Q1 2021 Diodes Inc Earnings Call
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Uh huh.
Yes.
Okay.
Thank you for calling my name is Howard many of your conference that the number please.
18 of them.
I don't seem to have an idea of its the diodes, Inc earnings call.
Oh I know there is $5 nine for.
Yeah.
Okay.
Many of you last name Sir.
Brown B R O W N.
First of many please.
John J O H N.
The company name Sir.
Error AI E R. A.
Okay.
And I need your phone number please.
978 to $5 three for four zero too.
Thank you please holger.
Thanks.
$5 million of acquisition related costs zero point $7 million in restructuring costs and $2 9 million dollar gain in value of certain LSC investments.
Non-GAAP adjusted net income in the fourth quarter, 2020 was $37 3 million or <unk> 74 per diluted share.
Included in first quarter of 2021, GAAP net income and non-GAAP. Adjusted net income was approximately $4 $8 million net of tax of noncash share based compensation expense, excluding share based compensation expense, both GAAP earnings per share and non-GAAP adjusted.
P. S would have increased by <unk> 11 per diluted share for first quarter 2021, and 10 cents for the fourth quarter 2020.
EBITDA for the first quarter was $81 7 million or 19, 8% of revenue compared to $67 1 million or 19, 1% of revenue in the prior quarter.
We have included in our earnings release, a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details.
Cash flow generated from operations was $68 2 million for the first quarter 2021 free cash flow was $51 million for the first quarter, which included $17 2 million for capital expenditures.
Net cash flow in the first quarter was a positive $10 6 million, which included a paydown of $37 $4 million of long term debt.
Turning to the balance sheet at the end of first quarter cash cash equivalents restricted cash plus short term investments totaled approximately $339 million working capital was $618 million and total debt, including long term and short term was 415.
<unk>.
In terms of inventory at the end of first quarter total inventory days decreased to approximately 98 in the quarter on a consolidated basis as compared to 115 last quarter finished.
The finished goods inventory days also decreased to 27 from 31 in the fourth quarter 2020.
Total inventory dollars decreased $17 1 million to approximately $290 million total inventory in the quarter consisted of $18 $2 million decrease in raw materials, a $3 $5 million decrease in finished goods and of four six.
Increase in work in process.
Capital expenditures on a cash basis for the first quarter 2021 were $17 $2 million or for 2% of revenue, we expect to remain within our target model of 5% to 9% for the full year.
Now turning to our outlook.
For the second quarter of 2021, we expect revenue to increase to approximately $434 million plus or minus 3%, which represents a record on both an organic and the consolidated basis for a combined increase of 5% sequentially at the midpoint.
We expect GAAP gross margin on a consolidated basis to be 35, 6% plus or minus 1% non.
Non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition related intangible assets are expected to be approximately 25% of revenue plus or minus 1%.
We expect net interest expense to be approximately $1 $6 million.
Our income tax rate is expected to be 19% plus or minus 3% and shares used to calculate diluted EPS for the second quarter are anticipated to be approximately $45 7 million. Please.
Please note that purchasing accounting adjustments of $3 $3 million after tax for payer com and previous acquisitions is not included in these non-GAAP estimates with that said I will now turn the call over to Emily Yang.
Thank you Brett and good afternoon, the Seth.
<unk>, 9% sequential increase in the first quarter revenue with the other day in the high end of our guidance driven by the record direct revenue increased more than 30%.
S revenue up more than 10% the bypass records in Asia, and Europe combined with strong growth in North America distributor inventory in terms of weeks decrease quarter over quarter and below our defining normal range of 11 to reflection of weeks.
Looking at the global sales in the first quarter Asia represented 81% of the revenue you were up 12% in North America of 7% in terms of our end markets computing represented 30% of the revenue industrial 22 per se consumer, 19% communications, 17% and automotive 12 per sale.
Revenue, we achieved record revenue in automotive end market, which was strong across all regions and the computing market driven by record per account revenue.
Now, let me review of the end market in greater details.
Starting with our automotive market our record revenue achieved in the quarter reflects an 18% sequential increase of 61% year over year increase to 12% of total revenue. This growth was driven by strong organic growth with diodes automotive products with minimal contribution from LLC.
Since this product have low exposure to this market. We also continue to gain content with our expand the automotive portfolio of Paragon products as we secured several new designs for our interface and frequency control product in the automotive applications, ranging from Adas infotainment telematics and dashboard.
During the quarter, we introduced several new automotive grade products, including the USB switches.
Spenders and 14, new frequency control products for the in vehicle infotainment system connected driving 19 and body control application.
We also introduced a true why automotive, Matt Hoffman, Sir and all for 'twenty DC to DC product with the signings in design wins at multiple customers in the infotainment power supply 19 instrument clusters telematics Adas.
Application. We also secured additional design wins with <unk> L. E D drag for us in voltage regulators with major car manufacturers applications like wireless charging lighting and D. C D C for electric vehicles.
Also during the quarter of it we saw very strong demand for our protection devices in automotive pistol link HDMI L. E D S and data line protection higher voltage battery system drove up the demand for our MOSFET products also released two new MOSFET, Inc. Paul package to help address the power efficiency the men.
We also released three channel of linear led drivers seven new SBR product in spite of bipolar transistor automotive product during the quarter FBR eschew byproduct with the signing by the number of customers in the EV battery management system.
Carhart light display onboard computer and portable power bank application.
In our industrial market. We also achieved very healthy revenue growth of 13% sequentially and 25% or for the prior year similar to the automotive market revenue contributions from LLC is very minimal, which highlight the strong growth and momentum for Io has continue to achieve and the inc.
That's real market during the quarter, we saw increasing demand of our YY LDL product family for applications, such as power tools in the tourists Iot and other industrial applications. We have also seen the increasing number of design wins for the near voltage regulators and DC fan to support of applications such as mining machine.
<unk> communications MCU and system. Additionally, we saw more day signings of the FBR entrenched yoki in applications like industrial router lighting and heavy machinery die of <unk>.
MOSFET products continue to gain market share impressive D C in Florida of application and our success with LCD driver chips that continue with new design ins for commercial lighting projects.
We also released at $8 eight Inc. PCI Express suite of packet switch, which is designed to meet the need of industrial PC market to improve the reliability and increased bandwidth fulfillment.
In the consumer market, we saw strong demand for our peso sort of driver due to track of market growth. We also continue to expand our business for USB power delivery. The colder in OEM ODM quick charge of application PV of monitor design. We've also continued to represent a large opportunity for P. J P.
And we have very good design win activities for very small transistors into robotic vacuum cleaners and Doorbell Inc.
In addition, we continue to build traction for our products in the Iot Smart home and entertainment applications.
For the communication market, we saw traction from Steph ROE Shockey and FBR proud of in the satellite radio <unk> routers at this point of vouchers and power over Ethernet switches the mez for our Paragon product remained strong as high speed data processing growth the ramping of 200 for Hunter.
800 gig connection per.
The call frequency control products at her low jitter small size Crystal oscillator family has several design ins into optical modules. We also release more than 11, new devices in frequency control product family for communications applications.
Also during the quarter our high P. S. R. L deal proud of family and only polar Hall sensors continue to achieve the same with empty signings, Inc. Smartphone are low saturated high voltage transistors with the signed into routers, IP Cams and optical network application.
Lastly, in the computing market revenue increased 54% quarter over quarter, and 160% year over year to a quarterly record of primarily driven by record <unk> revenue combined with initial revenue contribution from LSC product New design activity continues in the Pea.
The seven along with increased demand of our existing per account products driven by the growth across all of the platforms, including consumer education and commercial Pcs in the quarter. We released 318 volt drivers surface. The USB type C and display port for Pcs and two additional H P.
And I drove for travelers for high speed of media application continuous demand for high resolution display propelled our HDMI D. P. Retry for product to other unit volume peak, new USB power switch product for USB eight.
And USB C for achieved solid revenue growth driven by strong market demand for notebooks art design in momentum continues but do unit polar Hoffman Sir E. F. The total solutions for USB type C Flash LCD driver and the Schottky product in the notebook tablet and storage.
Vacation.
Also during the quarter and computing market, we released close to 100, new power Pvs High search data line protection and power stage product for power line and New bus protection for notebooks mobile phone panels in charge of application.
In summary, we are very pleased with our strong start to the new year, the bi above seasonal growth, resulting in record first quarter of revenue.
Additional the record Pos as well as low channel and internal inventory indicate a strong second quarter with continued increases in growth and profitability. We have already began to realize the initial benefits of the manufacturing synergy from the LSC acquisition with significant opportunities for <unk>.
Upside that capitalizing the additional synergies of crop products customers and end markets.
With that we now open the floor to questions operator.
Certainly ladies and gentlemen, if you have the question at this time. Please press Star then one on your Touchtone telephone if for your question has been answered and you'd like to remove yourself from the queue. Please press the pound key we ask that you. Please limit yourself to one question and one follow up you may get back in the queue. As time allows our first question comes from the line of Matt Ramsay from Cowen Your question.
Please.
Thank you very much good afternoon everybody.
Impressive results for sure.
Dr. Lu.
Wonder if you might give us a bit of a more detailed status upgrade of the inc.
Integration of.
On the operations side with LSC.
You I think mentioned.
Your brief prepared comments that you're now at 70% utilization in those facilities.
Certainly a good environment to have.
Extra capacity given the tightness in the industry. So if you could give us a little bit of an update there and how you see that utilization rate of those facilities trending in the next couple of quarters. Thanks.
Yes.
Let me.
Living good day.
Got it for.
The integration too.
Yes, hi, everybody this is Gary.
This conference call, Okay and to answer your question, Yes, we do see improvement by the facility.
For the inquiries of logging the second quarter and we'll continue loading of the three in the next couple of quarter and we will see them.
More utilization.
And of the fourth quarter.
Got it thank you and welcome to the call and thank you for the detail as my follow up question I guess for the whole team. It's been some very impressive growth of.
The consolidated Inorganically, but it's no secret that there's a lot of different.
Points of capacity tightness across the industry.
The diodes happens to be in a position to have some extra foundry capacity, which is great, but maybe you could calibrate us a little bit on.
How other things in the market may be affecting the upside that you can continue to deliver I'm thinking about things like testing capacity packaging wafers.
Substrates and even limitations of supply of of some of your peer companies that may sell into the same.
Cars or end market devices, if theres any way you could calibrate how the environment is out there.
Versus the strength of your company has seen any of that would be much appreciated. Thank you.
Okay The mall.
Sure.
Most of the strength.
The capacity.
The wafer fab and the flow.
Nearly half of our wafer for quad.
I'm in a way for requirement call meaningful.
We feel free.
And the.
On the other.
The other Fortunately is because.
In 2019, we.
The the.
From Texas instruments, we of course.
And that's true.
Yes.
The additional 10.
Okay.
And the other one.
We are ramping up the.
We call it.
Which is.
Hi.
Acquire.
And that is the plan.
And now we are ramping up for it.
Each section of.
The tool so it goes to that.
Helping.
For for the wait for it.
Then.
In addition, when.
When we purchased it we see.
And you always see.
Under the old.
Remember, we just talking about debt when we acquired ease of 50% so.
No.
Good day, we took in the ball.
<unk> is already up to 70 per se than.
The new.
The capacity.
On the utilization for.
We see for it.
So overall, we really have a good.
Room.
All.
Revenue by.
The ramp up.
Total debt.
The yes.
Weak.
Oh able to get more support from all of its total for it. So overall we.
We see some pumps for them.
No.
And you can see the.
The revenue growth continue revenue.
The growth in line.
The two Q.
We are able to continue support for us.
In the future.
The rest of the year.
That's correct, Okay, and then the rest of it.
The assembly.
Majority of it is.
Oh, the actually so we do continue to expand.
So we.
We don't see a major limitation for.
Oh the expansion.
Okay.
And at least of it you know it's really.
Oh right right for.
Uh huh.
The.
Diodes.
<unk> performed much better than all of comparator due.
Two we have allowed the.
In total.
Fiction.
Thank you Dr. Lu for that are the results speak for themselves I will jump back in the queue I appreciate it.
Thank you.
Thank you. Our next question comes from the line of William Stein from true of Securities. Your question. Please.
Thanks for taking my question part of it was answered a moment ago, but maybe.
Maybe looking for.
The more.
Maybe the word is it more forceful view.
One else's.
All of the other companies are talking very clearly about capacity constraints it sounds like they're not as.
The problematic for you because of your internal capacity are you seeing lead times in aggregate stretch either because of.
The company is having trouble delivering on some on some parts.
Or because customers are willing to place orders that longer lead time.
Are you seeing that dynamic in your business and if so maybe how far out in the future we stretching today.
Right Hi, This is Emily let me answer the question so.
We definitely seen the overall market constraint that we have very very strong book to bill the ratio, we have extremely strong backlog across all of the regions and just like I reported we have very very strong appeal as we saw as well so definitely we've seen a little bit of the imbalance of supply and demand in the markets of hard to make sure we've seen that.
Well, what we've been doing is actually we oh for timing of different bottlenecks by working very closely with the customers to understand there to the net right.
You know definitely we are seeing.
Longer I would say upper teens right people of the lead time is stretching a little bit longer but I've been emphasizing it's not really about the the time, it's really true demand that understanding from the customer by working closely with them.
So we've definitely seen longer visibility for the backhaul point of view so yes.
One other if I can.
An idea of that.
Hmm.
And then sort of discussed in the semi industry for some years is competition from.
The local China.
China based manufacturers and there's I think of new JV announced in the last couple of days between the.
<unk> and <unk>.
And Fox Con.
To produce small Ics.
Not necessarily about that.
Potential future of competitor, specifically, but if you can characterize the competitive.
The threats generally and specifically about.
Sort of local new entrants in the market in China. Thank you.
Right so definitely we.
New competitors coming from China is nothing new.
We haven't seen that obviously situation for a while already like I mentioned before what we usually see this kind of competitors really more on the low end of the product or the technology. So over the years that diodes has been implemented a strategy is actually walking away.
From this kind of deep commodity market areas.
What we've been doing is actually continue to improve our technology and continue to drive the product mix to the higher and saw the right. So I would say even the having more of competition in the low end area. It doesn't really have a big impact for the overall the items business actually said it.
Other with our new strategy because that has been our direction for the last few years.
Yeah.
Yes.
You know we.
What we do.
We do is the.
Our.
Sales from.
From the from the commodity.
For the content or total solution sales with the the.
The very strong for the what product portfolio and all the the.
The stable of.
History of.
The M&A, we are now a part of our portfolio.
We did.
Very wide range and do for.
We'll keep of.
The empty when we go to the customer when we approach to the total solution and the new stuff company for China Company.
They are not able to have Barry.
A wide range of victims.
We do of the product portfolio and so the.
We watch all four day for all compared.
Compared to come but you don't.
Right.
To what degree Florida portfolio.
This is just get the claim.
Oh.
True.
And then the.
Yeah.
No.
True.
Solution.
One of the range.
Okay. Thank you and congratulations on the excellent results.
Thank you.
Thank you. Our next question comes from the line of Tristan <unk> from Baird. Your question. Please.
Yes.
Hi, Thanks for letting me ask the question.
I think I heard that about 50% of your production is outsourced the current CNI, saying, that's mostly on the analytic side pulling the debt.
Years ago, Kansas He shut down.
Are you expecting to meaningfully change for the next few years and an increased percentage of your manufacturing that's going to be in sort of also notably as you.
Now have more capacity in house between.
A fab to fab and in light on that.
Yes.
Let me ask the question.
Your line.
Okay for you guys weekend.
True.
About from the years ago part of it.
The windows.
And the G fast in the cramp on Ti, we got a fixed income.
I usually for value Scarlet and also just recently, we merge with the semi.
We have of six inch wafer fab and the <unk>.
And the team.
And the kilo in Taiwan.
Looking for the.
Good candidates with the good capacity to increase the internally in the future. So does that probably isn't.
In the very soon and the way you will have the New York for capacity, maybe okay, but definitely this is our direction to increase our internal capacity and reduce the outside the poor from the tough comp.
Okay, and then given yes.
The the relative supply advantage, you have versus peers and given.
Larger and then of companies of deemphasizing certain products being sort.
Like on the strength do you basically see market share gains.
And so you're basically taking on products debt.
For the sheer peers.
Either of deemphasizing on purpose, so not able to.
To serve the market with.
Yes definitely.
And the maintenance is very strong and whoever the company type of capacity you will win the business.
Right. So let me just the let me just the Adam the debt on top of that I think since then it's not it's all about balancing right. So keep in mind, our strategy doesn't really change what we've been focusing his contract extension right. So we want to continue to expand the product into the customer and the continue.
The two expand our customer base right. So right now it's the interesting dynamic of the market, but does not take away our long term focus at the company. So what our focus is continues with our total solution sales continue to improve our product mix right. So that is actually the reason because.
We do have a very clear goal by 2025 that we want to achieve $2 $5 billion right. So I would say, yes. There are short term I would say variations for the the man of supply imbalance, but that does not take away our long term strategy of the product mix improvement as well.
Well as content expansion.
Okay very useful color. Thank you.
Thank you once again, ladies and gentlemen, if you have any questions. At this time. Please press Star then one of our next question comes from the line of David Williams from Loop capital. Your question. Please.
Good afternoon, and thanks for the question and.
Congrats on the solid progress.
Hum.
Yes, the wanted to see maybe if you could help size of maybe your backlog or maybe any color around that the velocity of the orders through the quarter, just kind of how you've seen orders tracking and how you think about that as we move through this quarter maybe into the third quarter.
Okay, Hi, David let.
Let me.
Answer your question. So we do actually continue to see strong book to Bill ratio are much higher than one and other we are you know like I reported in the Q1 be felt right. We've seen very strong U S. B cell and the rest of the appeal as from Asia as well as for Europe, even for them in the water.
America, we actually seen very very strong momentum the momentum growth more than 20 per cent.
I look at the the Rep P. L. P business point of view of the OEM business. I also mentioned, we actually run more than 30 per satellite. So based on all of this data and based on the strong backlog that we currently have all of the book.
So you know overall I would say the market is very very strong across all of the region and also across all of the statements.
So we think the center we are definitely seeing continue extra strong strength from the automotive and we're also seeing very good momentum in the industrial continue to recover and the computing will continue to be strong I think even consumer of communication. We are also seeing very strong backlog as well.
For your rate issue.
If you took all of.
The inventory from all of these.
He is very low.
We typically looking for either.
One of 14 week of the.
The inventory.
No even the Doe.
All right.
So.
But in addition of the appeal.
The strong appeal is.
You know the.
Tony.
So although inventory.
Good day.
It's a.
The Bristol.
Oh my goodness.
Mhm.
Yeah.
Okay alright. Thanks.
And then maybe just from from your customers do you get a sense of there being fairly rational.
In terms of their orders, obviously double booking sort of thing.
It may not mean, much but do you get a sense of maybe they are becoming a little more rationale in their ordering and understanding of the lead times and in placing orders that.
Debt are inline with what book.
With what the dynamics are.
Yeah. So I think you know like I mentioned before we worked very closely with the tier one tier two customers who understand their true. The net what we see is it's very rational but going through the distribution of side of the tier three tier for it's not something we have the bandwidth to work with each individual customer to us.
Understand it so how do we measure is that true we look at the P. O S. V. So we look at the channel inventory. So with all of this data I will say Oh for all of the business seems really solid and.
Strong overall.
Great. Thanks, so much.
Yeah.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to management for any further remarks.
Yes.
Thank you for you of participation on today's call.
Operator.
No disconnect.
Thank you and thank you ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
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