Diodes Incorporated Reports First Quarter Fiscal 2024 Financial Results
Diodes Incorporated (DIOD) reported its financial results for the first quarter of fiscal 2024, showing a decline in revenue and profit margins compared to the previous quarters. The company experienced lower demand in consumer, computing, and communications markets due to seasonality and inventory adjustments. However, signs of demand improvement were observed towards the end of the quarter, indicating a potential return to seasonal growth in the upcoming quarter. Diodes remains focused on operational efficiency and expects revenue growth in higher-margin automotive and industrial markets to improve gross margins. The company's financial performance was impacted by reduced loading at manufacturing facilities, affecting gross margin, but Diodes anticipates a recovery in the coming quarters.
Anticipated return to seasonal growth in the second quarter.
Focus on operational efficiency and revenue growth in higher-margin markets.
Strategic steps taken by the company to improve process technology and lower manufacturing costs.
Revenue decline in the first quarter compared to previous quarters.
Reduction in gross profit margin due to slower overall demand environment.
Impact of reduced loading at manufacturing facilities on financial performance.
Insights
Diodes Incorporated's recent financial results indicate a contraction in both revenue and net income compared to the previous quarter and the same quarter last year. This decline is purportedly due to a slower recovery in certain markets and seasonal factors. However, there appears to be an undercurrent of optimism for returning to growth in the ensuing quarter, partially based on stabilizing distributor inventory levels.
The reported gross margin contraction could be a point of concern for investors, as it may signal pricing pressure or elevated costs. However, the management's focus on improving factory loading and targeting higher-margin markets could mitigate these concerns in the long term.
The negative free cash flow is worth noting, as it reflects more cash being used in operations than generated, which could impact financial flexibility. Investors should monitor subsequent quarters to determine if this trend reverses as projected by the company's leadership.
The semiconductor industry, where Diodes Incorporated operates, is known for its cyclicality and the current downturn appears to fit this pattern. The reference to 'typical first quarter seasonality' suggests that the company's performance is not entirely out of step with industry norms, even though the reported numbers are down sequentially and year-over-year.
The mention of a target model of 40% for combined product revenue in automotive and industrial markets indicates resilience in these segments, despite broader market softness. Investors might view this as a stabilizing factor, given these markets often bring higher margins and could be less volatile compared to the consumer, computing and communications sectors.
Diodes Incorporated's strategic focus on qualifying more products and penetrating high-margin automotive and industrial markets is a classic maneuver in the tech sector to offset declines in more volatile segments. The investment in process technology and cost-reduction measures could also be viewed as a foundation for improving margins and competitiveness in the long run.
The company's balance sheet remains relatively solid with a substantial working capital. However, the rising capital expenditures, in light of negative free cash flow, might raise questions about the timing and scale of investments during a period of reduced revenue.
Return to Seasonal Growth Expected in Second Quarter with First Quarter Representing the Low Point in Market Demand
First Quarter Highlights
-
Revenue was
, compared to$302.0 million in the fourth quarter 2023 and$322.7 million in the first quarter 2023;$467.2 million -
GAAP gross profit was
, compared to$99.6 million in the fourth quarter 2023 and$112.5 million in the first quarter 2023;$194.5 million - GAAP gross profit margin was 33.0 percent, compared to 34.9 percent in the fourth quarter 2023 and 41.6 percent in the first quarter 2023;
-
GAAP net income was
, compared to$14.0 million in the fourth quarter 2023 and$25.3 million in the first quarter 2023;$71.2 million -
Non-GAAP adjusted net income was
, compared to$13.0 million in the fourth quarter 2023 and$23.4 million in the first quarter 2023;$73.4 million -
GAAP EPS was
per diluted share, compared to$0.30 per diluted share in the fourth quarter 2023 and$0.55 per diluted share in the first quarter 2023;$1.54 -
Non-GAAP EPS was
per diluted share, compared to$0.28 per diluted share last quarter and$0.51 per diluted share in the prior year quarter;$1.59 -
Excluding
, net of tax, of non-cash share-based compensation expense, both GAAP and non-GAAP earnings per share would have increased by$4.0 million per diluted share;$0.09 -
EBITDA was
, or 16.0 percent of revenue, compared to$48.3 million , or 18.1 percent of revenue, in the fourth quarter 2023 and$58.4 million , or 26.1 percent of revenue, in the first quarter 2023; and$121.8 million -
Cash flow used in operations of
and a negative$31.1 million of free cash flow, including$51.5 million of capital expenditures. Net cash flow was a negative$20.4 .$47.9 million
Commenting on the results, Gary Yu, President of Diodes, stated, “Revenue in the quarter reflected the slower than expected recovery in the consumer, computing and communications markets coupled with typical first quarter seasonality due to the Chinese New Year holiday. However, late in the quarter we began to see some signs of demand improvement with distributor inventory levels starting to stabilize, supporting our belief that the first quarter should be the low point and are guiding for a return to seasonal growth in the second quarter.
“In the automotive and industrial end markets, first quarter combined product revenue remained above our target model of
“In summary, with early evidence of recent pricing pressures subsiding, Diodes is well positioned with the size and scale to support a return to growth as global demand and distributor inventory improves across our end markets. We remain focused on operating our manufacturing facilities at a high level of efficiency as demonstrated by the steps the Company has taken over the past several quarters to further develop our process technology and capabilities, while lowering manufacturing costs across our operations.”
First Quarter 2024
Revenue for first quarter 2024 was
GAAP gross profit for the first quarter 2024 was
GAAP operating expenses for first quarter 2024 were
First quarter 2024 GAAP net income was
First quarter 2024 non-GAAP adjusted net income was
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):
Three Months Ended | ||||
March 31, 2024 | ||||
GAAP net income | $ |
14,038 |
|
|
GAAP diluted earnings per share | $ |
0.30 |
|
|
Adjustments to reconcile net income to non-GAAP net income: | ||||
Amortization of acquisition-related intangible assets |
|
3,102 |
|
|
Non-cash mark-to-market investment value adjustments |
|
(296 |
) |
|
Insurance recovery for manufacturing facility |
|
(3,843 |
) |
|
Non-GAAP net income | $ |
13,001 |
|
|
Non-GAAP diluted earnings per share | $ |
0.28 |
|
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 first quarter 2024 GAAP net income and non-GAAP adjusted net income was approximately
EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, in first quarter 2024 was
For first quarter 2024, net cash used in operating activities was
Balance Sheet
As of March 31, 2024, the Company had approximately
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 March 31, 2024.
Business Outlook
Gary Yu further commented, “For the second quarter of 2024, we expect revenue to be approximately
Amortization of acquisition-related intangible assets of
Conference Call
Diodes will host a conference call on Thursday, May 9, 2024 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its first 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 May 15, 2024 at midnight Central Time. The replay number is 1-877-344-7529 with a pass code of 6259286. 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 Investor Relations section of the Company’s website. 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 automotive, industrial, computing, consumer electronics, and communications 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 including engineering, testing, manufacturing, and customer service, enable 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 second quarter of 2024, we expect revenue to be approximately
The Diodes logo is a registered trademark of Diodes Incorporated in
© 2024 Diodes Incorporated. All Rights Reserved.
DIODES INCORPORATED AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
||||||||
(in thousands, except per share data) |
||||||||
(unaudited) |
||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2024 |
2023 |
|||||||
Net sales | $ |
301,972 |
|
$ |
467,241 |
|
||
Cost of goods sold |
|
202,388 |
|
|
272,787 |
|
||
Gross profit |
|
99,584 |
|
|
194,454 |
|
||
Operating expenses | ||||||||
Selling, general and administrative |
|
53,735 |
|
|
70,991 |
|
||
Research and development |
|
33,964 |
|
|
33,232 |
|
||
Amortization of acquisition-related intangible assets |
|
3,810 |
|
|
3,852 |
|
||
(Gain)loss on disposal of fixed assets |
|
(4,872 |
) |
|
(48 |
) |
||
Other operating (income)expense |
|
(1 |
) |
|
- |
|
||
Total operating expense |
|
86,636 |
|
|
108,027 |
|
||
Income from operations |
|
12,948 |
|
|
86,427 |
|
||
Other (expense) income | ||||||||
Interest income |
|
4,614 |
|
|
1,772 |
|
||
Interest expense |
|
(532 |
) |
|
(2,132 |
) |
||
Foreign currency gain(loss), net |
|
972 |
|
|
(1,893 |
) |
||
Unrealized gain(loss) on investments |
|
370 |
|
|
3,889 |
|
||
Other income |
|
434 |
|
|
530 |
|
||
Total other income (expense) |
|
5,858 |
|
|
2,166 |
|
||
Income before income taxes and noncontrolling interest |
|
18,806 |
|
|
88,593 |
|
||
Income tax provision |
|
3,537 |
|
|
16,616 |
|
||
Net income |
|
15,269 |
|
|
71,977 |
|
||
Less net (income) attributable to noncontrolling interest |
|
(1,231 |
) |
|
(827 |
) |
||
Net income attributable to common stockholders | $ |
14,038 |
|
$ |
71,150 |
|
||
Earnings per share attributable to common stockholders: | ||||||||
Basic | $ |
0.30 |
|
$ |
1.56 |
|
||
Diluted | $ |
0.30 |
|
$ |
1.54 |
|
||
Number of shares used in earnings per share computation: | ||||||||
Basic |
|
46,032 |
|
|
45,600 |
|
||
Diluted |
|
46,285 |
|
|
46,161 |
|
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 March 31, 2024: |
|||||||||||||
Operating
|
Other (Income) Expense |
Income Tax Provision |
Net Income | ||||||||||
Per-GAAP | $ |
14,038 |
|
||||||||||
Diluted earnings per share (per-GAAP) | $ |
0.30 |
|
||||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||||
Amortization of acquisition-related intangible assets | 3,810 |
(708 |
) |
|
3,102 |
|
|||||||
Non-cash mark-to-market investment value adjustments | (370 |
) |
74 |
|
(296 |
) |
|||||||
Insurance recovery for manufacturing facility | (4,804 |
) |
961 |
|
|
(3,843 |
) |
||||||
Non-GAAP | $ |
13,001 |
|
||||||||||
Diluted shares used in computing earnings per share |
|
46,285 |
|
||||||||||
Non-GAAP diluted earnings per share | $ |
0.28 |
|
Note: Included in GAAP and non-GAAP net income was approximately |
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 March 31, 2023: |
||||||||||||
Operating
|
Other
|
Income Tax
|
Net Income |
|||||||||
Per-GAAP |
|
|
|
|
|
$ |
71,150 |
|
||||
|
|
|
|
|
||||||||
Diluted earnings per share (per-GAAP) |
|
|
|
|
|
$ |
1.54 |
|
||||
|
|
|
|
|
||||||||
Adjustments to reconcile net income to non-GAAP net income: |
|
|
|
|
|
|||||||
|
|
|
|
|
||||||||
Amortization of acquisition-related intangible assets | 3,852 |
|
|
|
(707 |
) |
|
3,145 |
|
|||
|
|
|
|
|
||||||||
Officer retirement | 2,845 |
|
|
|
(583 |
) |
|
2,262 |
|
|||
|
|
|
|
|
||||||||
Non-cash mark-to-market investment value adjustments |
|
|
(3,889 |
) |
|
778 |
|
|
(3,111 |
) |
||
|
|
|
|
|
||||||||
Non-GAAP |
|
|
|
|
|
$ |
73,446 |
|
||||
|
|
|
|
|
||||||||
Diluted shares used in computing earnings per share |
|
|
|
|
|
|
46,161 |
|
||||
|
|
|
|
|
||||||||
Non-GAAP diluted earnings per share |
|
|
|
|
|
$ |
1.59 |
|
Note: Included in GAAP and non-GAAP net income was approximately |
||||||||||
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
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.
Insurance recovery for manufacturing facility – The Company recorded gains related to insurance recovery for a manufacturing facility in
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.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the first quarter of 2024 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the first quarter of 2024, FCF was a negative
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 | |||||||
March 31, | |||||||
2024 |
2023 |
||||||
Net income (per-GAAP) | $ |
14,038 |
|
$ |
71,150 |
||
Plus: | |||||||
Interest expense, net |
|
(4,082 |
) |
|
360 |
||
Income tax provision |
|
3,537 |
|
|
16,616 |
||
Depreciation and amortization |
|
34,855 |
|
|
33,653 |
||
EBITDA (non-GAAP) | $ |
48,348 |
|
$ |
121,779 |
DIODES INCORPORATED AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS |
||||||||
(Unaudited) (In thousands, except share and per share data) |
||||||||
March 31 | December 31, | |||||||
2024 |
2023 |
|||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ |
266,202 |
|
$ |
315,457 |
|
||
Restricted Cash |
|
4,358 |
|
|
3,026 |
|
||
Short-term investments |
|
9,782 |
|
|
10,174 |
|
||
Accounts receivable, net of allowances of |
|
391,508 |
|
|
371,930 |
|
||
Inventories |
|
429,363 |
|
|
389,774 |
|
||
Prepaid expenses and other |
|
100,016 |
|
|
97,024 |
|
||
Total current assets |
|
1,201,229 |
|
|
1,187,385 |
|
||
Property, plant and equipment, net |
|
723,478 |
|
|
746,169 |
|
||
Deferred income tax |
|
50,912 |
|
|
51,620 |
|
||
Goodwill |
|
146,941 |
|
|
146,558 |
|
||
Intangible assets, net |
|
59,952 |
|
|
63,937 |
|
||
Other long-term assets |
|
173,660 |
|
|
171,990 |
|
||
Total assets | $ |
2,356,172 |
|
$ |
2,367,659 |
|
||
Liabilities | ||||||||
Current liabilities: | ||||||||
Line of credit | $ |
48,928 |
|
$ |
40,685 |
|
||
Accounts payable |
|
149,228 |
|
|
158,261 |
|
||
Accrued liabilities |
|
164,570 |
|
|
179,674 |
|
||
Income tax payable |
|
13,283 |
|
|
10,459 |
|
||
Current portion of long-term debt |
|
1,270 |
|
|
4,419 |
|
||
Total current liabilities |
|
377,279 |
|
|
393,498 |
|
||
Long-term debt, net of current portion |
|
19,639 |
|
|
16,979 |
|
||
Deferred tax liabilities |
|
10,509 |
|
|
13,662 |
|
||
Unrecognized tax benefits |
|
34,035 |
|
|
34,035 |
|
||
Other long-term liabilities |
|
89,899 |
|
|
99,808 |
|
||
Total liabilities |
|
531,361 |
|
|
557,982 |
|
||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Preferred stock - par value |
|
- |
|
|
- |
|
||
Common stock - par value |
|
36,936 |
|
|
36,819 |
|
||
Additional paid-in capital |
|
509,401 |
|
|
509,861 |
|
||
Retained earnings |
|
1,689,312 |
|
|
1,675,274 |
|
||
Treasury stock, at cost, 9,286,862 shares held at March 31, 2024 and December 31, 2023 |
|
(337,986 |
) |
|
(337,986 |
) |
||
Accumulated other comprehensive loss |
|
(149,073 |
) |
|
(143,227 |
) |
||
Total stockholders' equity |
|
1,748,590 |
|
|
1,740,741 |
|
||
Noncontrolling interest |
|
76,221 |
|
|
68,936 |
|
||
Total equity |
|
1,824,811 |
|
|
1,809,677 |
|
||
Total liabilities and stockholders' equity | $ |
2,356,172 |
|
$ |
2,367,659 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240509947462/en/
Company Contact:
Diodes Incorporated
Gurmeet Dhaliwal
Director, IR & Corporate Marketing
P: 408-232-9003
E: Gurmeet_Dhaliwal@diodes.com
Investor Relations Contact:
Shelton Group
Leanne Sievers
President, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com
Source: Diodes Incorporated (F)
FAQ
<p>What was Diodes Incorporated's revenue for the first quarter of 2024?</p>
Diodes' revenue for the first quarter of 2024 was $302.0 million.
<p>How did Diodes' first quarter 2024 net income compare to previous quarters?</p>
Diodes' net income in the first quarter of 2024 was $14.0 million, lower than in the fourth quarter of 2023 and the first quarter of 2023.
<p>What did Gary Yu, President of Diodes, mention about the company's performance in the first quarter of 2024?</p>
Gary Yu stated that the first quarter represented a low point in market demand but expects a return to seasonal growth in the second quarter.
<p>What factors affected Diodes' financial results in the first quarter of 2024?</p>
Factors such as slower demand recovery in certain markets, inventory adjustments, and reduced loading at manufacturing facilities impacted Diodes' financial results in the first quarter of 2024.
<p>What are Diodes' expectations for the second quarter of 2024?</p>
Diodes expects revenue to be approximately $316 million, with a 4.6% sequential increase at the mid-point, reflecting a return to typical seasonal growth.