcomponents.
These supply constraints led to longer lead times in procuring materials and subcomponents and, in some cases, meaningfully higher costs for the subcomponents. Our revenues, earnings, and cash flow may be adversely impacted if these conditions reoccur. We are exposed to risks associated with worldwide financial markets and the global economy.
In addition, our business could be adversely affected to the extent we fail to appropriately manage, expand, and update our information technology infrastructure. The loss of and inability to attract and retain key personnel could significantly harm our results of operations and competitive position.
Difficulties with the implementation or transition to our next generation enterprise resource planning and other new enterprise-wide information technology system applications could harm our business and impact our results of operations. Our business could be adversely affected to the extent we fail to appropriately manage, expand, and update our information technology infrastructure.
In October 2023, the U.S. government introduced another round of final interim rules. These rules are not yet final, and additional restrictions could be imposed. The rules impose extensive restrictions and compliance obligations, and Chinese customers may replace us with competitors who are not subject to U.S. export rules.
Over the past few years, the U.S. government has introduced several additional regulatory changes that impose extensive restrictions and compliance obligations, and Chinese customers may replace us with competitors who are not subject to U.S. export rules. Additionally, our ability to maintain business in China may be dependent at least in part on obtaining export licenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor a discussion of how risks from cybersecurity threats are reasonably likely to affect us, including our business strategy, results of operations, or financial condition, please see “If our information security measures are breached or fail and a customer’s or our data is improperly obtained or unauthorized access to our information technology systems occurs, we may incur significant legal and financial exposure and liabilities.” under the heading Part I, Item 1A “Risk Factors”.
Biggest changeFor a discussion of how risks from cybersecurity threats are reasonably likely to affect us, including our business strategy, results of operations, or financial condition, please see “If our information security measures are breached, disrupted, or fail, we may incur significant legal and financial exposure and liabilities” under the heading Part I, Item 1A “Risk Factors”. 26 Table of Contents Cybersecurity Governance Pursuant to its charter, the Audit and Finance Committee of our Board of Directors is principally responsible for oversight of managements’ actions to monitor and control cybersecurity risk exposure.
Prior to granting vendor access to our systems or data, we conduct pre-engagement diligence to ensure that each of our third party vendors involved in processing sensitive data have reasonable cybersecurity processes and procedures in place. We also have contractual provisions with key vendors for prompt notification of material cybersecurity incidents. 25 Table of Contents ● Insurance.
Prior to granting key vendor access to our systems or data, we conduct pre-engagement diligence to ensure that each of our third party vendors involved in processing sensitive data have reasonable cybersecurity processes and procedures in place. We also have contractual provisions with key vendors for prompt notification of material cybersecurity incidents. ● Insurance.
The plan provides for the formation of a multi-functional incident response team led by the Chief Information Officer (“CIO”) and comprised of IT, legal, corporate communications, internal audit, and operational personnel. ● Global Recovery.
The plan provides for the formation of a multi-functional incident response team led by the Chief Information Officer (“CIO”) and comprised of IT, legal, corporate communications, internal audit, operational personnel, and members of the Board of Directors. ● Global Recovery.
The Audit and Finance Committee reports to the full Board and, if warranted, coordinates with the Board to address material risks. In addition, the full Board receives a cybersecurity briefing from the CIO annually.
The Audit and Finance Committee reports to the full Board and, if warranted, coordinates with the Board to address material risks. In addition, two members of the Board have been delegated authority to serve as initial points of contact for the Board in the event of a severe information security incident.
Removed
Cybersecurity Governance Pursuant to its charter, the Audit and Finance Committee of our Board of Directors is principally responsible for oversight of managements’ actions to monitor and control cybersecurity risk exposure.
Added
The full Board receives a cybersecurity briefing from the CIO annually.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Information concerning our principal properties is set forth below: ​ ​ ​ ​ ​ ​ Location Principal Activity Ownership Denver, Colorado ​ Corporate headquarters, general and administrative ​ Leased Fort Collins, Colorado ​ Research and development, distribution, sales, and service ​ Leased Penang, Malaysia ​ Manufacturing and distribution ​ Leased Rosario, Philippines ​ Manufacturing ​ Owned Santa Rosa, Philippines ​ Manufacturing ​ Leased Zhongshan, China ​ Manufacturing ​ Leased Mexicali, Mexico ​ Manufacturing ​ Leased Littlehampton, United Kingdom ​ Manufacturing, distribution, sales, service, and research and development ​ Leased Lockport, New York ​ Manufacturing, distribution, service, and research and development ​ Leased Singapore, Singapore ​ Global operations headquarters (sales, service, and research and development) ​ Leased Quezon, Philippines ​ Engineering, research and development, administration, and support ​ Leased Taipei, Taiwan ​ Sales, distribution, and service ​ Leased Hong Kong, Hong Kong ​ Distribution and general and administrative ​ Leased ​ 26 Table of Contents In addition to the above principal properties, we have several other facilities throughout North America, Europe, and Asia.
Biggest changePROPERTIES Information concerning our principal properties is set forth below: ​ ​ ​ ​ ​ ​ Location Principal Activity Ownership Denver, Colorado ​ Corporate headquarters, general and administrative ​ Leased Fort Collins, Colorado ​ Research and development, distribution, sales, and service ​ Leased Penang, Malaysia ​ Manufacturing and distribution ​ Leased Rosario, Philippines ​ Manufacturing ​ Owned Santa Rosa, Philippines ​ Manufacturing ​ Leased Zhongshan, China ​ Manufacturing (planned closure in 2025) ​ Leased Mexicali, Mexico ​ Manufacturing ​ Leased Bangkok, Thailand ​ Planned manufacturing ​ Leased Littlehampton, United Kingdom ​ Manufacturing, distribution, sales, service, and research and development ​ Leased Lockport, New York ​ Manufacturing, distribution, service, and research and development ​ Leased Singapore, Singapore ​ Global operations headquarters (sales, service, and research and development) ​ Leased Quezon, Philippines ​ Engineering, research and development, administration, and support ​ Leased Taipei, Taiwan ​ Sales, distribution, and service ​ Leased Sungnam City, South Korea ​ Sales, distribution, and service ​ Leased Hong Kong, Hong Kong ​ Distribution and general and administrative ​ Leased ​ In addition to the above principal properties, we have several other facilities throughout North America, Europe, and Asia.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance shown in the graph represents past performance and should not be considered an indication of future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2018 2019 2020 2021 2022 2023 Advanced Energy Industries, Inc. $ 100.00 ​ $ 165.85 ​ $ 225.88 ​ $ 213.02 ​ $ 201.60 ​ $ 257.03 NASDAQ Composite $ 100.00 ​ $ 136.73 ​ $ 198.33 ​ $ 242.38 ​ $ 163.58 ​ $ 236.70 Dow Jones US Electrical Components & Equipment $ 100.00 ​ $ 123.68 ​ $ 149.34 ​ $ 187.20 ​ $ 154.45 ​ $ 197.36 S&P 1000 $ 100.00 ​ $ 125.11 ​ $ 141.32 ​ $ 177.08 ​ $ 152.22 ​ $ 177.01 ​ Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this annual report on Form 10-K. ​ ITEM 6.
Biggest changeThe performance shown in the graph represents past performance and should not be considered an indication of future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2019 2020 2021 2022 2023 2024 Advanced Energy Industries, Inc. $ 100.00 ​ $ 136.19 ​ $ 128.44 ​ $ 121.56 ​ $ 154.97 ​ $ 165.12 NASDAQ Composite $ 100.00 ​ $ 145.05 ​ $ 177.27 ​ $ 119.63 ​ $ 173.11 ​ $ 224.34 Dow Jones US Electrical Components & Equipment $ 100.00 ​ $ 120.75 ​ $ 151.36 ​ $ 124.87 ​ $ 159.57 ​ $ 213.20 S&P 1000 $ 100.00 ​ $ 112.96 ​ $ 141.54 ​ $ 121.67 ​ $ 141.49 ​ $ 158.89 Russell 2000 $ 100.00 ​ $ 119.93 ​ $ 137.67 ​ $ 109.50 ​ $ 127.98 ​ $ 142.73 ​ Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this annual report on Form 10-K. ​ ITEM 6.
Purchases of Equity Securities by the Issuer To repurchase shares of our common stock, we periodically enter into stock repurchase agreements, open market transactions, and/or other transactions in accordance applicable federal securities laws.
Purchases of Equity Securities by the Issuer To repurchase shares of our common stock, we periodically enter into share repurchase agreements, open market transactions, and/or other transactions in accordance with applicable federal securities laws.
The comparison assumes $100 invested on December 31, 2018 in Advanced Energy common stock and in each of the indices and assumes reinvestment of dividends, if any. Dollar amounts in the graph are rounded to the nearest whole dollar.
The comparison assumes $100 invested on December 31, 2019 in Advanced Energy common stock and in each of the indices and assumes reinvestment of dividends, if any. Dollar amounts in the graph are rounded to the nearest whole dollar.
This does not include stockholders whose shares are held in “street name” through brokers or other nominees. In each of the four quarters in 2023, we paid quarterly cash dividends of $0.10 per share, totaling $15.2 million for the full year.
This does not include stockholders whose shares are held in “street name” through brokers or other nominees. In each of the four quarters in 2024, we paid quarterly cash dividends of $0.10 per share, totaling $15.4 million for the full year.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividends Our common stock is listed on the NASDAQ Global Select Market under the symbol “AEIS.” On January 31, 2024, the number of common stockholders of record was 236.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividends Our common stock is listed on the NASDAQ Global Select Market under the symbol “AEIS.” On January 31, 2025, the number of common stockholders of record was 196.
Before repurchasing our shares, we consider the market price of our common stock, the nature of other investment opportunities, available liquidity, cash flows from operations, general business and economic conditions, and other relevant factors. ​ During the past three years, our Board approved several increases to the stock repurchase program.
Before repurchasing our shares, we consider the market price of our common stock, the nature of other investment opportunities, available liquidity, cash flows from operations, general business and economic conditions, and other relevant factors. ​ We did not repurchase any shares during the fourth quarter of 2024.
The maximum dollar value of shares that may yet be purchased under share repurchase program does not have a time limit. 28 Table of Contents Performance Graph The performance graph below shows the five-year cumulative total stockholder return on our common stock in comparison to certain other indices during the period from December 31, 2018 through December 31, 2023.
At December 31, 2024, the remaining amount authorized by our Board for future share repurchases was $197.4 million with no time limitation. 28 Table of Contents Performance Graph The performance graph below shows the five-year cumulative total stockholder return on our common stock in comparison to certain other indices during the period from December 31, 2019 through December 31, 2024.
Removed
Most recently, the Board approved a $40.0 million increase to the program specifically for a $40.1 million stock repurchase that occurred concurrently with the September 12, 2023 issuance of the Convertible Notes. ​ The following table summarizes stock repurchases during the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Month Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs ​ ​ (in thousands, except price per share data) September ​ ​ 378 ​ $ 105.74 ​ ​ 378 ​ ​ ​ Total ​ ​ 378 ​ $ 105.74 ​ ​ 378 ​ $ 199,192 ​ We did not repurchase any shares during the fourth quarter of 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. RESERVED ​ 29 ​ ​ ​ ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 30 ​ ​ ​ ​ ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ 42 ​ ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 44 ​ ​ ​ ​
Biggest changeITEM 6. RESERVED ​ 29 ​ ​ ​ ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 30 ​ ​ ​ ​ ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ 41 ​ ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 43 ​ ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

38 edited+35 added−43 removed23 unchanged
Biggest changeIn addition, the tax effect also includes a discrete tax benefit associated with the release of a portion of our deferred tax asset valuation allowance. ​ ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ ​ ​ ​ ​ ​ ​ Operating expenses and operating income from continuing ​ ​ Years Ended December 31, operations, excluding certain items (in thousands) 2023 2022 Gross profit from continuing operations, as reported ​ ​ $ 592,398 ​ $ 675,506 Adjustments to gross profit: ​ ​ ​ ​ Stock-based compensation ​ ​ 2,059 ​ 1,478 Facility expansion, relocation costs and other ​ ​ 2,334 ​ 5,295 Acquisition-related costs ​ ​ ​ 238 ​ ​ (299) Non-GAAP gross profit ​ ​ 597,029 ​ 681,980 Non-GAAP gross margin ​ ​ 36.1% ​ 37.0% ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses from continuing operations, as reported ​ ​ ​ 478,704 ​ ​ 442,411 Adjustments: ​ ​ ​ ​ ​ Amortization of intangible assets ​ ​ (28,254) ​ (26,114) Stock-based compensation ​ ​ (28,942) ​ (18,371) Acquisition-related costs ​ ​ (4,026) ​ (8,637) Facility expansion, relocation costs and other ​ ​ (189) ​ — Restructuring, asset impairments, and other charges ​ ​ (26,977) ​ (6,814) Non-GAAP operating expenses ​ ​ ​ 390,316 ​ ​ 382,475 Non-GAAP operating income ​ ​ $ 206,713 ​ $ 299,505 Non-GAAP operating margin ​ ​ 12.5% ​ 16.2% ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ ​ ​ ​ ​ ​ ​ Income from continuing operations, excluding certain items ​ ​ Years Ended December 31, (in thousands, except per share amounts) ​ 2023 2022 Income from continuing operations, less non-controlling interest, net of income tax ​ ​ $ 130,749 ​ $ 201,875 Adjustments: ​ ​ ​ Amortization of intangible assets ​ ​ 28,254 ​ 26,114 Acquisition-related costs ​ ​ 4,264 ​ 8,338 Facility expansion, relocation costs, and other ​ ​ 2,523 ​ 5,295 Restructuring, asset impairments, and other charges ​ ​ 26,977 ​ 6,814 Unrealized foreign currency gain ​ ​ ​ (89) ​ ​ (7,645) Acquisition-related costs and other included in other income (expense), net ​ ​ ​ (1,516) ​ ​ (8,417) Tax effect of non-GAAP adjustments, including certain discrete tax benefits ​ ​ (31,303) ​ (3,008) Non-GAAP income, net of income tax, excluding stock-based compensation ​ ​ ​ 159,859 ​ ​ 229,366 Stock-based compensation, net of tax ​ ​ ​ 24,181 ​ ​ 15,444 Non-GAAP income, net of income tax ​ ​ $ 184,040 ​ $ 244,810 Non-GAAP diluted earnings per share ​ ​ $ 4.88 ​ $ 6.49 ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ Year Ended December 31, Per share earnings excluding certain items 2023 2022 Diluted earnings per share from continuing operations, as reported ​ $ 3.46 ​ $ 5.35 Add back: ​ ​ ​ ​ ​ ​ Per share impact of non-GAAP adjustments, net of tax ​ 1.42 ​ ​ 1.14 Non-GAAP earnings per share ​ $ 4.88 ​ $ 6.49 ​ Liquidity and Capital Resources Liquidity Adequate liquidity and cash generation is important to the execution of our strategic initiatives.
Biggest changeFinally, non-GAAP results exclude one-time tax benefits and losses associated with changes in our legal entity structure or ownership of certain assets. ​ ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ ​ ​ ​ ​ ​ Operating expenses and operating income from continuing ​ Years Ended December 31, operations, excluding certain items 2024 2023 ​ ​ (in thousands) Gross profit from continuing operations, as reported ​ $ 529,343 ​ $ 592,398 Adjustments to gross profit: ​ ​ ​ Stock-based compensation ​ 3,994 ​ 2,059 Facility expansion, relocation costs and other ​ 4,421 ​ 2,334 Acquisition-related costs ​ ​ (13) ​ ​ 238 Non-GAAP gross profit ​ 537,745 ​ 597,029 Non-GAAP gross margin ​ 36.3% ​ 36.1% ​ ​ ​ ​ ​ ​ ​ Operating expenses from continuing operations, as reported ​ ​ 492,736 ​ ​ 478,704 Adjustments: ​ ​ ​ ​ Amortization of intangible assets ​ (26,046) ​ (28,254) Stock-based compensation ​ (41,946) ​ (28,942) Acquisition-related costs ​ (5,965) ​ (4,026) Facility expansion, relocation costs and other ​ (1,222) ​ (189) Restructuring, asset impairments, and other charges ​ (30,318) ​ (26,977) Non-GAAP operating expenses ​ ​ 387,239 ​ ​ 390,316 Non-GAAP operating income ​ $ 150,506 ​ $ 206,713 Non-GAAP operating margin ​ 10.2% ​ 12.5% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ Years Ended December 31, Income from continuing operations, excluding certain items 2024 2023 ​ ​ (in thousands) Income from continuing operations, less non-controlling interest, net of income tax ​ $ 56,306 ​ $ 130,749 Adjustments: ​ ​ Amortization of intangible assets ​ 26,046 ​ 28,254 Acquisition-related costs ​ 5,952 ​ 4,264 Facility expansion, relocation costs, and other ​ 5,643 ​ 2,523 Restructuring, asset impairments, and other charges ​ 30,318 ​ 26,977 Unrealized foreign currency gain ​ ​ (3,512) ​ ​ (89) Other costs included in other income (expense), net ​ ​ 2,812 ​ ​ (1,516) Tax effect of non-GAAP adjustments, including certain discrete tax benefits ​ (19,563) ​ (31,303) Non-GAAP income, net of income tax, excluding stock-based compensation ​ ​ 104,002 ​ ​ 159,859 Stock-based compensation, net of tax ​ ​ 36,292 ​ ​ 24,181 Non-GAAP income, net of income tax ​ $ 140,294 ​ $ 184,040 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, Weighted-average common shares ​ 2024 ​ 2023 ​ ​ (in thousands) Diluted weighted-average common shares outstanding ​ ​ 37,839 ​ ​ 37,750 ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of non-GAAP measure ​ Years Ended December 31, Per share earnings excluding certain items 2024 2023 Diluted earnings per share from continuing operations, as reported ​ $ 1.49 ​ $ 3.46 Add back: ​ ​ ​ ​ ​ ​ Per share impact of non-GAAP adjustments, net of tax ​ 2.22 ​ ​ 1.42 Non-GAAP earnings per share ​ $ 3.71 ​ $ 4.88 37 Table of Contents Liquidity and Capital Resources Liquidity Adequate liquidity and cash generation are important to the execution of our strategic initiatives.
GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination . Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements pursuant to Regulation S-K.
GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination . Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any off-balance sheet arrangements pursuant to Regulation S-K.
The following section discusses our results of operations for 2023 and 2022 and year-to-year comparisons between those periods. Company Overview Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.
The following section discusses our results of operations for 2024 and 2023 and year-to-year comparisons between those periods. Company Overview Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.
Income Taxes in Part II, Item 8 “Financial Statements and Supplementary Data.” 41 Table of Contents Business Combinations We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values.
Income Taxes in Part II, Item 8 “Financial Statements and Supplementary Data.” 40 Table of Contents Business Combinations We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values.
In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, restructuring, asset impairments, and other charges, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.
In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.
Our primary sources of liquidity continue to be our available cash, investments, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined in Note 18. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data”).
Our primary sources of liquidity continue to be our available cash, cash generated from operations, and available borrowing capacity under the Revolving Facility (refer to Note 18. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data”).
Results of Continuing Operations The analysis presented below is organized to provide the information we believe will be helpful for understanding of our historical performance and relevant trends going forward and should be read in conjunction with our consolidated financial statements, including the notes thereto, in Part II, Item 8 “Financial Statements and Supplementary Data” of this annual report on Form 10-K.
We expect the current market conditions to continue for several quarters. 31 Table of Contents Results of Continuing Operations The analysis presented below is organized to provide the information we believe will be helpful for understanding of our historical performance and relevant trends going forward and should be read in conjunction with our consolidated financial statements, including the notes thereto, in Part II, Item 8 “Financial Statements and Supplementary Data” of this annual report on Form 10-K.
Entering 2024, although we are experiencing a lower demand environment, we continue to believe that the long-term market growth drivers support our long-term strategy, research and development efforts, and capital investments.
Although we are currently experiencing a lower demand environment in certain markets, we continue to believe that the long-term market growth drivers support our long-term strategy, research and development efforts, and capital investments.
In addition to the available capacity on the Revolving Facility, prior to the maturity date of our 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 $115.0 million. Any requested increase is subject to lender approval.
In addition to the 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. For more information see Note 18.
Acquisitions in Part II, Item 8 “Financial Statements and Supplementary Data.” Business Environment and Trends 2023 Summary Results and Key Activities For the year ended December 31, 2023, our revenue was $1,655.8 million, representing a decline of 10.3% as compared to 2022.
Acquisition in Part II, Item 8 “Financial Statements and Supplementary Data.” Business Environment and Trends 2024 Summary Results and Key Activities For the year ended December 31, 2024, our revenue was $1,482.0 million, representing a decline of 10.5% as compared to 2023.
As of December 31, 2023, our cash and cash equivalents total $1,044.6 million, while our available funding under our Revolving Facility is $200.0 million. Additionally, we generated $212.9 million of cash flow from continuing operations in 2023. We believe our sources of liquidity will be adequate to meet anticipated debt service, share repurchase programs, and dividends.
As of December 31, 2024, our cash and cash equivalents totaled $722.1 million, and our available funding under our Revolving Facility is $600.0 million. Additionally, we generated $132.9 million of cash flow from continuing operations in 2024. We believe our sources of liquidity will be adequate to meet anticipated debt service, share repurchase programs, and dividends.
We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.
We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors. 38 Table of Contents Share Repurchases To repurchase shares of our common stock, we periodically enter into share repurchase agreements.
We experienced an increase in interest expense due to a higher interest rate on the portion of our Term Loan Facility subject to a variable interest rate and the issuance of our Convertible Notes. The interest rate swap contracts expire on September 10, 2024.
Interest expense increased due to interest associated with the Convertible Notes and a higher interest rate on the portion of our Term Loan Facility subject to a variable interest rate. We prepaid in full the Term Loan Facility on September 9, 2024, and the interest rate swap contracts expired on September 10, 2024.
Derivative Financial Instruments in Part II, Item 8 “Financial Statements and Supplementary Data.” Dividends During 2023, we paid quarterly cash dividends of $0.10 per share, totaling $15.2 million for the full year.
Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” Dividends During 2024, we paid quarterly cash dividends of $0.10 per share, totaling $15.4 million.
The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses.
The presentation of this additional information should not be considered a substitute for results prepared in accordance with U.S. GAAP. The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses.
Such accounting positions require significant judgments, assumptions, and estimates to be used in the preparation of the consolidated financial statements. Actual results could differ materially from the amounts reported based on variability in factors affecting these statements. Inventories We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis.
The accounting positions described below are significantly affected by critical accounting estimates. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the consolidated financial statements and actual results could differ materially from the amounts reported based on variability in factors affecting these estimates.
Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.” ​ 35 Table of Contents Interest Income, Interest Expense, and Other Income (Expense), net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Interest income ​ $ 27,092 ​ $ 4,147 ​ $ 22,945 553.3 % Interest expense ​ $ (16,566) ​ $ (7,325) ​ $ (9,241) 126.2 % Other income (expense), net ​ $ (1,759) ​ $ 11,824 ​ $ (13,583) (114.9) % ​ We experienced an increase in interest income on higher cash balances, due in part to proceeds from our issuance of Convertible Notes in the third quarter of 2023, ability to concentrate cash in investment accounts, and higher short term interest rates.
Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.” ​ Interest Income, Interest Expense, and Other Income (Expense), net We experienced an increase in interest income on higher cash balances, due in part to proceeds from the issuance of the Convertible Notes in the third quarter of 2023, our ability to concentrate cash in investment accounts, and higher short term market interest rates.
We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods. In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. These non-GAAP measures are not in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies.
In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. These non-GAAP measures are not prepared in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management.
The following table summarizes these repurchases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (in thousands, except per share amounts) 2023 2022 2021 Amount paid or accrued to repurchase shares ​ ​ $ 40,132 ​ $ 26,635 ​ $ 78,125 Number of shares repurchased ​ ​ 378 ​ 356 ​ 901 Average repurchase price per share ​ ​ $ 105.74 ​ $ 74.90 ​ $ 86.76 ​ The above table reflects a $40.1 million repurchase of our common stock that was concurrent with the Convertible Notes issuance.
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 ​ At December 31, 2024, the remaining amount authorized by the Board for future share repurchases was $197.4 million with no time limitation.
End Markets Summary and Trends As further described below, the demand environment in each of our markets is impacted by macroeconomic conditions, various market trends, customer buying patterns, design wins, and other factors.
During 2024, we continued progress on a new factory near Bangkok, Thailand, which we expect to be operational in 2026. End Markets Summary and Trends The demand environment in each of our markets is impacted by macroeconomic conditions, various market trends, customer buying patterns, design wins, and other factors.
Operating Expenses The following table summarizes our operating expenses (in thousands) and as a percentage of revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2023 2022 ​ Research and development ​ ​ $ 202,439 12.2 % $ 191,020 10.4 % Selling, general, and administrative ​ ​ 221,034 13.3 ​ 218,463 11.8 ​ Amortization of intangible assets ​ ​ ​ 28,254 1.7 ​ 26,114 1.4 ​ Restructuring, asset impairments, and other charges ​ ​ 26,977 1.6 ​ 6,814 0.4 ​ Total operating expenses ​ ​ $ 478,704 28.9 % $ 442,411 24.0 % ​ Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ (in thousands) Research and development ​ $ 202,439 ​ $ 191,020 ​ $ 11,419 6.0 % ​ The increase in research and development was primarily driven by increased headcount and compensation costs of $9.0 million, which was partially due to the SL Power acquisition.
Operating Expenses The following table summarizes our operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ Change 2024 v. 2023 ​ ​ 2024 ​ 2023 ​ Dollar ​ Percent ​ ​ ​ (in thousands) Research and development $ 211,834 $ 202,439 $ 9,395 4.6 % Selling, general, and administrative ​ 224,538 ​ ​ 221,034 ​ 3,504 ​ 1.6 % Amortization of intangible assets ​ ​ 26,046 ​ ​ 28,254 ​ ​ (2,208) ​ (7.8) % Restructuring, asset impairments, and other charges ​ 30,318 ​ ​ 26,977 ​ 3,341 ​ 12.4 % Total operating expenses ​ $ 492,736 ​ $ 478,704 ​ $ 14,032 ​ 2.9 % ​ Research and Development Research and development expenses increased $9.4 million to $211.8 million, as compared to $202.4 million in the prior year.
In 2023, we reported higher operating expenses of $478.7 million, primarily attributable to $27.0 million of charges related to our restructuring initiatives which are focused on optimizing manufacturing, support operations and to a lesser extent a general workforce reduction to align to our revenue levels.
In 2024, we reported higher operating expenses of $492.7 million, an increase of $14.0 million primarily attributable to higher stock-based compensation expense, higher research and development (“R&D”) program costs, higher restructuring charges from initiatives focused on optimizing manufacturing and support operations, partially offset by a general workforce reduction to align to our revenue levels.
Summary of Operations and Significant Accounting Policies and Estimates in Part II, Item 8 “Financial Statements and Supplementary Data” describes the significant accounting policies used in the preparation of our consolidated financial statements. The accounting positions described below are significantly affected by critical accounting estimates.
GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported. Note 1. Summary of Operations and Significant Accounting Policies and Estimates in Part II, Item 8 “Financial Statements and Supplementary Data” describes the significant accounting policies used in the preparation of our consolidated financial statements.
The effective tax rate for 2023 was lower than the same periods in 2022 primarily due to a $25.6 million release of a deferred tax asset valuation allowance in 2023. Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income.
Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.
As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase in future years. 36 Table of Contents Non-GAAP Results Management uses non-GAAP operating income and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations.
Non-GAAP Results Management uses non-GAAP operating income and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods.
After that date, the entire balance of our Term Loan Facility will be subject to a variable interest rate. In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate.
The interest rate swap contracts previously entered into related to the Term Loan Facility expired on September 10, 2024. Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.
However, in the short-term it is unclear how the macroeconomic conditions, including higher interest rates impacting end customer’s capital investment and potential macroeconomic weakness, will affect our customer demand and revenue.
However, in the short-term it is unclear how certain macroeconomic conditions, including the effect of higher interest rates impacting end customers’ capital investment, the timing of inventory digestion, and customer buying patterns, will affect customer demand and our revenue. Semiconductor Equipment Market The Semiconductor Equipment market appears to be slowly recovering from a cyclical downturn, which bottomed in 2023.
Long-Term Debt in Part II, Item 8 “ Financial Statements and Supplementary Data .” At December 31, 2023, the remaining amount authorized by the Board for future share repurchases was $199.2 million with no time limitation. 39 Table of Contents Cash Flows A summary of our cash from operating, investing, and financing activities was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 2022 Net cash from operating activities from continuing operations ​ ​ $ 212,925 ​ $ 183,731 Net cash from operating activities from discontinued operations ​ ​ (3,988) ​ (144) Net cash from operating activities ​ ​ 208,937 ​ 183,587 Net cash from investing activities ​ ​ (64,751) ​ (208,272) Net cash from financing activities ​ ​ 445,684 ​ (61,865) Effect of currency translation on cash and cash equivalents ​ ​ (4,132) ​ 996 Net change in cash and cash equivalents ​ ​ 585,738 ​ (85,554) Cash and cash equivalents, beginning of period ​ ​ 458,818 ​ 544,372 Cash and cash equivalents, end of period ​ ​ $ 1,044,556 ​ $ 458,818 ​ Net Cash From Operating Activities Net cash from operating activities from continuing operations was $212.9 million, an increase of $29.2 million, compared to $183.7 million in the prior year.
Cash Flows A summary of our cash from operating, investing, and financing activities was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 ​ ​ (in thousands) Net cash from operating activities from continuing operations ​ $ 132,924 ​ $ 212,925 Net cash used in operating activities from discontinued operations ​ (2,177) ​ (3,988) Net cash from operating activities ​ 130,747 ​ 208,937 Net cash used in investing activities ​ (73,541) ​ (64,751) Net cash (used in) from financing activities ​ (377,093) ​ 445,684 Effect of currency translation on cash and cash equivalents ​ (2,583) ​ (4,132) Net change in cash and cash equivalents ​ (322,470) ​ 585,738 Cash and cash equivalents, beginning of period ​ 1,044,556 ​ 458,818 Cash and cash equivalents, end of period ​ $ 722,086 ​ $ 1,044,556 ​ Net Cash From Operating Activities Net cash from operating activities from continuing operations was $132.9 million, a decrease of $80.0 million, compared to $212.9 million in the prior year.
We anticipate the 2022 Plan will be substantially completed by the end of 2024. ​ For additional information, see Note 12.
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. For additional information about this and prior year restructuring plans, see Note 12.
Income Tax Provision (Benefit) The following table summarizes tax provision (benefit) (in thousands) and the effective tax rate for our income from continuing operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2023 2022 Income from continuing operations, before income tax ​ ​ $ 122,461 ​ $ 241,741 ​ Income tax provision (benefit) ​ ​ $ (8,288) ​ $ 39,850 ​ Effective tax rate ​ ​ ​ (6.8) % ​ 16.5 % ​ Our effective tax rates differ from the U.S. federal statutory rate of 21% for 2023 and 2022, primarily due to a valuation allowance release for certain deferred tax assets in 2023 and the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations in 2022.
Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding our debt. ​ 35 Table of Contents Income Tax Benefit The following table summarizes tax benefit and the effective tax rate for our income from continuing operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2024 2023 ​ ​ ​ (in thousands) ​ Income from continuing operations, before income tax ​ ​ $ 52,377 ​ $ 122,461 ​ Income tax benefit ​ ​ $ (3,929) ​ $ (8,288) ​ Effective tax rate ​ ​ ​ (7.5) % ​ (6.8) % ​ Our effective tax rates differ from the U.S. federal statutory rate of 21% for the years ended December 31, 2024 and 2023, primarily due to the intercompany transfer of intellectual property among certain of our subsidiaries in 2024 and a valuation allowance release in 2023.
These actions should largely be complete in 2024 and are expected to enable a more efficient and cost-effective operating structure.
The restructuring actions should largely be completed in 2026 and are expected to enable a more efficient and cost-effective operating structure. In the third quarter of 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility.
The following table summarizes our Consolidated Statements of Operations and as a percentage of revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ ​ 2022 Revenue $ 1,655,810 100.0 % $ 1,845,422 100.0 % Gross profit ​ 592,398 ​ 35.8 ​ ​ 675,506 ​ 36.6 ​ Operating expenses ​ 478,704 ​ 28.9 ​ ​ 442,411 ​ 24.0 ​ Operating income from continuing operations ​ 113,694 ​ 6.9 ​ ​ 233,095 ​ 12.6 ​ Interest income ​ ​ 27,092 ​ 1.6 ​ ​ ​ 4,147 ​ 0.2 ​ Interest expense ​ ​ (16,566) ​ (1.0) ​ ​ ​ (7,325) ​ (0.4) ​ Other income (expense), net ​ (1,759) ​ (0.1) ​ ​ 11,824 ​ 0.6 ​ Income from continuing operations, before income tax ​ 122,461 ​ 7.4 ​ ​ 241,741 ​ 13.1 ​ Income tax provision (benefit) ​ (8,288) ​ (0.5) ​ ​ 39,850 ​ 2.2 ​ Income from continuing operations ​ $ 130,749 ​ 7.9 % ​ $ 201,891 ​ 10.9 % ​ ​ Revenue The following tables summarize net revenue and percentages of revenue by markets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Change 2023 v. 2022 ​ ​ ​ 2023 ​ 2022 Dollar Percent ​ Semiconductor Equipment ​ $ 743,794 44.9 % ​ $ 930,809 50.5 % ​ $ (187,015) (20.1) % Industrial and Medical ​ 474,449 ​ 28.7 ​ ​ 426,763 ​ 23.1 ​ ​ 47,686 11.2 ​ Data Center Computing ​ ​ 249,874 ​ 15.1 ​ ​ ​ 327,466 ​ 17.7 ​ ​ ​ (77,592) (23.7) ​ Telecom and Networking ​ 187,693 ​ 11.3 ​ ​ 160,384 ​ 8.7 ​ ​ 27,309 17.0 ​ Total ​ $ 1,655,810 ​ 100.0 % ​ $ 1,845,422 ​ 100.0 % ​ $ (189,612) (10.3) % Total revenue decreased from the same period in the prior year due to market downturns in the Semiconductor Equipment and Data Center Computing markets, which were partially offset by revenue increases in the Industrial and Medical and the Telecom and Networking markets driven by improved supply of certain components. ​ 32 Table of Contents Backlog Backlog represents outstanding orders for products we expect to deliver within the next 12 months.
The following table summarizes our Consolidated Statements of Operations and as a percentage of revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ Change 2024 v. 2023 ​ ​ ​ 2024 ​ 2023 ​ Dollar ​ Percent ​ ​ (in thousands) Revenue $ 1,482,042 $ 1,655,810 $ (173,768) (10.5) % Gross profit ​ 529,343 ​ ​ 592,398 ​ (63,055) ​ (10.6) % Operating expenses ​ 492,736 ​ ​ 478,704 ​ 14,032 ​ 2.9 % Operating income from continuing operations ​ 36,607 ​ ​ 113,694 ​ (77,087) ​ (67.8) % Interest income ​ ​ 42,860 ​ ​ 27,092 ​ ​ 15,768 ​ 58.2 % Interest expense ​ ​ (25,105) ​ ​ (16,566) ​ ​ (8,539) ​ 51.5 % Other income (expense), net ​ (1,985) ​ ​ (1,759) ​ (226) ​ 12.8 % Income from continuing operations, before income tax ​ 52,377 ​ ​ 122,461 ​ (70,084) ​ (57.2) % Income tax benefit ​ (3,929) ​ ​ (8,288) ​ 4,359 ​ (52.6) % Income from continuing operations ​ $ 56,306 ​ $ 130,749 ​ $ (74,443) ​ (56.9) % ​ ​ 32 Table of Contents Revenue The following tables summarize net revenue and percentages of revenue by markets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ Change 2024 v. 2023 ​ ​ ​ 2024 ​ 2023 Dollar Percent ​ ​ ​ (in thousands) Semiconductor Equipment ​ $ 792,559 53.5 % ​ $ 743,794 44.9 % ​ $ 48,765 6.6 % Industrial and Medical ​ 316,177 ​ 21.3 ​ ​ 474,449 ​ 28.7 ​ ​ (158,272) (33.4) % Data Center Computing ​ ​ 284,192 ​ 19.2 ​ ​ ​ 249,874 ​ 15.1 ​ ​ ​ 34,318 13.7 % Telecom and Networking ​ 89,114 ​ 6.0 ​ ​ 187,693 ​ 11.3 ​ ​ (98,579) (52.5) % Total ​ $ 1,482,042 ​ 100.0 % ​ $ 1,655,810 ​ 100.0 % ​ $ (173,768) (10.5) % Total revenue decreased from the same period in the prior year due primarily to lower end demand and customer inventory rebalancing, resulting in lower demand in our Industrial and Medical and Telecom and Networking markets.
Within this segment, our products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. On April 25, 2022, we acquired 100% of the issued and outstanding shares of capital stock of SL Power, which is based in Calabasas, California.
Within this segment, our products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. On June 20, 2024, we acquired Airity Technologies, Inc. (“Airity”). 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. See Note 2.
After that date, the entire balance of our Term Loan Facility will be subject to a variable interest rate. In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate. As of December 31, 2023, we had $200.0 million in available funding under the Revolving Facility.
Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate. Other expense, net was $2.0 million in 2024, as compared to $1.8 million of expense in the prior year. Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items.
These declines were partially offset by higher revenues in the Industrial and Medical and Telecom and Networking markets, as improved supply of critical components during 2023 enabled us to fulfill demand and reduce backlog for our products. For more details on the trends in our end markets, see “End Markets Summary and Trends” elsewhere in this Item 7.
For more details on the trends in our end markets, see “End Markets Summary and Trends” elsewhere in this Item 7.
The decline was attributable to lower revenue from our Semiconductor Equipment and Data Center Computing markets, both of which experienced a reduced demand environment starting in the fourth quarter 2022 and continued into 2023.
The decline was attributable to lower revenue from our Industrial and Medical and Telecom and Networking markets due to customer inventory rebalancing, resulting in a lower demand environment. These declines were partially offset by higher revenues in the Semiconductor Equipment market, from the 2023 trough level, and growing AI-related demand in the Data Center Computing market.
For more information see Note 18 Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” For more information on the interest rate swap that fixes the interest rate for a portion of our Term Loan Facility, see Note 7.
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. See Note 18. Long-Term Debt in Part II, Item 8 “ Financial Statements and Supplementary Data ” and Liquidity and Capital Resources below.
In addition, we may, depending upon the number or size of additional acquisitions, seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all. 38 Table of Contents Debt On September 12, 2023, we completed a private, unregistered offering of $575.0 million Convertible Notes and received net proceeds of approximately $561.1 million after the discount for the initial purchasers’ fees.
In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all. Debt On September 9, 2024, we used existing cash on hand to prepay the full $345.0 million outstanding principal balance under our Term Loan Facility.
Removed
The results of operations of SL Power are included in our consolidated results from the acquisition date forward. This acquisition added complementary products to Advanced Energy’s medical power offerings and extends our presence in several advanced industrial markets. See Note 2.
Added
In connection with the 2024 Plan, we recorded a $29.6 million charge primarily associated with expected employment-related charges and facility exit costs. See Note 12.
Removed
Although we experienced a challenging demand environment related to our revenue, we achieved $212.9 million cash flow from continuing operating activities as we managed our working capital and core spending levels, resulting in a $25.4 million increase in cash flow from operating activities compared to 2022.
Added
Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.” 30 Table of Contents In the third quarter of 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.
Removed
On September 12, 2023, we completed a private, unregistered offering of $575.0 million aggregate principal amount 2.50% convertible senior notes (“Convertible Notes”) and received net proceeds of approximately $561.1 million after the discount for the initial purchasers’ fees.
Added
Demand improved in 2024, but a number of external factors continue to limit the market recovery, including unfavorable macroeconomic conditions, prolonged weak demand for consumer electronics, low fab utilization, and U.S. export restrictions to China. We continue to believe the long-term growth drivers will support cyclical growth for this market.
Removed
We intend to use the net proceeds to fund future growth, which 30 Table of Contents may include strategic acquisitions, opportunistically repay existing outstanding indebtedness, repurchase our common stock, or general corporate purposes. See Note 18. Long-Term Debt in Part II, Item 8 “ Financial Statements and Supplementary Data ” and Liquidity and Capital Resources below.
Added
Growth drivers include more manufacturing capacity needed to support increasing demand for semiconductor devices, increasing etch and deposition process steps with new technology inflections, and the transition to advanced technology nodes requiring higher content of advanced power solutions per tool. In addition, we believe our investment in new products can enable market share gains resulting in higher than market growth.
Removed
Concurrent with the Convertible Notes issuance, we repurchased 0.4 million shares of common stock for $40.1 million and entered into hedge and warrant contracts with respect to our common stock (see Note 5. Stockholders’ Equity and Earnings Per Share and Note 18. Long-Term Debt in Part II, Item 8 “ Financial Statements and Supplementary Data ”).
Added
Industrial and Medical Market Beginning in the second half of 2023, the impact of weaker macroeconomic conditions started to lower demand for our products in the Industrial and Medical market. In addition, in the previous two years, many customers built inventories of our products following the supply chain disruption and extended lead times.
Removed
Semiconductor Equipment Market Beginning in the fourth quarter of 2022, the Semiconductor Equipment market entered a downturn due to a combination of unfavorable macroeconomic conditions, overcapacity in the market for memory devices, prolonged weakness in demand for consumer electronics, general semiconductor inventory consumption resulting in falling manufacturing utilization, and new U.S. export restrictions to China for certain semiconductor equipment.
Added
As lead times normalized in 2024, customers rebalanced their elevated inventory levels resulting in further decline in revenue. We expect these factors will continue to limit our revenue in the near term but believe that growth will return to this market after customer inventories return to normal levels and end markets recover.
Removed
During 2023, these factors continued to impact our revenue, but we were able to partially offset the market weakness by growing revenues in areas such as high voltage and service. Entering 2024, we expect the factors driving the market downturn to continue in the near-term.
Added
Data Center Computing Market Revenue in the Data Center Computing market was weak in the first quarter of 2024 driven by reduced investments by our hyperscale customers, lower demand for enterprise systems, and the timing of large customer orders.
Removed
As mentioned above, we believe the long-term growth drivers for demand in this market will resume, due to the need for more manufacturing capacity to support growing demand for semiconductor devices and the related capital equipment. Industrial and Medical Market We delivered record revenue in the Industrial and Medical market in 2023.
Added
Starting in the second quarter of 2024, demand rebounded driven by accelerated investments in AI and customers starting to ramp new generations of high power solutions, resulting in revenue growth in 2024. We expect these factors will continue to support strong demand for the next few quarters.
Removed
The year started with strong demand driven by customer investments in production capacity. In addition, increased supply of critical components allowed us to fulfill the higher level of customer demand and drove the record quarterly revenues in both the first and second quarter of 2023.
Added
Telecom and Networking Market In 2023, improved supply of critical components drove a meaningful increase in revenue, which more than offset weakening market conditions in the Telecom and Networking market. End demand further weakened during 2024. In addition, customers rebalanced their elevated inventory levels as lead times normalized, resulting in a further decline in our revenue.
Removed
However, in the second half of 2023 we began to see lower demand in this market largely driven by macroeconomic factors, including higher interest rates, which has adversely impacted end customer’s capital investment. Entering 2024, we expect weaker macroeconomics condition to continue to impact our revenue in the near-term.
Added
The Semiconductor Equipment market modestly recovered from the cyclical trough in 2023, and revenue in the Data Center Computing market grew as hyperscale customers increased investments in AI. Revenue by Market Sales in the Semiconductor Equipment market increased $48.8 million, or 6.6%, to $792.6 million, as compared to $743.8 million in the prior year.
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Data Center Computing Market As compared to revenue levels exiting 2022, in the first half of 2023, we saw reduced revenues in the Data Center Computing market due to slowing demand in the enterprise server and storage market as customers delayed investments.
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The increase was primarily due to improved demand as we emerge from the cyclical trough in 2023. Sales in the Industrial and Medical market decreased $158.3 million, or 33.4%, to $316.2 million, as compared to $474.4 million in the prior year.
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Increased demand for high end computing applications, such as artificial intelligence, from some of our customers led to increased revenue in the second half of 2023. These investments can have disparate cycles, and it is not clear how quickly our enterprise server and storage customers will return to their historical level of investments.
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After a record year in 2023, the decrease was primarily due to lower end demand and customers working down their elevated inventories on shortened lead times following the supply chain disruption. Sales in the Data Center Computing market increased $34.3 million, or 13.7%, to $284.2 million, as compared to $249.9 million in the prior year.
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Telecom and Networking Market During the period, substantially improved supply of critical components allowed us to largely fulfill outstanding demand from the prior year and drove strong revenue growth in the Telecom and Networking market as compared to 31 Table of Contents 2022.
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The increase was due to accelerated hyperscale investments in AI and growing adoption of next generation high power solutions. Sales in the Telecom and Networking market decreased $98.6 million, or 52.5%, to $89.1 million as compared to $187.7 million in the prior year. The decrease was due to the prior year benefiting from the improved supply of critical components.
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However, leading companies in this market have reported end user weakness, and we expect and plan for a slower demand environment in 2024.
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This enabled fulfillment of outstanding orders in 2023, which did not continue in 2024.
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As of December 31, 2023, our backlog was $406.8 million, which represents a decrease of $468.5 million or 53.5% compared to the $875.3 million balance as of December 31, 2022. Backlog levels have historically averaged less than one quarter of revenue. However, during the supply chain shortages backlog increased substantially due to long lead times.
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In addition, we experienced a slow demand environment and inventory rebalancing at many of our customers, which we expect to continue. ​ ​ 33 Table of Contents Gross Profit and Gross Margin ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ Change 2024 v. 2023 ​ ​ ​ 2024 2023 Dollar Percent ​ ​ ​ (in thousands) Gross profit ​ $ 529,343 ​ $ 592,398 ​ $ (63,055) ​ (10.6) % Gross margin ​ ​ 35.7 % ​ 35.8 % ​ ​ ​ ​ ​ ​ The decrease in gross profit was largely due to the decline in revenue, partially offset by reduction in manufacturing expenses.
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Backlog at the end of 2023 returned to a normalized level and decreased from the end of 2022 primarily due to shorter lead times of our products, allowing some of our customers to substantially reduce placing orders for products that we have resumed stocking in customer-specific hubs or for targeted delivery beyond six months.
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Gross margin declined mainly due to the impact of lower volume, largely offset by lower manufacturing, material, and other costs of 170 basis points and favorable mix of 150 basis points.
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Backlog at any particular date is not necessarily indicative of actual revenue which may be generated for any succeeding period.
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The increase is related to higher stock-based compensation expense as well as higher program and materials costs compared to the prior year. This was partially offset by lower variable compensation. Selling, General and Administrative Selling, general and administrative expenses increased $3.5 million to $224.5 million, as compared to $221.0 million in the prior year.
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In addition, there is uncertainty of the timing of when backlog can convert into revenue, and our customers can cancel, change, or delay product purchase commitments with little or no notice. ​ Revenue by Market ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Semiconductor Equipment ​ $ 743,794 ​ $ 930,809 ​ $ (187,015) (20.1) % ​ The decrease in Semiconductor Equipment revenue was primarily due to a cyclical downturn in the semiconductor industry and the U.S. export controls restricting shipments of equipment to Chinese semiconductor customers.
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The increase is primarily driven by higher stock-based compensation expense, partially offset by actions taken to control costs, including headcount reduction and lower variable compensation. Amortization of Intangible Assets Amortization expense decreased $2.2 million to $26.0 million, as compared to $28.3 million in the prior year.
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The revenue decline was partially mitigated by strong service revenues and growth in certain applications, such as high voltage power supplies. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Industrial and Medical ​ $ 474,449 ​ $ 426,763 ​ $ 47,686 11.2 % ​ The increase in Industrial and Medical revenue was primarily due to improved materials availability, relatively stable demand for our portfolio of products in the first half of the year, and incremental revenues on new design wins. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Data Center Computing ​ $ 249,874 ​ $ 327,466 ​ $ (77,592) (23.7) % ​ The decrease in Data Center Computing revenue was due to the cyclical downturn in the data center server and storage market, partially offset by increased demand for advanced computing applications by some customers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Telecom and Networking ​ $ 187,693 ​ $ 160,384 ​ $ 27,309 17.0 % ​ The increase in Telecom and Networking revenue was due to substantially improved material availability, allowing us to largely fulfill outstanding demand from the prior year. ​ ​ 33 Table of Contents Gross Profit and Gross Margin ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change 2023 v. 2022 ​ ​ ​ 2023 2022 Dollar Percent ​ ​ ​ (in thousands) Gross profit ​ $ 592,398 ​ $ 675,506 ​ $ (83,108) ​ (12.3) % Gross margin ​ ​ 35.8 % ​ 36.6 % ​ ​ ​ ​ ​ ​ The decrease in gross profit as a percentage of revenue was largely due to the decline in revenue, unfavorable product mix, and higher operating costs based on investments made in 2023, partially offset by lower premiums and related recoveries for securing critical parts.
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Certain intangible assets reached the end of their estimated useful life in the current year. This was partially offset by amortization of intangible assets acquired in the Airity acquisition. For additional information, see Note 2. Acquisition and Note 11.
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Gross margin percentage declined year over year primarily due to unfavorable product mix. This decline was partially offset by lower premiums paid to brokers for scarce parts. Premium recoveries generate revenue but no gross profit. As a result, they are dilutive to our gross margin.
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Intangible Assets and Goodwill in Part II, Item 8 “Financial Statements and Supplementary Data.” ​ 34 Table of Contents Restructuring, Asset Impairments and Other Charges In the third quarter of 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility.
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Premium recoveries impacted gross margins by approximately 35 basis points in the current year, compared to approximately 140 basis points in the prior period. Additionally, when including higher material costs not recovered, gross margin was impacted by approximately 70 basis points in the current year, compared to approximately 200 basis points in the prior period.
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In connection with the 2024 Plan, we recorded a $29.6 million charge primarily associated with expected employment-related charges and facility exit costs. 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeLong-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” For more information on the interest rate swap that fixes the interest rate for a portion of our Term Loan Facility, see Note 7.
Biggest changeHowever, increases in interest rates could impact the decision to borrow under our Credit Agreement and our ability to refinance existing maturities or acquire additional debt on favorable terms. For more information see Note 18. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.” ​ 42 Table of Contents
Although these translation changes have no immediate cash impact, the translation changes may impact future borrowing capacity, and overall value of our net assets. 42 Table of Contents The functional currencies of our worldwide facilities primarily include the United States Dollar, Euro, South Korean Won, New Taiwan Dollar, Japanese Yen, Pound Sterling, and Chinese Yuan.
Although these translation changes have no immediate cash impact, the translation changes may impact future borrowing capacity, and overall value of our net assets. 41 Table of Contents The functional currencies of our worldwide facilities primarily include the United States Dollar, Euro, South Korean Won, New Taiwan Dollar, Japanese Yen, Pound Sterling, and Chinese Yuan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management In the normal course of business, we have exposures to interest rate risk from our investments and Credit Facility. We also have exposure to foreign exchange rate risk related to our foreign operations and foreign currency transactions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management In the normal course of business, we have exposures to interest rate risk from our investments and Credit Agreement. We also have exposure to foreign exchange rate risk related to our foreign operations and foreign currency transactions.
We are subject to risks associated with revenue and purchasing activities and costs to operate that are denominated in currencies other than our functional currencies such as the Singapore Dollar, Malaysian Ringgit, Mexican Peso and Philippine Peso. The impact of a change in one or more of these particular exchange rates would be immaterial.
We are subject to risks associated with revenue and purchasing activities and costs to operate that are denominated in currencies other than our functional currencies, such as the Singapore Dollar, Malaysian Ringgit, Mexican Peso, Philippine Peso, and Thai Baht. Historically, the impact of changes to these particular exchange rates has not been material to our operating results.
A change in interest rates does not have a material impact upon our future earnings and cash flow for fixed rate debt. However, increases in interest rates could impact our ability to refinance existing maturities and acquire additional debt on favorable terms. ​ 43 Table of Contents
Interest Rate Risk At the present time, a change in interest rates does not have an impact upon our future earnings and cash flow because our only outstanding debt is the Convertible Notes, which carry a fixed 2.5% interest rate.
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Interest Rate Risk Our interest rate risk exposure relates primarily on our variable rate Term Loan Facility. As of December 31, 2023 we have interest rate swap agreements in effect that fix the interest rate for $220.7 million at 1.17% of our Term Loan Facility, while $134.3 million of the Term Loan Facility remains floating at 6.21%.
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The Term Loan Facility and Revolving Credit Facility 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. The interest rate swap contracts expire on September 10, 2024.
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After that date, the entire balance of our Term Loan Facility will be subject to a variable interest rate. In addition, should we have future borrowings under our Revolving Facility, those borrowings would be subject to a variable rate. For more information see Note 18.
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Derivative Financial Instruments in Part II, Item 8 “Financial Statements and Supplementary Data.” As of December 31, 2023 with respect to the borrowed portion of our Credit Facility that is subject to a variable interest rate, a hypothetical increase of 100 basis points (1%) in interest rates would have an insignificant impact on our interest expense.

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