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Diodes Incorporated Reports Third Quarter 2020 Financial Results
Revenue Exceeds Expectations, Increasing 7.2% Sequentially Driven by Record Revenue in Automotive, Computing and Consumer End Markets
Third Quarter Highlights
-
Revenue was
$309.5 million , an increase of 7.2 percent compared to$288.7 million in the second quarter 2020; -
Gross profit was
$111.1 million , an increase of 9.5 percent compared to$101.5 million in the second quarter 2020; - Gross profit margin increased 70 basis points to 35.9 percent from 35.2 percent in the second quarter 2020;
-
GAAP net income was
$27.2 million , or$0.51 per diluted share, as compared to$21.0 million , or$0.40 per diluted share, in the second quarter 2020; -
Non-GAAP adjusted net income was
$32.8 million , or$0.62 per diluted share, as compared to$28.6 million , or$0.54 per diluted share, in the second quarter 2020; -
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$0.09 per diluted share; -
EBITDA 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 -
Achieved cash flow from operations of
$39.7 million and$21.9 million free cash flow, including$17.8 million of capital expenditures. Net cash flow was a positive$85.2 million , which includes an additional draw-down of debt as a partial currency hedge associated with the anticipated close of the Lite-On acquisition at the end of November as well as a pay-down of long-term debt.
Commenting on the results, Dr.
“In fact, our total revenue has increased 10% from the first quarter of 2020 at the onset of the pandemic with net income increasing approximately 35%, demonstrating both the resiliency of our business as well as the solid leverage in our operating model. We expect to further extend our growth momentum as we continue to see broad-based improvements across our target end markets and geographies, which at the mid-point of our fourth quarter guidance represents the highest quarterly revenue in the Company’s history. These expectations exclude any contribution from our proposed acquisition of Lite-On Semiconductor that is expected to close at the end of November.”
Third Quarter 2020
Revenue for third quarter 2020 was
GAAP gross profit for the third quarter 2020 was
GAAP operating expenses for third quarter 2020 were
Third quarter 2020 GAAP net income was
Third quarter 2020 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 |
|||||
|
|||||
GAAP net income |
$ |
27,152 |
|||
GAAP diluted earnings per share |
$ |
0.51 |
|||
Adjustments to reconcile net income to non-GAAP net income: | |||||
Amortization of acquisition-related intangible assets |
|
3,266 |
|||
Acquisition-related financing costs |
|
2,130 |
|||
Acquisition-related costs |
|
238 |
|||
Non-GAAP net income |
$ |
32,786 |
|||
Non-GAAP diluted earnings per share |
$ |
0.62 |
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
EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, in the third quarter 2020 was
For third quarter 2020, 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 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
Purchase accounting adjustments related to amortization of acquisition-related intangible assets of
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,” “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
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) |
|||||||||||||||||
Three Months Ended |
|
|
Nine Months Ended |
||||||||||||||
|
|
|
|
||||||||||||||
|
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 |
||||||||||
Operating
|
|
Other
|
|
Income Tax
|
|
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 |
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 |
|||||||||||
Operating
|
|
Income Tax
|
|
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 |
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 |
||||||||||||
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 |
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 |
||||||||||
Operating
|
Income Tax
|
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 |
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.
Acquisition related financing costs – The Company excluded expenses associated with a new credit facility and refinance of existing debt to prepare for the acquisition of Lite-On Semiconductor. The Company believes the exclusion of the acquisition related financing costs 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.
Acquisition related costs – The Company excluded expenses associated with the acquisition of Lite-On Semiconductor, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed as they were incurred and as services were received, and in which the corresponding tax adjustments were made for the non-deductible portions of these expenses. The Company believes the exclusion of the acquisition related costs 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.
Board member retirement costs – The Company excluded expenses in connection with the retirement of a member of the Company’s board of directors. The Company modified that director’s unvested RSU grants to vest upon his retirement. The shares subject to the modified grants will be released that board member as if they were vesting under the original vesting timeline. In connection with this modification the Company recorded additional expense of approximately
Land sale inspection extension fee – The Company excluded receipt of inspection extension fees related to the sale of the land located in
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the third quarter of 2020 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the third quarter of 2020, 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 |
|
Nine Months Ended |
||||||||||
|
|
|
||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||
Net income (per-GAAP) |
$ |
27,152 |
$ |
38,060 |
$ |
68,353 |
$ |
106,060 |
||||
Plus: | ||||||||||||
Interest expense, net |
|
3,607 |
|
1,736 |
|
7,064 |
|
4,383 |
||||
Income tax provision |
|
5,871 |
|
10,613 |
|
15,097 |
|
32,085 |
||||
Depreciation and amortization |
|
26,699 |
|
27,888 |
|
81,043 |
|
82,805 |
||||
EBITDA (non-GAAP) |
$ |
63,329 |
$ |
78,297 |
$ |
171,557 |
$ |
225,333 |
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) |
||||||||
|
|
|
||||||
|
2020 |
|
|
|
2019 |
|
||
(unaudited) |
|
(audited) |
||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
587,643 |
|
$ |
258,390 |
|
||
Short-term investments |
|
3,014 |
|
|
4,825 |
|
||
Accounts receivable, net of allowances of |
|
261,782 |
|
|
260,322 |
|
||
Inventories |
|
260,289 |
|
|
236,472 |
|
||
Prepaid expenses and other |
|
101,961 |
|
|
49,950 |
|
||
Total current assets |
|
1,214,689 |
|
|
809,959 |
|
||
Property, plant and equipment, net |
|
453,487 |
|
|
469,574 |
|
||
Deferred income tax |
|
23,566 |
|
|
17,516 |
|
||
|
155,492 |
|
|
141,318 |
|
|||
Intangible assets, net |
|
114,306 |
|
|
119,523 |
|
||
Other |
|
71,112 |
|
|
81,494 |
|
||
Total assets |
$ |
2,032,652 |
|
$ |
1,639,384 |
|
||
Liabilities | ||||||||
Current liabilities: | ||||||||
Line of credit |
$ |
70,746 |
|
$ |
13,342 |
|
||
Accounts payable |
|
127,315 |
|
|
122,148 |
|
||
Accrued liabilities and other |
|
103,259 |
|
|
100,571 |
|
||
Income tax payable |
|
5,235 |
|
|
16,156 |
|
||
Current portion of long-term debt |
|
14,978 |
|
|
33,105 |
|
||
Total current liabilities |
|
321,533 |
|
|
285,322 |
|
||
Long-term debt, net of current portion |
|
330,766 |
|
|
64,401 |
|
||
Deferred tax liabilities |
|
14,445 |
|
|
16,333 |
|
||
Other long-term liabilities |
|
114,857 |
|
|
120,545 |
|
||
Total liabilities |
|
781,601 |
|
|
486,601 |
|
||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Preferred stock - par value shares issued or outstanding |
|
- |
|
|
- |
|
||
Common stock - par value 51,945,299 and 51,206,969, issued and outstanding at |
|
35,628 |
|
|
35,111 |
|
||
Additional paid-in capital |
|
440,944 |
|
|
427,262 |
|
||
Retained earnings |
|
858,311 |
|
|
789,958 |
|
||
2020 and |
|
(39,205 |
) |
|
(37,768 |
) |
||
Accumulated other comprehensive loss |
|
(97,105 |
) |
|
(108,139 |
) |
||
Total stockholders' equity |
|
1,198,573 |
|
|
1,106,424 |
|
||
Noncontrolling interest |
|
52,478 |
|
|
46,359 |
|
||
Total equity |
|
1,251,051 |
|
|
1,152,783 |
|
||
Total liabilities and stockholders' equity |
$ |
2,032,652 |
|
$ |
1,639,384 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20201109006067/en/
Company Contact:
Director of Investor Relations
P: 972-987-3959
E: laura_mehrl@diodes.com
Investor Relations Contact:
President, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com
Source: