ADVANCED ENERGY INDUSTRIES INC (AEIS) Business

ITEM 1.            BUSINESS

Company Overview

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell and service precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

We are organized on a global, functional basis and operate as a single segment of power electronics conversion products. Within this segment, our products are sold in the Semiconductor Equipment, Data Center Computing, Industrial and Medical, and Telecom and Networking markets.

We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995. Our executive offices are located at 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202, and our telephone number is 970-407-6555.

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Recent Events

Credit Agreement

On May 8, 2025, we terminated our prior credit agreement, dated as of September 10, 2019 (and subsequently amended) and entered into a new credit agreement (the “Credit Agreement”) consisting of a senior unsecured term loan facility (“Term Loan Facility”) and a senior unsecured revolving facility (“Revolving Facility”) both maturing on May 8, 2030. The maturity date may be accelerated to the date that is 91 days prior to the maturity date of our 2.50% convertible senior notes due September 15, 2028 (the “Convertible Notes”), if the sum of our consolidated cash and cash equivalents plus the undrawn balance on the Revolving Facility is less than 120% of the redemption amount of the Convertible Notes. The financing terms of the new Credit Agreement are substantially the same as the terms of the prior credit agreement. As part of the new credit facility, HSBC Bank USA, N.A. (“HSBC”) was appointed as the administrative agent for the lender group. See Note 7. Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.”

Restructuring Activity

We continue to execute our previously announced manufacturing consolidation plan. In 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility (the “2024 Plan”). Manufacturing operations in Zhongshan ceased during the second quarter of 2025. Final site closure activities are in progress and are expected to conclude in 2026. Further, we expect to continue to consolidate several of our smaller manufacturing sites through 2026.

In 2025, further actions were approved related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation. See Note 11. Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.”

Products and Services

Our precision power products and solutions are designed to enable process technologies, improve productivity, lower the cost of ownership, and/or provide critical power capabilities for our customers. These products are designed to meet our customers’ demanding requirements in efficiency, flexibility, performance, and reliability. 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. Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, data center computing, industrial production, medical and life science equipment, aerospace and defense, networking, and telecommunications. We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets.

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

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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”), distributors, and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, low noise emission, and lower power consumption as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Semiconductor Equipment Market

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

Our portfolio of power conversion and related products sold into this market includes plasma power, high-voltage power, system power, and adjacent sensing solutions. Our plasma power solutions are used to create plasma-based etch and deposition processes. Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

Our strategy is to outgrow the wafer fabrication equipment (“WFE”) market by developing plasma power products for advanced processing applications and through market share gains in both plasma power and adjacent semiconductor applications. We believe the plasma power market will grow faster than WFE due to increasing number of plasma process steps and growing demand for more complex power content. In addition, we are targeting to win customer adoptions of our new plasma power products to strengthen our positions in core applications with leading market share, such as conductor etch and deposition, and to grow our market position in targeted applications with lower market share, such as dielectric etch. Finally, we are targeting to leverage our broad portfolio of system power, thermal and sensing, remote plasma source, and high voltage products to gain share in adjacent semiconductor applications.

Data Center Computing Market

The Data Center Computing market is being driven by the rapid growth of AI and related investments. The accelerated power rating of next-generation AI processors and increased density of AI processors in each IT rack have significantly increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

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

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. Due to higher power requirements for AI-based server racks, the demand for high-end AI power solutions has been growing faster than the traditional server power market. We believe our capabilities in advancing new power solutions for next-generation AI-based server racks position us to participate in the continued growth in this market.

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 supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power. In addition, our sensing, control, and instrumentation products

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complement our power solutions. Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, life science, test and measurement equipment, robotics, industrial production, defense, aerospace, and large-scale lighting 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. 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.

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 AI-driven increased bandwidth.

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

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.

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.

During the year ended December 31, 2025, three customers accounted for 23%, 19%, and 12% of our total revenue, respectively. During the year ended December 31, 2024, two customers accounted for 26% and 11% of our total revenue, respectively. No other customers accounted for 10% or more of total revenues. 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. 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.

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

We maintain customer service centers globally, as 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. See Part I, Item 1A “Risk Factors” for a discussion of certain risks related to our sales and marketing operations.

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Manufacturing

We manufacture our products primarily in our large factories in the Philippines, Malaysia, and Mexico. We also perform limited specialty manufacturing for some of our products in the U.S., the United Kingdom, and Europe. During 2025, we continued to execute our previously announced manufacturing consolidation plan, which included the shutdown of our Zhongshan, China manufacturing site. Manufacturing operations in Zhongshan ceased during the second quarter of 2025. Final site closure activities are in progress and expected to conclude in 2026. We expanded capacity in our Philippines and Mexicali factories, and we continued progress on a new factory in Thailand. We expect to continue to consolidate several of our smaller factory sites during 2026.

Our manufacturing requires a wide variety of mechanical and electrical components, which are often made to our specifications. We use numerous companies, including contract manufacturers, to supply parts for the manufacture and support of our products. 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 address supply challenges and reduce the associated risks to production by endeavoring to select and qualify alternate suppliers for key parts, maintain appropriate inventories of critical components, and competitively source parts through electronic bidding tools to find the lowest possible total cost.

See Part I, Item 1A, “Risk Factors” for a discussion of certain risks related to our manufacturing operations.

Intellectual Property

Protection of our technology assets through intellectual property rights is important for our competitive position. We believe that continued research and development of technologically advanced solutions and 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 technology, and to the enhancement of existing products, and we expect these investments to continue. 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.

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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. 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. 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:

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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. We believe that continued research and development of technologically advanced solutions and 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 technology, and to the enhancement of existing products, and we expect these investments to continue. For the years ended December 31, 2025, 2024, and 2023 our research and development expenses were $232.4 million, $211.8 million, and $202.4 million, respectively and have ranged from 12.2% to 14.3% of our total revenue.

Human Capital

Our people are our strength. We have a globally diverse workforce with approximately 13,000 employees. Our employees are located in the Asia-Pacific region, Europe, and North America, and are comprised of approximately 53% male and 47% 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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Culture

As an industry leading technology company, we work together collaboratively to solve complex, high-value problems and achieve common goals. Our global talent, winning technology and operational excellence are our competitive advantage. 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 recognize that an inclusive work environment, diverse perspectives and collaboration enable us to drive innovation and future growth for our global customers, and we remain committed to ensuring a work environment where employees can grow and share in the Company’s success.

Health and Safety

We are committed to providing a safe work environment for our employees and have a global team that is responsible for health and safety related activities including hazard and risk identification. We provide regular health and safety trainings both on-site and through our virtual tool that assigns training based on job profiles and site-specific requirements. We have established policies and practices to ensure that working conditions are safe, workers are treated with respect and dignity, and manufacturing processes are environmentally responsible. We also reference the Responsible Business Alliance Code of Conduct at selected manufacturing sites as a guide to promote labor, health, safety, environmental, and ethics best practices.

Employee Engagement

We are committed to providing a collaborative and productive work environment for our employees. In 2025, we conducted our 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 and also communicated the results of the employee survey with our employees, leaders, executive team, and Board of Directors. In 2024, we launched Powering Technology Together, our employee value proposition, to highlight our commitment to providing a best-in-class employee experience for our people across the globe and to differentiate ourselves as an employer of choice. We believe our employee value proposition will help us build our employer brand and attract and retain the best talent.

Total Rewards

We provide market-competitive compensation and benefits to our employees to attract, motivate and retain a highly talented and engaged workforce who are committed to the Company’s core values and objectives. Our compensation programs are focused on equitable and fair pay practices that reward for high performance, continuous improvement, and drive increased shareholder value.

Learning and Development

We provide learning and development opportunities to employees at all levels to support growth within their current role and help prepare them for potential future roles. Our internal learning solutions are provided online and in person, with training on topics such as technical skills, supervisor effectiveness, and leadership development. Where training is not available internally, we support external training for skill development in current or future roles. We have internship and graduate development programs, as well as annual talent reviews and succession planning to develop a talent pipeline across various levels of the Company.

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Community Involvement

Advanced Energy strives to make a positive impact in its communities through volunteerism, charitable giving and partnerships with local communities. We have an active Community Investment Steering Committee and offer employees paid time off to participate in Company organized initiatives and volunteer with non-profit organizations of their choice. Our Child of Employee Scholarship Program, available to children of Advanced Energy employees, celebrates education accomplishments and provides financial support for them to pursue their career and learning goals. We also offer an annual Advanced Energy STEM (Science, Technology, Engineering, and Mathematics) Scholarship in the U.S. to support and develop emerging talent in STEM.

Environmental Matters

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. We make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after filing such reports with, or furnishing them to, the Securities and Exchange Commission (“SEC”). Such reports are also available at www.sec.gov. Information contained on our website is not incorporated by reference in, or otherwise part of, this annual report on Form 10-K nor any of our other filings with the SEC.

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