Q2 2025 Diodes Inc Earnings Call
Good afternoon and welcome to Dos Incorporated, second quarter, 2025 Financial results conference call.
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As a reminder, this conference call is being recorded today. Thursday, August 7th, 2025.
I would now like to turn the call over to Leanne fevers of Shelton group, investor relations wean. Please go ahead.
Good afternoon and welcome to diode second quarter 2025 Financial results conference call. I'm Leanne Sievers president of Shelton group Dow's investor relations firm joining us today are dod's president and CEO Gary you CFO Brett Whitmire
Senior vice president of worldwide sales and marketing, Emily Yang and director of investor relations skirmett dalawa.
I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company. Finalizing, its closing procedures and customary quarterly review by the company's independent registered public accounting firm as such. These results are un audited and subject to revision until the company files its form 10q for its quarter ended, June 30th 2025.
In addition Management's prepared remarks contained, forward-looking statements, which are subject to risks and uncertainties and management. May make additional forward-looking statements in response to your questions.
Therefore, the company claims the protection of the Safe Harbor for forward-looking statements. That is contained in the private Securities, litigation Reform, Act of 1995.
Actual results May differ from those discussed today and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings, with the Securities and Exchange Commission, including forms 10K, and 10 Q. In addition, any projections as to the company's future performance represent Management's estimates as of today? August 7th, 2025, that is assumes. No obligation.
To update these projections in the future as market conditions, may or may not change except to the extent required by applicable law. Additionally, the company's press release and management statements. During this conference call will include discussions of certain measures and financial information and gaap and non-gaap terms. Included in the company's press release or definitions and reconciliations of gaap to non-gaap items which provide additional details.
Also, throughout the company's press release and management statements. During this conference call, we refer to net income attributable, to Common stockholders as gaap, net income.
For those of you unable to listen to the entire call, at this time of recording will be available via webcast for 90 days in the investor relations section of dod's website at www.dios.com. And now I'll turn the call over to diyos president and CEO Gary, you Gary, please go ahead.
Welcome everyone, and thank you for joining us on today's conference call.
As announced in our press release earlier today, we expect revenue results to represent our third consecutive quarter of year-over-year growth, indicating the ongoing improvement in market conditions and demand.
Phone that sells increased sequentially across our regions with double digit growth in Asia.
The increasing demand in the quarter. Also contribute to channel inventory being reduced further with both Channel and internal inventory, DayZ, decreasing
why we continue to see positive, sign up the Border Market recovery, our consumer and Market experienced the strongest growth during the quarter,
Contributing to less favorable products combined with our higher margin automotive and Industrial markets, remain effective flat as a percentage of total revenue.
Additionally, the channel inventory, depletion. Continue to limit increased loading at our manufacturing facilities.
Resulting in underloading costs also being a headwind to gross margin expansion.
Even when considering those Dynamic, we continue to increase gross profit dollar and the delivery non-gaap earning growth of almost 70% sequentially. As we continue to close the manage expenses.
Point many driven by strong demand in Asia for AI related, Computing, applications, and increasing demand in the EV Automotive Market in China.
With that, let me now turn the call over to Brett to discuss our second quarter 2025 Financial results as well as our third quarter guidance in more detail.
Thanks Gary and good afternoon everyone revenue for the second quarter 2025 was 366.2 Million. An increase of 14% over 319.8 million in the second quarter 2024 and a 10% increase over 332.1% of 2025.
Gross profit for the second quarter was 115.3 million or 31.5% of Revenue, compared to 107.4 million or 33.6% of Revenue. In the prior year, quarter and 104.7 million or 31.5% of Revenue in the prior quarter.
Gap. Operating expenses for the second quarter were $105.9 million, or 28.9% of revenue, and on a non-GAAP basis were $99.8 million, or 27.3% of revenue, which excludes $5.8 million in amortization of acquisition-related and tangible assets. Except...
Expenses this compares to gaap operating expenses in the second quarter, 2024 of 103.7 million, or 32.4% of Revenue, and 103.4 million or 31.1% of Revenue. In the prior quarter, non-gaap operating expenses in the prior quarter were 97.1 million or 29.3% of Revenue.
Total other income amounted to approximately 43.8 million for the quarter. Consisting of 29.6 million and unrealized gains from Investments 13.7 million in gains from disposal of a subsidiary. 7 million dollars in interest income 0.4 million. In other income, 6.4 million and foreign currency losses, and 0.5 million in interest expense income before taxes and non-controlling interest in the second quarter, 2025 was 53.2 Million compared to income of 12.8 million in the prior year period and a loss of 2.8 million in the previous quarter.
Turning the income taxes are effective income tax rate for the second quarter was approximately 17%. We continue to expect the tax rate for the full year to be approximately 18% plus or minus 3%.
Gaap net income for the second quarter was 46.1 million or 99 cents per diluted share compared to net income of 8, million or 17 cents per diluted share in the prior year quarter and a net loss of 4.4 million or 10 cents per diluted, share last quarter.
Share count used to compute Gap income per share for the second quarter of 2025 was 46.5 Million shares.
Non-gaap adjusted net income. In the second quarter was 15 million or 32 cents per diluted share, which excluded net of tax 23.4 million non-cash, unrealized mark-to-market gain on investment value adjustment, 12.7 million gain on disposal of a subsidiary. 4.8 million of acquisition related and tangible asset costs.
This compares to non-gaap adjusting net, income of 15.4 million or 33 cents per diluted. Share in the second quarter 2024 and 8.8 million or 19 cents per diluted share in the prior quarter.
Excluding non-cash, share-based compensation, expense of 4.6 million for the second quarter. Net of tax, both, gaap net income, and non-gaap adjusted. Net income would have increased by 10 cents per share.
Ibida. For the second quarter was 84.5 million or 23.1% of Revenue compared to 41.1 million or 12.8% of Revenue in the prior year period and 26.2 million or 7.9% of Revenue in the prior quarter.
Come to non-gaap adjusted net, income and GAP, that income to ibida, which provides additional details.
Operations was 41.
For the second quarter.
Free cash flow was 21.1 Million, which included 20.4 million of capital expenditures.
The net cash flow was a negative. 18.2 million including approximately 49.2 million, from an increase in equity investment, and 10 million, for stock buyback program.
Turning to the balance sheet. At the end of second quarter Cash, Cash equivalents restricted Cash Plus short-term Investments totaled, approximately 333 million.
Working capital was approximately 871 million and total debt, including long-term and short-term was approximately 54 million.
In terms of inventory at the end of second quarter total inventory days were approximately 173 as compared to 187 last quarter down approximately 14 days sequentially.
Finished good. Inventory days. Were 71 a decrease of 9 days from the 80 last quarter.
Total inventory, dollars, increased 11.7 million from the prior quarter to 482.7 million consisting of 9.7 million increase in work in process and 9.1 million increase in raw materials and the 7.1 million decrease in finished goods.
Capital expenditures on a cash basis. Were 20.4 million for the second quarter or 5.6% of Revenue which was at the low end of our targeted range of 5 to 9% of Revenue.
Now, turning to our outlook for the third quarter 2025, we expect Revenue to increase to approximately 392 million plus, or minus 3%, which represents 12% growth over the prior year period at the midpoint, which will be the fourth consecutive quarter of year-over-year growth.
Gaap gross margin is expected to be 31.6% plus or minus 1% non-gaap operating expenses which are Gap. Operating expenses adjusted for amortization of acquisition related and tangible assets are expected to be approximately, 26% of Revenue, plus or minus 1%.
We expect net interest income to be approximately $1 million. Our income tax rate is expected to be 18% plus or minus 3% and shares used to calculate EPS for the third quarter are anticipated to be approximately 46.5 million.
Not included in these non-gaap estimates is amortization of 4.8 million after tax for previous Acquisitions. With that said, I now turn the call over to Emily a
Thank you, Brett and good afternoon Revenue in the quarter was up 10.3%.
And above the high end of our guidance. Mainly driven by strong demand in Asia, especially AI related Computing and consumer. Rent are for new programs.
Our Global PS increase across all regions with double digit growth in Asia and our Channel inventory, decrease, again, this quarter both in terms of dollars and weeks.
We are also seeing this momentum. Extend into the third quarter with strong beginning backgrounds.
During the second quarter.
We further extended our new product initiative, with over 100 new part numbers introduced of which over 50% would automotive parts.
Looking at Global sales in the second quarter, Asia represented, 78% of Revenue, Europe, 12% and North America. 10% in terms of our end markets industrial was 23% of diyos product Revenue, Automotive, 19% Computing, 26% consumer, 18%, and Communications 14% of product Revenue.
Our automotive industrial markets combined totals 42%. In this quarter, we are beginning to see signs of graduate demand Improvement in this market.
There is still pockets of Channel inventory to work through.
Now, let me review the end markets in Greater detail.
Starting with Automotive marketing.
The quarter. We continue to see improvements, even though there's continued to be inventory digestions, as some customers, as I mentioned,
Beginning to see, increasing, demand and strength in the EV auto market in China as we move into the third quarter.
The China automakers are increasingly focused on the Inc, cabin experience with more features like Adas, infotainment, smart, carpet panomatic, and lighting, which is driving demand for dials product and our content per car.
Specific to the second quarter. We saw increasing adoption of our growth of USB type-c red drivers, Rhett timers switches and active crossbar. Moses along with new design wings for TVs and ESC protection devices in real sea, entertainment and smart topic applications.
We also received solid demand for over current protection, switches in electronic control unit systems.
And are also gaining design. We momentum for protection devices in vehicle displays and power distribution unit applications.
We are also seeing strong demand in design wins for our automotive compliance DC to EC devices, LDOs, ideal diodes, controllers, as well as our SBR products for ADS, panomatic, and infotainment systems.
Additionally dials LED controllers, are winning the size in Adas front, lighting applications and our linear LED drivers are winning designs in the rear exterior lighting and EV car charging indicator application.
Also, during the quarter, we added multiple new products through the introduction of lV. Mosfets for dcdc battery management system, brushless DC motors 80 volt and 100 volts all products and 1700 volt and 1200, volt, silicon carbide mosfets.
Turning to Industrial Market. Even though the inventory situation is improving, some customers are still going through adjustments. We expect this will last the other quarter or 2 from a demand perspective. We are seeing good recovery and strong momentum for applications. Such as AI robotics medical and automation.
During the quarter, we continue to gain. Strong design tractions for our silicon carbide, shocky, barrier dials and photo couplers in energy storage systems.
And our silicon carbide mosfets, the EV charging platform, but fast, charging input structures.
We have also secure new designs for our shocky barrier. Dials SDR and Zeno dials in DC fans power over ethernet and adapter applications across industrial power 7.
Also, during the quarter, our wide wing, ldo is received solid demand from fans, power tools and e-meter applications. While a multi-channel LED drivers ramp up in signage applications.
We are also seeing tractions for SBR products in power supply applications. Balico desktop PC and soft surface switch mode, power supply. And our protection devices are winning designs in battery Management Systems
In the Computing Market, the Highlight continues to be strong demand, momentum for AI related applications, and with the current chipset, refresh cycle. We are seeing increasing opportunities and strong share games.
Our PCI Express 3.0 package. Switches are leading the momentum in the AI application but are also expanding the young AI surface into other applications like industrial and Security. In fact, we have multiple design ins for our packet switches.
From various applications across all regions that should drive further growth for our products.
Also, during the quarter, we are seeing increased adoption of HDMI display, port, USBC, red drivers, crossbar, moxa switches, as well as clock buffers, with level, shifters, in various Computing applications, like, or stations gaming notebook, desktop docking, stations monitors and mini PCS
In terms of product introduction, we introduced several new products including PCI Express 6.03 drivers, clock buffers and clock muscles that are seen strong momentum in Surfer and data center application.
Basically increased in recent years and dios is well, positioned to gain increasing shares with our broaden product portfolio as an example. Our SBR products provide
excellent service protection for high-speed data applications along, with our 40, volt boost controllers and dcdc buck converters in Surfer and data center applications
In the consumer Market, the revenue increase was the strongest of our end markets and was mainly driven by customers ramp up new designs for applications such as wearables. Audio charging camera game consoles and personal care combined with overall market share game.
The second quarter, we saw a rapid adoption of our MPD fee. Red drivers in robots drums, mixed reality and embedded. MMC switches in gaming console applications,
While current limited power switch saw, solid demand from physical interface power ports such as USB and HDMI.
Also, in the consumer Market, our LED drivers and power factor. Correction, LED controllers, have multiple design wins for iot devices and personal share devices. We also achieved solid growth from audio products in the consumer applications like Health monitors and tractors. And with our smallest,
Sino dials as well as Zeno dials. So strong increases while at production products and ldos are being designed into tablets and smart watches. Lastly, in the communications markets, our timing product are seeing growth driven by Ai and iot applications in the networking segments for switches and routers. While our ultra low, Jitter family of crystal oscillators dominates in the smart network interface cards in data center, AI, surface and networking applications mr5 will High psrr. Ldo softball. The demand from camera networking applications
In summary, we are very pleased with the solid momentum in our business. As we continue to see improving market conditions, and demand across our end markets as the demand continued to drive utilization Improvement and inventory, digestion, extends across the automotive industrial Market in particular, we are very well positioned with Broad and portfolio of products and increasing design Wing to drive the continuous growth and future margin expansion.
With that. We now open the floor to questions, operator.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
The first question to take a day comes from David Williams with Benchmark. Please go ahead.
Hey, good afternoon everyone and uh congratulations on a really strong results here. It's great to see
Thank you, David.
Yeah so so maybe first uh just kind of thinking about the the geographic drivers and and Asia's clearly doing better for you all and it sounds like this is more the design in and more demand coming in but I guess how do you parse out? How much of this could potentially be related uh to tariff driven full ends which we've heard from nearly all companies reporting this earning season. It is a fair to assume that some of this demand is related to that. Or do you feel like you you're able to isolate that out and maybe that's not what's driving some of this demand.
Hi David. This is Emily.
Um, I think what we've seen the Tariff pooling is really small in material overall, right? Well, we've seen it's really driven by the strong demand, and also the market share game together with some of the new designs and new programs ramping up.
So so, so you, you feel pretty comfortable with it, it really is kind of self-directed and not. Uh, not really related to the, the Tariff pull in is that fair
Um, and and then, if you kind of think about how much digestion Still Remains, and you talked about Pockets remaining in automotive, but how do you how do you think about what is left their remaining? I know it's kind of depends on your your OEM. Um, but like I say, geographically, is there a way to kind of think about the inventory levels where they're still excesses that need to be, uh, digested.
Uh, yes, I think overall you are actually write a lot is driven by the oems. What we see in the market is Bill Dynamics, it varies a lot from customer to customer, uh, program to program and part to part, right? So it's kind of hard to draw a line, say everything Eco, but all in all, we actually seen a lot of improvements. So if we look at the automotive, uh, even we maintained a 19% quarter over quarter as a percentage to the product Revenue.
If I compare the actual year to year, we actually increase about 23.5%. I believe that can give you a strong indication that even we still have some inventory digestion that we going through, but the market overall is improving
Very, very well. Uh, and just 1 last 1, that's on May here. Just kind of thinking about your new products uh how should we consider the maybe the differential on the margin opportunity? Uh, maybe uh, over at some products that you're replacing? And I know you've got a lot of new products that are coming in and really a big driver of the margin. But but is there a good way to think about what that differential could be.
Thank you. Yeah, so let me address this question. So product makes Improvement initiative.
um, has
been, uh, key Focus for dials for a pair of time in general, when the product, they usually have a production cycle,
The newer, the product, the new release product, usually provide some additional features and functions and that the customers actually willing to pay more of the premium for the functions and features and a lot of time, it can be also a cost Improvement smaller Dice, and better packaging and stuff like that, right? So that's usually, uh, the behavior for a new products. So, for a product, if we sell this for more than like 15, 20 years every year, there's a price, uh, uh degradation. So a lot of time at the end of the production cycle, the cost is more expensive at the end, right? So that's the reason why we pushing a lot of new product introduction.
Not only to gain additional Market, but also to improve the overall cost structure by providing more functions and features and basically a value, add to the customers.
Thank you.
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The next question comes from Tristan Gaara with beard. Please go ahead.
Hi, good afternoon. You talked about uh, AI
driver. Uh, is it fair to assume that a lot of that is your pcie uh, packet switch. And
Any way to quantify as a percent uh what it's now what presenting you a few uh data center revenue and also what the growth, you know, should we expect? And I think you've described uh in the past that it's not just uh, AI data Etc. But it will it also general purpose data center. So how how many photos that opportunity as a as a percentage?
Hi, Tristan, this is Emily. Yes. So AI related. Um, you know, on the hyperscaler with some of the design, uh, packets which is definitely 1 of the product and uh, but there's also a lot of other AI related product that we are selling in.
That's the reason I mentioned this is going to continue to drive a lot of momentum for us for the quarters to come.
Is only 1 of the Hero part, I will promote.
AI related, you know, application. However, as we continue mentioning about the system solution or, you know, total solution is really going to drive for. So if we have a 1 or 2 hero product in 1 segment, I really want to bring our Advanced analog mix signal and also other these 3 component to still together, so that's going to create more value on this only 1 device, only
Okay, thank you. That's very useful. Um, and then, um, we've seen, uh, at least 1 large, uh, company, uh, you know, here and it appears starting to raise pricing. Uh, you know, we know. So, how should I look at that? Uh, because I mean, we're clearly in an environment where there is other capacity. Um, you know, I, I think of you see your positioning will be to gain share, but I wanted to kind of get your sense of uh the the higher cost of what materials, you know, impact on pricing because and and what you expect, you know, for the rest of this year because it does have implications in terms of how companies are managing it in factories.
Yes, Tristan, we definitely uh, read the news as well. So what we doing is we monitoring the situation, very closely. Uh, like I mentioned before any time, any of my peers, making strategic decisions price, increase excess, certain markets, always create opportunity for dials overall, um, to work with the customer during the last price increase, uh, during the co time, I also openly talk about it, our view for the business is actually, uh, relationship with the customer long term. Uh, it's a lot more important than the short-term benefit, right? So,
We want to continue to work with the customers and be a strong supplier to them for a long term. So the partnership is a key Focus for us overall and we are not changing our strategy. So we want to leverage, this type of opportunity to continue to expand our print positions and continue to grow. The relationship into the deeper level and continue to expand our overall design in design Wing demand creations with the customer together. So that will be our focus and will be our strategy moving forward.
Uh thanks again and then just last quick, question if I may uh in terms of uh qualifications uh for customers in analog, migrating back to in-house capacity or we still looking at the first step of next year. What what's the What's the timing on on on this uh on this trip from Outsourcing?
Oh yeah, you know I as I mentioned about so many times first thing, you know, we are proactively, you know, qualify your product and process into our internal Wi-Fi, right? And I as I keep mentioning that that the progress, it went very well so far, and we see quite a few in our key customer already, you know, working on our PC and requirement and working on that to see if we can, you know, continue to support it with our internal wafer wafer facility. So so again you know this is a very important message from dials. I really want to emphasize in you know to everybody here is like and we really want to qualify our internal wafer to offset the the Headway in front of our waiver service agreement that kind of slow down demand in the future. So we do see the good progress on that too.
Great. Thank you.
As a reminder, if you would like to ask a question, please press star and 1 to enter the question queue.
The next question comes from David Williams with Benchmark.
Please go ahead.
Hey, thanks for letting me ask a follow-up briefly. I just wanted to say Gary, congratulations on the uh, on the CEO official naming their, it's it's great to see that it was after Ernie's last quarter. I want to make sure and squeeze that in there. But but, uh, while I have you 1 other quick question and maybe Brad or Emily or whomever but, um, on the, the, the utilization um, is there can you tell us about where your utilization is running today and uh, and maybe what the the mix impact was on the margin side?
well actually, you know
Intentionally try to give away from them. The illustration for this kind of capacity is kind of low. Okay. I won't be able to give you the detail of exactly your session. Yes, but what we do, you know, for the past couple quarters, we continue consolidate or migrate those like low cost, commodity idle capacity in due to supporting the high-end Market in our high-end market and high customer demand kind of requirement. So again, you know, with our hybrid manufacturing strategy as an answer, the question before and we continue to load our external, okay, product? And the process into internal and we are doing the qualification process and even we issued a PCN for the key customer in different segments. And uh, so far the progress really good. So I can guarantee you if I don't, you know, in the future or loading will continue to grow, okay? With this kind of strategy, we really want to go for that.
I think on top of that, we did actually um,
Have a very good reselling. The second quarter. We also guided about seasonality growth for the third quarter, when the revenue continued to increase of
Course, supported by POS growth. We actually will continue to minimize the underloading cost, right? I think on top of that, 1 of the thing, we also kind of drive in for margin Improvement, is continue to drive the product mix initiative improvement from that point of view, Auto industrial will remain our key focus and we want to continue to drive the growth new product introduction.
We talked a little bit earlier, would be other key focuses for us overall. Um, you know, some good product like the paracom division of the product family will continue to be the Focus, right? So, I think combined with what Gary just mentioned, and, uh, combined with continued cost, down driven manufacturing efficiency. Uh, we are actually confident that you actually going to start seeing uh, some margin Improvement as well. So even you didn't ask it, but I want to make sure I put it there because I think that's really the the real question behind that you want to ask, right?
Yeah, no uh, very well, thanks. Thanks so much for the color there and uh, congrats again on the execution. Keep up the good work.
Thank you. Thank you.
You, this is our question and answer session.
I would like to turn the conference back over to Gary Yu for any closing remarks.
Thank you, everyone for participating. On today's call. We look forward to reporting our progress on next quarter's conference call.
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