Significant Gross Margin Improvement on First Quarter Revenue Growth; Second Quarter Revenue and Margin Expected to Accelerate

PLANO, Texas — (BUSINESS WIRE) — May 9, 2017 — Diodes Incorporated (Nasdaq: DIOD), a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets, today reported its financial results for the first quarter ended March 31, 2017.

First Quarter Highlights

• Revenue was $236.3 million, an increase of 1.8 percent from the $232.1 million in the fourth quarter 2016 and an increase of 6.1 percent from $222.7 million in first quarter 2016;
• GAAP gross profit was $73.9 million, including $0.5 million related to KFAB closure accruals, and non-GAAP gross profit was $74.4 million, excluding the accrual. This compares to GAAP gross profit of $67.3 million in the fourth quarter 2016 and $64.2 million in first quarter 2016;
• GAAP gross profit margin was 31.3 percent, and non-GAAP gross profit margin was 31.5 percent. This compares to GAAP gross profit margin of 29.0 percent in fourth quarter 2016 and 28.8 percent in first quarter 2016;
• GAAP net income was $1.2 million, or $0.02 per diluted share, which included approximately $3.9 million of non-cash acquisition-related intangible asset amortization costs and $1.8 million of restructuring cost related to KFAB closure accruals, compared to GAAP net income of $1.3 million, or $0.03 per diluted share in fourth quarter 2016 and GAAP net loss of $1.7 million, or ($0.04) per share, in first quarter 2016;
• Non-GAAP adjusted net income was $7.0 million, or $0.14 per diluted share, compared to $7.7 million, or $0.15 per diluted share, in fourth quarter 2016 and $5.9 million, or $0.12 per diluted share, in first quarter 2016;
• Excluding $2.7 million, net of tax, non-cash share-based compensation expense, both GAAP net income and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and
• Achieved $45.6 million of cash flow from operations, and $26.5 million free cash flow, including $19.1 million of capital expenditures. Net cash flow was $17.3 million, which includes the pay down of $11.0 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated,

“Revenue in the quarter was at the high end of guidance, increasing almost 2 percent sequentially as compared to typical seasonality of down about 5 percent. Sales in Europe were particularly strong with a resurgence in revenue from the industrial market, combined with strengthening demand in North America. Additionally, our automotive revenue continued to grow from the record level achieved last year, resulting in growth of almost 25 percent over the prior year quarter.

“Also notable in the quarter, gross margin exceeded our guidance and surpassed 31 percent. The improvement was due to increased loading at our manufacturing facilities as a result of the stronger business environment as well as better pricing, in particular for analog products acquired from Pericom. Our KFAB facility is up and running with stabilized monthly output attained in March. When combined with lower SG&A and R&D expenses as a percentage of revenue, we delivered GAAP profitability of $0.02, despite the KFAB closure accruals. Excluding the accruals, non-GAAP earnings per share was $0.14. Further, our strong cash generation enabled us to pay down an additional $11 million in long-term debt.

“As we look to the second quarter, our business as well as the overall market are showing signs of continued strength, resulting in our expectation of 10 percent sequential growth and 33 percent non-GAAP gross margin at the mid-point. With a broadened product portfolio and an expanded sales channel following our integration of Pericom, we are well positioned to fully capitalize on these improving market conditions.”

First Quarter 2017

Revenue for first quarter 2017 was $236.3 million, an increase of 1.8 percent from the $232.1 million in fourth quarter 2016 and an increase of 6.1 percent from the $222.7 million in first quarter 2016. Revenue in the quarter increased sequentially reflecting better than expected seasonality due primarily to strength in Europe and North America.

GAAP gross profit for first quarter 2017 was $73.9 million, or 31.3 percent of revenue, including approximately $0.5 million related to KFAB closure accruals. Non-GAAP gross profit, excluding the accrual, was $74.4 million, or 31.5 percent of revenue. GAAP gross profit in the fourth quarter 2016 was $67.3 million, or 29.0 percent of revenue, and in the first quarter 2016 was $64.2 million, or 28.8 percent of revenue. The increase in gross profit margin was due primarily to improved utilization and pricing.