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Diodes Incorporated Reports Fourth Quarter and Fiscal 2019 Financial Results
Achieves Record Full Year Revenue and Gross Margin, Driving Record EBITDA, Net Income and EPS
Year 2019 Highlights
- Revenue grew to a record
$1.25 billion , an increase of 2.9 percent over the$1.21 billion in 2018; - GAAP gross profit was a record
$465.8 million , a 7.0 percent increase from$435.3 million last year; - GAAP gross margin improved 140 basis points to a record 37.3 percent from 35.9 percent in 2018;
- GAAP operating income increased 29.9 percent to a record
$200.6 million , or 16.1 percent of revenue and 15.8 percent on a non-GAAP basis, which compared to 12.7 percent and 14.5 percent, respectively, in 2018; - GAAP net income was a record
$153.3 million , or$2.96 per diluted share, compared to$104.0 million , or$2.04 per diluted share, last year; - Non-GAAP adjusted net income increased 24.6 percent to a record
$151.1 million , or$2.91 per diluted share, compared to$121.3 million , or$2.38 per diluted share, in 2018; - Excluding
$16.2 million , net of tax, non-cash share-based compensation expense, both GAAP net income and non-GAAP adjusted net income would have increased by$0.31 per diluted share; - EBITDA improved 20.1 percent to a record
$313.6 million , or 25.1 percent of revenue, compared to$261.1 million , or 21.5 percent of revenue last year; and - Achieved a record
$229.8 million cash flow from operations and a record$131.3 million of free cash flow, including$98.5 million of capital expenditures, or 7.9 percent of revenue. Net cash flow was a positive$17.7 million , which includes the pay down of$117.3 million of long-term debt.
Fourth Quarter Highlights
- Revenue was
$301.2 million as compared to$314.4 million in the fourth quarter 2018; - GAAP gross profit was
$109.4 million as compared to$114.2 million in the fourth quarter 2018; - GAAP gross profit margin was 36.3 percent in both the fourth quarter 2018 and the fourth quarter 2019;
- GAAP net income was
$47.2 million , or$0.90 per diluted share as compared to$29.5 million , or$0.58 per diluted share, in the fourth quarter 2018; - Non-GAAP adjusted net income was
$33.8 million , or$0.65 per diluted share as compared to$33.2 million , or$0.65 per diluted share, in the fourth quarter 2018; - Excluding
$4.1 million , net of tax, of non-cash share-based compensation expense, both GAAP and non-GAAP earnings per share would have increased by$0.08 per diluted share; - EBITDA was
$88.3 million , or 29.3 percent of revenue, compared to$70.5 million , or 22.4 percent of revenue, in the fourth quarter 2018; and - Achieved cash flow from operations of
$52.1 million and$29.7 million free cash flow, including$22.4 million of capital expenditures. Net cash flow was a positive$39.8 million , which includes the pay-down of$22.6 million of long-term debt.
Commenting on the results, Dr.
“Our full year revenue growth of 2.9% once again outperformed our served market, which was down 6.6% in 2019. This consistent, above-market performance is a direct result of our targeted sales strategy to serve as a total solutions provider, leveraging our expanded product portfolio and broadened customer relationships. Our approach has also resulted in increased market share and content gains across key end equipment, while also addressing new application areas.
“Looking forward to the coming year, we expect to maintain our strong performance and continued achievement of record results, as we take further steps toward our long-term financial goals of 40% gross margin and 20% operating margin. With the automotive and industrial markets approaching our target of 40% of total revenue, we are well positioned to further drive growth and margin expansion. Our focus remains on increasing content across the growing end markets of automotive, industrial, high-end servers and storage, 5G as well as IoT.”
Fourth Quarter 2019
Revenue for fourth quarter 2019 was
GAAP gross profit for the fourth quarter 2019 was
GAAP operating expenses for fourth quarter 2019 were
Fourth quarter 2019 GAAP net income was
Fourth quarter 2019 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 |
||||||
December 31, 2019 |
||||||
GAAP net income |
$ |
47,190 |
|
|||
GAAP diluted earnings per share |
$ |
0.90 |
|
|||
Adjustments to reconcile net income to non-GAAP net income: | ||||||
Amortization of acquisition-related intangible assets |
|
3,689 |
|
|||
Acquisition related costs |
|
938 |
|
|||
Land sale inspection extension fee |
|
(99 |
) |
|||
Gain on land sale |
|
(19,201 |
) |
|||
Loss on impairment |
|
1,283 |
|
|||
Non-GAAP net income |
$ |
33,800 |
|
|||
Non-GAAP diluted earnings per share |
$ |
0.65 |
|
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 fourth quarter 2019 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 the fourth quarter 2019 was
For fourth quarter 2019, net cash provided by operating activities was
Balance Sheet
As of
The results announced today are preliminary and unaudited, as they are subject to the Company finalizing its closing procedures and completion of the Company's 2019 annual audit by its independent registered public accounting firm. As such, these results are subject to revision until the Company files its Form 10-K for the year ending
Business Outlook
Dr. Lu concluded, “For the first quarter of 2020, we expect revenue to be approximately
“Non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 22.5 percent of revenue, plus or minus 1 percent. We expect net interest expense to be approximately
Purchase accounting adjustments related to amortization of acquisition-related intangible assets of
Conference Call
Diodes will host a conference call on
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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 first quarter of 2020, we expect revenue to be approximately
DIODES INCORPORATED AND SUBSIDIARIES |
|||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
|||||||||||||||||
(unaudited) |
|||||||||||||||||
(in thousands, except per share data) |
|||||||||||||||||
|
|
|
|
|
|
||||||||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
||||||||||||
|
|
December 31, 2019 |
|
|
December 31, 2019 |
||||||||||||
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
2019 |
|
|
|
2018 |
|
Net sales |
$ |
301,157 |
|
$ |
314,446 |
|
$ |
1,249,130 |
|
$ |
1,213,989 |
|
|||||
Cost of goods sold |
|
191,795 |
|
|
200,247 |
|
|
783,323 |
|
|
778,713 |
|
|||||
Gross profit |
|
109,362 |
|
|
114,199 |
|
|
465,807 |
|
|
435,276 |
|
|||||
Operating expenses | |||||||||||||||||
Selling, general and administrative |
|
44,199 |
|
|
44,419 |
|
|
181,343 |
|
|
176,197 |
|
|||||
Research and development |
|
21,951 |
|
|
21,487 |
|
|
88,517 |
|
|
86,286 |
|
|||||
Amortization of acquisition-related intangible assets |
|
4,502 |
|
|
4,488 |
|
|
18,041 |
|
|
18,351 |
|
|||||
Gain on disposal of fixed assets |
|
(24,271 |
) |
|
(55 |
) |
|
(24,429 |
) |
|
(636 |
) |
|||||
Other operating expense |
|
1,727 |
|
|
- |
|
|
1,727 |
|
|
596 |
|
|||||
Total operating expense |
|
48,108 |
|
|
70,339 |
|
|
265,199 |
|
|
280,794 |
|
|||||
Income from operations |
|
61,254 |
|
|
43,860 |
|
|
200,608 |
|
|
154,482 |
|
|||||
Other income (expense) | |||||||||||||||||
Interest income |
|
409 |
|
|
547 |
|
|
2,189 |
|
|
1,978 |
|
|||||
Interest expense |
|
(1,730 |
) |
|
(2,282 |
) |
|
(7,893 |
) |
|
(9,901 |
) |
|||||
Foreign currency loss, net |
|
(2,355 |
) |
|
(317 |
) |
|
(3,737 |
) |
|
(3,701 |
) |
|||||
Other income |
|
2,022 |
|
|
1,031 |
|
|
7,079 |
|
|
7,104 |
|
|||||
Total other income (expense) |
|
(1,654 |
) |
|
(1,021 |
) |
|
(2,362 |
) |
|
(4,520 |
) |
|||||
Income before income taxes and noncontrolling interest |
|
59,600 |
|
|
42,839 |
|
|
198,246 |
|
|
149,962 |
|
|||||
Income tax provision |
|
12,046 |
|
|
12,830 |
|
|
44,131 |
|
|
44,556 |
|
|||||
Net income |
|
47,554 |
|
|
30,009 |
|
|
154,115 |
|
|
105,406 |
|
|||||
Less net (income) loss attributable to noncontrolling interest |
|
(364 |
) |
|
(490 |
) |
|
(865 |
) |
|
(1,385 |
) |
|||||
Net income attributable to common stockholders |
$ |
47,190 |
|
$ |
29,519 |
|
$ |
153,250 |
|
$ |
104,021 |
|
|||||
Earnings per share attributable to common stockholders: | |||||||||||||||||
Basic |
$ |
0.92 |
|
$ |
0.59 |
|
$ |
3.02 |
|
$ |
2.09 |
|
|||||
Diluted |
$ |
0.90 |
|
$ |
0.58 |
|
$ |
2.96 |
|
$ |
2.04 |
|
|||||
Number of shares used in earnings per share computation: | |||||||||||||||||
Basic |
|
51,086 |
|
|
50,221 |
|
|
50,787 |
|
|
49,841 |
|
|||||
Diluted |
|
52,144 |
|
|
50,929 |
|
|
51,860 |
|
|
50,935 |
|
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 December 31, 2019: |
|||||||||||
Operating |
|
Income Tax |
|
Net Income |
|||||||
Per-GAAP |
$ |
47,190 |
|
||||||||
Diluted earnings per share (Per-GAAP) |
$ |
0.90 |
|
||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
Amortization of acquisition-related intangible assets |
4,502 |
|
(813 |
) |
|
3,689 |
|
||||
Acquisition related costs |
1,192 |
|
(254 |
) |
|
938 |
|
||||
Land sale inspection extension fee |
(125 |
) |
26 |
|
|
(99 |
) |
||||
Gain on land sale |
(24,305 |
) |
5,104 |
|
|
(19,201 |
) |
||||
Loss on impairment |
1,624 |
|
(341 |
) |
|
1,283 |
|
||||
Non-GAAP |
$ |
33,800 |
|
||||||||
Diluted shares used in computing earnings per share |
|
52,144 |
|
||||||||
Non-GAAP diluted earnings per share |
$ |
0.65 |
|
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 December 31, 2018: |
|||||||||||
COGS |
Operating |
Income Tax |
Net Income |
||||||||
Per-GAAP |
$ |
29,519 |
|||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted |
$ |
0.58 |
|||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
M&A | |||||||||||
Pericom |
|
2,619 |
|||||||||
Amortization of acquisition-related intangible assets |
3,193 |
(574 |
) |
||||||||
Others |
|
1,059 |
|||||||||
Amortization of acquisition-related intangible assets |
1,295 |
(236 |
) |
||||||||
Non-GAAP |
$ |
33,197 |
|||||||||
Diluted shares used in computing earnings per share |
|
50,929 |
|||||||||
Non-GAAP earnings per share | |||||||||||
Diluted |
$ |
0.65 |
Note: Included in GAAP and non-GAAP adjusted 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 twelve months ended December 31, 2019: |
|||||||||||
Operating |
|
Income Tax |
|
Net Income |
|||||||
Per-GAAP |
$ |
153,250 |
|
||||||||
Diluted earnings per share (Per-GAAP) |
$ |
2.96 |
|
||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
Amortization of acquisition-related intangible assets |
18,040 |
|
(3,261 |
) |
|
14,779 |
|
||||
Acquisition related costs |
1,663 |
|
(349 |
) |
|
1,314 |
|
||||
Land sale inspection extension fee |
(425 |
) |
89 |
|
|
(336 |
) |
||||
Gain on land sale |
(24,305 |
) |
5,104 |
|
|
(19,201 |
) |
||||
Loss on impairment |
1,624 |
|
(341 |
) |
|
1,283 |
|
||||
Non-GAAP |
$ |
151,089 |
|
||||||||
Diluted shares used in computing earnings per share |
|
51,860 |
|
||||||||
Non-GAAP diluted earnings per share |
$ |
2.91 |
|
Note: Included in GAAP and non-GAAP adjusted 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 twelve months ended December 31, 2018: |
|||||||||||
COGS |
|
Operating |
|
Income Tax |
|
Net Income |
|||||
Per-GAAP |
$ |
104,021 |
|||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted |
$ |
2.04 |
|||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
M&A | |||||||||||
Pericom |
|
10,430 |
|||||||||
Amortization of acquisition-related intangible assets |
12,719 |
(2,289 |
) |
||||||||
KFAB |
|
194 |
|||||||||
Restructuring |
206 |
(12 |
) |
||||||||
Others |
|
6,616 |
|||||||||
Amortization of acquisition-related intangible assets |
5,632 |
(1,030 |
) |
||||||||
Officer retirement |
2,550 |
(536 |
) |
||||||||
Non-GAAP |
$ |
121,261 |
|||||||||
Diluted shares used in computing earnings per share |
|
50,935 |
|||||||||
Non-GAAP earnings per share | |||||||||||
Diluted |
$ |
2.38 |
Note: Included in GAAP and non-GAAP adjusted 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.
KFAB restructuring - The Company has recorded restructuring charges related to the shutdown and relocation of its wafer fabrication facility located in Lee’s Summit, MO (“KFAB”). 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.
Officer retirement – In 2018, 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 the acquisition of
Land sale inspection extension fee – The Company excluded receipt of inspection extension fees related to the sale of the land located in
Loss on impairment – The Company excluded impairment loss related to the intangible assets previously acquired from TFSS. The Company feels it is appropriate to exclude this impairment loss since they don’t represent ongoing operating expenses and will present investors with a more accurate indication of our continuing operations.
Gain on land sale – The Company excluded the gain related to the sale of the land located in
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the fourth quarter of 2019 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the fourth quarter of 2019, FCF was
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 |
|
Twelve Months Ended |
||||||||||
December 31, 2019 |
|
December 31, 2019 |
||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||
Net income (per-GAAP) |
$ |
47,190 |
$ |
29,519 |
$ |
153,250 |
$ |
104,021 |
||||
Plus: | ||||||||||||
Interest expense, net |
|
1,321 |
|
1,735 |
|
5,704 |
|
7,923 |
||||
Income tax provision |
|
12,046 |
|
12,830 |
|
44,131 |
|
44,556 |
||||
Depreciation and amortization |
|
27,757 |
|
26,424 |
|
110,562 |
|
104,642 |
||||
EBITDA (non-GAAP) |
$ |
88,314 |
$ |
70,508 |
$ |
313,647 |
$ |
261,142 |
DIODES INCORPORATED AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS |
||||||||
(in thousands) |
||||||||
December 31, |
|
December 31, |
||||||
2019 |
|
2018 |
||||||
(unaudited) |
|
(audited) |
||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
258,390 |
|
$ |
241,053 |
|
||
Short-term investments |
|
4,825 |
|
|
7,499 |
|
||
Accounts receivable, net of allowances of $4,866 and $4,102 at December 31, 2019 and 2018, respectively |
|
260,322 |
|
|
228,405 |
|
||
Inventories |
|
236,472 |
|
|
215,435 |
|
||
Prepaid expenses and other |
|
49,950 |
|
|
42,446 |
|
||
Total current assets |
|
809,959 |
|
|
734,838 |
|
||
Property, plant and equipment, net |
|
469,574 |
|
|
446,835 |
|
||
Deferred income tax |
|
17,516 |
|
|
31,652 |
|
||
Goodwill |
|
141,318 |
|
|
132,437 |
|
||
Intangible assets, net |
|
119,523 |
|
|
137,935 |
|
||
Other long-term assets |
|
81,494 |
|
|
42,674 |
|
||
Total assets |
$ |
1,639,384 |
|
$ |
1,526,371 |
|
||
Liabilities | ||||||||
Current liabilities: | ||||||||
Line of credit |
$ |
13,342 |
|
$ |
10,254 |
|
||
Accounts payable |
|
122,148 |
|
|
117,808 |
|
||
Accrued liabilities |
|
100,571 |
|
|
82,605 |
|
||
Income tax payable |
|
16,156 |
|
|
15,744 |
|
||
Current portion of long-term debt |
|
33,105 |
|
|
27,613 |
|
||
Total current liabilities |
|
285,322 |
|
|
254,024 |
|
||
Long-term debt, net of current portion |
|
64,401 |
|
|
186,143 |
|
||
Deferred tax liabilities |
|
16,333 |
|
|
17,993 |
|
||
Other long-term liabilities |
|
120,545 |
|
|
90,779 |
|
||
Total liabilities |
|
486,601 |
|
|
548,939 |
|
||
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; 51,206,969 and 50,221,035, issued and outstanding at December 31, 2019 and 2018, respectively |
|
35,111 |
|
|
34,454 |
|
||
Additional paid-in capital |
|
427,262 |
|
|
399,915 |
|
||
Retained earnings |
|
789,958 |
|
|
636,708 |
|
||
Treasury stock, at cost, 1,457,206 shares held at December 31, 2019 and 2018 |
|
(37,768 |
) |
|
(37,768 |
) |
||
Accumulated other comprehensive loss |
|
(108,139 |
) |
|
(101,846 |
) |
||
Total stockholders' equity |
|
1,106,424 |
|
|
931,463 |
|
||
Noncontrolling interest |
|
46,359 |
|
|
45,969 |
|
||
Total equity |
|
1,152,783 |
|
|
977,432 |
|
||
Total liabilities and stockholders' equity |
$ |
1,639,384 |
|
$ |
1,526,371 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200211006022/en/
Source:
Company Contact:
Diodes Inc.
Laura Mehrl
Director of Investor Relations
P: 972-987-3959
E: laura_mehrl@diodes.com
Investor Relations Contact:
Shelton Group
Leanne Sievers
President, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com