Diodes Achieves Record Revenue with Continued Margin Improvement in Q3

Diodes Incorporated reported its financial results for the third quarter ended September 30, 2013, including: Revenue of $224.5 million, an increase of 4.7 percent from the $214.4 million in the second quarter 2013, and an increase of 34.7 percent from the $166.6 million in the third quarter 2012; Gross profit of $69.6 million, compared to $61.3 million in the second quarter of 2013, that included a $3.7 million inventory valuation adjustment related to the BCD acquisition, and $43.6 million in the third quarter of 2012; Gross profit margin was 31.0 percent, compared to 28.6 percent in the second quarter of 2013 and 26.2 percent in the third quarter of 2012; and GAAP net income was $13.6 million, or $0.28 per diluted share, compared to second quarter 2013 of $8.6 million, or $0.18 per diluted share, and third quarter 2012 of $8.6 million, or $0.18 per diluted share.

Non-GAAP adjusted net income was $15.8 million, or $0.33 per diluted share, compared to $15.5 million, or $0.33 per diluted share, in second quarter 2013 and $9.5 million, or $0.20 per diluted share, in third quarter 2012. Excluding $2.3 million, net of tax, share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and the company achieved $16.7 million cash flow from operations and $9.6 million of free cash flow. Net cash flow was $(9.3) million, primarily due to the $22 million purchase of short-term investments and a $7 million pay down on a revolver.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, “Our third quarter was highlighted by the continued achievement of record quarterly revenue, increased market share gains, and solid operational performance across our business. Our past design win momentum and strength in the TV market and at certain major OEM customers were able to offset the continued weakness in the PC market. We also further improved our gross margin through our cost reduction efforts and improved BCD wafer fab loadings. Additionally, we reduced our operating expenses on a dollar basis, and as a percentage of revenue, demonstrating further progress towards achieving our target model of 20 percent of revenue.

“These achievements are even more notable when considering the weakness of the U.S. dollar relative to most of the currencies where we have operations, in particular the British Pound and the Euro. Our improved operational efficiencies and cost reductions were able to mostly offset this currency impact and allowed us to exceed our operational expectations for the quarter.

“As we look to the fourth quarter, it is shaping up to be weaker than our normal seasonality due to a broad based market weakness, especially the continued weakness in the PC market. However, we believe we are well positioned in the coming year to benefit from ongoing operational improvements as we leverage our broadened product portfolio and additional cost savings from transferring BCD products into our packaging facilities, and eventually off-loading our analog foundry wafer loadings into BCD’s wafer fabs.”