Good day, ladies and gentlemen and welcome to the Advanced Energy Q3 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) I will now introduce your host for this conference call, Ms. Annie Leschin, Investor Relations. You may begin, ma’am.

Thank you, operator and good morning everyone. Thank you for joining us today for our third quarter 2014 earnings conference call. With me on today's call are Yuval Wasserman, President and CEO; and Danny Herron, Executive Vice President and CFO. 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 fourth quarter, Advanced Energy will be participating in the Raymond James Boston Fall Investors Conference on November 11. As other events come up we will make additional announcements. I’d like to remind everyone that except for the 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 Yuval Wasserman. Yuval?

Good morning everyone and thank you for joining us for our third quarter conference call and my first call as Advanced Energy’s CEO. I’m excited to take on this role and capitalize on the progress of the last few years, to accelerate the growth and profitability. As most of you know, I have spent the last seven years at Advanced Energy holding various executive positions including President and COO of the company, and most recently President of all Power Products. Over the time our strong team has developed an efficient business model, launched a series of differentiated product and fostered strong customer relationship, all of which have solidified AE’s position as a global and diversified leader in the industry. As CEO, I look forward to continuing to build on that momentum, so that we can leverage and further optimize our product lines, global organization and manufacturing platform, to better serve our customers, accelerate growth, and create value for our shareholders. I feel very fortunate to be taking on this role at this time for three reasons in particular. One, the long term growth fundamentals of the broad power conversion industry are expanding with increased demand for high performance, highly reliable application specific precision power conversion solutions. Two, with our core competencies in precision power conversion technology and our continuing investment through our efficient distributed R&D model AE is positioned to capitalize on these trends. Three, is the incredible global team at AE that has worked tirelessly to develop and execute on our strategy. This team has repositioned the company, redefined our brand, brought new products to market and demonstrated the clear advantages of our model. I believe our global team is one of the strongest in the industry and I’m privileged to lead such a compelling organization. From where I…

Thank you, Yuval. In today's call, I will refer 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 12, we had a strong quarter of total revenues of $143.1 million exceeding our expectations. The sales to semiconductor applications rose significantly as a result of our share gains and penetration with our RF pulse products as well as small increases in other applications. The third quarter revenues performed better than expected, slightly higher than the same quarter last year. Non-GAAP adjusted net income decreased 22% versus the same quarter last year to $16.9 million, and increased 9% from $15.5 million in the second quarter. We ended the quarter with $106 million in cash and investments, a decrease of $24.4 million after spending $35 million to acquire UltraVolt and pay down at European credit line. Looking at our revenue performance on Slide 13, sales to semiconductor applications rose 17.6% sequentially to $57.9 million due to our strong penetration of existing and new customers with our advanced RF technology, aided by semiconductor order late in the quarter. Service sales increased 9.5% sequentially to $12.8 million in the quarter as we also gained share in Japan and increased RMA volumes from key OEMs. Sales to data storage and industrial applications declined 17% to $13.7 million, from $16.6 million last quarter as expected, coming off the second quarter highest. Flat panel display applications increased 40% sequentially to $30.6 million with particular strength in Korea and China, as they continue to rebound…

(Operator Instructions) Our first question comes from Edwin Mok with Needham. Edwin Mok – Needham & Company: Hi, thanks for taking my question. Congrats for the great quarter. So first question on semi-cap, very strong, looks like you guys are definitely gaining share, it was a pulsing product. I was wondering if, – do you expect that strength to continue into the fourth quarter. And is that baked into your guidance and how should we think about at least the first-half of 2015, what kind of visibility I wonder for 2015?

So, Edwin, obviously we are carefully listening to our customers. Our forecast is a function of the blend of our end-customers market share with the end users, and their investment timing. What we hear from our customers and from the forecasters as well is an anticipation of continuing growth in the semiconductor wafer fab equipment. Our capability to be extremely agile to respond to changes and the dynamic in the market helps us to be extremely responsive as we demonstrated in Q4 where we managed a lot of drop in orders and increase in demand due to the adoption of our RF power supplies.

Edwin, your last question wasn’t included in guidance. Let me just say, we always include everything that we know about at that time that we make management judgments on our guidance. And I think if you look at the last 13 or 14 quarters, we’ve been pretty good at coming in between the ranges that we’ve given in. Edwin Mok – Needham & Company: Okay. Great. That’s helpful and then just quickly on industrial, as you guys talked about down a little bit this quarter but it looks like you guys have made great progress in several frontiers. I know that this is maybe not as a volatile as latest semi-cap space but any color you can provide us in terms of how you think about the business next year and with these acquisition now integrated, looks like they are starting integrating in the organization, how do you kind of think about the growth of that segment.

So, Edwin the powerful of the last few quarters was the ability to diversify our product lines. We are spread across many more industries, many more applications and we have a higher mixture of what I would call custom products, derivatized products and off-the-shelf catalogue products. So we have now added hundreds of new product part numbers and thousands of customers to our portfolio. To able to manage that obviously we have restructured our global sales organization to allow us to manage key accounts where we need to work in design wins with dedicated account teams, but at the same time to expand and grow our distribution channels around the world to manage more of the standard product, the off-the-shelf products that go to thousands of customers. We expect to see less volatility obviously because we are now serving a much broader base of customers and applications. Edwin Mok – Needham & Company: I see, so, but you don’t have targets, I’m going to call, for comp growth rate you expect for the company year-on-year, with that can you help us?

Not that we can share right now. Edwin Mok – Needham & Company: Okay. That’s fair. In the solar side, it looks like you guys – and there are some pricing pressures. If I calculate correctly your gross margin actually dropped below 10% on the solar side, right? And please correct me if I’m wrong in that but, is that all coming from pricing pressure? And now that you’ve moved your manufacturing, it sounds like both the 3-phase string, as well as, 1 megawatt into Shenzhen, do you expect that to start recovering in the fourth quarter or is it more like sometimes in 2015 and you have to wait for pricing to stabilize it. I’m just trying to understand, what are your drivers for gross margin and if there is anything you guys can deal in your end?

I’ll ask Danny to answer question. Go ahead, Danny.

Edwin, that was three or four questions, so let me try to answer all of them. The first one, obviously we don’t give out margin, so in your model you can calculate what you think it is and that’s your model so we’re not going to comment on the margins but the math is pretty simple. Look, in terms of the move to Shenzhen, we completed the transition of the manufacturing of the product to Shenzhen. But as we said many times the cost reductions will come through as the supply chain balances out and we start using the new production. Obviously, with some decrease in revenue that hasn’t totally flowed through yet, so we not yet seeing the full benefit of the moves to Shenzhen. Edwin Mok – Needham & Company: Okay, great. Last question on the tax, I just want to understand correctly. You said that the discrete tax credit was $3 million. So what was the rest of the – because I think you guys reported a bigger tax benefit in that, so I'm just trying to understand is that – was there something else in there? And for the 7% to 8% tax rate that you guide for the full-year, is that excluding the discrete tax benefit, or is that all in tax?

Yes, good questions. First of all, the discrete tax benefits are due to filing their actual return for last year and then rolling those items through how you calculate your tax return, as well as the expiration of statue for previous year's tax positions you’ve taken, that’s what the $3 million. Without the $3 million, we were still comfortably within a range of guidance that we gave. The 7% to 8% is our effective tax rate. So that would be without any discrete items and obviously, that effective tax rate is determined by your geographic split of profits, as well as your product spilt profits. And given our current expectations for the full-year, that 7% to 8% applies this year given the situation in solar versus the extreme profitability we are seeing in precision power. Edwin Mok – Needham & Company: Okay, great. That’s all I have. Thank you.

Thanks, Edwin.

Our next question comes from Pavel Molchanov with Raymond James. Pavel Molchanov – Raymond James: Thank you for taking the question. Clearly, the follow results are not what you wanted to be, what are specific steps that you guys are taking to kind of remedy it both from a top line perspective and from a margin perspective?

Thanks for the question, Pavel. Obviously, we are not happy with the performance of the inverter product line. Right now, it’s a highly focused area for the management team. We were addressing both tactically and strategically. On a tactical side, we talked about the transition of our manufacturing to low-cost area. We have a new organizational structure that will increase our efficiency and reduce our cost. And as I mentioned in my prepared notes, we had a series of new products that we are launching during the next six to nine months with lower cost and lower cost of ownership. We continue to work on those, while at the same time working as part of our strategic planning process on our long-term strategy, which we will share with you in Q1 during the Analyst Day. Pavel Molchanov – Raymond James: And not trying to kind of front run ahead of the Analyst Day, but one of the things that that the company has traditionally said is, you want to stay away from the residential rooftop market and yet that’s where so much of the growth, particularly in North America, as far as solar go seems to be currently. Are you reevaluating that part of the strategy among others?

Pavel, what we see in North America at a place to our product portfolio is growth in a rooftop commercial. And this is exactly where we place our 3-phase string inverters. We have seen growth in this area as I reported in my previous notes, and we continue to see growth in area, not only in the U.S., but across the world. Obviously, various regions around the world on a commercial space with a 3-phase behave differently. But as you know, the two main product lines we have are the central 1 megawatt inverter, we right now continue to drive to market and the portfolio, the 3-phase string inverters that we focused on positioning for rooftop and commercial, in small-scale utilities, if they choose to go with the distributed architecture. Pavel Molchanov – Raymond James: Okay, I'll leave it there. Appreciate it very much.

Thank you.

Our next question comes from Joe Maxa of Dougherty & Company. Joe Maxa – Dougherty & Company: On the solar side, I mean, it’s been a struggle for quite a while now. I mean, is this makes sense for you guys to keep this long-term, or something you are considering time to move or, what's the longer-term, can you get back to profitability, can you keep that profitable and maybe a sense of when you think you can get there?

Well, obviously, we are not sitting on our hands right now, and a huge effort has been put in place to increase the profitability of the inverter product line. And I mentioned before the measures we take on a short-term tactical level, obviously, we are looking at a strategy for the company, as part of the rigorous strategic planning process we have in the company. And a critical component of that strategy is the strategy around the inverter product line. And we are looking at all the options ahead of us, and we'll show you in Q1. Joe Maxa – Dougherty & Company: Do you anticipate margins bouncing back in the fourth quarter, as well as revenue as well in the fourth quarter versus the third quarter or should be – we be looking at similar type results?

I'll ask Danny to address that.

So, Joe, as we said, I mean, our transition to Shenzhen will allow us to have lower cost production. As you’ve all mentioned, we are introducing a series of new products that have designed lower cost into those products. But they will take time to flow through the supply chain. We have completed the transition to Shenzhen for the production, but until the older inventory flows through the system, you won't see the benefit of the saving. So obviously, this time we have a pathway to get into improved margins with our newer products and with the production in Shenzhen, but it will need to flow through the supply chain, and we need to continue to work in the marketplace with ASP erosions that are out there. Joe Maxa – Dougherty & Company: All right. And do you expect revenues to be up or down in the fourth quarter sequentially?

I don’t think we give individual guidance. It’s been our practice in the past, Joe. But we continue to focus on profitable growth. We could increase revenue substantially, but we are trying to focus on profitable growth, not just market share. Joe Maxa – Dougherty & Company: Got it. Thank you.

Our next question comes from Josh Baribeau with Canaccord. Josh Baribeau – Canaccord Adams: Could you explain maybe a little bit more color in the solar business on pricing effects versus potential reductions in volume, what kind of led to the decrease in the effects?

I think, both contributed to the impact on the quarter. The volume – the decline in volume mainly because of push out of some of the utility scale project out affected the efficiency of the operation as the volume decline. We also show a decline in ASP in the market that that affected our gross margins. In addition to that, we continue to invest in some of the new products that we are launching to market zone, and did not stop the investment on those products, which allowed us to launch the products according to the product roadmap, and also increase our R&D spendings. But all-in-all, it’s a combination of decline in volume that affected the efficiency and erosion of ASP.

Josh, I would add just, going back to the total company, because we're tending to focus on a solar question. The total company is doing quite well. We continue to focus on profits, which continue to improve, our cash generation is there. Fortunately, we have diversified our company in many different product lines and aligned ourselves that way. So we have a very good financial profit-generating machine that one of our products lines, solar is having some challenges. But the strength of our model is everything else is clicking quite well. Josh Baribeau – Canaccord Adams: Okay. And maybe just sorry to stay on that topic with those previous comments, but is there any way you can help us kind of quantify the operating margin effect, I know, you don’t talk about gross margins, but the operating margin effect of the lower pricing versus the lower volumes over in Shenzhen?

We don’t give out our individual pricing, but there is some third-party studies, which you can look at, and they will show price erosion offset by production volume increases. Megawatts are up, pricing is down, but we play in the industry. So I wouldn’t say that, we will be that different than the industry, which you can certainly go to those third parties and get some more data if they desire. Josh Baribeau – Canaccord Adams: Okay. And then lastly from me, how much did UltraVolt contribute to the growth in the Power business this quarter?

We don’t break that out. Obviously UltraVolt was only in for a couple of months. We'll have some additional expenses for UltraVolt in the fourth quarter, although they will be offset by their products and their margin. So UltraVolt will be a nice addition to our product line, as you involve in it, gets us into a whole new application of products. Josh Baribeau – Canaccord Adams: And actually sorry if I could just squeeze one more in there. I'm seeing a lot of – a lot of folks you are seeing a lot of sort of the resurgence of, or the continuation of the 28-nanometer node in the foundry space, certainly in some of the lower cost regions. Are you guys – you see talk about a lot of leading edge wins, but you – are you also starting to or continuing to benefit from more legacy build-outs as well?

Josh Baribeau – Canaccord Adams: Great. That’s it from me. Thanks.

Our next question comes from Krish Sankar with Bank of America. Krish Sankar – Bank of America: Hi, thanks for taking my question, I had a few of them. First, you guys mentioned a couple of times how the tariff in the module – the higher module price is impacting utility scale business, kind of curious why is it not impacting the commercial inverter business?

Right now from our perspective what we see with a customer base we have, we see push out of utility scale projects from Q4 – in Q3 and Q4 out into early next year. The anticipation right now is that, we’ll see a renewal of interest and investment next year as people are preparing for the end of 2016, the end of the ITC. We already see a pipeline of opportunities ahead of us in utility scales, as some of the customers we have are preparing for capacity growth next year.

Krish, the other thing to consider, utility scale project runs 18 months to two years. It takes a lot of permitting and sometimes that permitting is based on the engineering design and panels are different. So the repermitting process takes a little time in utility. On a commercial rooftop you generally start and finish that within a month or two, so it’s a whole different process.

It’s a much earlier to cycle time. Krish Sankar – Bank of America: Got it. All right, fair enough. And then other couple of questions I have in the inverter side, obviously given the lack of profitability there. Kind of curious, if you look at typical inverter ASP, they kind of decelerate for the industry, at least, 10% year-over-year. I'm curious once you do the move to Shenzhen and all these low cost activities starts flowing through, can you maintain a cost reduction greater than 10% year-over-year, so you can still be profitable at sometime in the future?

Well, this is the aim. What we’re trying to do is to reduce our cost faster than the erosion of the average ASP in the market. And as I mentioned before, we do that both in transitioning to low-cost area, reducing the content for the cost of the goods we have through some of the new projects we’re launching, and using a much more efficient organization. Krish Sankar – Bank of America: All right. And then just the last question from my side, is this a hypothetical one, if I look at your Q3 inverter sales about $52 million and operating loss of $12 million, if you assume – if you take the Q3 numbers and keep everything like the same, once you do your cost reduction, what will the operating income look like?

Danny, you want to answer that?

Yes, we obviously haven’t given that level of detail. Obviously, we’re doing everything we can to reduce the cost, once again, I'll point you back. The total company is doing quite well. We’re generating plenty of cash, and we’re using that to fund our operation to move stuff in the Shenzhen. We have certainly benefited from putting everything to our business model that has everything go into this Shenzhen facility. It’s helped us not only in our solar products, but it’s also helped us in our precision power product. And we’ll continue to put more and more of our production through Shenzhen, and continue to focus on lowering our cost, improving profitability across the company in all product lines. Krish Sankar – Bank of America: All right. And then just a final question, if you decide that the inverter business of (inaudible), it’s not going to be profitable for a while. How easier, how difficult is it to get out of the inverter business?

There are lots of different ways that could happen, and we’re not at a point, where those are under discussion on a public basis, that’s part of our strategic planning process, is always look at various options.

We’re looking at our options long-term for the company. We’re working on our strategy for each of our product lines, and we’ll be happy to share it with you in Q1 at our Analyst Day. Krish Sankar – Bank of America: All right. Thank you very much, guys. Thank you.

Thanks.

(Operator Instructions) Our next question comes from Jairam Nathan with Sidoti. Jairam Nathan – Sidoti & Co.: Question, just on a solar side, couple of questions here. First, is it a gross margin differential between 3-phase string and your 1 megawatt product, and is – and was that part of the reason why the gross margin came down?

The answer is yes, there is, and also it depends on the solution we sell through our customers. Our central inverter is sold either an individual inverter or a part of an integrated solution, where we sell a single inverter or skids with balance the system components, or multiple two inverters on a sched with multiple additional balance the system component. Obviously, the dollar per watt price we get for the contract, or for the project depends on the offering we have. So it’s not a – obviously, it’s a product related and solution related pricing. When we talk about our ASP in general, we’re talking about our blended number, but the answer is yes, it depends on the – an actual offering we sell. Jairam Nathan – Sidoti & Co.:

Danny, you want to answer that, Danny?

Obviously, with the business – the challenge like solar is right now, that’s not something that would pass a hurdle rate on an acquisition target, okay. And we know that. We’re focused as we’ve said during this call. We’re focused on taking actions that improve that production cost, that improve the ASPs, and make us more relevant to our customers and grow that business. It is a product line. We have many product lines in this company. This company is doing quite well. This is a challenge product line and we always put in these resources against this to try to improve this product line. But obviously to your first question, it’s not something it was only open market that we would probably…

Yes, let me add to that. We continue to diversify the company. As you remember, we migrated from business unit structure to a product line structure. We drive highly efficient organization, we continue to diversify. And part of our growth strategy is to add more markets, more application, more product lines. So the blended outcome is something we're very, very proud off. But at the same time, as we look at each one of the product lines, we want to make sure that we have healthy product lines with good contribution. And right now, we’re not happy with the inverter product lines performance, and it’s a high level of focus on addressing that on a short-term. And at the same time, looking at a strategy going forward, which we would be more than happy to share with you in Q1. Jairam Nathan – Sidoti & Co.: Okay, thanks. Just last question, with regard to the ASP declines of – like would there be inventory charge or something that we can – we should expect in the next quarter or has it already been taken kind of?

As we said – as I said my prepared remarks, we wrote down some inventories in European central inverters to fair market value. But what we thought that we'll closely monitor that, but obviously as we demand shape going out in the future, we think, it will be fine. But we will constantly monitor it, and if adjustments are needed, we’ll make those entries into the books. Jairam Nathan – Sidoti & Co.: Okay. Thank you. That’s all I have.

Thanks.

Our next question comes from Mehdi Hosseini with SIG or SIG. Mehdi Hosseini – Susquehanna International Group:

And lastly, in Q3, we saw a significant amount of drop in orders, in the middle and the second-half of the quarter, that was basically driven by our customers positioning critical components for their own ramp plants. And if you look at the whole thing together, these are the three contributors, obviously our ability to be agile and to respond very quickly to market changes to demand, profile changes helped us really to serve our customers with what they needed on time. So these are the three components. Mehdi Hosseini – Susquehanna International Group: Got it. And then, one more follow-up for your quickly on the solar panel side. This year seems to be revenues for 2014 to be less than last year, but in Q3 you saw a nice pickup, actually it was a nice pickup that started in Q2 and up again in Q3. How should we think about the revenues in Q4 and beyond Q4, what are the key drivers, or is there any driver for growth into next year?

So the driver that we saw and I cannot talk about next year maybe, but the driver we saw are mainly capacity installation in China and also investment in OLED capabilities. One area that we see continuing growth is in the touch panel side of the business, where we have a very strong position with our power supplies across the board and across many customers and regions. Mehdi Hosseini – Susquehanna International Group: Okay, great. And then one my final question for Danny. How should we model gross margin and OpEx for Q4. If you cannot discuss absolute percentage of value, you can, at least, help us directionally, please?

Yes, Mehdi, I would expect OpEx might be slightly higher in Q4 as we have the full impact of UltraVolt for the quarter. Other than that, we’ll continue to maintain our focus on striving to keep OpEx flat, as far as gross margin, that’s going to depend on your product line assumption model and what that drives. As I said earlier, we’ve got a really good track record of falling within our guidance range that we've given, I think, it's 14 quarters in a row. So that should give you some comfort the numbers we gave you will be close. Mehdi Hosseini – Susquehanna International Group: Got it. Thank you.

And I’m not showing any further questions at this time. I’d like to turn the conference back to Yuval for closing remarks.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day.