Note: Included in GAAP and non-GAAP adjusted net income was approximately $13.7 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted diluted earnings per share would have improved by $0.30 per share.

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 the United States (“GAAP”). The Company’s management makes adjustments to the GAAP measures that it feels are necessary to allow investors and other readers of the Company’s financial releases to view the Company’s operating results as viewed by the Company’s management, board of directors and research analysts in the semiconductor industry. These non-GAAP measures are not prepared in accordance with, and should not be considered alternatives or necessarily superior to, GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names. The explanation of the adjustments made in the table above, are set forth below:

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.

Officer retirement – 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.

Insurance recovery for manufacturing facility – The Company recorded gains related to insurance recovery for a manufacturing facility in Asia. The Company believes the exclusion of the insurance recovery provides investors with a more accurate reflection of the continuing operations of the Company and facilitates comparisons with the results of other periods which may not reflect such gains.

Non-cash mark-to-market investment adjustments – The Company excluded mark-to-market adjustments on various equity related investments. The Company believes this is not reflective of the ongoing operations and exclusion of this provides investors an enhanced view of the Company’s operating results.

Restructuring charge – The Company recorded restructuring charges related to various locations. 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.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the second quarter of 2024 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the second quarter of 2024, FCF was a negative $3.5 million, which represents the cash and cash equivalents that we are able to generate after taking into account cash outlays required to maintain or expand property, plant and equipment. FCF is important because it allows us to pursue opportunities to develop new products, make acquisitions and reduce debt.

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								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Net income (per-GAAP)		$	8,000			$	82,020			$	22,038			$	153,170
Plus:
Interest expense, net			(3,385	)			(35	)			(7,467	)			325
Income tax provision			2,643				17,224				6,180				33,840
Depreciation and amortization			33,794				34,243				68,649				67,896
EBITDA (non-GAAP)		$	41,052			$	133,452			$	89,400			$	255,231

DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
		June 30,				December 31,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	264,709			$	315,457
Restricted Cash			2,948				3,026
Short-term investments			9,188				10,174
Accounts receivable, net of allowances of $12,133 and $5,641 at June 30, 2024 and December 31, 2023, respectively			384,965				371,930
Inventories			461,539				389,774
Prepaid expenses and other			97,115				97,024
Total current assets			1,220,464				1,187,385
Property, plant and equipment, net			707,617				746,169
Deferred income tax			50,956				51,620
Goodwill			145,595				146,558
Intangible assets, net			57,391				63,937
Other long-term assets			179,034				171,990
Total assets		$	2,361,057			$	2,367,659
Liabilities
Current liabilities:
Line of credit		$	26,343			$	40,685
Accounts payable			156,687				158,261
Accrued liabilities			167,436				179,674
Income tax payable			9,145				10,459
Current portion of long-term debt			1,344				4,419
Total current liabilities			360,955				393,498
Long-term debt, net of current portion			18,988				16,979
Deferred tax liabilities			9,532				13,662
Unrecognized tax benefits			34,035				34,035
Other long-term liabilities			85,971				99,808
Total liabilities			509,481				557,982
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; 46,146,009 and 45,938,382, issued and outstanding at June 30, 2024 and December 31, 2023, respectively			36,958				36,819
Additional paid-in capital			513,309				509,861
Retained earnings			1,697,312				1,675,274
Treasury stock, at cost, 9,287,762 and 9,286,862 shares held at June 30, 2024 and December 31, 2023			(338,052	)			(337,986	)
Accumulated other comprehensive loss			(135,172	)			(143,227	)
Total stockholders' equity			1,774,355				1,740,741
Noncontrolling interest			77,221				68,936
Total equity			1,851,576				1,809,677
Total liabilities and stockholders' equity		$	2,361,057			$	2,367,659

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