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 2020 GAAP net income and non-GAAP adjusted net income was approximately $5.0 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 third quarter 2020, $0.09 for second quarter 2020 and $0.09 for third quarter 2019.

EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, in the third quarter 2020 was $63.3 million, or 20.5 percent of revenue, compared to $55.3 million, or 19.2 percent of revenue, in the second quarter 2020 and $78.3 million, or 24.2 percent of revenue, in the third quarter 2019. For a reconciliation of GAAP net income to EBITDA, see the table near the end of this release for further details.

For third quarter 2020, net cash provided by operating activities was $39.7 million. Net cash flow was a positive $85.2 million, including $105 million of an additional draw-down of debt as a partial currency hedge associated with the anticipated close of the Lite-On acquisition and a pay-down of long-term debt in the amount of $49.7 million. Free cash flow (a non-GAAP measure) was $21.9 million, which includes $17.8 million of capital expenditures.

Balance Sheet

As of September 30, 2020, the Company had approximately $591 million in cash, cash equivalents and short-term investments. Long-term debt (including the current portion) totaled approximately $346 million and working capital was approximately $893 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 September 30, 2020.

Business Outlook

Dr. Lu concluded, “Building on our growth momentum in the third quarter and record POS results, we expect fourth quarter revenue to increase to a record of approximately $324 million, plus or minus 3 percent, which at the mid-point represents growth of 4.7 percent sequentially and 7.6 percent year-over-year, which is significantly above typical seasonal results over the past 5 years of down 4 percent. These revenue expectations exclude any contribution from the Lite-On Semiconductor acquisition, which is expected to close at the end of November. We expect GAAP gross margin to be 36 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 22.0 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 fourth quarter are anticipated to be approximately 53.0 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 $3.3 million of Lite-On acquisition-related financing costs.

Conference Call

Diodes will host a conference call on Monday, November 9, 2020 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its third quarter 2020 financial results. Investors and analysts may join the conference call by dialing 1-855-232-8957 and providing the confirmation code 3088808. 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 November 16, 2020 at midnight Central Time. The replay number is 1-855-859-2056 with a pass code of 3088808. 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 fourth quarter of 2020, we expect revenue to be a record and increase to approximately $324 million plus or minus 3 percent; we expect GAAP gross margin to be 36 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 22.0 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 fourth quarter are anticipated to be approximately 53.0 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; 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									Nine Months Ended
		September 30									September 30
			2020				2019					2020				2019
Net sales		$	309,459			$	323,674				$	878,845			$	947,973
Cost of goods sold			198,369				201,628					570,421				591,528
Gross profit			111,090				122,046					308,424				356,445
Operating expenses
Selling, general and administrative			44,651				46,123					132,238				137,143
Research and development			24,469				22,689					69,469				66,566
Amortization of acquisition related intangible assets			4,007				4,519					12,249				13,539
Other operating income			108				-					(108	)			(158	)
Total operating expense			73,235				73,331					213,848				217,090
Income from operations			37,855				48,715					94,576				139,355
Other income (expense)
Interest income			138				272					579				1,780
Interest expense			(3,745	)			(2,007	)				(7,643	)			(6,163	)
Foreign currency loss, net			(2,618	)			(822	)				(6,143	)			(1,382	)
Other income			1,627				2,577					2,902				5,056
(Expense) Income			(4,598	)			20					(10,305	)			(709	)
Income before income taxes and noncontrolling interest			33,257				48,735					84,271				138,646
Income tax provision			5,871				10,613					15,097				32,085
Net income			27,386				38,122					69,174				106,561
Less net income attributable to noncontrolling interest			(234	)			(62	)				(821	)			(501	)
Net income attributable to common stockholders		$	27,152			$	38,060				$	68,353			$	106,060
Earnings per share attributable to common stockholders:
Basic		$	0.52			$	0.75				$	1.33			$	2.09
Diluted		$	0.51			$	0.73				$	1.30			$	2.05
Number of shares used in earnings per share computation:
Basic			51,825				50,998					51,563				50,687
Diluted			52,729				51,869					52,612				51,699
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, 2020:
		Operating Expenses		Other Income (Expense)		Income Tax Provision			Net Income
Per-GAAP									$	27,152
Diluted earnings per share (Per-GAAP)									$	0.51
Adjustments to reconcile net income to non-GAAP net income:
Amortization of acquisition-related intangible assets		4,007				(741	)			3,266
Acquisition-related financing costs				2,698		(568	)			2,130
Acquisition-related costs		300				(62	)			238
Non-GAAP									$	32,786
Diluted shares used in computing earnings per share										52,729
Non-GAAP diluted earnings per share									$	0.62

Note: Included in GAAP and non-GAAP net income was approximately $5.0 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 $0.09 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, 2019:
			Operating Expenses			Income Tax Provision			Net Income
Per-GAAP									$	38,060
Diluted earnings per share (Per-GAAP)									$	0.73
Adjustments to reconcile net income to non-GAAP net income:
Amortization of acquisition-related intangible assets			4,518			(818	)			3,700
Acquisition related costs			471			(95	)			376
Land sale inspection extension fee			(300	)		63				(237	)
Non-GAAP									$	41,899
Diluted shares used in computing earnings per share										51,869
Non-GAAP diluted earnings per share									$	0.81

Note: Included in GAAP and non-GAAP net income was approximately $4.4 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 $0.09 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 nine months ended September 30, 2020:
				Operating Expenses		Other Income (Expense)		Income Tax Provision			Net Income
Per-GAAP											$	68,353
Diluted earnings per share (Per-GAAP)											$	1.30
Adjustments to reconcile net income to non-GAAP net income:
Amortization of acquisition-related intangible assets				12,249				(2,249	)			10,000
Acquisition-related financing costs						6,118		(1,343	)			4,775
Acquisition-related costs				1,124				(230	)			894
Board-member retirement costs				1,705				(358	)			1,347
Non-GAAP											$	85,369
Diluted shares used in computing earnings per share												52,612
Non-GAAP diluted earnings per share											$	1.62

Note: Included in GAAP and non-GAAP net income was approximately $13.4 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 $0.25 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 nine months ended September 30, 2019:
		Operating Expenses			Income Tax Provision			Net Income
Per-GAAP								$	106,060
Diluted earnings per share (Per-GAAP)								$	2.05
Adjustments to reconcile net income to non-GAAP net income:
Amortization of acquisition-related intangible assets		13,538			(2,448	)			11,090
Acquisition related costs		471			(95	)			376
Land sale inspection extension fee		(300	)		63				(237	)
Non-GAAP								$	117,289
Diluted shares used in computing earnings per share									51,699
Non-GAAP diluted earnings per share								$	2.27

Note: Included in GAAP and non-GAAP net income was approximately $12.1 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 $0.23 per share.

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE