Diodes Incorporated Reports Second Quarter 2020 Financial Results

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 second quarter 2020 GAAP net income and non-GAAP adjusted net income was approximately $4.7 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 $0.09 per diluted share for second quarter 2020, $0.07 for first quarter 2020 and $0.08 for second quarter 2019.

EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, in the second quarter 2020 was $55.3 million, or 19.2 percent of revenue, compared to $52.9 million, or 18.9 percent of revenue, in the first quarter 2020 and $77.1 million, or 23.9 percent of revenue, in the second quarter 2019. For a reconciliation of GAAP net income to EBITDA, see the table near the end of this release for further details.

For second quarter 2020, net cash provided by operating activities was $33.1 million. Net cash flow was a positive $283.7 million, including a $200 million initial draw-down of debt as a partial currency hedge associated with the anticipated close of the Lite-On acquisition later in the year. Free cash flow (a non-GAAP measure) was $16.5 million, which includes $16.5 million of capital expenditures.

Balance Sheet

As of June 30, 2020, the Company had approximately $507 million in cash, cash equivalents and short-term investments. Long-term debt (including the current portion) totaled approximately $295 million and working capital was approximately $801 million.

The results announced today are preliminary and unaudited, as they are subject to the Company finalizing its closing procedures and customary quarterly review by the Company's 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 June 30, 2020.

Business Outlook

Dr. Lu concluded, “For the third quarter of 2020, we expect revenue to increase to approximately $304 million, plus or minus 3 percent. We expect GAAP gross margin to be 35.5 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 23.0 percent of revenue, plus or minus 1 percent. We expect non-GAAP net interest expense to be approximately $1.5 million. Our income tax rate is expected to be 18 percent, plus or minus 3 percent, and shares used to calculate diluted EPS for the third quarter are anticipated to be approximately 52.8 million.”

Purchase accounting adjustments related to amortization of acquisition-related intangible assets of $3.3 million, after tax, for Pericom and previous acquisitions is not included in these non-GAAP estimates. Also not included is $2.4 million of Lite-On acquisition-related financing costs.

Conference Call

Diodes will host a conference call on Thursday, August 6, 2020 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second quarter 2020 financial results. Investors and analysts may join the conference call by dialing 1-855-232-8957 and providing the confirmation code 1495588. International callers may join the teleconference by dialing +1-315-625-6979 and entering the same confirmation code at the prompt. A telephone replay of the call will be made available approximately two hours after the call and will remain available until August 13, 2020 at midnight Central Time. The replay number is 1-855-859-2056 with a pass code of 1495588. International callers should dial +1-404-537-3406 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 http://www.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 consumer electronics, computing, communications, industrial, and automotive 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 28 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 revenue growth, market share gains, increase in gross margin and increase in gross profits in 2020 and beyond; that for the third quarter of 2020, we expect revenue to be approximately $304 million plus or minus 3.0 percent; we expect GAAP gross margin to be 35.5 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 23.0 percent of revenue, plus or minus 1 percent; we expect non-GAAP net interest expense to be approximately $1.5 million; we expect our income tax rate to be 18 percent, plus or minus 3 percent; shares used to calculate diluted EPS for the third quarter are anticipated to be approximately 52.8 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 we may not be able to consummate our previously announced acquisition of Lite-On Semiconductor Corporation (“LSC”) on the terms and in the time frame currently contemplated (including the risk that regulatory reviews may delay the acquisition or require significant revisions to the terms and conditions associated with the acquisition); 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.

 
 
 
 

DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30

 

 

June 30

 

 

 

2020

 

 

 

2019

 

 

 

 

2020

 

 

 

2019

 

Net sales

$

288,669

 

$

322,006

 

$

569,386

 

$

624,299

 

Cost of goods sold

 

187,177

 

 

200,018

 

 

372,052

 

 

389,900

 

Gross profit

 

101,492

 

 

121,988

 

 

197,334

 

 

234,399

 

 
Operating expenses
Selling, general and administrative

 

45,372

 

 

47,333

 

 

87,587

 

 

91,021

 

Research and development

 

21,322

 

 

21,707

 

 

45,000

 

 

43,877

 

Amortization of acquisition related intangible assets

 

4,021

 

 

4,536

 

 

8,242

 

 

9,020

 

Other operating income

 

(92

)

 

(104

)

 

(216

)

 

(158

)

Total operating expense

 

70,623

 

 

73,472

 

 

140,613

 

 

143,760

 

 
Income from operations

 

30,869

 

 

48,516

 

 

56,721

 

 

90,639

 

 
Other income (expense)
Interest income

 

168

 

 

633

 

 

441

 

 

1,508

 

Interest expense

 

(2,653

)

 

(2,011

)

 

(3,898

)

 

(4,156

)

Foreign currency loss, net

 

(3,600

)

 

(496

)

 

(3,525

)

 

(560

)

Other income

 

1,274

 

 

1,235

 

 

1,275

 

 

2,480

 

Total other expense

 

(4,811

)

 

(639

)

 

(5,707

)

 

(728

)

 
Income before income taxes and noncontrolling interest

 

26,058

 

 

47,877

 

 

51,014

 

 

89,911

 

Income tax provision

 

4,670

 

 

11,174

 

 

9,226

 

 

21,472

 

Net income

 

21,388

 

 

36,703

 

 

41,788

 

 

68,439

 

Less net income attributable to noncontrolling interest

 

(355

)

 

(419

)

 

(587

)

 

(439

)

Net income attributable to common stockholders

$

21,033

 

$

36,284

 

$

41,201

 

$

68,000

 

 
Earnings per share attributable to common stockholders:
Basic

$

0.41

 

$

0.72

 

$

0.80

 

$

1.35

 

Diluted

$

0.40

 

$

0.70

 

$

0.78

 

$

1.32

 

Number of shares used in earnings per share computation:
Basic

 

51,527

 

 

50,658

 

 

51,431

 

 

50,529

 

Diluted

 

52,569

 

 

51,620

 

 

52,517

 

 

51,566

 

Note: Throughout this release, we refer to “net income attributable to common stockholders” as “net income.”

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