Earnings

Advanced Energy Removes Payout Cap On Performance Stock Awards, Adding $10.0 Million In Expense

The board committee scrapped a five-times limit on part of outstanding performance awards, with $4.0 million of the charge due in the fourth quarter.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Advanced Energy Removes Payout Cap On Performance Stock Awards, Adding $10.0 Million In Expense

Advanced Energy Industries, which makes precision power products for chip equipment, data centers and other industrial uses, said its board compensation committee on October 29 removed a five-times cap on part of its outstanding performance stock awards, a change that adds about $10.0 million of stock-based pay expense. The company disclosed it in its quarterly report filed Monday, the same day it reported third-quarter results.

What the committee changed

Under the old limit, the portion of each performance stock unit tied to relative total shareholder return could not be worth more than five times its grant-date value. Relative total shareholder return measures how the stock performs against a set peer group.

Of the roughly $10.0 million in added expense, about $4.0 million lands in the fourth quarter of 2026, and the rest is recognized over the remaining service periods of the grants. The committee left everything else alone, including the ceiling that keeps each award's maximum payout at 200% of target shares.

The company's adjusted earnings measures exclude stock-based compensation, so the charge will reduce standard-accounting earnings but not the adjusted figure management emphasizes.

A year of rising stock pay

Stock-based compensation reached $58.1 million for the first nine months of 2026, against $41.2 million a year earlier, according to the filing. In the third quarter alone it was $18.6 million, up from $14.6 million.

Restricted stock units that vested in the nine months (0.5 million) outnumbered those granted (0.3 million), primarily because market-based performance awards settled above target on relative shareholder return. RSUs granted during the period carried a weighted-average grant-date fair value of $304.06, versus $111.72 for awards outstanding at the start of the year.

The company's earnings release showed third-quarter revenue of $696 million and GAAP earnings of $2.80 a share from continuing operations.

Debt reshuffle and buybacks

The pay change follows a year of reworking the balance sheet around convertible debt. Advanced Energy sold $1.15 billion of notes due 2031 in May and exchanged part of its 2028 notes. It settled the last $136.4 million of the 2028 notes on October 2, issuing 0.5 million shares for the conversion value above principal.

It suspended share buybacks when it issued the redemption notice in June and resumed them in October. Shares outstanding stood at 40.0 million on September 30, up from 37.8 million at year-end.

In Monday's release the company guided fourth-quarter GAAP earnings per share to $3.30, plus or minus $0.30, a range that will have to absorb the first roughly $4.0 million installment of the new charge.

Fourth-quarter results will show the first $4.0 million of the charge against that $3.30 GAAP guide.

Sources

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