Gains LTM Market Share Despite Challenging Market Conditions; Announces $100 Million Share Repurchase Program

PLANO, Texas — (BUSINESS WIRE) — November 5, 2015 — 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 third quarter ended September 30, 2015.

Third Quarter Highlights

• Revenue was $208.9 million, a decrease of 4.8 percent from the $219.5 million in the second quarter 2015 and a decrease of 10.6 percent from the $233.8 million in the third quarter 2014. Third quarter revenue reflected a 56 percent decline in assembly test manufacturing services, while revenue excluding manufacturing services was down only 1.5 percent sequentially;
• Gross profit was $61.6 million, compared to $69.4 million in the second quarter 2015 and $74.7 million in the third quarter 2014;
• Gross profit margin was 29.5 percent, compared to 31.6 percent in the second quarter 2015 and 32.0 percent in the third quarter 2014;
• GAAP net income was $2.8 million, or $0.06 per diluted share, compared to second quarter 2015 of $15.1 million, or $0.31 per diluted share, and third quarter 2014 of $19.4 million, or $0.40 per diluted share;
• Non-GAAP adjusted net income was $6.3 million, or $0.13 per diluted share, compared to $16.6 million, or $0.34 per diluted share, in second quarter 2015 and $21.2 million, or $0.43 per diluted share, in third quarter 2014;
• Excluding $2.7 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 $45.5 million of cash flow from operations, and ($2.6) million of free cash flow, including $48.1 million of capital expenditures primarily for the Chengdu site expansion. Net cash flow was ($5.8) million, which includes the pay down of $6.1 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, “The sequential decline in third quarter revenue reflected a 56 percent decrease in revenue associated with assembly test manufacturing services, which was included in our previously disclosed guidance, combined with a greater than expected decline in distributor POP sales due to an inventory reduction. Distributor POS was actually strong in the quarter. When excluding manufacturing services, revenue was down only 1.5 percent sequentially. As a strategic response to the challenging environment, we took the opportunity to capture market share by securing additional content at key customer accounts, particularly in smartphones. Increased sales of these lower margin products combined with the lower capacity utilization at our packaging facilities pressured margins during the quarter. Notably, the incremental market share gained positions us more favorably with customers as market conditions improve.”

Dr. Lu concluded, “We currently expect this weak environment and the distributor inventory adjustments to extend into the fourth quarter so have taken additional measures to carefully manage expenses, including reductions in travel and vendor expenses as well as a freeze on new hires. Since we are cautiously optimistic for overall improvements in 2016, we expect these actions to be temporary and do not anticipate the need for more aggressive steps. Looking forward, I continue to believe Diodes’ increased focus on automotive, industrial and the high-volume portable and wearable markets will be key drivers of our business in the coming year.”

Third Quarter 2015

Revenue for the third quarter 2015 was $208.9 million, a decrease of 4.8 percent from the $219.5 million in the second quarter 2015 and a decrease of 10.6 percent from the $233.8 million in the third quarter 2014. The sequential decrease in revenue was due to the expected reduction in revenue associated with assembly test manufacturing services combined with an inventory reduction at global distributors.

Gross profit for the third quarter 2015 was $61.6 million, or 29.5 percent of revenue, compared to the second quarter 2015 of $69.4 million, or 31.6 percent of revenue, and compared to the third quarter 2014 of $74.7 million, or 32.0 percent of revenue. The decline in gross profit margin was due to lower capacity utilization and product mix.

GAAP operating expenses for the third quarter 2015 were $51.7 million, or 24.7 percent of revenue, compared to $47.4 million, or 21.6 percent of revenue in the second quarter 2015 and $49.7 million, or 21.3 percent of revenue in the third quarter 2014. Non-GAAP operating expenses for the third quarter of 2015, excluding acquisition related costs and an asset impairment charge, were $49.1 million, or 23.5 percent of revenue.