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Diodes Incorporated Reports Second Quarter 2015 Financial Results

PLANO, Texas--(BUSINESS WIRE)--

Diodes Incorporated (Nasdaq: DIOD), a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic and analog semiconductor markets, today reported its financial results for the second quarter ended June 30, 2015.

Second Quarter Highlights

  • Revenue was $219.5 million, an increase of 6.4 percent from the $206.2 million in the first quarter 2015 and a decrease of 1.7 percent from the $223.2 million in the second quarter 2014;
  • Gross profit was $69.4 million, compared to $63.9 million in the first quarter 2015 and $70.3 million in the second quarter 2014;
  • Gross profit margin was 31.6 percent, compared to 31.0 percent in the first quarter 2015 and 31.5 percent in the second quarter 2014;
  • GAAP net income was $15.1 million, or $0.31 per diluted share, compared to first quarter 2015 of $11.1 million, or $0.23 per diluted share, and second quarter 2014 of $17.4 million, or $0.36 per diluted share;
  • Non-GAAP adjusted net income was $16.6 million, or $0.34 per diluted share, compared to $12.7 million, or $0.26 per diluted share, in first quarter 2015 and $18.2 million, or $0.38 per diluted share, in second quarter 2014;
  • Excluding $2.5 million, net of tax, non-cash share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and
  • Achieved $14.4 million of cash flow from operations, and ($9.0) million of free cash flow, including $23.3 million of capital expenditures primarily for the Chengdu site expansion. Net cash flow was ($27.5) million, which includes the pay down of $18.1 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, “Revenue was up 6.4 percent sequentially due to continued strength in the industrial and automotive markets, especially in Europe where revenue increased 8 percent after growing 14 percent last quarter despite the weak Euro. Our growth this quarter is particularly noteworthy considering the continued weakness in the computing market. Also significant, we improved gross margin 60 basis points sequentially despite pricing pressure in the computing market as we continued to benefit from our product mix improvements and cost reduction efforts.

“As mentioned in the past, we have been strategically focusing our efforts on increasing content in the industrial and automotive markets. We have introduced a growing number of new products that meet the stringent requirements of these markets. In fact, we have now achieved two consecutive quarters of industrial sales exceeding 23 percent of total revenue, and our automotive sales reached 5 percent on record automotive revenue. Additionally, we have expanded our technical and sales resources to deepen relationships with customers in North America and Europe, which we believe will contribute to growth in both the intermediate and long-term.

“We also continue to broaden our product offerings for high-volume portable electronics and are securing an increasing number of design wins in wireless charging as well as the wearables and Internet of Things markets. Although these markets are in the early stages of expansion, Diodes is well positioned to capture share in these growing markets based on our expertise in miniaturized and power efficient packaging.”

Second Quarter 2015

Revenue for the second quarter 2015 was $219.5 million, an increase of 6.4 percent from the $206.2 million in the first quarter 2015 and a decrease of 1.7 percent from the $223.2 million in the second quarter 2014. Revenue was up sequentially due primarily to continued strength in the industrial and automotive markets, which more than offset the softness in the computing market.

Gross profit for the second quarter 2015 was $69.4 million, or 31.6 percent of revenue, compared to the first quarter 2015 of $63.9 million, or 31.0 percent of revenue, and compared to the second quarter 2014 of $70.3 million, or 31.5 percent of revenue. Gross profit margin was up 60 basis points sequentially due to the continued benefit of product mix improvements and cost reductions.

Operating expenses for the second quarter 2015 were $47.4 million, or 21.6 percent of revenue, compared to $47.0 million, or 22.8 percent of revenue in the first quarter 2015 and $47.2 million, or 21.1 percent of revenue in the second quarter 2014.

Second quarter 2015 GAAP net income was $15.1 million, or $0.31 per diluted share, compared to first quarter 2015 of $11.1 million, or $0.23 per diluted share, and second quarter 2014 of $17.4 million, or $0.36 per diluted share.

Second quarter 2015 non-GAAP adjusted net income was $16.6 million, or $0.34 per diluted share, which excluded, net of tax, $1.5 million of non-cash, acquisition related intangible asset amortization costs. This compares to non-GAAP adjusted net income of $12.7 million, or $0.26 per diluted share, in the first quarter 2015 and $18.2 million, or $0.38 per diluted share, in the second quarter 2014.

The following is a 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
June 30, 2015
GAAP net income $ 15,078
GAAP diluted earnings per share $ 0.31
Adjustments to reconcile net income to adjusted net income:
Amortization of acquisition related intangible assets 1,494
Non-GAAP adjusted net income $ 16,572
Non-GAAP adjusted diluted earnings per share $ 0.34

(See the reconciliation tables of net income to adjusted net income near the end of the release for further details.)

Included in the second quarter of 2015 GAAP and non-GAAP adjusted net income was approximately $2.5 million, net of tax, of non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted diluted EPS would have increased by an additional $0.05 per share for each of the second quarter 2015, first quarter 2015 and second quarter 2014.

EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, for the second quarter 2015, was $40.2 million, compared to $35.3 million for the first quarter 2015 and $42.9 million for the second quarter 2014. For a reconciliation of GAAP net income to EBITDA, see the table near the end of the release for further details.

For the second quarter 2015, net cash provided by operating activities was $14.4 million. Free cash flow was ($9.0) million, which includes $23.3 million of capital expenditures primarily for the Chengdu site expansion. Net cash flow was ($27.5) million, which reflects the pay down of $18.1 million of long-term debt.

As of June 30, 2015, the Company had approximately $220 million in cash, cash equivalents and short-term investments, long-term debt totaled approximately $100 million, and working capital was approximately $508 million.

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 Quarterly Report on Form 10-Q for the second quarter of 2015.

Business Outlook

Dr. Lu concluded, “For the third quarter of 2015, we expect revenue to range between $209 million and $225 million, or a decrease of 4.8 percent to an increase of 2.5 percent sequentially. At the midpoint of the guidance, total revenue is projected down 1 percent from the second quarter due to a significant reduction in the revenue associated with assembly test manufacturing services; revenue excluding manufacturing services is projected to grow approximately 3 percent sequentially. We expect gross margin to be 31.5 percent, plus or minus 2 percent. Operating expenses are expected to be approximately 22.2 percent of revenue, plus or minus 1 percent. We expect our income tax rate to be 26 percent, plus or minus 3 percent, and shares used to calculate diluted EPS for the third quarter are anticipated to be approximately 49.6 million. For 2015, we expect our capital expenditures to be 5 to 9 percent of revenue, excluding the Chengdu site expansion.”

Conference Call

Diodes will host a conference call on Thursday, August 6, 2015 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second quarter 2015 financial results. Investors and analysts may join the conference call by dialing 1-855-232-8957 and providing the confirmation code 81364333. International callers may join the teleconference by dialing 1-315-625-6979 and enter 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 Thursday, August 13, 2015 at midnight Central Time. The replay number is 1-855-859-2056 with a pass code of 81364333. 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...


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