Automotive and Industrial Product Revenue Above Target Model at 45% Despite Soft 3C Market Demand and Customer Inventory Rebalancing

PLANO, Texas — (BUSINESS WIRE) — November 8, 2023 — Diodes Incorporated (Diodes) (Nasdaq: DIOD) today reported its financial results for the third quarter ended September 30, 2023.

Third Quarter Highlights

• Revenue was $404.6 million, a decrease of 13.4 percent from $467.2 million in the second quarter 2023 and 22.4 percent from $521.3 million in the third quarter 2022;
• GAAP gross profit was $155.9 million, a decrease of 20.2 percent from $195.4 million in the second quarter 2023 and 28.4 percent from $217.8 million in the third quarter 2022;
• GAAP gross profit margin was 38.5 percent, compared to 41.8 percent in the second quarter 2023 and 41.8 percent in the third quarter 2022;
• GAAP net income was $48.7 million, compared to $82.0 million in the second quarter 2023 and $86.4 million in the third quarter 2022;
• Non-GAAP adjusted net income was $52.5 million, compared to $73.3 million in the second quarter 2023 and $92.2 million in the third quarter 2022;
• GAAP EPS was $1.05 per diluted share, compared to $1.77 per diluted share in the second quarter 2023 and $1.88 per diluted share in the third quarter 2022;
• Non-GAAP EPS was $1.13 per diluted share, compared to $1.59 per diluted share last quarter and $2.00 per diluted share in the prior year quarter;
• Excluding $4.7 million, net of tax, of non-cash share-based compensation expense, both GAAP and non-GAAP earnings per share would have increased by $0.10 per diluted share;
• EBITDA was $90.6 million, or 22.4 percent of revenue, compared to $133.5 million, or 28.6 percent of revenue, in the second quarter 2023 and $141.9 million, or 27.2 percent of revenue, in the third quarter 2022; and
• Achieved cash flow from operations of $50.1 million and $11.6 million of free cash flow, including $38.5 of capital expenditures. Net cash flow was a negative $27.1 million, including the pay-down of $35.3 million of total debt.

Commenting on the results, Dr. Keh-Shew Lu, Chairman, President and Chief Executive Officer, stated, “Third quarter revenue reflected weaker than expected end customer demand in the consumer, computing and communications markets as well as the overall Asia market. Our original assumption of a market recovery did not materialize during the quarter. Our automotive product revenue in the third quarter remained at a record 19% of revenue, contributing to our combined automotive and industrial revenue being 45% of revenue and above our target model of 40%. However, in the fourth quarter we expect a broad-based slowdown globally in the industrial market as well as softness in the automotive market due to customer inventory adjustments coupled with year-end distributor inventory management, which is in addition to the ongoing delayed recovery in the 3C markets. As a result, our outlook for the fourth quarter is much lower than our typical seasonality.

“Despite the temporarily weaker demand dynamics, we remain focused on the long-term and our product mix improvement initiatives as we continue to invest in R&D for new products, targeting expanded design wins in the automotive and industrial markets. Additionally, we are further developing the process technology in our previously acquired fabrication facilities to build the capability in preparation for the reduction of our wafer service agreements, while also increasing manufacturing cost savings across our operations. These steps represent further enhancements to the actions we’ve taken over the past several years, which have consistently enabled us to deliver increasing growth and profitability and will continue to focus on achieving our next goal of $1 billion in annual gross profit.”

Third Quarter 2023

Revenue for third quarter 2023 was $404.6 million, decreasing 13.4 percent from $467.2 million in the second quarter 2023 and 22.4 percent from $521.3 million in the third quarter 2022.

GAAP gross profit for the third quarter 2023 was $155.9 million, or 38.5 percent of revenue, due to the impact of the Company’s wafer service agreements combined with higher facility underutilization costs due to softer than expected demand in the quarter. This compares to $195.4 million, or 41.8 percent of revenue, in the second quarter 2023 and $217.8 million, or 41.8 percent of revenue, in the third quarter of 2022.

GAAP operating expenses for third quarter 2023 were $102.0 million, or 25.2 percent of revenue, and on a non-GAAP basis were $95.6 million, or 23.7 percent of revenue, which excludes $3.8 million of amortization of acquisition-related intangible asset expenses and $2.6 million of restructuring costs. GAAP operating expenses in the second quarter 2023 were $105.8 million, or 22.6 percent of revenue and $105.4 million, or 20.2 percent of revenue, in the third quarter 2022.

Third quarter 2023 GAAP net income was $48.7 million, or $1.05 per diluted share, compared to GAAP net income $82.0 million, or $1.77 per diluted share, in the second quarter 2023 and GAAP net income of $86.4 million, or $1.88 per diluted share in the third quarter 2022.

Third quarter 2023 non-GAAP adjusted net income was $52.5 million, or $1.13 per diluted share, which excluded, net of tax, $3.1 million of acquisition-related intangible asset costs, $1.9 million of restructuring costs and a $0.9 million gain on an equity investment. This compares to non-GAAP adjusted net income of $73.3 million, or $1.59 per diluted share, in the second quarter 2023 and $92.2 million, or $2.00 per diluted share, in the third 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):