Good day ladies and gentlemen and welcome to the Advanced Energy Industries, Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time (Operator Instructions). As a reminder, this conference is being recorded. I will now turn the call over to Annie Leschin, Investor Relations. Please go ahead.

Thank you, operator and good morning everyone. Thank you for joining us today for our second quarter 2014 earnings conference call. With me on today's call are Garry Rogerson, Chief Executive Officer; Danny Herron, Executive Vice President and CFO; and Yuval Wasserman, President of Precision Power Products. By now you should have received a copy of the earnings release that was issued yesterday evening. For a copy of the release, please visit our website at advancedenergy.com or call us directly at 970-407-4670. During the third quarter Advanced Energy will be participating at the Jefferies Industrial Conference on August 11 in New York; at the Canaccord Genuity 34th Annual Growth Conference, August 14 in Boston; and at the Credit Suisse Small and Mid Cap Conference in New York in September. As other events come up we will make additional announcements. Now I’d like to remind everyone that except for historical financial information contained herein, the matters discussed on this call contains certain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Statements that include the terms believe, expect, plans, objectives, estimates, anticipates, intends, targets, goals or the like should be viewed as forward-looking and uncertain. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the industries we serve; the timing of orders received from our customers, and unanticipated changes in our estimates, reserves or allowances, as well as other factors listed in our press release. These and other risks are described in Forms 10-Q, 10-K and other forms filed with the SEC. In addition, we assume no obligation to update the information that we provided you during this call, including our guidance provided today and in our press release. Guidance will not be updated after today's call until our next scheduled quarterly financial release. I’d now like to turn the call over to Garry Rogerson, CEO of Advanced Energy. Garry.

Good morning everyone and thank you for joining us. We had a sound second quarter, growing revenue sequentially, driving strong profitability and generating significant amounts of cash. In the midst of a downturn in one of our major application areas, we saw the power of our model to reach greater peaks and maintain high levels of profitability during troughs. The quarter, the diversification of our revenue enabled us to largely negate the effects of the semiconductors cyclicality. Our precision power applications remain at near record levels, up 14% over last year. Shipments of our new 1 megawatt inverter product ramped in the quarter, causing inverter revenues to rebound sequentially. All of this led to solid revenues of $146 million, non-GAAP EPS of $0.38 and GAAP EPS of $0.26 for the quarter. With the completion of our fourth acquisition during the quarter and today’s purchase of UltraVolt, we continue to put our cash to work in adjacent applications, increasing our geographic presence and accelerating revenues. We generated over $30 million of cash in the quarter and we deployed it through another acquisition, the payoff of a credit line and the completion of a 25 million share repurchase. My focus continues to be on market expansion, cash generation and earnings per share. We plan to expand into new applications, accelerate revenue and outperform industry cycles, while delivering excess cash to our shareholders. We have once again proven the power of our strategy of centralizing manufacturing, decentralizing R&D and building and investing in our global distribution. This new structure will allow us to adjust our cost quickly. With the exception of semiconductors, virtually all applications increased sequentially this quarter and our recent additions to industry wide applications, as well as our ongoing diversification of existing applications led to very high industrial revenues. The…

Thank you, Garry. Turning to slide 10, revenue from our precision power product lines declined slightly this quarter, down just 1% from the last quarter to $82 million. While semiconductor applications pulled back from their extremely high levels late last year, we saw a growth across a number of applications, with particular strengths in our industrial segment, which now includes significant contributions from our recently acquired power control modules and high voltage power product lines. The high voltage power products have added new applications in semiconductor, in areas that we have never served before, such as mass spectrometry, X-ray and many others. The strong growth of these revenue streams largely offset the decline in the semiconductor segment, as we delivered in our strategy to diversify our product lines and expand our addressable markets. Clearly, our strategy is driving our success through cyclical peaks and troughs. Our acquisition of UltraVolt announced last night gives us a significant presence in the high voltage market, adding a number of complementary power supplies and modules to our growing portfolio. Serving close to 100 industries, UltraVolt brings us new applications in medical equipment, analytical instrumentations, industrial applications, avionics and defense, while also expanding our presence in certain semiconductor and industrial applications. The combination with our HiTek power offerings allows us to accelerate our potential high voltage business further, by leveraging the core technology and product architectures of both entities, creating products that are more configurable and flexible, allowing us to customize and go to market very quickly with new solutions. With the global distribution channels and low cost operations, we believe we can drive synergies and accelerate our penetration into the global high voltage market. Let me now turn to our served applications and highlights from these areas, beginning with slide 11. Sales to semiconductor…

Thank you, Yuval. In today’s call I will referred to both GAAP and non-GAAP results. As a reminder, non- GAAP measures exclude the impact of acquisition related costs, stock based compensation, amortization of intangibles, non-recurring tax items and executive severance. A reconciliation of non-GAAP income from operations and per-share earnings is provided in the press release table. I will be referring to the earnings slides posted on our website this morning. Turning to slide 14; let me begin with the highlights of the second quarter. Total revenues were $146.3 million, representing a 4.7% increase versus the same quarter last year and a 3.8% increase from last quarter at $140.9 million. Non-GAAP adjusted net income increased 12% versus the same quarter last year reaching $15.5 million, while decreasing 14% from $18.1 million last quarter. We ended the quarter with $130 million in cash and investments, an increase of $7.5 million. Turning to our revenue performance on slide 15, sales to data storage and industrial applications rose 51% to $16.6 million from $11 million last quarter, reflecting our expansion under new applications, including our two recent acquisitions. Flat panel display applications increased 18% sequentially to $2.6 million, rebounding all of their loads. Inverter sales increased 11% sequentially to $64.5 million in the second quarter as we shift our 1-megawatt products in volume and continue to see strong demand for our 3-phased string products. Sales to renewable applications were roughly flat with last quarter, due primarily to ongoing purchases in China. Sales to semiconductor applications decreased 12.5% sequentially to $49.3 million, in line with the expected market pause. Service sales were also roughly flat, down just 1% to $11.7 million in the quarter. Turning to slide 16, non-GAAP operating expenses increased to $35.7 million from $31.8 million last quarter, as we included at…

Thank you. (Operator Instructions). Our first question comes from Joe Maxa with Dougherty & Company. Your line is open. Joe Maxa - Dougherty & Company: Good morning.

Hi, Joe. Joe Maxa - Dougherty & Company : Hi, a question of the solar side. You are talking about some softness here in the back half related to the import duties. What would be your take on when you may see that division to breakeven. Previously I think you are talking fourth quarter?

Hi Joe, thanks for the question. Let’s talk about the solar business as a couple of product lines, which is the utility product lines and the more commercial products lines or you can call them the central inverters versus the string inverters. The center inverters, which is the 1 megawatt for us has been pushed back by our customers due to the government issues that we’ve talked about before. We haven’t seen any lost business yet or should I say we haven’t seen any significant loss business because of the government issues. What we’ve seen is push outs. So it looks to us, although it’s going to be Q1, Q2, Q3 of next year, but it’s a little bit of a bet when it will be. Remember there is a cliff of 2017, so at some point before then it’s going to be rough to do the installations, and that’s all U.S. I just comment then on U.S. The 3-phased string is another kettle of fish entirely. The 3-phased string is in the commercial area and nibbling into the utility area and that is growing rapidly. The enquiries for that product are up enormously in the U.S. and we are having a difficult time actually gearing up to that product line. But it’s the switch from central inverters in commercial to 3-phased string was very rapid. Now the good news for us here is that we have got the two product lines that have got some good hope for the future; 3-phased string which has got a lot of legs in it, especially globally, and the central inverters for these large projects thus hung-up due to regulation issues there. Does that help you? Joe Maxa - Dougherty & Company : Yes, that is helpful. Also I’m wondering regarding pricing pressure related to the same issues, right. I mean if there’s more competition volume for…?

Yes, it’s absolutely pricing pressure because of the push-outs, people are looking for business and again, as I always said to you before, I would rather lose $6 million on 50 than $12 million on a 100 and we’ll be there ready to take the business when it comes. After saying that, maybe I could just talk about the structure of the organization. Over the last six months we’ve been talking to you about going to a more product line focused, as opposed to business unit focus, and that we’ve now totally accomplished. We talked about manufacturing being collapsed together and a variety of other things. We’ve now got a much more functional organization, which will allow us to much more easily move R&D from inverters to semi-auto, wherever we wanted to do it, or from semi to inverters. In fact it allows us to transfer our information much more easily and it allows us to get that final bit of cost out that we wanted to get out of the company. So we’ve got a new structure as well, which will help us with that cost issue that you talk about. Joe Maxa - Dougherty & Company : Great, and I’ll just ask one on the precession power segment. You are expecting industrials to decline 3Q, just give maybe a little more color if that was more large project specific. Why you’re expecting it to down tick in 3Q and I’m also wondering what’s the contribution that you may expect from UltraVolt?

I’m going to pass that to Yuval, but before I pass it to Yuval, I just want to say, if you look at that since it went back to the inverter product lines out of the company, just the Shenzhen bit, it’s incredible how well we’ve done over this cycle that we’ve been, and if you’ve noticed, we’ve been pretty flat. It’s been a remarkable performance considering how this semi goes up and down and we’ve done that through our industrial focus. I’ll pass you on to Yuval for some more detail.

Sure. On the industrial market Q2 was exceptionally high because of two main areas of investment by our customers. We had a significant growth in optical coating in Japan. In addition our hard-coating business in Europe that made Q2 very, very high in comparison to Q1. We’re coming off of a high quarter in Q2 and in Q3 what we see is a slight decline, because of the decline in industrial investment in China, as China continued to struggle with the emerging debt prices and some decline in general industrial investments. It’s not going to be a huge decline. It’s going to be what I call as seasonality or a market driven decline. Our industrial market continues to be a core building block in our strategy and the recent acquisition of UltraVolt is just part of that trust what we have in expanding our total available market, by adding more products into our portfolio.

It’s a good point Yuval. Maybe you should comment on the high voltage strategy and how we’re building truly another plank to the company in that strategy.

Sure. So the high voltage market Joe, it is very fragmented. It’s a very large market. If you look at the total market in high voltage power supplies, it could be a $1.5 billion total available market, including components and modules and systems and rack mount devices covering thousands of applications in hundreds of markets. The high voltage market is a market we have never served. We are expanding right now in this market as further strategy to build on a much broader served available market. The first building block for this strategy was the acquisition of HiTek Power. HiTek Power brings us systems and custom high voltage power supplies that go to many industries from semiconductor new applications we never had before into other markets like X-ray, mass spectrometry and industrial. The acquisition of UltraVolt brings us a totally different and very complementary set of products, mainly high voltage modules and some systems that are taking us to the medical equipment, avionics, defense, as well as some unique applications in semi, which we have never served before. These two entities or these two product lines do not cannibalize each other. They are fully complementary. Not only that, we belief that we can leverage the architecture of these products and come up with a new family of products that will be extremely modulus and will allows us to go to market extremely fast with custom made high voltage power supplies. And this industry is interesting. The high voltage power supplies, a lot of the solutions are custom made and the ability to very quickly, derivative and configure product with specific applications in a very short time is a competitive advantage. Our strategy has been and is to remain closer to customer, be distributed and develop solutions very quickly closer the customers and that architecture will allow us to do that in the high voltage as well.

I think one of the most exiting areas for me is mass spectrometry. I mean there you’ve got a $40 billion market place that we can now play in and there are five or six players in that marketplace, mass spec companies, and that’s ideal for us from a distribution point of view. We know how to deal with these large accounts. So that with this technology I think is a very strong play for us in the future, and I can imagine that as we push out further, mass spec will become a bigger part of this company. In fact, if I remember rightly, we are already now in two of the largest mass spec companies in the world. Joe Maxa - Dougherty & Company : That’s great. And sorry for one more, but can you give us an idea of what the revenue is from Ultratech, so we have a ballpark number to look at.

Yes, I won’t say a number, because we haven’t set one, but it’s not huge. I think the existing thing for us here is the future of that product line and the combination with HiTek, but we’ve also said it will be accretive by the end of the year. As I always say, with these little acquisitions there are few bumps on the road as we go forward generally in the first to six to nine month, but we expect to be accretive within 12 months. Joe Maxa - Dougherty & Company : Thank you.

Our next question comes from Pavel Molchanov with Raymond James. Your line is open.

Thanks for taking my question. You referenced the changes in the solar industry that are kind of shifting away from utility scale and I know that historically you’ve said you do not want to be in the residential market, but obviously there’s quite a bit of opportunities there. Are you reevaluating or rethinking that perhaps?

Well, firstly we are always looking at our opportunities and we always look at them. I personally don’t think that’s an opportunity for us now. Our focus is really the utility, which maybe I was too harsh on the utility. There is a drop off on that business at the present time, but those sites have not been cancelled yet, but they are getting squashed up on that 2017 date. I do believe that the 3-phase string is a product line that will do extremely well over the next two years, both in commercial, utility and it will go into the higher end of residential, so it’s a very flexible product line for us in the future. But hey, I don’t want to say never to anything. It is possible, but again, I want to say a new structure that we’ve at last got to, which we’ll be moving towards a product line structure that will allow us to move our internal resources wherever you want to and invest wherever we want to, much quicker than we have before.

Okay. let me follow up on the solar bit. The headwinds in the U.S. market because of the trade war with China, is that something that you expect to essentially be perpetual now or is it only that at the beginning there is uncertainty and therefore these headwinds. So the question is does it subside at some point.

When you are on a conference call with our President you should ask him that question, because I really don’t know what the government is going to do. But we do know that there are lot of sites funded up to 2017 and we have the correct product for a lot of those sites. So that’s what we are focused on at the present time. We also do know that the 3-phased string is a product line that’s got a hell of a future with it and it fits our model beautifully. I mean if you look at the 3-phased string product, it looks like any of our other boxes. Shenzhen can manufacture it easily, we can distribute it easily, it’s a really ideal fit to us. So I am very comfortable with that being one of our product lines in the future. It may not the dominant product line, but it will certainly be a product line of ours.

Okay, fair enough. I appreciate it.

Thank you. Good questions.

Our next question comes from Edwin Mok with Needham & Company. Your line is open. Edwin Mok - Needham & Company: Hi, Edwin. Edwin Mok - Needham & Company: Hi, thanks for taking my call. So first question I have is, I just want to make sure I got directionally correct. So it sounds like industrial will be down a little bit, semiconductors are already down as well because of the market. How about flat panel inverter and renewable, how do you think about directionally how those business will trend in the third quarter, that is baked into your guidance?

Yuval, do you want to comment?

Can you repeat the question Edwin? Edwin Mok - Needham & Company: Yes, so all of the five markets that you guys laid out right or six of them that you laid out including service, right. I think you said industrial will be down a little bit because of this China digestion just mentioned and I suspect semi is down flat, our service is slightly kind of stable. How about the other three flat panel, inverter and renewable, how do you think at least directionally how do think business will trend in the third quarter. We think that semi will be flat do down in the quarter. We think that the inverters will be down in the quarter and the others will obviously pick up where they are down and to get to the number we’ve suggested to you. Is that enough for you? Edwin Mok - Needham & Company: I think just at least directionally we just want to get a sense of that. So okay, great, that’s helpful. And then I guess to stick with the inverter, first, regarding your breakeven with the cost reduction effort that you mentioned today right, how do you kind of think about breakeven revenue now for the inverter business?

Yes, that’s a wonderful question to us. There is pricing pressure as was mentioned earlier, because of this delay in projects, so people are searching out projects. There’s also an issue that our inventory is building up because of this delay. We were believing we are going to ship at lease twice as much as we are in the central inverters for this type of project, so we have an inventory build up as well. So clearly I would like to move that inventory, so that it’s going to be a little bit of margin pressure going forward. So I’ve said to you before, I’m not willing to take, to just chuck money down the drain as you know and we would take actions to stop that happening as we move forward. So yes, there is margin pressure, breakeven during that $60 million to $70 million area I would think and on normalized margins.

Do remember Edwin, we have structured the company such that it’s a product line focus. So that allows us to take, I think we mentioned about $8 million annually out of our business. So that’s a further improvement to reduce in that breakeven.

Yes, as we’ve moved to this more product line structure, it has allowed us two thing; one to move R&D around and have it in the right places, but secondly that last bit of cost that we had because we were business unit focused, we can squeeze out as well. So we can take about $8 million, which is $2 million a quarter for the inviter, so you can sort of work it out yourself. Edwin Mok - Needham & Company: I see. So that $8 million, is that all come from OpEx and then now that since you have another acquisition right, how do you are going to think about OpEx trend in the third quarter? I imaging there is some incremental cost come from this new business that you bought. So can you give us some color around how that will trend as we get into 3Q and 4Q.

Yes, obviously with acquisitions our OpEx went up in Q2, because of the acquisitions of HiTek and PCM, which I highlighted in my comments and operating expenses will go up slightly, because of the UltraVolt acquisition. But in general our earnings should continue to grow as we do these acquisitions, even though one particular line on the P&L might grow also. The through behind all of these is to increase our revenues, increase our earnings and they do that as Gary said within the year, we expect UltraVolt to be positive for us.

Well I think the nice thing you are seeing is that the machine that we developed is really generating the cash; its allowing us to grow our revenue. So I think I mentioned or Danny mentioned. I mean over the last two and a half, three quarter years we’ve generated nearly $200 million of cash and in the three years before that we only generated about $60 million and margins have expanded and our revenues have grown significantly. So revenues have grown significantly, margins have expanded, and we’ve generated gobs of cash and then we put that cash to work in either buybacks by giving it back to our investors or in acquisitions, and you are seeing exactly our strategy. It’s a very, very clear, simple strategy that I believe over the long term will work really well.

In 20 months we’ve acquired five companies. The acceleration is there, the diversity is there, that’s why we are not suffering the same cyclicality as others. As we continue to buy these companies, it’s just a long term annuity that’s going to help us in the future. This is not the AE of five years ago, it’s certainly a different company with a different focus. It’s about generating cash and growing our earnings and we are doing that. Edwin Mok - Needham & Company: Great. That’s great color. Thank you.

(Operator Instructions) Our next question comes from Josh Baribeau with Canaccord. Your line is open.

Hi, Josh. Josh?

Josh, if your line is on mute, can you please un-mute it.

Yes, sorry about that. If I missed this, can you help quantify the increase in capital intensity for ultra high def versus standard high def or maybe the increase in capital intensity for OLED versus traditional LCD?

I’m going to have to pass that to Yuval.

I cannot comment to that. All I can tell you is that as Gary said, we expect to see an improvement in our business; that goes to glass, flat panel display and that’s driven by the market right now. We continue to see more dense applications going to both flat panel displays and to glass coating, for which we have unique product offerings in the bipolar DC power supplies that allows us to go to these markets and not only grow with the market, but gain share and expand the performance of our business better than the market in those applications.

Again, I want to keep reinforcing. We keep mentioning the same applications. As time goes on, we’re going to mention many more, X-ray, medical, mass spectrometry. We are going to be able to expand to many more applications now. So the cycles hopefully are going to start going away for us.

Okay, and then can you help us out with a little bit of maybe operatically what you can do or what you have done to take some of your recent acquisitions, some of that production capacity over to your facilities in China if there’s any synergies that we have there.

Yes. It will be silly to get down into the waves and comment on any product line, but in general what we are doing is taking our supply chain group, number one and looking at the product line and seeing if we can get cost reductions in the supply chain. And number two, the more routine products are then being moved to Shenzhen; and then number three, we look at the more complex products. And it depends on the product line. For instance a company like HiTek that had some very specialty testing of the products, so you can appreciate these high voltage pieces that they are producing, we would leave that specialty in their facility in the U.K. But in general, our philosophy is to continue to move things to our Shenzhen facility and then outsource from that facility. There’s no thought in this company of new buildings, new square footage. This company is all about dollars per square foot, dollars per head, we want that cash. And then you are seeing the result and we are just becoming a cash generating machine, which is exactly what we wanted to happen and it is happening.

Great, and then finally from me, let’s talk about some of the other things that you are doing in the inverter space. If any I guess, we are certainly focusing on the negatives and the restructuring, but is there any investment that’s happening, let’s say to integrate different types of energy storage or other power management within those products that you are looking?

Good question. Firstly, I don’t actually think there’s a negativity in the market place at the present time, but the product lines that we have are very well positioned in that market place. So then the question is what else are we doing? Firstly, it’s becoming more global, becoming more global with these product lines fitting our products to the individual markets wherever it in Japan or Canada or wherever or China or India, the obvious countries, that numbers one. Number two is anything that those product lines, especially that 3-phased string to be a bigger product and smaller products and then the main area, the other area that we are looking at the present time is obviously energy, energy storage, which we talked about. We have projects with the government going on, we have projects in Germany going on at the present time and storage is obviously going to be a big area in the future in the energy business.

Okay, that’s helpful. I’ll pass it on, thank you.

Thank you.

Thank you.

And I’m showing no further questions. I will now turn the call back over to Garry Rogerson for final remarks.

Well, thank you for listening today. We continue on our journey with generating cash, with expanding our earnings per share. We’re focusing on our margins. We look forward to seeing you soon. I think Danny is going to be at the Needham Conference next week.

A couple of conferences.

A couple of conferences next week and I look forward to seeing you again very soon. Thank you. Bye- bye.

Thank you ladies and gentlemen. That does conclude today’s conference. You may all disconnect and everyone have a great day.