Diodes Incorporated Reports Third Quarter 2017 Financial Results

Achieves Another Quarter of Record Revenue and Gross Profit; Sets a New Record for Operating Income

PLANO, Texas — (BUSINESS WIRE) — November 7, 2017 — Diodes Incorporated (Nasdaq: DIOD), a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets, today reported its financial results for the third quarter ended September 30, 2017.

Third Quarter Highlights

  • Revenue was a record $285.2 million, an increase of 8.0 percent from the $264.2 million in the second quarter 2017 and an increase of 13.8 percent from the $250.7 million in the third quarter 2016;
  • GAAP gross profit was a record $96.3 million, including $2.7 million of KFAB closure costs, and non-GAAP gross profit was $99.0 million. This compares to $90.1 million in the second quarter 2017 and $80.6 million in the third quarter 2016;
  • GAAP gross profit margin was 33.8 percent, and non-GAAP gross profit margin was 34.7 percent. This compares to GAAP gross profit margin of 34.1 percent in the second quarter 2017 and 32.2 percent in the third quarter 2016;
  • GAAP income from operations was $23.7 million, or 8.3 percent of revenue. Non-GAAP adjusted income from operations (which excludes intangible asset amortization costs and KFAB shutdown costs) was a record $35.2 million, or 12.3 percent of revenue, compared to $29.9 million, or 11.3 percent, last quarter and $25.5 million, or 10.2 percent, in the year ago quarter;
  • GAAP net income was $14.5 million, or $0.29 per diluted share, compared to $13.2 million, or $0.26 per diluted share, in the second quarter 2017 and $10.6 million, or $0.21 per diluted share, in the third quarter 2016;
  • Non-GAAP adjusted net income was $22.6 million, or $0.45 per diluted share, compared to $17.8 million, or $0.36 per diluted share, in the second quarter 2017 and $15.1 million, or $0.30 per diluted share, in the third quarter 2016;
  • Excluding $3.2 million, net of tax, of non-cash share-based compensation expense, both GAAP and non-GAAP diluted earnings per share would have increased by $0.06 per diluted share; and
  • Achieved $40.9 million of cash flow from operations, and $2.9 million free cash flow, including $38.0 million of capital expenditures. Net cash flow was a negative ($65.4) million, which includes the pay down of $75.2 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, “Diodes achieved another quarter of record results, setting new highs on revenue, gross profit and operating income. Our growth continued to be broad-based across all regions and end markets. We also achieved record revenue in our computing and communications end markets, complemented by 30 percent year-over-year growth in both automotive and industrial. In fact, our automotive end market reached a record 8 percent of revenue, which is even more notable considering the higher revenue base. Revenue from Pericom also continued to grow from the high level achieved last quarter, with solid margin contribution as we integrate these products into our complete customer offerings.

“Additionally, continued improvements in product mix and utilization across our facilities resulted in non-GAAP gross margin close to our target model of 35 percent in the quarter. We have completed wafer manufacturing at our KFAB facility and remain on track to return the property to the landlord by November 15th. Consistent with our focus on driving increased profitability and expanding shareholder value, we recently established new long-term financial targets, which includes gross margin of 40 percent and operating margin of 20 percent. As a result of the strategic actions we have taken over the past few years, we have positioned the business to drive significant earnings expansion, serving as the basis for introducing these increased targets.

“Our business is also generating a significant amount of cash. We plan to continue allocating cash toward reducing our long-term debt, while also maintaining the flexibility to support our future expansion initiatives, potential strategic acquisitions as well as our existing share buyback program. Looking forward, we are well positioned to benefit from our solid operating leverage to deliver increased profitability and shareholder value.”

Third Quarter 2017

Revenue for third quarter 2017 was $285.2 million, an increase of 8.0 percent from the $264.2 million in the second quarter 2017 and an increase of 13.8 percent from $250.7 million in third quarter 2016. Revenue in the quarter increased sequentially reflecting continued strength across all of the Company’s target end markets and geographies.

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