Diodes Incorporated Reports Record Third Quarter Fiscal 2022 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 third quarter 2022 GAAP net income and non-GAAP adjusted net income was approximately $8.1 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 $0.18 per diluted share for the third quarter 2022, $0.18 for third quarter 2021 and $0.14 for the second quarter 2022.

EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, in third quarter 2022 was a record $141.9 million, or 27.2 percent of revenue, increasing from $114.5 million, or 24.3 percent of revenue, in third quarter 2021 and $130.6 million, or 26.0 percent of revenue, in second quarter 2022. For a reconciliation of GAAP net income to EBITDA, see the table near the end of this release for further details.

For third quarter 2022, net cash provided by operating activities was $132.2 million. Net cash flow was a positive $78.3 million. Free cash flow (a non-GAAP measure) was $62.4 million, which includes $69.8 million of capital expenditures.

Balance Sheet

As of September 30, 2022, the Company had approximately $393 million in cash and cash equivalents, restricted cash, and short-term investments. Total debt (including long-term and short-term) amounted to approximately $296 million and working capital was approximately $765 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 September 30, 2022.

Business Outlook

Dr. Lu concluded, “For the fourth quarter of 2022, we expect revenue to be approximately $494 million, plus or minus 3 percent, in-line with typical seasonality. GAAP gross margin is expected to be 41.0 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 21.0 percent of revenue, plus or minus 1 percent. We expect net interest expense to be approximately $4.0 million. Our income tax rate is expected to be 19.0 percent, plus or minus 3 percent, and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately 46.5 million.”

Amortization of acquisition-related intangible assets of $3.2 million, after tax, for previous acquisitions is not included in these non-GAAP estimates.

Conference Call

Diodes will host a conference call on Monday, November 7, 2022, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second 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 November 14, 2022 at midnight Central Time. The replay number is 1-877-344-7529 with a pass code of 5714382. 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 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 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 fourth quarter of 2022, we expect revenue to be approximately $494 million plus or minus 3 percent; we expect GAAP gross margin to be 41.0 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 21.0 percent of revenue, plus or minus 1 percent; we expect non-GAAP net interest expense to be approximately $4.0 million; we expect our income tax rate to be 19.0 percent, plus or minus 3 percent; shares used to calculate diluted EPS for the fourth 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.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 

Three Months Ended

 

Nine Months Ended

September 30

 

September 30

2022

 

2021

 

2022

 

2021

Net sales

$

521,273

 

$

471,422

 

$

1,504,368

 

$

1,324,991

 

Cost of goods sold

 

303,455

 

 

290,191

 

 

883,327

 

 

845,322

 

Gross profit

 

217,818

 

 

181,231

 

 

621,041

 

 

479,669

 

 
Operating expenses
Selling, general and administrative

 

68,545

 

 

67,803

 

 

209,055

 

 

186,759

 

Research and development

 

32,787

 

 

31,458

 

 

92,226

 

 

89,104

 

Amortization of acquisition-related intangible assets

 

3,938

 

 

4,056

 

 

11,780

 

 

12,139

 

Other operating expense(income)

 

102

 

 

667

 

 

(3,762

)

 

1,673

 

Total operating expense

 

105,372

 

 

103,984

 

 

309,299

 

 

289,675

 

 
Income from operations

 

112,446

 

 

77,247

 

 

311,742

 

 

189,994

 

 
Other (expense) income
Interest income

 

862

 

 

765

 

 

2,549

 

 

2,351

 

Interest expense

 

(2,724

)

 

(1,417

)

 

(5,428

)

 

(6,298

)

Foreign currency (loss) gain, net

 

(1,008

)

 

805

 

 

2,532

 

 

(984

)

Unrealized (loss) gain on investments

 

(2,648

)

 

5,922

 

 

(15,960

)

 

14,838

 

Other income

 

2,218

 

 

2,244

 

 

5,741

 

 

6,398

 

Total other (expense) income

 

(3,300

)

 

8,319

 

 

(10,566

)

 

16,305

 

 
Income before income taxes and noncontrolling interest

 

109,146

 

 

85,566

 

 

301,176

 

 

206,299

 

Income tax provision

 

20,172

 

 

14,766

 

 

55,279

 

 

36,320

 

Net income

 

88,974

 

 

70,800

 

 

245,897

 

 

169,979

 

Less net (income) attributable to noncontrolling interest

 

(2,588

)

 

(2,376

)

 

(6,665

)

 

(6,729

)

Net income attributable to common stockholders

$

86,386

 

$

68,424

 

$

239,232

 

$

163,250

 

 
Earnings per share attributable to common stockholders:
Basic

$

1.90

 

$

1.52

 

$

5.28

 

$

3.65

 

Diluted

$

1.88

 

$

1.50

 

$

5.21

 

$

3.59

 

Number of shares used in earnings per share computation:
Basic

 

45,475

 

 

44,986

 

 

45,283

 

 

44,689

 

Diluted

 

46,014

 

 

45,642

 

 

45,938

 

 

45,507

 

 

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 September 30, 2022:

Operating
Expenses
Other
Income
(Expense)
Income
Tax
Provision
Net Income
Per-GAAP

$

86,386

 
Diluted earnings per share (Per-GAAP)

 

1.88

 
Adjustments to reconcile net income to non-GAAP net income:
 
Amortization of acquisition-related intangible assets

3,939

(721

)

 

3,218

 
Acquisition-related costs

128

(27

)

 

101

 
Gain on sale of manufacturing facilities

413

(62

)

 

351

 
Non-cash mark-to-market investment adjustments

2,649

(530

)

 

2,119

 
Non-GAAP

$

92,175

 
Diluted shares used in computing earnings per share

 

46,014

 
Non-GAAP diluted earnings per share

$

2.00

 

Note: Included in GAAP and non-GAAP net income was approximately $8.1 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 improved by $0.18 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 September 30, 2021:

Operating
Expenses
Other
Income
(Expense)
Income
Tax
Provision
Net Income
Per-GAAP

$

68,424

 

 
Diluted earnings per share (Per-GAAP)

 

1.50

 

 
Adjustments to reconcile net income to non-GAAP net income:
 
Amortization of acquisition-related intangible assets

4,057

(744

)

 

3,313

 

 
Acquisition-related costs

208

(44

)

 

164

 

 
Non-cash mark-to-market investment adjustments

(5,921

)

1,184

 

 

(4,737

)

 
Restructuring costs

141

(21

)

 

120

 

 
Non-GAAP

$

67,284

 

 
Diluted shares used in computing earnings per share

 

45,642

 

 
Non-GAAP diluted earnings per share

$

1.47

 

 

Note: Included in GAAP and non-GAAP adjusted net income was approximately $8.0 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 improved by $0.18 per share.

DIODES INCORPORATED AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(in thousands, except per share data)

(unaudited)

 

For the nine months ended September 30, 2022:

Operating
Expenses
Other
Income
(Expense)
Income
Tax
Provision
Net
Income
Per-GAAP

$

239,232

 

 
Diluted earnings per share (Per-GAAP)

 

5.21

 

 
Adjustments to reconcile net income to non-GAAP net income:
 
Amortization of acquisition-related intangible assets

11,780

 

(721

)

 

11,059

 

 
Acquisition-related costs

607

 

(127

)

 

480

 

 
Insurance recovery for manufacturing facility

(3,594

)

719

 

 

(2,875

)

 
Gain on sale of manufacturing facilities

413

(62

)

 

351

 

 
Non-cash mark-to-market investment adjustments

15,960

(3,386

)

 

12,574

 

 
Non-GAAP

$

260,821

 

 
Diluted shares used in computing earnings per share

 

45,938

 

 
Non-GAAP diluted earnings per share

$

5.68

 

 

Note: Included in GAAP and non-GAAP adjusted net income was approximately $21.1 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 improved by $0.46 per share.

DIODES INCORPORATED AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(in thousands, except per share data)

(unaudited)

For the nine months ended September 30, 2021:

Operating
Expenses
Other Income
(Expense)
Income Tax
Provision
Net Income
Per-GAAP

$

163,250

 

 
Diluted earnings per share (Per-GAAP)

$

3.59

 

 
Adjustments to reconcile net income to non-GAAP net income:
 
Amortization of acquisition-related intangible assets

12,139

(2,227

)

 

9,912

 

 
Acquisition-related costs

2,265

(475

)

 

1,790

 

 
Non-cash mark-to-market investment adjustments

(14,838

)

2,968

 

 

(11,870

)

 
Restructuring costs

961

(144

)

 

817

 

 
Non-GAAP

$

163,899

 

 
Diluted shares used in computing earnings per share

 

45,507

 

 
Non-GAAP diluted earnings per share

$

3.60

 

 

Note: Included in GAAP and non-GAAP adjusted net income was approximately $19.7 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 improved by $0.43 per share.

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE

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