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Diodes Incorporated Reports First Quarter 2018 Financial Results
Revenue Increases 16.2% Year-Over-Year with Record Gross Profit Dollars Increasing 33.4%; Expects Continued Strong Growth in the Second Quarter
First Quarter Highlights
- Revenue was
$274.5 million , an increase of 16.2 percent from the$236.3 million in the first quarter 2017 and an increase of 2.3 percent from the$268.4 million in the fourth quarter 2017; - GAAP gross profit was a record
$98.6 million , compared to$73.9 million in the first quarter 2017 and$96.4 million in the fourth quarter 2017; - GAAP gross profit margin was 35.9 percent, compared to 31.3 percent in the first quarter 2017 and 35.9 percent in the fourth quarter 2017;
- GAAP net income was
$18.5 million , or$0.37 per diluted share, compared to net income of$1.2 million , or$0.02 per diluted share, in the first quarter 2017 and a net loss of($30.7) million , or($0.62) per share, in the fourth quarter 2017; - Non-GAAP adjusted net income was
$24.2 million , or$0.48 per diluted share, compared to$7.0 million , or$0.14 per diluted share, in the first quarter 2017 and$21.6 million , or$0.42 per diluted share, in the fourth quarter 2017; - Excluding
$5.0 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 a record
$54.2 million , or 20 percent of revenue, compared to$28.6 million , or 12 percent of revenue, in the first quarter 2017 and$47.0 million , or 18 percent of revenue, in the fourth quarter 2017; and - Achieved cash flow from operations of
$54.0 million and$22.3 million free cash flow, including$31.6 million of capital expenditures. Net cash flow was a negative$21.3 million , which includes the pay down of$46.5 million of long-term debt.
Commenting on the results, Dr.
“The quarter was also highlighted by gross profit dollars reaching a record, growing 33 percent year-over-year -- twice the rate of our revenue growth and contributing to an almost 3.5 times increase in non-GAAP earnings per share over the same time period. Additionally, EBITDA in the first quarter reached a record
“Looking to the second quarter, we expect to extend our growth momentum with continued strength across our target geographies and end markets, which we anticipate will result in the achievement of new quarterly records for both revenue and gross profit.”
First Quarter 2018
Revenue for first quarter 2018 was
GAAP gross profit for the first quarter 2018 was a record
GAAP operating expenses for first quarter 2018 were
First quarter 2018 GAAP net income was
First quarter 2018 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, 2018 |
|||||||
GAAP net income | $ | 18,526 | |||||
GAAP diluted income per share | $ | 0.37 | |||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||
M&A | |||||||
Pericom | 2,574 | ||||||
Amortization of acquisition-related intangible assets |
2,574 | ||||||
KFAB | (253 | ) | |||||
Restructuring | (253 | ) | |||||
Others | 3,342 | ||||||
Amortization of acquisition-related intangible assets | 1,328 | ||||||
Officer retirement | 2,014 | ||||||
Non-GAAP net income | $ | 24,189 | |||||
Non-GAAP diluted earnings per share | $ | 0.48 |
(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 2018 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 first quarter 2018 was a record
For first quarter 2018, net cash provided by operating activities was
Balance Sheet
As of
The results announced today are preliminary, 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
Business Outlook
Dr. Lu concluded, “For the second quarter of 2018, we expect continued strong growth with revenue increasing to a range between
Conference Call
Diodes will host a conference call on
About
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,” “sets the stage,” “continuing,” “working diligently to,” “position the company for,” “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 2018 and beyond; that for the second quarter of 2018, we expect strong growth and revenue to range between
Recent news releases, annual reports and
DIODES INCORPORATED AND SUBSIDIARIES | |||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||
(unaudited) |
|||||||||
(in thousands, except per share data) |
|||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2018 | 2017 | ||||||||
NET SALES | $ | 274,512 | $ | 236,303 | |||||
COST OF GOODS SOLD | 175,917 | 162,392 | |||||||
Gross profit | 98,595 | 73,911 | |||||||
OPERATING EXPENSES | |||||||||
Selling, general and administrative | 47,150 | 39,690 | |||||||
Research and development | 20,200 | 18,040 | |||||||
Amortization of acquisition-related intangible assets | 4,767 | 4,758 | |||||||
Restructuring | (320 | ) | 2,231 | ||||||
Other operating expenses | (142 | ) | (165 | ) | |||||
Total operating expenses | 71,655 | 64,554 | |||||||
Income from operations | 26,940 | 9,357 | |||||||
OTHER INCOME (EXPENSES) | |||||||||
Interest income | 514 | 295 | |||||||
Interest expense | (2,757 | ) | (3,485 | ) | |||||
Foreign currency loss, net | (3,029 | ) | (3,794 | ) | |||||
Others | 4,635 | (271 | ) | ||||||
Total other expenses | (637 | ) | (7,255 | ) | |||||
Income before income taxes and noncontrolling interest | 26,303 | 2,102 | |||||||
INCOME TAX PROVISION | 7,783 | 560 | |||||||
NET (LOSS) INCOME | 18,520 | 1,542 | |||||||
Less: NET (LOSS) INCOME attributable to noncontrolling interest | 6 | (325 | ) | ||||||
NET (LOSS) INCOME attributable to common stockholders | $ | 18,526 | $ | 1,217 | |||||
(LOSS) EARNINGS PER SHARE attributable to common stockholders | |||||||||
Basic | $ | 0.38 | $ | 0.03 | |||||
Diluted | $ | 0.37 | $ | 0.02 | |||||
Number of shares used in computation | |||||||||
Basic | 49,337 | 48,316 | |||||||
Diluted | 50,622 | 49,663 | |||||||
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, 2018: |
|||||||||||||
COGS |
Operating |
Income Tax |
Net Income | ||||||||||
Per-GAAP | $ | 18,526 | |||||||||||
Earnings per share (Per-GAAP) | |||||||||||||
Diluted | $ | 0.37 | |||||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||||
M&A | |||||||||||||
Pericom | 2,574 | ||||||||||||
Amortization of acquisition-related intangible assets | 3,139 | (565 | ) | ||||||||||
KFAB | (253 | ) | |||||||||||
Restructuring | (320 | ) | 67 | ||||||||||
Others | 3,342 | ||||||||||||
Amortization of acquisition-related intangible assets | 1,628 | (300 | ) | ||||||||||
Officer retirement | 2,550 | (536 | ) | ||||||||||
Non-GAAP | $ | 24,189 | |||||||||||
Diluted shares used in computing earnings per share | 50,622 | ||||||||||||
Non-GAAP earnings per share | |||||||||||||
Diluted | $ | 0.48 | |||||||||||
Note: Included in GAAP and non-GAAP net (loss) 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, 2017: |
|||||||||||
COGS |
Operating |
Income Tax |
Net Income | ||||||||
Per-GAAP | $ | 1,217 | |||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted | $ | 0.02 | |||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
M&A | |||||||||||
Pericom | 2,623 | ||||||||||
Retention costs | 194 | (68 | ) | ||||||||
Amortization of acquisition-related intangible assets | 3,045 | (548 | ) | ||||||||
Others | 1,354 | ||||||||||
Amortization of acquisition-related intangible assets | 1,713 | (359 | ) | ||||||||
KFAB - Restructuring | 490 | 2,336 | (989 | ) | 1,837 | ||||||
Non-GAAP | $ | 7,031 | |||||||||
Diluted shares used in computing earnings per share | 49,663 | ||||||||||
Non-GAAP earnings per share | |||||||||||
Diluted | $ | 0.14 | |||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
The Company adjusts
Detail of non-GAAP adjustments
Retention costs– The Company excluded costs related to employee retention in connection with the Pericom acquisition. Although these retention costs will be recurring every quarter until the final retention payment has been made, they are not part of the employees’ normal annual salaries and therefore are being excluded. The Company believes the exclusion of retention costs related to acquisitions provides investors with a more accurate reflection of costs likely to be incurred in the absence of an unusual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.
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, which was recognized through purchase accounting, 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 – The Company has recorded increased expense related to the retirement of two corporate officers. The officer retirement expense has been excluded from management’s assessment of the Company’s current period operating performance in order to facilitate comparisons with previously presented periods that do not reflect such expense.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the first quarter of 2018 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the first quarter of 2018, FCF was a
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, | ||||||
2018 | 2017 | |||||
Net (loss) income (per-GAAP) | $ | 18,526 | $ | 1,217 | ||
Plus: | ||||||
Interest expense, net | 2,243 | 3,190 | ||||
Income tax provision | 7,783 | 560 | ||||
Depreciation and amortization | 25,610 | 23,664 | ||||
EBITDA (non-GAAP) | $ | 54,162 | $ | 28,631 |
DIODES INCORPORATED AND SUBSIDIARIES | ||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
(in thousands) |
||||||||
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
(unaudited) | (audited) | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 182,411 | $ | 203,820 | ||||
Short-term investments | 3,851 | 4,558 | ||||||
Accounts receivable, net | 174,141 | 200,112 | ||||||
Inventories | 236,501 | 216,506 | ||||||
Prepaid expenses and other | 37,415 | 37,328 | ||||||
Total current assets | 634,319 | 662,324 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | 469,654 | 459,169 | ||||||
DEFERRED INCOME TAXES | 41,157 | 40,580 | ||||||
OTHER ASSETS | ||||||||
Goodwill | 135,994 | 134,187 | ||||||
Intangible assets, net | 151,810 | 156,445 | ||||||
Other | 38,428 | 35,968 | ||||||
Total assets | $ | 1,471,362 | $ | 1,488,673 | ||||
CURRENT LIABILITIES | ||||||||
Line of Credit | $ | 4,466 | $ | 1,008 | ||||
Accounts payable | 106,973 | 108,001 | ||||||
Accrued liabilities and other | 86,027 | 99,301 | ||||||
Income tax payable | 21,041 | 18,216 | ||||||
Current portion of long-term debt | 21,876 | 20,636 | ||||||
Total current liabilities | 240,383 | 247,162 | ||||||
LONG-TERM DEBT, net of current portion | 199,924 | 247,492 | ||||||
DEFERRED TAX LIABILITIES - non current | 26,321 | 25,176 | ||||||
OTHER LONG-TERM LIABILITIES | 94,925 | 94,925 | ||||||
Total liabilities | 561,553 | 614,755 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY | ||||||||
Diodes Incorporated 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; 49,571,038 and 49,130,090, issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 34,021 | 33,727 | ||||||
Additional paid-in capital | 385,928 | 386,338 | ||||||
Retained earnings | 551,213 | 532,687 | ||||||
Treasury stock, at cost, 1,457,206 and 1,457,206 shares held at March 31, 2018 and December 31,2017, respectively | (37,768 | ) | (37,768 | ) | ||||
Accumulated other comprehensive loss | (64,841 | ) | (83,480 | ) | ||||
Total Diodes Incorporated stockholders' equity | 868,553 | 831,504 | ||||||
Noncontrolling interest | 41,256 | 42,414 | ||||||
Total equity | 909,809 | 873,918 | ||||||
Total liabilities and equity | $ | 1,471,362 | $ | 1,488,673 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180508006418/en/
Source:
Company Contact:
Diodes Inc.
Laura Mehrl
Director of Investor Relations
P: 972-987-3959
E: laura_mehrl@diodes.com
or
Investor Relations Contact:
Shelton Group
Leanne Sievers
President, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com