Good day ladies and gentlemen, and welcome to the Advanced Energy Q4 2013 Earnings Conference Call. (Operator instructions.) As a reminder, this conference is being recorded. I will now turn the call over to your host, Annie Leschin, Investor Relations. Please go ahead.

Thank you, Operator, and good morning everyone. Thank you for joining us today for our Q4 2013 earnings conference call. With me on the call are Garry Rogerson, Chief Executive Officer; Danny Heron, Executive Vice President and CFO; Yuval Wasserman, President of the Thin Films business; and Gordon Tredger, President of the Solar Energy business. By now you should have received a copy of the earnings release that was issued yesterday evening. For a copy of this release please visit our website at www.advanced-energy.com or call us directly at 970-407-4670. During Q1 Advanced Energy will be participating in a few different conferences: first, the Goldman Sachs Technology & Internet Conference on February 11th in San Francisco and the Susquehanna Financial Group’s Semiconductor and LED Summit on March 4th in New York. As other events come up we will make additional announcements. I would like to remind everyone that except for the historical financial information contained herein the matters discussed on this call contain 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,” “plan,” “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 industry’s 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 provide to you during this call including our guidance provided today in our press release. Guidance will not be updated after today’s call until our next scheduled quarterly financial release. And now I’d like to turn the call over to Garry Rogerson, CEO of Advanced Energy. Garry?

Good morning everyone, and thank you for joining us. We ended 2013 with a strong quarter, generating $0.67 of non-GAAP earnings per share and $45 million of cash on revenues of $153 million. Operating income excluding restructuring increased 22% versus last quarter to $22.3 million or a 15% operating margin. Once again, we saw the power of our R&D and manufacturing model could generate a significant improvement in profits with even a small increase in revenue. Despite pricing pressure in our served applications over the last two years, we have improved our operating margins by implementing operational excellence initiatives that have saved us approximately $80 million. Additionally, with the minimal CAPEX required by our manufacturing model we have generated over $145 million of cash in the last two years. We have put that cash to work in the form of strategic acquisitions to drive growth by increasing our [PAN] and through share buybacks to return value to our shareholders. In total we are pleased with the progress we have made this year on our strategic plan announced back in Q4 2011. During Q4 we took the final steps toward our goal of developing one manufacturing and supply chain organization. We accelerated certain actions leading to some larger restructuring charges this quarter than we previously thought. We have now completed the restructuring that we announced two years ago. We plan to continue to find ways to become more efficient but we do not expect to break out restructuring costs going forward, with the exception of course of those relating to acquisitions. Looking ahead, our views on manufacturing and more specifically the supply chain as a whole are key to our future plans for success and we believe a major competitive advantage. We expect our manufacturing costs to decrease significantly as our…

Thank you, Garry, and good morning everyone. Turning to Slide 8, in Thin Films revenue grew 16% to $88 million and semiconductor applications strengthened this quarter while our thin film industrial applications came down from higher Q3 levels. Our investment in advanced new products is demonstrating consistently design wins, increasing market presence, and enabling expansions into new applications and geographies – all of which is contributing to the bottom line. Turning to Slide 9, beginning with semiconductors strength this quarter was driven by our introduction of new products combined with healthy CAPEX, investment in [GNAN] and the ramp of [clean denominators]. Our growing presence in new applications such as etch, PECVD and PVD with our advanced RF technology is making inroads with key customers and geographies. While we expect some moderation in Q1 we’ll look for next-generation technology buys and capacity investments to fuel much of 2014. A few areas of potential include a migration to 3D devices and packaging as well as the adoption of new materials for logic and memory devices, which are driving the need for advanced etch and deposition applications where advanced plasma processing is required. Our post-RF power supplies with advanced frequency tuning and our matching network are enabling customers to pursue challenging, advanced etch processes required for 3D devices for current and new applications. Combined with a new remote plasma source technology we are expanding our presence in new processes such as plasma-enhanced atomic layer deposition and dry etch. Heading into our abatement application just two years ago we are already generating repeat business and penetrating new global customers. In flat panel display we continue to benefit from capacity buys in PVD and such panels where our share is strong and a new BMS product is positioned for the next generation of [sputtering]. While…

Thanks, Yuval. Let me begin on Slide 12. 2013 ended with the achievement of another milestone as we revamped our Inverter product line with the first shipments of our 1 MW to customers. Combined with our Three-Phase String Inverters acquired earlier in the year we now have in place new, higher-margin inverters that meet the demands of utility and commercial customers. This quarter we generated $55 million in solar revenues and maintained a strong backlog of orders for our 1 MW Inverter. With the transition behind us we are ramping volumes of the 1 MW and developing a number of country-specific Three-Phase String products, and positioning us for growth in 2014 across a number of geographies. Turning to Slide 13, customer response has been quite positive. The 1 MW is now installed with multiple customers at several sites including integrated power stations for some utility installations and ground mount commercial installations. The inverters are producing power at very strong rates, reflecting the key advantages of this product including one, the wider voltage range that enables the production of power earlier each day and also allows peak efficiencies to be reached sooner; two, higher DC loading ratios that allow power to ramp quickly; and three, the 98% efficiency rating enables peak production to be sustained longer. Existing and prospective customers are recognizing the additional economic benefits this product provides including the lower balance of system costs through our patent pending integrated PV Tie design. All of these benefits bode well for future orders. Last quarter we indicated that we were looking forward to gaining access to a large number of potential projects in 2014. During the quarter we realized initial purchase orders for a major project. We also saw certain commercial ground mount applications gravitating towards the 1 MW inverter given…

Thank you, Gordon. In today’s call I will refer to both GAAP and non-GAAP results. As a reminder, non-GAAP measures exclude the impact of restructuring charges, acquisition-related costs, stock-based compensation, the amortization of intangibles and nonrecurring tax items. 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. Let me begin with some commentary on our full=year results on Slide 16. 2013 was a very successful year for AE. Total sales grew 21% to $547 million compared to $452 million in 2012. Thin Film sales grew 26% year-over-year to $297 million from $235 million last year as we increased our market presence and expanded into new applications and geographies. Solar Energy sales increased 16% to $250 million this year from $217 million last year as we acquired and integrated our Three-Phase String product line. Total GAAP income from continuing operations without restructuring charges increased 150% to $62.3 million or $1.53 per diluted share compared to income from continuing operations without restructuring charges of $25.0 million or $0.63 per diluted share in 2012. Shareholder equity increased $74.3 million or 19%. Our commitment to a cost conscious culture continued during the year. We completed our restructuring and by the end of 2014 will have taken approximately $80 million out of our cost structure. We have improved our margins, accelerated our revenue growth and generated over $35 million of cash from operations for the year. We ended the year with a cash balance of $150 million, even after completing our acquisition of the Three-Phase String product line. Importantly we met our targets and had a strong quarter of profitability on Slide 17. As expected, our actual tax rate for the quarter…

Thank you. (Operator instructions.) Our first question comes from Edwin Mok with Needham & Company. Your line is open. Edwin Mok – Needham & Company: Thanks for taking my question and congrats on a great quarter. So the first question I have is did you guys, I noticed that you guys stopped providing the 1 MW shipment for the quarter. Can you give us some color on that? Did it increase, decrease? And if you could give the number that would be great.

Yeah, first thanks for saying it was a good quarter. I think the key to the quarter was actually what happened when we get just a little bit more revenue, how much of it falls to the bottom line. It’s pretty incredible what happens. I hope we’re starting to recognize the power of that model. We did start shipping the 1 MW; I said in November at the Analysts Meeting we took revenue there the first time. It’s starting to ramp up quite nicely. It’ll ramp up through this quarter and we’ll probably get to a steady state in Q2 on that product. The demand for that product is great and the efficiency of the product is good. Gordon, would you like to add a bit about the product itself?

Yeah, the product itself, I think I outlined in my remarks some of the advantages of the product. The benefits are resonating really well with our customers and we’re looking forward to some nice wins in 2014.

The key is the high efficiency of the product. It’s giving it outstanding results in the field and we’re getting great feedback on that. Edwin Mok – Needham & Company: Great, thanks for the color. Did you guys, can you disclose how many watts you shipped in the quarter?

312. Edwin Mok – Needham & Company: 312. So I was wondering, if I look over the last three quarters your revenue actually has been coming down a bit on the Solar side, right, and you guided for seasonal declines in Q1. What gives you confidence you can grow sequentially over the next few quarters, beyond Q1?

Oh wow! It’s an exciting time for us. I think you remember at the Analysts Day we talked about the new products, the new geographies and the applications we’re in. So we’re in good shape. The 1 MW as we just said is hitting the ground nicely and the Three-Phase String also. We got our first large order for a Three-Phase String last quarter in the US so that’s now happening as well. So we’ve got the products. We’ve clearly got the products for the utility and the commercial. We’re moving into new geographies as well. So that gives us a great feeling that sequentially we can grow the product line from Q1. Q1 is always a bit dodgy for solar but after that we’d expect there to be nice growth because of new products, new applications, new geographies. At the same time those products will be moving into our supply chain in Shenzhen and the costs will be coming down. So we feel at the moment we’re in a very good position in Solar. Now, you know my “but,” Edwin. My “but” is I know we can get to $100 million. I know that. The business is out there. But I don’t want to lose $10 million. At the moment this product line is probably giving us $0.20 to $0.30 of EPS for year so it’s accretive for us, which is great. I don’t want to get into a situation where we’ve got revenues and it becomes dilutive for us. So I’ve often said we’ll grow it slowly; I’ve used the word [pad] in the past. We’re going to be very careful. I know we can get there and it’s just a matter of time. So we’re in good shape, good shape. Edwin Mok – Needham & Company: Okay. But if I look at the quarter from an operating profit point of view, you have a negative operating profit and I assume a lot of that comes from just low gross margin on this product because you were just ramping it – and you expect that margin to kind of recover starting in the March quarter?

I’m going to pass you over to Danny but again, even last quarter it was accretive to our earnings per share. There is no way without it we would have gotten the earnings per share that we actually got. Danny, why don’t you say a few words?

Yeah, Edwin, as you know we allocate all our corporate costs out. There’s always an argument to be made and I tried to represent it on that next-to-last slide that shows we have a group of costs, infrastructure costs for being a public company that costs the company so much money. All of our product lines contribute margin to that. Segment reporting forces you to put some of those numbers to a segment but if that business went away the corporate costs wouldn’t go away. So when you strip that out as Garry said, this business contributes $0.20 to $0.30 a share of earnings at a breakeven level. Edwin Mok – Needham & Company: I see. Okay, that’s fine.

So Edwin, just again I’m very happy with the situation we’re in. Obviously I want to push the foot down on the accelerator a little bit and we will do that, but we will do that and make a bit more money out of it as we’re doing it. So we’re in a good position. It’s a growth marketplace and there’s potential for us to make earnings per share out of it. We just want to be careful in what we’re doing. Edwin Mok – Needham & Company: Okay, that’s fair. On your guidance, if I pick the midpoint of $142 million that implies a little more than 6% decline sequentially. Are you expecting Solar or Thin Films to decline at that rate? Can you compare which one will decline more, which one will decline less – if you can give us some color on that please.

Just to make sure we’re on firm ground here, sales from the same quarter a year ago. So let’s get rid of seasonality… I do hate this seasonality thing but let’s get rid of that. We’re growing 28% and non-GAAP earnings are growing 48% if you take the midpoint. So compared with the same quarter a year ago not so bad. Yuval has talked about semiconductor dropping a little bit – that’s obvious. The machine that we have really responded incredibly well to the pull of some of our OEMs last quarter. It’s amazing how when we get a product in our machine, how it pops the product out and the profit goes to the bottom line – so you’d expect that to come down. Other product lines, other applications within his marketplace are popping up and we expect that Solar will be similar to Q4. Edwin Mok – Needham & Company: I see, great. That’s all I have, thank you.

Thank you, Edwin.

Our next question comes from Shahriar Pourreza from Citigroup. Your line is open. Shahriar Pourreza – Citi : Good morning, everyone. Let me shift over to a little bit of bigger picture questions. I’m curious on your strategy in India. It’s been relatively a challenging environment to operate in; the national solar mission has been a little bit of a disappointment as far as how many bidders have bid in. We’re still hearing that it takes developers eight to nine months to get paid. I’m still wondering as you shift some resources into India how you’re allocating those resources. Do you see the issues in India abating? And then what kind of a product are you going to create for that market?

Firstly, over a year ago I said India is a slower market you have to be careful in. I said people do not get paid in that marketplace and now people are saying “Oh, we’re not getting paid.” Well, it’s a no-brainer, you know it’s a no-brainer, I know it’s a no-brainer. So the key for us is not to get talked into that situation. And again, we’re slow and we’re conservative. As a company we’re building up the infrastructure in India to sell all our product lines, not just inverters. So it’s all our product lines will go into India. It’s a great marketplace. We have to be careful that we get paid and we have to be careful in the governance issues as well, and I can assure you that we are. So I assume that we will not get burnt, that we will be able to move forward in that market quite happily. And it’s a good solar market for us; it’s a good thin film market for us, and actually with our new products that we’ve just acquired they’ve got a little foothold there which is actually going to help us grow some of our other thin film products and package products into India. So India for us as I think we said in the remarks is the key geography for us as a company. So as you step back as a company, India is important and Japan is important. The one that we would love to say we have direction on but we don’t is inverters in China, and I stood up and said that to you before. We don’t have a solution to inverters in China yet – we’re trying to work on one. We certainly don’t want to buy companies in China for that, I mean that’s a little bit of a difficult road to go up. So we’re working on ways that we can sell into China. Shahriar Pourreza – Citi : Gotcha. And just one question for Gordon: shifting over to the North America utilities scale market, are you seeing opportunities starting to pop up in nontraditional states outside of California, Arizona and New Jersey? Kind of maybe just as the utility scale market starts to slow down a little bit I’m kind of curious if you’re seeing, whether you’re seeing new states open up to solar?

Yeah, we are seeing new states opening up to solar and I think overall we have some nice opportunities in the 100 MW plus range that are on our radar, they’re progressing. But it’s very interesting to see the number of projects where we’re looking at say 30 MW or somewhere around that range, and a nice portfolio of those projects is setting up. And as you said some of these are in nontraditional states outside of the traditional utility hotbed in the Southwest. Shahriar Pourreza – Citi : Gotcha.

By the way, we’re also seeing utility projects in Canada, in Mexico. So in the region we’re starting to see utility projects. I think we took our first order in Mexico last quarter, didn’t we?

Yes.

And we’ve been in Canada for quite a time and there are a few utility projects there. Will we get them? I don’t know but they’re there. Shahriar Pourreza – Citi : Gotcha. And historically you’ve obviously shied away from talking about your market share but I’m curious. As Satcom continues to lose market share in the US have you been able to capture a lot of that business? Can you just directionally point us to where your market share has been as a result of the Satcom bankruptcy a while ago?

I mean there’s companies like IMS that are in the business of trying to measure market share. It’s not something that… We’ve said it publicly for the two years I’ve been here: it’s not something that we use to steer our business. It doesn’t influence our decision making. What we’re interested in is looking at opportunities to grow the business in a profitable way, in a sustainable way. And I think the cautionary tale with Satcom is they were chasing market share. They weren’t interested in holding their pricing; they chased every opportunity and they chased it right down the drain. The gains or losses from Satcom, I mean that happened as that business degenerated over the course of a year but that was a story from two years ago. Today we’re out there, we’ve got our revamped product line. We’ve got the flagship with the 1000NX or the 1 MW in the utility scale, and the Three-Phase String products are setting up quite nicely to take care of the needs of customers in the commercial space. So we think we’re doing fine. We’ve got a nice pipeline of opportunities that will allow us to reach the objectives that we’ve set out.

And I think you can see the smaller companies now struggling and slowly going away which is good, and we’re very bankable which is a key point here. We remain bankable and that’s what we want to be. We want to be the trustworthy partner to these EPCs in the future. Shahriar Pourreza – Citi : Gotcha. And just one smaller question – just remind us, are you selling the 1 MW inverter to the [Sempras] Expansion in Nevada?

We don’t answer specific questions on specific projects but to say that we’re getting a nice load of orders for that product in that area. Shahriar Pourreza – Citi : Okay, perfect. Thanks a lot.

Thanks.

Our next question comes from Jim Covello with Goldman Sachs. Your line is open. Jim Covello – Goldman Sachs: Good morning, guys, thanks so much for taking the question. Starting on the semi side, so your revenues are up 2x year-over-year, obviously a tremendously profitable business for you. On the semi side the doubling, roughly doubling of revenues year-over-year, how much of that in your mind is the market versus market share? And of the market share, how much of that is new applications that you’re serving versus taking sockets if you will from competitors.

I think it’s a combination of all of the above, Jim. If you look at what we did is we started winning design wins for advanced applications both in the etch area and the PECVD area with new products that we launched in the market. That allowed us not only to capture new applications in our traditional market but also to expand to new geographies and to new customers in new geographies which we never had business before. So what happened is a combination of going up with the tide but also accelerated growth by new applications, new customers, and as you said new sockets. Jim Covello – Goldman Sachs: Terrific. And then while the revenues overall in semiconductor have kind of exploded the service piece has stayed relatively flat. One would think there should be an incremental opportunity to service a lot of these opportunities, is that right?

The service has been fairly flat for a long time and going up independently or fluctuating independently of the capital equipment purchases. What we have seen recently is a slow increase in our market share in service because of a different engagement model we have with the end users that allows us to take business away from the third parties, the mom & pop shops all over the world and go with a fab-wide solution with fabs and sign long-term contracts. That allows us to drive the quality and a very good turnaround time with our services. Also it opens the ground for us for retrofits, upgrades, used equipment and that allows us to serve and help our customers as they go through capital reuse and capital repurposing. And we will continue to do that. Part of our strategy is in addition to the traditional just repair the box we would like to develop and launch service products to the market that will allow us to grow faster than the traditional utility, capacity-driven repair job. Jim Covello – Goldman Sachs: Thank you for that. And then the final question for me is kind of going back to something that Edwin was touching on. I understand that with some cost accounting dynamics there’s some EPS associated with the solar business right now. But at the end of the day the driver of the EPS, and the EPS is very significant, is the semi business. I understand you think there’s a $100 million revenue opportunity out there but we haven’t grown that revenue in a year and on an operating profit basis the business loses money. Is it time that would cause you to rethink this business or would there have to be some kind of changes in the dynamic of the market? I mean there’s been a lot of companies that have promised a lot in solar over the last decade and frankly very, very few have achieved that. I understand there’s this theoretical big opportunity out there but this is a market that continues to be subsidized and subsidies are at risk from time to time, that creates risk in this market; and then B.), because of pricing and other issues this market just hasn’t delivered over the last decade what anybody thought it would. On the other side of it you have an incredibly profitable semiconductor business that theoretically if you used some of the capital that was being dedicated to solar you could probably grow even faster. So is it time or is it some kind of market dynamics that would ultimately cause you to rethink the whole solar opportunity?

That’s a wonderful question. You’ve got to think about all the product lines. I know you focused on semi just then but think of our environmental products, hard coating products – think of the whole product lines that we have. And you can poke holes in any one of them and say “Oh, we don’t need that one, let’s invest in this area.” If we look at the total company solar does contribute earnings per share, it does contribute cash – it’s helping us. And as long as it’s helping us we will keep it and continue to try and grow it. Semiconductor has had a wonderful time but you know that’s cyclical and we need to get out of the ups and downs of that world – not that we’re not going to invest there, in fact we do that we continue to win. It’s embarrassing how much we win actually, it’s great. So but we need to get into other markets as well as we move forward. So yes, I understand where you’re coming from and as you also know I’m pretty hard on this type of stuff. If a product line isn’t contributing it’ll go, I can assure you. At the end of the day, product lines that don’t contribute will go, it’s as simple as that. But we’re very comfortable at the moment with our inverters, we’re comfortable with our environmental products; we’re comfortable with our flat panel display hard coating products and our semiconductor products. If we were not I would be doing something, we will be doing something. So please be assured that we continue to watch our pennies and watch what we’re doing. Jim Covello – Goldman Sachs: Thanks very much, good luck.

But it’s a great question, Jim, great question. Jim Covello – Goldman Sachs: Thanks a lot. Good luck.

Our next question comes from Pavel Molchanov with Raymond James. Your line is open. Pavel Molchanov – Raymond James: Thanks. Two questions with relation to solar. First in inverters, what do you think will be the average industry-wide price decline in 2014 and how will your price decline compare to that?

You know, I think the wonderful thing about our company – and Gordon will answer that specifically. The wonderful thing about our company is that huge competitive advantage we have: as we put products through Shenzhen, as we outsource through Shenzhen, we should have the lowest cost in the industry. There’s no question in my mind. We’re fighting a lot of vertically integrated companies that have a difficult time being nimble, moving around. We don’t. I believe we’ll have the lowest cost of anyone as we move forward and we should see our costs coming down at quite a rapid rate, as for instance the Three-Phase String moves into our Shenzhen facility, as the 1 MW gets more and more through our supply chain and goes through our Shenzhen facility. So Gordon?

To come back to the question on pricing, there’s experts out there who purport to be able to predict these things, and all I know is that in 2013 they got those horribly wrong. So what we focus on as Garry said is we’re pulling costs out of our products every day through new designs, through new products, through sourcing, through our supply chain management machine. And so we’re in a position to be competitive on a project-by-project basis. So that’s what we’re looking to do. Our pricing typically comes down a little softer than what the industry looks at because we are not out there as Garry said chasing revenue at any cost. We’re very focused as I said before on trying to grow the business in a profitable, sustained manner. Pavel Molchanov – Raymond James: Okay. And then to the Thin Films segment, is there any revival in the solar element of your Thin Film revenue? Or is that still pretty much on the sidelines.

It’s still pretty much depressed and we right now do not see any significant investment in the area. In Q3 though we had some investment that was driven by technology as companies were investing in new cell development for efficiency gain. But that was some R&D business that happened in Q3 and did not repeat itself – that’s why we saw some decline in Q4. We do not anticipate in 2014 to see any significant growth in the cell manufacturing equipment investment. Pavel Molchanov – Raymond James: Okay, and just a last quick one. You obviously highlighted the big cash build in Q4. Given how much cash you’re throwing off would you consider activating your buyback authorization at some point in the next twelve months?

That’s a great question. Obviously this is a great cash generating machine; in fact, the recent acquisition we just made, again there is no manufacturing so we have no manufacturing as we go forward which means we’re continuing to find ways to be a cash generating machine. What will we use that cash for? Number one is to invest in ourselves, to make the company more efficient. Number two is acquisitions and number three is absolutely buybacks. If we feel it’s time or we’ve got nothing to do with the cash, we will buy back. But saying that, there are acquisitions there. We are finding lots of little spots that can add to our machine where there’s no manufacturing, where our Shenzhen facility can take control of the supply chain. We’re seeing lots of opportunities, that’s not to say that they’ll all come but there are lots of opportunities out there and we are working on them feverishly to try and land a few more as we go forward. Again, you know, I know we’re too small. We need to get bigger and get into more applications.

And if you think about our recent acquisition it came with, as Garry said, no manufacturing. The working capital will begin at zero because it’s contract manufacturing so we’ll pay for product at about the same time we get paid for it. So it’s a great impact on our return on net assets. Pavel Molchanov – Raymond James: Thanks very much.

Our next question comes from Mehdi Hosseini with SIG. Your line is open. Mehdi Hosseini – Susquehanna International Group: Yes, thanks for taking my question. Garry, can you elaborate on book to bill for Thin Films and Inverter?

What I can tell you is that our backlog has increased over the year. Is that correct, Danny? I just want to make absolutely sure.

Yes, over the year.

Our backlog has increased over the year. Mehdi Hosseini – Susquehanna International Group: How about the last quarter?

I don’t think we…

We don’t report that.

We don’t report that on a quarterly basis. It’s a good question and I would ask it as well but we don’t report it on a quarterly basis. I think we have given you color in that the 1 MW backlog has increased significantly over the last six months or so and we are now ramping up to ship that backlog out. We’ve shipped a few out in Q4 and it’s stepping up into Q1, and as I said before we think we’ll be at that sort of number we want to be out in Q2. Mehdi Hosseini – Susquehanna International Group: Got it. And then for the purpose of modeling, looking to 2014 and looking at some of the restructuring you have done, I see your revenues in 2013 up 21% on a year-over-year basis but gross margin improved by only 130 basis points. Your operating margin improved dramatically but I see a lot of cutting or moderate spending in R&D. If I were to compare 2013 to 2011, revenues are up 5% but gross margin is actually down and you get operating margin improvement by reducing R&D spending. And I do understand you have this slide that talks about how cost cutting is impacting, and the big impact or the biggest dollar of cutting happened in 2013. So as I look at ’14 and if I make the assumption for the revenue growth, how should I think about gross margin and operating margin expansion because it seems to me the past trend is not really applicable going forward.

Well, maybe just a bit of a comment – our R&D is more efficient than it’s ever been. We’re producing more products, more derivatives than we ever have. So I’m pleased if we’re spending a little bit less and producing more and I hope your world is pleased with that as well. Mehdi Hosseini – Susquehanna International Group: The $60 million of cost saving in 2013, is that going to show up in gross margin improvement in ’14? And how will it impact operating margin and so forth?

I understand on the gross margin side, I think it’s amazing that we’ve kept our gross margins flat. Every quarterly meeting I’m in you’re asking “Oh, the pricing’s going down on our inverters, the pricing’s going down here, the pricing’s going down here; there’s pressure in semi because of the consolidation.” But our gross margins have stayed flat. Well done, AE, we’ve done a good job. So that’s good, that our gross margins have stayed the same and our R&D has gotten more efficient. That’s pretty good as we go forward. Danny, would you like to say a few comments?

Well, I’d say our quarterly EPS has grown consistently over the last two and a half years as a result of that cost cutting, as a result of focus on new products, as a result of us being in new markets. The guidance we gave today, if you take the midpoint of the guidance on a year-over-year basis versus last year’s Q1 we’re up almost 30% in revenues; we’re up in the new products we’re introducing.

I think that’s the difference between us and others and it’s taking a lot of people time to get used to it. We have little interest market share. We have an interest in earnings per share and cash generation, that’s what we’re interested in. We had an average year for cash generation last year, what was it, about $40 million? It was an average year. But we’re coming along. I think over the last two years we’ve generated $140 million, $150 million?

Yep, about $150 million.

So that’s what we’re interested in – cash generation, earnings per share. And that comes from us winning in semi, going into new applications in semi. As I said before it’s embarrassing how well we’re doing in semi. Going into new applications, going in more into inverters, stepping on the accelerator a little bit there – I meant that’s what’s going to happen as we go through. Mehdi Hosseini – Susquehanna International Group: Should we assume margins would be in the high 30%s? If you have sizable revenue growth, the majority of your new growth from operations is going to come from just a better scaling of OPEX – is that how we should model it?

On gross margin, what you’re going to have to do is guess the mix of products because we don’t tell you the mix. So you’re going to have to guess the mix of products coming through here and that’s the key for you, is to… And I think we try to give you enough color. We’ve said over the year that the inverters should grow and we have a backlog there of 1 MW products. We have the Three-Phase String which we’re starting to release into more and more countries which should grow. At the same time we’ve got a very high margin semi business and extra margin other products in the Thin Films. So you’re going to need to make a judgment there. What we try and do is give you a smorgasbord to choose from and come out with where you think we’re going to be. What we’ve said is we think we’re going to continue to grow this year. We’re in good shape. We’ve done everything… We haven’t done everything we can, that’s ridiculous. We’ve done a lot to put us in a good position to win this year and our win is earnings per share. Our win is earnings per share. So you need to model backwards and obviously we’ll point out things we’ve said that can help you get to that. But as I said, we think the inverters are going to grow a little bit this year. We think semi’s going to have a good time; we think we’re going to get more into hard coatings. So we’re in good shape and there may be a few acquisitions to come, who knows? Mehdi Hosseini – Susquehanna International Group: You got it, thanks for the color. I appreciate it.

Thank you, thanks for the question.

Our next question comes from Krish Sankar with Bank of America Merrill Lynch. Your line is open. Andrew Hughes – Bank of America Merrill Lynch: Good morning, everyone, this is Andrew on for Krish. Good morning, guys. A question on the Japanese inverter opportunity, I’m curious if that is looking at that as exclusively a Three-Phase market or if there’s opportunity for the 1 MW in there as well and whether or not you’ll be selling in conjunction with a partner or under the AEIS brand?

I’ll say just a few words about Japan. We have an infrastructure in Japan for all our product lines, so that’s a great start for us as we go forward. We had wins last year – I think we told you we won some great projects in Japan in the Thin Film area, and I think we’ve also told you we got our first order for a Three-Phase String product line in Japan. And obviously it’s a good market for us that we need to get into more and we have a plan to get there. And Gordon might comment on that a bit more.

Yeah, so for Japan we’re excited about the prospects. We have a partnership that we’ll be saying more about very soon and we’re excited about the products for the Three-Phase String products because they’re particularly well suited to that market through this partnership that we’ve developed. The utility scale is not something that we’re currently selling into but at the same time as we’ve gone into Japan and started to talk to more people there are opportunities that are being identified, and as Garry said we’re very well positioned in Japan now. We have people on the ground; we’re active in the market. And as I said in the prepared remarks we’re expecting Japan will be a big contributor to our success in 2015.

Again, be careful. I think we’re positioned well for 2014 and we start talking about things where we’re really get traction in 2015. And we’re now really putting the pieces in place for 2015. 2014 is in some ways set. We have great products, we’re going into new geographies, we’re off to the races. So be careful when you’re modeling. I think we released our real product store of inverters in Japan in Q2 sometime so just don’t get too carried away. Andrew Hughes – Bank of America Merrill Lynch: Gotcha, and then speaking of that geography for a second, any impact of foreign exchange on margins especially related to Thin Film products sales in Japan in Q4?

Well, the answer to that is no. But as we get more global obviously we have to take much, much more interest in exchange rates. Our employee base in Germany is increasing; we have an employee base in Switzerland. We’re in the US, we’re in China of course. So exchange rate is becoming a more interesting thing for us and we have to watch it much, much more carefully than we ever have. So that’s a good question and one that should be asked every quarter I think. Andrew Hughes – Bank of America Merrill Lynch: Alright great, thanks a lot. That’s all from me.

Thank you.

Our final question comes from Joe Maxa with Dougherty & Company. Your line is open. Joe Maxa – Dougherty & Company: Thank you, good morning. I wanted to just explore a little bit on this acquisition you made, the Power Control Modules. They were generating annually I think about $19 million – is that the expectation we should assume this year or is it a growing business, is it slowing? Maybe a little color on why AEG parted with it and those types of things.

Absolutely. Firstly, Yuval’s going to answer the question. Again, remember the first quarter or so these things are always a bit of a mess so don’t expect anything out of it in the first quarter or so. But after that yes, we expect nice revenue from it. We expect a good earnings per share contribution from it and excellent (inaudible) performance from it. Yuval is going to answer more to you.

Sure. So it’s a very lean business as Danny said. We outsource the manufacturing; we didn’t inherit any trade working capital and from our perspective it’s an easy business to integrate. And our strategy is to grow the business further. And the number you quoted that came through press releases is correct – it’s about €14 million annually. It’s profitable, very accretive, and what we are going to do is to, just like we did with the hard coating products we’re going to launch these products globally using our distribution network, service locations around the world and support organization to expand the growth of this product to other applications. The other growth opportunity is a synergy between some of our current products and this product line which will result in integrated solutions that will accelerate growth and provide much higher value. The interesting part, in this specific business what attracted us in addition to the profitability and the structure is the fact that this is not a Thin Film per se product line, not a semi per se product line. It’s very distributed, it’s very global and it goes after many industrial applications which is in line with our growth strategy. When we talked about it at the Analysts Day we talked about we need to expand beyond semi and beyond Thin Films to expand ourselves to applications, industrial applications that are less cyclical, that are more global and more diversified. Joe Maxa – Dougherty & Company: I see. Are you maintaining your sales staff or are you having some impact on OPEX at this point for the quarter until you’re able to grow the business?

We basically retain a team of product marketing, engineering and R&D in the same place where they’re located today. We have a small sales team, a global sales team that we will absorb into our organization and we’re not going to add beyond that anything else. We have enough power in our distribution channels to drive these products through the channel.

I think some of the synergies you get are absolutely fascinating. Yuval pointed out one where we’re packaging it up with some of our products as well, but just them being in India and getting a reasonable volume in India we now have a distribution channel for our products in India which is great. They actually needed to do a little bit of assembly in India where we actually do a little bit of assembly in India. There are lots of sort of hidden benefits, well not hidden benefits – I’ve just told you. But there are a lot of little benefits that come out of this type of acquisition as long as we keep to our model. If we don’t keep to our model, if you buy things that have got God knows how much manufacturing and this rubbish behind them, then you’re in trouble. You can’t manage it; you can’t get the cash out of it. But the way we’re doing it I think we can do quite well. Joe Maxa – Dougherty & Company: Okay, thank you.

Thank you.

I guess one other point: remember on the acquisition it will be a bit muddled for the next month or two and then Yuval will come out I guess at the beginning of the next quarter to tell you where we are with it. I guess you have stopped asking questions so thank you so much for listening. Hey, we are in a great position for the year. Our products are in a better position than they’ve ever been. We’re in good applications, good geographies. I’m looking forward to a very exciting year ahead and we’re going to keep you informed and be as granular as we can. I look forward to seeing you at the next conference, good-bye.

Thank you. Ladies and gentlemen, that does conclude today’s conference. You may all disconnect and have a wonderful day.