# Advanced Energy (AEIS) — Financial Analysis

**Exchange:**   
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-10  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/AEIS/thesis · /stocks/AEIS/memo

## Financial Snapshot

---
source: coverage-next-full
step: 04
ticker: AEIS
company: Advanced Energy Industries, Inc.
date: 2026-06-08
---

### Step 04 — Financial Quality & Adversarial Sweep: AEIS

#### S1 Financial Statement Quality Assessment

##### Quality Flags and Adjustments

**1. Non-GAAP vs. GAAP divergence (significant)**
AEIS's FY2025 GAAP diluted EPS was $3.84, while non-GAAP EPS was approximately $7.30 (estimated from Q1–Q4 non-GAAP quarters). This ~$3.46/share gap ($130M+) represents:
- SBC ($55.7M in FY2025) — large relative to net income
- Intangible amortization from acquisitions ($22.1M)
- Restructuring charges ($12.5M)
- Acquisition-related expenses and other

[Fact] SBC as % of revenue: 3.1% (FY2025), up from ~2.7% (FY2024). Growing in absolute terms. [S1: 10-K FY2025]

[Judgment] The non-GAAP adjustments are relatively standard for a company that has completed multiple acquisitions. Intangible amortization and one-time restructuring are legitimately non-recurring. SBC is real dilution cost — we treat this as real expense in analytical work.

**2. Customer concentration creates revenue visibility risk**
Three customers = ~54% of revenue. Revenue recognition is primarily on shipment/delivery. No backlog disclosed. Orders placed on purchase order basis, cancellable without penalty. This means forward revenue is less visible than subscription-model businesses. [S1]

**3. Effective tax rate variability**
- FY2025 effective tax rate: ~11.5% (tax provision $19.4M on $168.7M pre-tax income)
- FY2024: negative tax rate (tax benefit vs. low pre-tax income)
- Low effective rate in FY2025 likely driven by R&D tax credits, geographic tax mix (Asia manufacturing), and equity compensation deductions
- Risk: Higher normalized effective tax rate (20–25%) would reduce EPS by ~$1.00–2.00/share vs. management guidance

**4. CapEx step-up requires monitoring**
FY2025 CapEx of $107.4M vs. $56.8M in FY2024 — nearly 2x increase. This reflects Thailand factory construction (opening Q4 2026). FCF yield compresses materially during this period. Post-construction, CapEx should normalize. [S2]

**5. Convertible notes ($575M, 2.50%, due Sep 2028)**
Convertible at $116.25/share (roughly; conversion premium vs. issuance price). At current price of $307.16, these are deeply in-the-money. Conversion would be dilutive by ~4.9M shares (~13% dilution to current share count). AEIS has a call spread overlay (bought calls, sold warrants) that partially hedges dilution up to certain price levels. Full dilution EPS impact needs monitoring as the 2028 maturity approaches. [S1]

---

#### S2 Earnings Quality Metrics

| Metric | FY2023 | FY2024 | FY2025 | Assessment |
|--------|--------|--------|--------|------------|
| Operating CF / Net Income | 1.63x | 2.32x | 1.56x | Good — OCF consistently above net income |
| FCF / Net Income | 1.15x | 1.31x | 0.84x | FY2025 compressed by CapEx build |
| Accruals ratio | Low | Low | Low | Clean |
| Gross margin stability | 35.7–36.6% | 35.7% | 37.7% | Stable with expansion trend |
| Revenue recognition method | Point-in-time (product) + ratable (service) | Clean | Clean | Standard; no aggressive recognition |

[S2: StockAnalysis + 10-K]

**Earnings Quality: GOOD.** Operating cash flow consistently exceeds net income (1.5x–2.3x in 3 years), indicating real earnings. Revenue recognition is straightforward. No red flags on receivables build or inventory pileup.

---

#### S3 Balance Sheet Quality

**Goodwill and intangibles:**
- Total assets $2,546M; goodwill and intangibles are significant given Artesyn ($400M, 2019), SL Power ($68M, 2022), and Airity (2024) acquisitions.
- Goodwill impairment risk: AEIS passed impairment tests but Industrial/Medical segment underperformance bears watching.

**Working capital:**
- Receivables and inventory levels not explicitly available in this dataset; industrial companies typically run 60–90 days receivable; AEIS's large OEM customers may have extended payment terms.

**Pension obligations:**
- AEIS maintains defined benefit pension plans (flagged in 10-K risk factors). Unfunded status and interest rate sensitivity are non-trivial risks.

**Net cash position is genuine:** $791.2M cash vs. $679M debt = ~$112M net cash at FY2025 year-end. This is after a significant debt reduction — $575M converts + smaller term loan replaced $1B+ gross debt of FY2023. [S2]

---

#### S4 Adversarial Research Sweep

*This section reviews short seller reports, regulatory investigations, legal proceedings, and negative press to surface tail risks not visible in financial statements. Note: earnings transcripts not available (coverage-next-full path). Information sourced from filings, press releases, and public news.*

##### Short Seller / Bear Reports
**No active well-known short seller reports found on AEIS.** Stock has short interest but no prominent thesis published in public research databases accessible via search. [S3: web search]

##### Legal Proceedings (from 10-K FY2025)
**Material litigation not highlighted.** AEIS includes standard "various legal proceedings in the ordinary course of business" language without indicating material pending litigation. No class action securities fraud suits, environmental liability, or product liability claims of note disclosed in FY2025 10-K. [S1]

##### Regulatory / Export Control Risk
- **U.S. export controls on semiconductor equipment to China** are a risk — AEIS's semiconductor products may be subject to BIS licensing requirements. China revenue was <6% of FY2024; AEIS closed its Zhongshan, China manufacturing facility in 2025, reducing operational exposure but not eliminating customer exposure.
- **Tariff impact:** Mentioned in 10-K as potentially material in future periods (was not material in FY2025). Supply chain reconfiguration to Thailand partially addresses this.

##### Customer Dependence Concentration Risk
- Applied Materials (~23%) and Lam Research (~12%) are both subject to their own cyclical pressures and WFE cycle timing. If either reduces capex or inventory significantly, AEIS faces near-term revenue headwind.
- One unnamed hyperscaler (~19%) represents a significant and concentrated data center revenue relationship with limited visibility disclosed. Customer not named; concentration in Japan revenue spike suggests a specific customer relationship.

##### Management / Governance Flags
- CEO pay ratio of 840:1 is elevated but not uncommon for global manufacturing companies.
- Incentive plan expansion in May 2026 received only 76.7% shareholder approval — below typical 90%+ threshold; indicates some institutional shareholder pushback on dilution.
- Authorized share count doubled (70M→140M) at May 2026 meeting — provides M&A flexibility but creates dilution optionality that shareholders may not welcome.
- All recent insider transactions (CEO, CFO, directors) have been 10b5-1 plan sales following the 190% stock run. Net sellers post large appreciation — ordinary diversification, not a red flag.

##### Manufacturing Transition Risk
- China factory closure + Thailand factory (Q4 2026 opening) creates a 12–18 month window of manufacturing risk (customer disruption, quality issues, cost overruns). Not unique to AEIS but a real near-term operational risk. [S1]

##### Historical Investigations
**No SEC enforcement actions, material restatements, or accounting fraud allegations found in public records.** [S3: web search]

---

#### S5 Financial Quality Summary

| Dimension | Rating | Key Note |
|-----------|--------|----------|
| Earnings quality (cash conversion) | A | OCF > net income consistently |
| Revenue quality (recognition) | A | Standard hardware recognition, no aggressive policies |
| Balance sheet (net cash, leverage) | A- | Net cash positive; convertible note 2028 maturity is a watch |
| Governance | B+ | Say-on-pay 98.7% but incentive plan 76.7%; elevated CEO pay |
| Litigation / regulatory | B+ | No material suits; export control risk real but managed |
| Accounting complexity | B | Non-GAAP/GAAP $3.46 EPS gap; SBC dilution real |

**Overall Financial Quality: GOOD — B+**

---

#### Source Index

| ID | Source | Date |
|----|--------|------|
| S1 | AEIS 10-K FY2025 (legal proceedings, risk factors, debt structure) | 2026-06-08 |
| S2 | StockAnalysis.com financials + XBRL data | 2026-06-08 |
| S3 | Web search: AEIS short reports, legal proceedings, SEC enforcement | 2026-06-08 |
| S4 | AEIS proxy DEF 14A (May 2026) | 2026-06-08 |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/AEIS/fundamental

## Navigation

- Overview: /stocks/AEIS
- Financials (this page): /stocks/AEIS/financials
- Thesis: /stocks/AEIS/thesis
- Investment Memo: /stocks/AEIS/memo
- Coverage universe: /stocks