Note: Included in GAAP and non-GAAP adjusted net income was approximately $18.5 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 $0.40 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.

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.

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.

Insurance recovery for manufacturing facility – The Company recorded gains related to insurance recovery for a manufacturing facility in Asia. The Company believes the exclusion of the insurance recovery provides investors with a more accurate reflection of the continuing operations of the Company and facilitates comparisons with the results of other periods which may not reflect such gains.

Non-cash mark-to-market investment adjustments – The Company excluded mark-to-market adjustments on various equity related investments. 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.

Restructuring charge – The Company recorded restructuring charges related to various locations. These restructuring charges are excluded from management’s assessment of the Company’s operating performance. The Company believes the exclusion of the restructuring charges provides investors an enhanced view of the cost structure of the Company’s operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.

Investment gain – The Company excluded the gain realized on the sale of an equity investment. The Company believes this is not reflective of the ongoing operations and exclusion of this item provides investors an enhanced view of the Company’s operating results.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the third quarter of 2024 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the third quarter of 2024, FCF was $39.4 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								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
Net income (per-GAAP)		$	13,745			$	48,720			$	35,783			$	201,890
Plus:
Interest expense, net			(4,076	)			(3,609	)			(11,543	)			(3,284	)
Income tax provision			3,619				10,674				9,799				44,514
Depreciation and amortization			33,650				34,827				102,300				102,723
EBITDA (non-GAAP)		$	46,938			$	90,612			$	136,339			$	345,843

DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
		September 30,				December 31,
			2024				2023
Assets
Current assets:
Cash and cash equivalents		$	311,864			$	315,457
Restricted Cash			5,220				3,026
Short-term investments			7,463				10,174
Accounts receivable, net of allowances of $10,461 and $5,641 at September 30, 2024 and December 31, 2023, respectively			358,938				371,930
Inventories			482,038				389,774
Prepaid expenses and other			96,921				97,024
Total current assets			1,262,444				1,187,385
Property, plant and equipment, net			703,725				746,169
Deferred income tax			52,443				51,620
Goodwill			148,512				146,558
Intangible assets, net			53,698				63,937
Other long-term assets			168,560				171,990
Total assets		$	2,389,382			$	2,367,659
Liabilities
Current liabilities:
Line of credit		$	35,704			$	40,685
Accounts payable			150,247				158,261
Accrued liabilities			161,880				179,674
Income tax payable			3,506				10,459
Current portion of long-term debt			1,446				4,419
Total current liabilities			352,783				393,498
Long-term debt, net of current portion			20,717				16,979
Deferred tax liabilities			11,600				13,662
Unrecognized tax benefits			34,035				34,035
Other long-term liabilities			86,938				99,808
Total liabilities			506,073				557,982
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; 46,330,932 and 45,938,382, issued and outstanding at September 30, 2024 and December 31, 2023, respectively			37,082				36,819
Additional paid-in capital			517,129				509,861
Retained earnings			1,711,057				1,675,274
Treasury stock, at cost, 9,288,420 and 9,286,862 shares held at September 30, 2024 and December 31, 2023			(338,100	)			(337,986	)
Accumulated other comprehensive loss			(115,584	)			(143,227	)
Total stockholders' equity			1,811,584				1,740,741
Noncontrolling interest			71,725				68,936
Total equity			1,883,309				1,809,677
Total liabilities and stockholders' equity		$	2,389,382			$	2,367,659

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