Gross Margin Remains Above 41% for Four
Consecutive Quarters; Automotive and Industrial Reach a Record 47%
of Product Revenue
Diodes Incorporated (Diodes) (Nasdaq: DIOD) today reported its
financial results for the first quarter ended March 31, 2023.
First Quarter Highlights
- Revenue was $467.2 million, decreasing 3.1 percent from $482.1
million in the first quarter 2022 and down 5.8 percent from $496.2
million in the fourth quarter 2022;
- GAAP gross profit was $194.5 million, decreasing 1.1 percent
from $196.7 million in the first quarter 2022 and down 5.7 percent
from $206.2 million in the fourth quarter 2022;
- GAAP gross profit margin was 41.6 percent, an increase of 80
basis points from 40.8 percent in the first quarter 2022 and flat
compared to 41.6 percent in the fourth quarter 2022;
- GAAP net income was $71.2 million, compared to $72.7 million in
the first quarter 2022 and $92.1 million in the fourth quarter
2022;
- Non-GAAP adjusted net income was $73.4 million, compared to
$80.3 million in the first quarter 2022 and $79.6 million in the
fourth quarter 2022;
- GAAP EPS was $1.54 per diluted share, compared to $1.59 per
diluted share in the first quarter 2022 and $2.00 per diluted share
in the fourth quarter 2022;
- Non-GAAP EPS was $1.59 per diluted share, compared to $1.75 per
diluted share in the prior year quarter and $1.73 per diluted share
last quarter;
- Excluding $7.7 million, net of tax, of non-cash share-based
compensation expense, both GAAP and non-GAAP earnings per share
would have increased by $0.17 per diluted share;
- EBITDA was $121.8 million, or 26.1 percent of revenue, compared
to $118.2 million, or 24.5 percent of revenue, in the first quarter
2022 and $129.6 million, or 26.1 percent of revenue, in the fourth
quarter 2022; and
- Achieved cash flow from operations of $99.8 million and $51.8
million of free cash flow, including $48.0 of capital expenditures.
Net cash flow was a negative $15.2 million, including the pay down
of $60.8 million of total debt.
Commenting on the results, Dr. Keh-Shew Lu, Chairman, President
and Chief Executive Officer, stated, “Our first quarter results
were highlighted by continued strength in our gross margin
performance, which was at the high-end of our guidance despite the
seasonally lower revenue and economic slowdown in the consumer,
communications and computing markets. In fact, gross margin has
remained over 41% for the past four quarters and above our target
model of 40%, underscoring our execution on new product initiatives
and product mix improvements. A key contributor to our improved mix
has been our success expanding into the automotive and industrial
markets, which together represented a record 47% of total product
revenue in the quarter. Another contributing factor to our
consistent margin improvement is our manufacturing cost reductions
and operational efficiencies, which have also allowed us to
maintain healthy margins despite the COVID-related disruptions and
the Chinese New Year holiday during the quarter.
“Over the past several years, we have taken significant steps to
transform our business as well as our customer and market
positioning based on a total solutions sales approach, extensive
pipeline of new product introductions and design wins. Today,
Diodes has a diversified business across product groups, end
markets and applications, as well as geographies that are further
supported by a flexible manufacturing model and a team that is
highly focused on consistent execution and sustainable quarterly
performance. These fundamental factors position us well to not only
sustain our margin profile during an economic slowdown, but also
continue driving even higher profitability and cash flow in more
favorable economic environments.”
First Quarter 2023
Revenue for first quarter 2023 was $467.2 million, decreasing
3.1 percent from $482.1 million in the first quarter 2022 and down
5.8 percent from $496.2 million in the fourth quarter 2022.
GAAP gross profit for the first quarter 2023 was $194.5 million,
or 41.6 percent of revenue, compared to $196.7 million, or 40.8
percent of revenue, in the first quarter of 2022 and $206.2
million, or 41.6 percent of revenue, in the fourth quarter
2022.
GAAP operating expenses for first quarter 2023 were $108.0
million, or 23.1 percent of revenue, and on a non-GAAP basis were
$101.3 million, or 21.7 percent of revenue, which excludes $3.9
million of amortization of acquisition-related intangible asset
expenses and $2.8 million related to officer retirement. GAAP
operating expenses in the first quarter 2022 were $103.6 million,
or 21.5 percent of revenue, and in the fourth quarter 2022 were
$109.7 million, or 22.1 percent of revenue.
First quarter 2023 GAAP net income was $71.2 million, or $1.54
per diluted share, compared to GAAP net income in the first quarter
2022 of $72.7 million, or $1.59 per diluted share, and GAAP net
income of $92.1 million, or $2.00 per diluted share, in the fourth
quarter 2022.
First quarter 2023 non-GAAP adjusted net income was $73.4
million, or $1.59 per diluted share, which excluded, net of tax,
$3.1 million of acquisition-related intangible asset costs, $2.3
million of officer retirement expenses and a $3.1 million gain
related to an LSC investment. This compares to non-GAAP adjusted
net income of $80.3 million, or $1.75 per diluted share, in the
first quarter 2022 and $79.6 million, or $1.73 per diluted share,
in the fourth quarter 2022.
The following is an unaudited summary reconciliation of GAAP net
income to non-GAAP adjusted net income and per share data, net of
tax (in thousands, except per share data):
Three Months Ended March 31, 2023 GAAP net
income
$
71,150
GAAP diluted earnings per share
$
1.54
Adjustments to reconcile net income to non-GAAP net
income: Amortization of acquisition-related
intangible assets
3,145
Officer retirement
2,262
LSC investment related
(3,111
)
Non-GAAP net income
$
73,446
Non-GAAP diluted earnings per share
$
1.59
Note: Throughout this release, we refer to “net income
attributable to common stockholders” as “net income.”
(See the reconciliation tables of GAAP net income to non-GAAP
adjusted net income near the end of this release for further
details.)
Included in first quarter 2023 GAAP net income and non-GAAP
adjusted net income was approximately $7.7 million, net of tax, of
non-cash share-based compensation expense. Excluding share-based
compensation expense, both GAAP earnings per share (“EPS”) and
non-GAAP adjusted EPS would have increased by $0.17 per diluted
share for the first quarter 2023, $0.14 for first quarter 2022 and
$0.16 for the fourth quarter 2022.
EBITDA (a non-GAAP measure), which represents earnings before
net interest expense, income tax, depreciation and amortization, in
first quarter 2023 was $121.8 million, or 26.1 percent of revenue,
increasing from $118.2 million, or 24.5 percent of revenue, in
first quarter 2022 and a decrease from the $129.6 million, or 26.1
percent of revenue, in fourth quarter 2022. For a reconciliation of
GAAP net income to EBITDA, see the table near the end of this
release for further details.
For first quarter 2023, net cash provided by operating
activities was $99.8 million. Net cash flow was a negative $15.2
million, which includes the pay down of $60.8 million of total
debt. Free cash flow (a non-GAAP measure) was $51.8 million, which
includes $48.0 million of capital expenditures.
Balance Sheet
As of March 31, 2023, the Company had approximately $335 million
in cash and cash equivalents, restricted cash, and short-term
investments. Total debt (including long-term and short-term)
amounted to approximately $125 million and working capital was
approximately $731 million.
The results announced today are preliminary and unaudited, as
they are subject to the Company finalizing its closing procedures
and completion of the quarterly review by its independent
registered public accounting firm. As such, these results are
subject to revision until the Company files its Form 10-Q for the
quarter ending March 31, 2023.
Business Outlook
Dr. Lu concluded, “For the second quarter of 2023, we expect
revenue to be approximately $467 million, plus or minus 3 percent.
With a slower than expected recovery in the consumer, computing and
communications markets, we are guiding flat sequentially at the
mid-point to reduce the 3C channel inventory. The automotive and
industrial markets are expected to remain strong. We also expect to
continue driving our strategy of improved product mix and are
guiding GAAP gross margin to be a record 41.8 percent, plus or
minus 1 percent. Non-GAAP operating expenses, which are GAAP
operating expenses adjusted for amortization of acquisition-related
intangible assets, are expected to be approximately 22.0 percent of
revenue, plus or minus 1 percent. We expect net interest expense to
be approximately $1.0 million. Our income tax rate is expected to
be 20.0 percent, plus or minus 3 percent, and shares used to
calculate diluted EPS for the second quarter are anticipated to be
approximately 46.5 million.”
Amortization of acquisition-related intangible assets of $3.1
million, after tax, for previous acquisitions is not included in
these non-GAAP estimates.
Conference Call
Diodes will host a conference call on Tuesday, May 9, 2023 at
4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its
first quarter financial results. Investors and analysts may join
the conference call by dialing 1-833-634-2590, and
international callers may join the teleconference by dialing
+1-412-317-6038. A telephone replay of the call will be made
available approximately two hours after the call and will remain
available until May 16, 2023 at midnight Central Time. The replay
number is 1-877-344-7529 with a pass code of 8975900. International
callers should dial +1-412-317-0088 and enter the same pass code at
the prompt.
Additionally, this conference call will be broadcast live over
the Internet and can be accessed by all interested parties on the
Investors’ section of Diodes' website at
https://investor.diodes.com. To listen to the live call, please go
to the investors’ section of Diodes’ website and click on the
conference call link at least 15 minutes prior to the start of the
call to register, download and install any necessary audio
software. For those unable to participate during the live
broadcast, a replay will be available shortly after the call on
Diodes' website for approximately 90 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD), a Standard and Poor’s
SmallCap 600 and Russell 3000 Index company, delivers high-quality
semiconductor products to the world’s leading companies in the
automotive, industrial, computing, consumer electronics, and
communications markets. We leverage our expanded product portfolio
of discrete, analog, and mixed-signal products and leading-edge
packaging technology to meet customers’ needs. Our broad range of
application-specific solutions and solutions-focused sales, coupled
with worldwide operations of 32 sites, including engineering,
testing, manufacturing, and customer service, enables us to be a
premier provider for high-volume, high-growth markets. For more
information visit www.diodes.com.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995: Any statements set forth above that are not
historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such
statements include statements containing forward-looking words such
as “expect,” “anticipate,” “aim,” “estimate,” and variations
thereof, including without limitation statements, whether direct or
implied, regarding expectations of that for the second quarter of
2023, we expect revenue to be approximately $467 million plus or
minus 3 percent; we expect GAAP gross margin to be 41.8 percent,
plus or minus 1 percent; non-GAAP operating expenses, which are
GAAP operating expenses adjusted for amortization of
acquisition-related intangible assets, are expected to be
approximately 22.0 percent of revenue, plus or minus 1 percent; we
expect non-GAAP net interest expense to be approximately $1.0
million; we expect our income tax rate to be 20.0 percent, plus or
minus 3 percent; shares used to calculate diluted EPS for the
second quarter are anticipated to be approximately 46.5 million.
Potential risks and uncertainties include, but are not limited to,
such factors as: the risk that the COVID-19 pandemic may continue
and have a material adverse effect on customer demand and staffing
of our production, sales and administration facilities; the risk
that such expectations may not be met; the risk that the expected
benefits of acquisitions may not be realized or that integration of
acquired businesses may not continue as rapidly as we anticipate;
the risk that the cost, expense, and diversion of management
attention associated with the LSC acquisition may be greater than
we currently expect; the risk that we may not be able to maintain
our current growth strategy or continue to maintain our current
performance, costs, and loadings in our manufacturing facilities;
the risk that we may not be able to increase our automotive,
industrial, or other revenue and market share; risks of domestic
and foreign operations, including excessive operating costs, labor
shortages, higher tax rates, and our joint venture prospects; the
risks of cyclical downturns in the semiconductor industry and of
changes in end-market demand or product mix that may affect gross
margin or render inventory obsolete; the risk of unfavorable
currency exchange rates; the risk that our future outlook or
guidance may be incorrect; the risks of global economic weakness or
instability in global financial markets; the risks of trade
restrictions, tariffs, or embargoes; the risk that the coronavirus
outbreak or other similar epidemics may harm our domestic or
international business operations to a greater extent than we
currently anticipate; the risk of breaches of our information
technology systems; and other information, including the “Risk
Factors” detailed from time to time in Diodes’ filings with the
United States Securities and Exchange Commission.
The Diodes logo is a registered trademark of Diodes Incorporated
in the United States and other countries.
© 2023 Diodes Incorporated. All Rights Reserved
DIODES INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share
data)
Three Months Ended
March 31, 2023
2023
2022
Net sales
$
467,241
$
482,123
Cost of goods sold
272,787
285,426
Gross profit
194,454
196,697
Operating expenses Selling, general and
administrative
70,991
71,443
Research and development
33,232
28,677
Amortization of acquisition-related intangible assets
3,852
3,862
Other operating expense (income)
(48
)
(343
)
Total operating expense
108,027
103,639
Income from operations
86,427
93,058
Other (expense) income Interest income
1,772
826
Interest expense
(2,132
)
(1,114
)
Foreign currency (loss) gain, net
(1,893
)
1,721
Unrealized (loss) gain on investments
3,889
(5,548
)
Other income
530
1,876
Total other (expense) income
2,166
(2,239
)
Income before income taxes and noncontrolling
interest
88,593
90,819
Income tax provision
16,616
16,646
Net income
71,977
74,173
Less net (income) attributable to noncontrolling interest
(827
)
(1,482
)
Net income attributable to common stockholders
$
71,150
$
72,691
Earnings per share attributable to common
stockholders: Basic
$
1.56
$
1.61
Diluted
1.54
$
1.59
Number of shares used in earnings per share computation:
Basic
45,600
45,104
Diluted
46,161
45,844
Note: Throughout this release, we
refer to “net income attributable to common stockholders” as “net
income.”
DIODES INCORPORATED AND
SUBSIDIARIES
RECONCILIATION OF NET INCOME
TO ADJUSTED NET INCOME
(in thousands, except per share
data)
(unaudited)
For the three months
ended March 31, 2023:
OperatingExpenses Other(Income)Expense
Income TaxProvision Net Income Per-GAAP
$
71,150
Diluted earnings per share (per-GAAP)
$
1.54
Adjustments to reconcile net income to non-GAAP net
income: Amortization of acquisition-related intangble
assets
3,852
(707
)
3,145
Officer retirement
2,845
(583
)
2,262
LSC investment related
(3,889
)
778
(3,111
)
Non-GAAP
$
73,446
Diluted shares used in computing earnings per share
46,161
Non-GAAP diluted earnings per share
$
1.59
Note: Included in GAAP and non-GAAP net
income was approximately $7.7 million, net of tax, non-cash
share-based compensation expense. Excluding share-based
compensation expense, both GAAP and non-GAAP diluted earnings per
share would have increased by $0.17 per share.
DIODES INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF
NET INCOME TO ADJUSTED NET INCOME – Cont.
(in thousands, except per share
data)
(unaudited)
For the three months
ended March 31, 2022:
OperatingExpenses OtherIncome(Expense)
IncomeTaxProvision Net Income Per-GAAP
$
72,691
Diluted earnings per share (per-GAAP)
1.59
Adjustments to reconcile net income to non-GAAP net
income: Amortization of acquisition-related
intangible assets
3,862
(706
)
3,156
Acquisition-related costs
275
(57
)
218
LSC Investment Related
5,548
(1,303
)
4,245
Non-GAAP
$
80,310
Diluted shares used in computing earnings per share
45,844
Non-GAAP diluted earnings per share
$
1.75
Note: Included in GAAP and non-GAAP
adjusted net income was approximately $6.4 million, net of tax,
non-cash share-based compensation expense. Excluding share-based
compensation expense, both GAAP and non-GAAP adjusted diluted
earnings per share would have increased by $0.14 per share.
ADJUSTED NET INCOME
AND ADJUSTED EARNINGS PER SHARE
The Company’s financial statements present net income and
earnings per share that are calculated using accounting principles
generally accepted in the United States (“GAAP”). The Company’s
management makes adjustments to the GAAP measures that it feels are
necessary to allow investors and other readers of the Company’s
financial releases to view the Company’s operating results as
viewed by the Company’s management, board of directors and research
analysts in the semiconductor industry. These non-GAAP measures are
not prepared in accordance with, and should not be considered
alternatives or necessarily superior to, GAAP financial data and
may be different from non-GAAP measures used by other companies.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies’ non-GAAP financial measures, even if they have similar
names. The explanation of the adjustments made in the table above,
are set forth below:
Detail of non-GAAP adjustments:
Amortization of acquisition-related
intangible assets – The Company excluded this item,
including amortization of developed technologies and customer
relationships. The fair value of the acquisition-related intangible
assets is amortized using straight-line methods which approximate
the proportion of future cash flows estimated to be generated each
period over the estimated useful life of the applicable assets. The
Company believes that exclusion of this item is appropriate because
a significant portion of the purchase price for its acquisitions
was allocated to the intangible assets that have short lives and
exclusion of the amortization expense allows comparisons of
operating results that are consistent over time for both the
Company’s newly acquired and long-held businesses. In addition, the
Company excluded this item because there is significant variability
and unpredictability among companies with respect to this
expense.
Acquisition related costs –
The Company excluded expenses associated with previous acquisitions
of that typically consist of advisory, legal and other professional
and consulting fees. These costs were expensed as they were
incurred and as services were received, and in which the
corresponding tax adjustments were made for the non-deductible
portions of these expenses. The Company believes the exclusion of
the acquisition related costs provides investors with a more
accurate reflection of costs likely to be incurred in the absence
of an unusual event such as an acquisition and facilitates
comparisons with the results of other periods that may not reflect
such costs.
Officer retirement – The
Company excluded costs related to the retirement of two executives.
These costs represent cash payments and the accelerated vesting of
previously issued stock awards. The Company feels it is appropriate
to exclude these costs since they don’t represent ongoing operating
expenses and will present investors with a more accurate indication
of our continuing operations.
LSC investments related –
The Company excluded market to market adjustments and the
associated tax on certain LSC equity investments. The Company has
also excluded certain taxes related to integration and
restructuring activities within certain Taiwan subsidiaries
including LSC. The Company believes this is not reflective of the
ongoing operations and exclusion of this provides investors an
enhanced view of the Company’s operating results.
CASH FLOW
ITEMS
Free cash flow (FCF)
(Non-GAAP)
FCF for the first quarter of 2023 is a non-GAAP financial
measure, which is calculated by subtracting capital expenditures
from cash flow from operations. For the first quarter of 2023, FCF
was $51.8 million, which represents the cash and cash equivalents
that we are able to generate after taking into account cash outlays
required to maintain or expand property, plant and equipment. FCF
is important because it allows us to pursue opportunities to
develop new products, make acquisitions and reduce debt.
CONSOLIDATED
RECONCILIATION OF NET INCOME TO EBITDA
EBITDA represents earnings before net interest expense, income
tax provision, depreciation and amortization. Management believes
EBITDA is useful to investors because it is frequently used by
securities analysts, investors and other interested parties, such
as financial institutions in extending credit, in evaluating
companies in our industry and provides further clarity on our
profitability. In addition, management uses EBITDA, along with
other GAAP and non-GAAP measures, in evaluating our operating
performance compared to that of other companies in our industry.
The calculation of EBITDA generally eliminates the effects of
financing, operating in different income tax jurisdictions, and
accounting effects of capital spending, including the impact of our
asset base, which can differ depending on the book value of assets
and the accounting methods used to compute depreciation and
amortization expense. EBITDA is not a recognized measurement under
GAAP, and when analyzing our operating performance, investors
should use EBITDA in addition to, and not as an alternative for,
income from operations and net income, each as determined in
accordance with GAAP. Because not all companies use identical
calculations, our presentation of EBITDA may not be comparable to
similarly titled measures used by other companies. For example, our
EBITDA takes into account all net interest expense, income tax
provision, depreciation and amortization without taking into
account any amounts attributable to noncontrolling interest.
Furthermore, EBITDA is not intended to be a measure of free cash
flow for management’s discretionary use, as it does not consider
certain cash requirements such as tax and debt service
payments.
The following table provides a
reconciliation of net income to EBITDA (in thousands,
unaudited):
Three Months Ended
March 31, 2023
2023
2022
Net income (per-GAAP)
$
71,150
$
72,691
Plus: Interest expense, net
360
288
Income tax provision
16,616
16,646
Depreciation and amortization
33,653
28,594
EBITDA (non-GAAP)
$
121,779
$
118,219
DIODES INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(in thousands)
March 31
December 31,
2023
2022
(unaudited)
(audited)
Assets Current assets: Cash and cash equivalents
$
323,146
$
336,732
Restricted Cash
2,761
4,367
Short-term investments
8,768
7,059
Accounts receivable, net of allowances of $5,861 and $5,852 atMarch
31, 2023 and December 31, 2022, respectively
369,054
369,233
Inventories
341,941
360,281
Prepaid expenses and other
76,101
83,999
Total current assets
1,121,771
1,161,671
Property, plant and equipment, net
755,707
736,730
Deferred income tax
36,185
35,308
Goodwill
145,937
144,757
Intangible assets, net
75,398
79,137
Other long-term assets
150,563
130,709
Total assets
$
2,285,561
$
2,288,312
Liabilities Current liabilities: Line of credit
$
34,651
$
36,280
Accounts payable
143,694
160,442
Accrued liabilities
176,952
214,433
Income tax payable
33,876
19,682
Current portion of long-term debt
1,173
1,693
Total current liabilities
390,346
432,530
Long-term debt, net of current portion
89,636
147,470
Deferred tax liabilities
13,012
12,903
Other long-term liabilities
126,894
112,490
Total liabilities
619,888
705,393
Commitments and contingencies
Stockholders'
equity Preferred stock - par value $1.00 per share; 1,000,000
shares authorized; no shares issued or outstanding
-
-
Common stock - par value $0.66 2/3 per share; 70,000,000 shares
authorized; 45,706,798 and 45,469,722, issued and outstanding at
March 31, 2023 and December 31, 2022, respectively
36,661
36,503
Additional paid-in capital
494,598
494,773
Retained earnings
1,519,242
1,448,092
Treasury stock, at cost, 9,281,581 shares held at March 31, 2023
and December 31, 2022
(337,490
)
(337,490
)
Accumulated other comprehensive loss
(117,546
)
(128,233
)
Total stockholders' equity
1,595,465
1,513,645
Noncontrolling interest
70,208
69,274
Total equity
1,665,673
1,582,919
Total liabilities and stockholders' equity
$
2,285,561
$
2,288,312
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509005891/en/
Company Contact: Diodes Incorporated Gurmeet Dhaliwal
Director, IR & Corporate Marketing P: 408-232-9003 E:
Gurmeet_Dhaliwal@diodes.com
Investor Relations Contact: Shelton Group Leanne Sievers
President, Investor Relations P: 949-224-3874 E:
lsievers@sheltongroup.com
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