UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~ 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 002-25577

DIODES INCORPORATED

(Exact name of registrant as specified in its charter)


Delaware		95-2039518
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


4949 Hedgcoxe Road, Suite 200, Plano, Texas		75024
(Address of principal executive offices)		(Zip code)

(972) 987-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.66 2/3	DIOD	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of ~~November 3, 2022~~August 4, 2023 was ~~45,469,713~~45,938,786.

Table of Contents


		Page
Part I – Financial Information
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
Part II – Other Information
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. Mine Safety Disclosures		30
Item 5. Other Information		30
Item 6. Exhibits		31
Signatures		32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	378,996		$	363,599		$	321,616		$	336,732
Restricted cash		6,836			3,219			3,120			4,367
Short-term investments		6,909			6,542			9,042			7,059
Accounts receivable, net of allowances of $5,356 and $4,324 at September 30, 2022 and December 31, 2021, respectively		377,549			358,496
Accounts receivable, net of allowances of $5,634 and $5,852 at June 30, 2023 and December 31, 2022, respectively								393,132			369,233
Inventories		374,811			348,622			325,733			360,281
Prepaid expenses and other		131,460			107,194			107,746			83,999
Total current assets		1,276,561			1,187,672			1,160,389			1,161,671
Property, plant and equipment, net		698,452			582,079			748,115			736,730
Deferred income tax		17,718			21,256			35,354			35,308
Goodwill		141,175			149,890			146,138			144,757
Intangible assets, net		81,619			94,550			71,496			79,137
Other long-term assets		147,039			159,048			179,579			130,709
Total assets	$	2,362,564		$	2,194,495		$	2,341,071		$	2,288,312

Liabilities
Current liabilities:
Lines of credit	$	35,258		$	18,068		$	33,729		$	36,280
Accounts payable		196,543			221,254			152,192			160,442
Accrued liabilities and other		220,496			184,649			198,882			214,433
Income tax payable		49,985			29,682			27,004			19,682
Current portion of long-term debt		9,259			17,381			1,149			1,693
Total current liabilities		511,541			471,034			412,956			432,530
Long-term debt, net of current portion		251,174			265,574			54,575			147,470
Deferred tax liabilities		30,095			32,230			13,550			12,903
Unrecognized tax benefits								31,594			31,594
Other long-term liabilities		107,050			122,933			97,818			80,896
Total liabilities		899,860			891,771			610,493			705,393

Commitments and contingencies (See Note 9)

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; and 45,468,133 shares and 45,017,774 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		36,501			36,195
Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; and 45,748,940 shares and 45,469,722 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively								36,690			36,503
Additional paid-in capital		485,350			471,649			501,302			494,773
Retained earnings		1,356,041			1,116,809			1,601,262			1,448,092
Treasury stock, at cost, 9,281,581 shares at September 30, 2022 and 9,272,513 shares at December 31, 2021		(337,490	)		(336,894	)
Treasury stock, at cost 9,283,481 shares and 9,281,581 shares at June 30, 2023 and December 31, 2022, respectively								(337,670	)		(337,490	)
Accumulated other comprehensive loss		(144,480	)		(50,517	)		(139,104	)		(128,233	)
Total stockholders' equity		1,395,922			1,237,242			1,662,480			1,513,645
Noncontrolling interest		66,782			65,482			68,098			69,274
Total equity		1,462,704			1,302,724			1,730,578			1,582,919
Total liabilities and stockholders' equity	$	2,362,564		$	2,194,495		$	2,341,071		$	2,288,312

The accompanying notes are an integral part of these condensed consolidated financial statements.	The accompanying notes are an integral part of these condensed consolidated financial statements.						The accompanying notes are an integral part of these condensed consolidated financial statements.

-3-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net sales	$	467,152		$	500,972		$	934,393		$	983,095
Cost of goods sold		271,776			294,446			544,563			579,872
Gross profit		195,376			206,526			389,830			403,223

Operating expenses
Selling, general and administrative		67,500			69,067			138,491			140,510
Research and development		34,611			30,762			67,843			59,439
Amortization of acquisition related intangible assets		3,816			3,980			7,668			7,842
Other operating income		(118	)		(3,521	)		(166	)		(3,864	)
Total operating expense		105,809			100,288			213,836			203,927

Income from operations		89,567			106,238			175,994			199,296

Other income (expense)
Interest income		2,224			861			3,996			1,687
Interest expense		(2,189	)		(1,590	)		(4,321	)		(2,704	)
Foreign currency (loss) gain, net		(2,217	)		1,819			(4,110	)		3,540
Unrealized gain (loss) on investments		12,172			(7,764	)		16,061			(13,312	)
Other income		1,398			1,647			1,928			3,523
Total other income (expense)		11,388			(5,027	)		13,554			(7,266	)

Income before income taxes and noncontrolling interest		100,955			101,211			189,548			192,030
Income tax provision		17,224			18,461			33,840			35,107
Net income		83,731			82,750			155,708			156,923
Less net income attributable to noncontrolling interest		(1,711	)		(2,595	)		(2,538	)		(4,077	)
Net income attributable to common stockholders	$	82,020		$	80,155		$	153,170		$	152,846

Earnings per share attributable to common stockholders:
Basic	$	1.79		$	1.77		$	3.35		$	3.38
Diluted	$	1.77		$	1.75		$	3.31		$	3.33
Number of shares used in earnings per share computation:
Basic		45,733			45,265			45,667			45,185
Diluted		46,243			45,841			46,263			45,913

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Net sales
$
521,273

$
471,422

$
1,504,368

$
1,324,991

Cost of goods sold

303,455

290,191

883,327

845,322

Gross profit

217,818

181,231

621,041

479,669

Operating expenses

Selling, general and administrative

68,545

67,803

209,055

186,759

Research and development

32,787

31,458

92,226

89,104

Amortization of acquisition related intangible assets

3,938

4,056

11,780

12,139

Other operating expense (income)

102

667

(3,762
)

1,673

Total operating expense

105,372

103,984

309,299

289,675

Income from operations

112,446

77,247

311,742

189,994

Other (expense) income

Interest income

862

765

2,549

2,351

Interest expense

(2,724
)

(1,417
)

(5,428
)

(6,298
)
Foreign currency gain (loss), net

(1,008
)

805

2,532

(984
)
Unrealized (loss) gain on investments

(2,648
)

5,922

(15,960
)

14,838

Other income

2,218

2,244

5,741

6,398

Total other (expense) income

(3,300
)

8,319

(10,566
)

16,305

Income before income taxes and noncontrolling interest

109,146

85,566

301,176

206,299

Income tax provision

20,172

14,766

55,279

36,320

Net income

88,974

70,800

245,897

169,979

Less net income attributable to noncontrolling interest

(2,588
)

(2,376
)

(6,665
)

(6,729
)
Net income attributable to common stockholders
$
86,386

$
68,424

$
239,232

$
163,250

Earnings per share attributable to common stockholders:

Basic
$
1.90

$
1.52

$
5.28

$
3.65

Diluted
$
1.88

$
1.50

$
5.21

$
3.59

Number of shares used in earnings per share computation:

Basic

45,475

44,986

45,283

44,689

Diluted

46,014

45,642

45,938

45,507

The accompanying notes are an integral part of these condensed consolidated financial statements.

-4-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net income	$	83,731		$	82,750		$	155,708		$	156,923
Unrealized (loss) gain on defined benefit plan, net of tax		(627	)		7,133			2,079			5,600
Unrealized gain (loss) on derivative instruments, net of tax		1,663			2,063			(1,679	)		4,894
Unrealized foreign currency loss, net of tax		(22,594	)		(41,366	)		(11,271	)		(53,951	)
Comprehensive income		62,173			50,580			144,837			113,466
Less: Comprehensive income attributable to noncontrolling interest		(1,711	)		(2,595	)		(2,538	)		(4,077	)
Total comprehensive income attributable to common stockholders	$	60,462		$	47,985		$	142,299		$	109,389

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Net income
$
88,974

$
70,800

$
245,897

$
169,979

Unrealized (loss) gain on defined benefit plan, net of tax

(391
)

851

5,209

7,706

Unrealized gain on swaps and collars, net of tax

4,939

1,052

9,833

2,851

Unrealized foreign currency (loss) gain, net of tax

(55,054
)

(4,343
)

(109,005
)

4,768

Comprehensive income

38,468

68,360

151,934

185,304

Less: Comprehensive income attributable to noncontrolling interest

(2,588
)

(2,376
)

(6,665
)

(6,729
)
Total comprehensive income attributable to common stockholders
$
35,880

$
65,984

$
145,269

$
178,575

The accompanying notes are an integral part of these condensed consolidated financial statements.

-5-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated stockholders'			Noncontrolling			Total			Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity			Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, June 30, 2022		54,562	$	36,376		(9,273	)	$	(337,112	)	$	478,374		$	1,269,655	$	(93,974	)	$	1,353,319		$	64,140		$	1,417,459
Balance, March 31, 2023																													54,988	$	36,661		(9,282	)	$	(337,490	)	$	494,598		$	1,519,242	$	(117,546	)	$	1,595,465		$	70,208		$	1,665,673
Total comprehensive income (loss)		-		-		-			-			-			86,386		(50,506	)		35,880			2,588			38,468			-		-		-			-			-			82,020		(21,558	)		60,462			1,711			62,173
Net changes in noncontrolling interests		-		-		-			-			-			-					-			54			54
Net changes in noncontrolling interest																													-		-		-			-			-			-		-			-			(3,821	)		(3,821	)
Common stock issued for share-based plans		188		125		-			-			(126	)		-		-			(1	)		-			(1	)		44		29		-			-			(29	)		-		-			-			-			-
Share-based compensation		-		-		-			-			10,140			-		-			10,140			-			10,140			-		-		-			-			7,531			-		-			7,531			-			7,531
Deferred compensation plan		-		-		(9	)		(378	)		378			-		-			-			-			-			-		-		(1	)		(180	)		180			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(3,416	)		-		-			(3,416	)		-			(3,416	)		-		-		-			-			(978	)		-		-			(978	)		-			(978	)
Balance, September 30, 2022		54,750	$	36,501		(9,282	)	$	(337,490	)	$	485,350		$	1,356,041	$	(144,480	)	$	1,395,922		$	66,782		$	1,462,704
Balance, June 30, 2023																													55,032	$	36,690		(9,283	)	$	(337,670	)	$	501,302		$	1,601,262	$	(139,104	)	$	1,662,480		$	68,098		$	1,730,578

Balance, December 31, 2021		54,290	$	36,195		(9,273	)	$	(336,894	)	$	471,649		$	1,116,809	$	(50,517	)	$	1,237,242		$	65,482		$	1,302,724
Total comprehensive income		-		-		-			-			-			239,232		(93,963	)		145,269			6,665			151,934
Net changes in noncontrolling interests		-		-		-			-			(1,014	)		-		-			(1,014	)		(5,365	)		(6,379	)
																												Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated stockholders'			Noncontrolling			Total
																												Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, December 31, 2022																													54,751	$	36,503		(9,282	)	$	(337,490	)	$	494,773		$	1,448,092	$	(128,233	)	$	1,513,645		$	69,274		$	1,582,919
Total comprehensive income (loss)																													-		-		-			-			-			153,170		(10,871	)		142,299			2,538			144,837
Net changes in noncontrolling interest																													-		-		-			-			-			-		-			-			(3,714	)		(3,714	)
Common stock issued for share-based plans		460		306		-			-			(167	)		-		-			139			-			139			281		187		-			-			(187	)		-		-			-			-			-
Share-based compensation		-		-		-			-			26,566			-		-			26,566			-			26,566			-		-		-			-			17,183			-		-			17,183			-			17,183
Deferred compensation plan		-		-		(9	)		(596	)		596			-		-			-			-			-			-		-		(1	)		(180	)		180			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(12,280	)		-		-			(12,280	)		-			(12,280	)		-		-		-			-			(10,647	)		-		-			(10,647	)		-			(10,647	)
Balance, September 30, 2022		54,750	$	36,501		(9,282	)	$	(337,490	)	$	485,350		$	1,356,041	$	(144,480	)	$	1,395,922		$	66,782		$	1,462,704
Balance, June 30, 2023																													55,032	$	36,690		(9,283	)	$	(337,670	)	$	501,302		$	1,601,262	$	(139,104	)	$	1,662,480		$	68,098		$	1,730,578

The accompanying notes are an integral part of these condensed consolidated financial statements.

-6-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONT.)

(Unaudited)

(In thousands)

Common stock

Treasury stock

Additional
paid-in

Retained

Accumulated
other comprehensive

Total Diodes
Incorporated stockholders'

Noncontrolling

Total

Shares

Amount

Shares

Amount

capital

earnings

loss

equity

interest

equity

Balance, June 30, 2021

53,994

$
35,998

(9,263
)

$
(336,128
)

$
455,683

$
982,872

$
(55,841
)

$
1,082,584

$
60,413

$
1,142,997

Total comprehensive income

-

-

-

-

-

68,424

(2,440
)

65,984

2,376

68,360

Net changes in noncontrolling interests

-

-

-

-

-

-

-

-

(1,739
)

(1,739
)
Common stock issued for share-based plans

295

196

-

-

2,038

-

-

2,234

-

2,234

Share-based compensation

-

-

-

-

9,965

-

-

9,965

-

9,965

Deferred compensation plan

-

-

(10
)

(766
)

766

-

-

-

-

-

Tax related to net share settlement

-

-

-

-

(4,704
)

-

-

(4,704
)

-

(4,704
)
Balance, September 30, 2021

54,289

$
36,194

(9,273
)

$
(336,894
)

$
463,748

$
1,051,296

$
(58,281
)

$
1,156,063

$
61,050

$
1,217,113

Balance, December 31, 2020

53,536

$
35,692

(9,260
)

$
(335,910
)

$
449,598

$
888,046

$
(73,606
)

$
963,820

$
52,303

$
1,016,123

Total comprehensive income

-

-

-

-

-

163,250

15,325

178,575

6,729

185,304

Net changes in noncontrolling interests

-

-

-

-

(22
)

-

-

(22
)

2,018

1,996

Common stock issued for share-based plans

753

502

-

-

3,835

-

-

4,337

-

4,337

Share-based compensation

-

-

-

-

24,103

-

-

24,103

-

24,103

Deferred compensation plan

-

-

(13
)

(984
)

984

-

-

-

-

-

Tax related to net share settlement

-

-

-

-

(14,750
)

-

-

(14,750
)

-

(14,750
)
Balance, September 30, 2021

54,289

$
36,194

(9,273
)

$
(336,894
)

$
463,748

$
1,051,296

$
(58,281
)

$
1,156,063

$
61,050

$
1,217,113


	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, March 31, 2022		54,504	$	36,338		(9,273	)	$	(336,894	)	$	470,363		$	1,189,500	$	(61,804	)	$	1,297,503		$	62,516		$	1,360,019
Total comprehensive income (loss)		-		-		-			-			-			80,155		(32,170	)		47,985			2,595			50,580
Net changes in noncontrolling interest		-		-		-			-			-			-					-			(971	)		(971	)
Common stock issued for share-based plans		58		38		-			-			18			-		-			56			-			56
Share-based compensation		-		-		-			-			8,607			-		-			8,607			-			8,607
Deferred compensation plan		-		-		-			(218	)		218			-		-			-
Tax related to net share settlement		-		-		-			-			(832	)		-		-			(832	)		-			(832	)
Balance, June 30, 2022		54,562	$	36,376		(9,273	)	$	(337,112	)	$	478,374		$	1,269,655	$	(93,974	)	$	1,353,319		$	64,140		$	1,417,459

	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, December 31, 2021		54,290	$	36,195		(9,273	)	$	(336,894	)	$	471,649		$	1,116,809	$	(50,517	)	$	1,237,242		$	65,482		$	1,302,724
Total comprehensive income (loss)		-		-		-			-			-			152,846		(43,457	)		109,389			4,077			113,466
Net changes in noncontrolling interest		-		-		-			-			(1,014	)		-					(1,014	)		(5,419	)		(6,433	)
Common stock issued for share-based plans		272		181		-			-			(41	)		-		-			140			-			140
Share-based compensation		-		-		-			-			16,426			-		-			16,426			-			16,426
Deferred compensation plan		-		-		-			(218	)		218			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(8,864	)		-		-			(8,864	)		-			(8,864	)
Balance, June 30, 2022		54,562	$	36,376		(9,273	)	$	(337,112	)	$	478,374		$	1,269,655	$	(93,974	)	$	1,353,319		$	64,140		$	1,417,459

The accompanying notes are an integral part of these condensed consolidated financial statements.

-7-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months
	June 30,
	2023			2022
Cash flows from operating activities
Net income	$	155,708		$	156,923
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation		60,211			52,047
Amortization of intangible assets		7,668			7,842
Share-based compensation expense		17,467			16,513
Deferred income taxes		(298	)		(2,415	)
Investment (gain) loss		(16,003	)		13,197
Gain on disposal of property, plant and equipment		(151	)		(3,756	)
Other		(414	)		(2,145	)
Changes in operating assets:
Change in accounts receivable		(24,810	)		(50,368	)
Change in inventory		32,588			(35,119	)
Change in other operating assets		(29,689	)		(25,083	)
Changes in operating liabilities:
Change in accounts payable		(6,992	)		5,404
Change in accrued liabilities		(11,779	)		17,790
Change in income tax payable		7,181			11,988
Change in other operating liabilities		1,741			(5,479	)
Net cash flows provided by operating activities		192,428			157,339

Cash flows from investing activities
Acquisitions, net of cash received		-			(85,692	)
Purchases of property, plant and equipment		(84,989	)		(78,105	)
Proceeds from sale of property, plant and equipment		362			89
Proceeds from short-term investments		1,933			3,819
Purchases of short-term investments		(4,094	)		(6,708	)
Purchases of securities		(13,900	)		(4,051	)
Proceeds from sales of securities		417			2
Other		2,780			6,078
Net cash and cash equivalents used in investing activities		(97,491	)		(164,568	)

Cash flows from financing activities
Advances on lines of credit and short-term debt		9,796			45,214
Repayments of lines of credit and short-term debt		(11,902	)		(35,382	)
Proceeds from long-term debt		10,193			184,718
Repayments of long-term debt		(103,251	)		(227,078	)
Net proceeds from issuance of common stock		-			140
Repayment of and proceeds from finance lease obligation		(23	)		(12	)
Taxes paid related to net share settlement		(10,647	)		(8,864	)
Net changes in noncontrolling interest		107			2,701
Other		(932	)		(227	)
Net cash and cash equivalents used in financing activities		(106,659	)		(38,790	)

Effect of exchange rate changes on cash and cash equivalents		(4,641	)		(13,252	)
Change in cash and cash equivalents, including restricted cash		(16,363	)		(59,271	)
Cash and cash equivalents, beginning of period, including restricted cash		341,099			366,818
Cash and cash equivalents, end of period, including restricted cash	$	324,736		$	307,547

Nine Months

September 30,

2022

2021

Cash flows from operating activities

Net income
$
245,897

$
169,979

Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions

Depreciation

81,622

79,731

Amortization of intangible assets

11,780

12,139

Share-based compensation expense

26,724

24,925

Deferred income taxes

(2,723
)

635

Investment loss (gain)

15,778

(15,133
)
(Gain) loss on disposal of property, plant and equipment

(3,677
)

69

Other

(3,614
)

1,137

Changes in operating assets:

Change in accounts receivable

(33,819
)

(27,936
)
Change in inventory

(51,402
)

(20,570
)
Change in other operating assets

(40,587
)

(16,451
)
Changes in operating liabilities:

Change in accounts payable

(10,522
)

32,155

Change in accrued liabilities

35,552

18,353

Change in income tax payable

23,124

4,627

Change in other operating liabilities

(4,567
)

(2,671
)
Net cash flows provided by operating activities

289,566

260,989

Cash flows from investing activities

Acquisitions, net of cash received

(85,692
)

(157
)
Purchases of property, plant and equipment

(147,927
)

(86,150
)
Proceeds from sale of property, plant and equipment

414

3,145

Proceeds from short-term investments

5,081

5,632

Purchases of short-term investments

(6,500
)

(6,759
)
Purchase of equity securities

(4,051
)

-

Other

13,075

(5,010
)
Net cash and cash equivalents used in investing activities

(225,600
)

(89,299
)

Cash flows from financing activities

Advances on lines of credit and short-term debt

56,839

16,138

Repayments of lines of credit and short-term debt

(35,382
)

(142,873
)
Proceeds from long-term debt

324,718

419,810

Repayments of long-term debt

(344,390
)

(494,238
)
Net proceeds from issuance of common stock

139

4,337

Repayment of and proceeds from finance lease obligation

(61
)

(181
)
Taxes paid related to net share settlement

(12,280
)

(14,750
)
Net changes in noncontrolling interests

2,756

1,998

Other

(3,716
)

(500
)
Net cash and cash equivalents used in financing activities

(11,377
)

(210,259
)

Effect of exchange rate changes on cash and cash equivalents

(33,575
)

2,878

Change in cash and cash equivalents, including restricted cash

19,014

(35,691
)
Cash and cash equivalents, beginning of period, including restricted cash

366,818

320,529

Cash and cash equivalents, end of period, including restricted cash
$
385,832

$
284,838

-8-


Supplemental Cash Flow Information
Interest paid during the period	$	4,692	$	5,858	$	3,378	$	2,226
Taxes paid during the period	$	50,192	$	37,320	$	63,137	$	29,674

Non-cash investing and financing activities:
Accounts payable balance related to the purchase of property, plant and equipment	$	36,511	$	21,685	$	23,674	$	30,286
Dividend payable to noncontrolling interest					$	3,771	$	3,657

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above. The Company’s restricted cash primarily consisted of the cash required to be on deposit under our Asia credit facilities to support outstanding loan and import/export guarantees. As of September 30, 2022, restricted cash of $~~6.8~~ ~~million was pledged as collateral for issuance of bank loans, bank acceptance notes and letters of credit.~~

Nine Months Ended

September 30,

2022

2021

Current assets:

Cash and cash equivalents
$
378,996

$
280,543

Restricted cash (included in other current assets)

6,836

4,295

Total cash, cash equivalents and restricted cash
$
385,832

$
284,838

The accompanying notes are an integral part of these condensed consolidated financial statements.

-9-

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Summary of Operations and Significant Accounting Policies

Summary of Operations

Diodes Incorporated, together with its subsidiaries (collectively the “Company,” “we” or “our”~~(Nasdaq:~~ (Nasdaq: DIOD)), a Standard and Poor's Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the industrial, automotive, computing, consumer ~~electronics, computing,~~and communications ~~industrial, and automotive~~ markets.

The Company's ~~products include~~diverse product portfolio covers diodes; rectifiers; transistors; MOSFETs; ~~GPP bridges; GPP rectifiers;~~SiC diodes and MOSFETs; protection devices; ~~function-specific arrays; single gate~~ logic; voltage translators; amplifiers and comparators; ~~Hall-effect and temperature~~ sensors; and power management devices ~~including LED drivers,~~such as AC-DC converters, ~~and controllers,~~ DC-DC switching, ~~and~~ linear voltage regulators, voltage references, ~~along with special-function devices, such as USB~~LED drivers, power switches, ~~load~~and voltage supervisors. We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, ~~voltage supervisors, and motor controllers. The Company also has timing, connectivity, switching,~~multi-protocol switches, interface products, and signal integrity solutions for high-speed signals.

The Company's corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California, respectively. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City, and Zhubei City, Taiwan; Shanghai and Yangzhou, China; Oldham, England; and Neuhaus, Germany. The Company's wafer fabrication facilities are located in Oldham, England; Greenock, Scotland; Shanghai and Wuxi, China; and Keelung and Hsinchu, ~~Taiwan~~Taiwan; and South Portland, Maine, United States. The Company has assembly and test facilities located in Shanghai, Jinan, Chengdu, and Wuxi, China; Neuhaus, Germany; and Jhongli and Keelung, Taiwan. Additional engineering, sales, warehouse, and logistics offices are located in Taipei, Taiwan; Hong Kong; Oldham, England; Shanghai, Shenzhen, Wuhan, and Yangzhou, China; Seongnam-si, South Korea; and Munich and Frankfurt, Germany; with support offices throughout the world.

•

The Company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO 9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016;

•

~~Diodes Incorporated~~The Company is also C-TPAT certified; and

•

We believe these quality awards reflect the superior quality-control techniques established at ~~Diodes Incorporated~~the Company and further enhance our credibility as a vendor-of-choice to original equipment manufacturers ("OEMs") increasingly concerned with quality and consistency.

Our market focus is on high-growth, end-user applications in the following areas:

•

~~Automotive: connected driving, comfort/style/safety, and electrification/powertrain;~~

•

Industrial: embedded systems, precision controls, and Industrial IoT;

•

~~Consumer: IoT, wearables, home automation,~~Automotive: connected driving, comfort/style/safety, and ~~smart infrastructure;~~

•

~~Communications: smart phones, 5G networks, advanced protocols, and charging solutions; and~~electrification/powertrain;

•

Computing: cloud computing including server, storage, and data center ~~applications.~~applications;

•

Consumer: IoT, wearables, home automation, and smart infrastructure; and

•

Communications: smartphones, 5G networks, advanced protocols, and charging solutions.

Basis of Presentation

The condensed consolidated financial data at December 31, ~~2021~~2022 are derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission (“SEC”) on February ~~18, 2022~~10, 2023 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, ~~2022.~~2023.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim

-10-

financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current condensed consolidated financial statement presentation.

~~Recently Issued Accounting Pronouncements~~

In March 2022, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 740): Troubled Debt Restructurings and Vintage Disclosures. This ASU among other things, updates accounting and disclosures for public business entities to disclose gross write-offs and gross recoveries by class of financing receivable and major security type in vintage disclosures. This guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods therein. We do not anticipate this guidance will have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance, the acquirer should determine what contract assets and/or contract liabilities it would have recorded under ASC 606 as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ~~ASU2021~~-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted.

In November 2021, the FASB issued ASU No. 2021-10 Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard was effective for the Company on January 1, 2022 and only impacts annual financial statement footnote disclosures. The adoption will not have a material effect on our consolidated financial statements.

NOTE 2 – Earnings per Share

Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. During the ~~three months and nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we paid no dividends on our Common Stock.

The table below sets forth the reconciliation between net income and the weighted average shares outstanding used for calculating basic and diluted EPS:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Earnings (numerator)
Net income attributable to common stockholders	$	86,386	$	68,424	$	239,232	$	163,250	$	82,020	$	80,155	$	153,170	$	152,846

Shares (denominator)
Weighted average common shares outstanding (basic)		45,475		44,986		45,283		44,689		45,733		45,265		45,667		45,185
Dilutive effect of stock options and stock awards outstanding		539		656		655		818		510		576		596		728
Adjusted weighted average common shares outstanding (diluted)		46,014		45,642		45,938		45,507		46,243		45,841		46,263		45,913

Earnings per share attributable to common stockholders
Basic	$	1.90	$	1.52	$	5.28	$	3.65	$	1.79	$	1.77	$	3.35	$	3.38
Diluted	$	1.88	$	1.50	$	5.21	$	3.59	$	1.77	$	1.75	$	3.31	$	3.33

Stock options and stock awards excluded from EPS calculation because the effect would be anti-dilutive		104		-		83		-		36		175		19		76

-11-

NOTE 3 – Inventories

The table below sets forth inventories which are stated at the lower of cost or net realizable value:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Finished goods	$	108,754	$	108,557	$	86,317	$	96,659
Work-in-progress		79,884		81,784		72,152		80,616
Raw materials		186,173		158,281		167,264		183,006
Total	$	374,811	$	348,622	$	325,733	$	360,281

NOTE 4 – Goodwill and Intangible Assets

The table below sets forth the changes in goodwill:

Balance at December 31, 2021
$
149,890

Acquisition
$
1,779

Foreign currency translation adjustment

(10,494
)
Balance at September 30, 2022
$
141,175


Balance at December 31, 2022	$	144,757
Foreign currency translation adjustment		1,381
Balance at June 30, 2023	$	146,138

-11-

The table below sets forth the value of intangible assets, other than goodwill:


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Intangible assets subject to amortization:
Gross carrying amount	$	249,756		$	247,695		$	250,747		$	250,747
Accumulated amortization		(168,707	)		(156,927	)		(180,205	)		(172,537	)
Foreign currency translation adjustment		(8,347	)		(7,582	)		(8,223	)		(8,141	)
Total		72,702			83,186			62,319			70,069
Intangible assets with indefinite lives:
Gross carrying amount		10,303			12,364			10,303			10,303
Foreign currency translation adjustment		(1,386	)		(1,000	)		(1,126	)		(1,235	)
Total		8,917			11,364			9,177			9,068
Total intangible assets, net	$	81,619		$	94,550		$	71,496		$	79,137

The table below sets forth amortization expense related to intangible assets subject to amortization:

Amortization expense

2022

2021

Three Months Ended September 30,

$
3,938

$
4,056

Nine Months Ended September 30,

$
11,780

$
12,139


Amortization expense	2023		2022
Three Months Ended June 30,	$	3,816	$	3,980
Six Months Ended June 30,	$	7,668	$	7,842

NOTE 5 – Income Tax Provision

The table below sets forth information related to our income tax expense:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Domestic pre-tax income	$	53,967		$	27,781		$	185,839		$	53,427		$	42,005		$	68,753		$	96,729		$	131,872
Foreign pre-tax income	$	55,179		$	57,785		$	115,337		$	152,872		$	58,950		$	32,458		$	92,819		$	60,158
Income tax provision	$	20,172		$	14,766		$	55,279		$	36,320		$	17,224		$	18,461		$	33,840		$	35,107
Effective tax rate		18.5	%		17.3	%		18.4	%		17.6	%		17.1	%		18.2	%		17.9	%		18.3	%
Impact of tax holidays on tax expense	$	(173	)	$	(174	)	$	1,118		$	(1,436	)	$	(31	)	$	1,334		$	(105	)	$	1,291
Earnings per share impact of tax holidays:
Basic	$	0.01		$	-		$	(0.02	)	$	0.03		$	-		$	(0.03	)	$	-		$	(0.03	)
Diluted	$	0.01		$	-		$	(0.02	)	$	0.03		$	-		$	(0.03	)	$	-		$	(0.03	)

The ~~increase~~decrease in the effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 when compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, is primarily attributable to the ~~change~~geographical mix of pre-tax income and loss across tax jurisdictions relative to the Company’s consolidated pre-tax income and the impact of changes to the outside basis difference in ~~pre-tax earnings during~~foreign subsidiaries where the ~~comparable periods.~~

-Company does not assert permanent reinvestment.12-

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income tax but may be subject to non-U.S. withholding taxes.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before ~~2013,~~2012, or for the tax years 2015 ~~tax year.~~- 2018. We are no longer subject to China income tax examinations by tax authorities for tax years before 2012. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2016. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties ~~if any,~~ related to unrecognized tax benefits in interest expense. As of ~~September~~June 30, ~~2022,~~2023, the gross amount of unrecognized tax benefits was approximately $~~47.1~~49.9 million.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

~~On August 9, 2022, the United States ("U.S.") government enacted the U.S. CHIPS and Science Act (“CHIPS Act”). The CHIPS Act includes a~~ -2512~~% investment tax credit for certain investments in domestic semiconductor manufacturing. The credit is provided for qualifying property, which is placed in service after December 31, 2022.~~-

~~On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”). The IRA includes a new~~ 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations. Applicable corporations would be eligible to claim a credit for the minimum tax paid against regular tax in future years. The IRA also includes a 1~~% excise tax on stock repurchases. The IRA applies to tax years beginning after December 31, 2022.~~

~~Diodes is currently evaluating the effect the CHIPS Act and the IRA will have on its consolidated financial statements.~~

NOTE 6 – Share-Based Compensation

The table below sets forth information related to our share-based compensation expense:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Cost of goods sold	$	485	$	390	$	1,168	$	946	$	381	$	336	$	833	$	683
Selling, general and administrative		8,529		8,690		22,309		21,350		6,250		7,246		14,612		13,780
Research and development		1,197		1,081		3,247		2,629		1,016		1,029		2,022		2,050
Total share-based compensation expense	$	10,211	$	10,161	$	26,724	$	24,925	$	7,647	$	8,611	$	17,467	$	16,513

Share Grants – Share grants consist of restricted stock awards, restricted stock units and performance stock units ("PSUs"). Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period and are measured based on the fair market value of the underlying stock on the date of grant. Compensation expense is recognized on a straight-line basis over the requisite four-year service period. All new grants are granted under the Company’s 2022 Equity Incentive Plan.

~~Performance stock units (“PSUs”)~~PSUs are measured based on the fair market value of the underlying stock on the date of grant, and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the probable payout percentage.

As of ~~September~~June 30, ~~2022,~~2023, total unrecognized share-based compensation expense related to share grants was approximately $~~72.6~~61.1 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.3 years.

Stock ~~Options~~Modification ~~–We recognized~~. During the six months ended June 30, 2023 we modified previously granted stock ~~option expense of less than $~~30 ~~thousand~~awards for ~~each~~two corporate officers who retired. The result of the ~~three month periods ended September 30, 2022 and 2021. We recognized stock option expense of less than $~~55 ~~thousand for each~~modification was the acceleration of the ~~nine month periods~~vesting of 54,525 stock awards for the corporate officers. The incremental expense recorded for this modification was approximately $2.1 million, which was expensed in SG&A in the six months ended ~~September~~June 30, 2022 and 2021. All stock option expense is related to stock options granted by Savitech Corporation (“Savitech”) in Savitech stock to their employees. We acquired a controlling interest in Savitech in 2020.2023.

-13-

NOTE 7 – Enterprise Wide Segment Information and Net Sales

Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar economic characteristics, use similar production processes and share similar customer type. Our primary operations include operations in Asia, the Americas and Europe. ~~During the three months ended September 30, 2022,~~ ~~two~~Two customers each accounted for $~~58.7~~ ~~million, or~~ ~~11.3~~10%~~, and $56.4~~ ~~million,~~ or ~~10.8%, respectively,~~greater of our net ~~sales. During~~sales during the three and six months ended ~~September~~June 30, ~~2021, one~~2023. No customer accounted for ~~10.0~~10% or $~~44.8~~ ~~million~~greater of our net ~~sales. During~~sales during the ~~nine~~three and six months ended ~~September~~June 30, ~~2022,~~ ~~one~~2022. No customer accounted for $~~156.0~~ ~~million,~~10% or ~~10.4~~%,more of our ~~net sales.~~outstanding accounts receivable at any point in the periods presented in this Quarterly Report on Form 10-Q. All customers that accounted for 10% or more of our net sales during any period presented in this Quarterly Report on Form 10-Q, are broad-based global distributors that sell to thousands of different end users.No ~~customer accounted for~~ 10~~% or greater of our net sales during any other period presented in this Quarterly Report on Form 10-Q, and~~ no ~~customer accounted for 10% or more of our outstanding accounts receivable at any point in the periods presented in this Quarterly Report on Form 10-Q.~~

Disaggregation of Net Sales. We disaggregate net sales with customers into direct sales and distribution sales (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We deliver our products to customers around the world for use in the industrial, automotive, computing, consumer ~~electronics, computing,~~and communications ~~industrial and automotive~~ markets. Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months. The tables below set forth net sales based on the location of the subsidiary producing the net sale:

Three Months Ended September 30, 2022

Asia

Americas

Europe

Consolidated

Total sales

$
473,454

$
373,663

$
98,100

$
945,217

Intercompany elimination

(201,487
)

(189,643
)

(32,814
)

(423,944
)
Net sales

$
271,967

$
184,020

$
65,286

$
521,273

Three Months Ended September 30, 2021

Asia

Americas

Europe

Consolidated

Total sales

$
503,968

$
300,055

$
74,335

$
878,358

Intercompany elimination

(196,858
)

(180,396
)

(29,682
)

(406,936
)
Net sales

$
307,110

$
119,659

$
44,653

$
471,422

As of and for the

Nine Months Ended September 30, 2022

Asia

Americas

Europe

Consolidated

Total sales

$
1,388,493

$
981,317

$
262,556

$
2,632,366

Intercompany elimination

(525,306
)

(513,814
)

(88,878
)

(1,127,998
)
Net sales

$
863,187

$
467,503

$
173,678

$
1,504,368

Property, plant and equipment, net

$
500,534

$
96,691

$
101,227

$
698,452

Total assets

$
1,614,300

$
509,439

$
238,825

$
2,362,564

As of and for the

Nine Months Ended September 30, 2021

Asia

Americas

Europe

Consolidated

Total sales

$
1,458,120

$
808,607

$
202,107

$
2,468,834

Intercompany elimination

(552,212
)

(508,543
)

(83,088
)

(1,143,843
)
Net sales

$
905,908

$
300,064

$
119,019

$
1,324,991

Property, plant and equipment, net

$
421,254

$
23,792

$
95,474

$
540,520

Total assets

$
1,456,670

$
345,471

$
239,768

$
2,041,909

-1413-


For the Three Months Ended June 30, 2023	Asia			Americas			Europe			Consolidated
Total sales	$	403,434		$	333,178		$	117,393		$	854,005
Intercompany elimination		(188,504	)		(165,537	)		(32,812	)		(386,853	)
Net sales	$	214,930		$	167,641		$	84,581		$	467,152


For the Three Months Ended June 30, 2022	Asia			Americas			Europe			Consolidated
Total sales	$	464,154		$	313,884		$	86,399		$	864,437
Intercompany elimination		(166,656	)		(166,594	)		(30,215	)		(363,465	)
Net sales	$	297,498		$	147,290		$	56,184		$	500,972

As of and for the
Six Months Ended June 30, 2023	Asia			Americas			Europe			Consolidated
Total sales	$	827,596			664,585		$	217,438		$	1,709,619
Intercompany elimination		(369,969	)		(340,688	)		(64,569	)		(775,226	)
Net sales	$	457,627		$	323,897		$	152,869		$	934,393

Property, plant and equipment, net	$	540,172		$	90,588		$	117,355		$	748,115
Total assets	$	1,553,842		$	505,460		$	281,769		$	2,341,071

As of and for the
Six Months Ended June 30, 2022	Asia			Americas			Europe			Consolidated
Total sales	$	915,039		$	607,654		$	164,456		$	1,687,149
Intercompany elimination		(323,819	)		(324,171	)		(56,064	)		(704,054	)
Net sales	$	591,220		$	283,483		$	108,392		$	983,095

Property, plant and equipment, net	$	472,923		$	100,092		$	98,639		$	671,654
Total assets	$	1,627,631		$	424,489		$	232,924		$	2,285,044

The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type (direct sales or Distributor):



	Three Months Ended				For the Three Months Ended June 30,
Net Sales by Region	2022		2021		2023		2022
Asia	$	383,236	$	376,062	$	313,754	$	372,055
Europe		77,162		58,202		92,239		68,032
Americas		60,875		37,158		61,159		60,885
Total net sales	$	521,273	$	471,422	$	467,152	$	500,972

Net Sales by Type
Direct sales	$	153,732	$	159,247	$	144,083	$	147,249
Distributor sales		367,541		312,175		323,069		353,723
Total net sales	$	521,273	$	471,422	$	467,152	$	500,972

					For the Six Months Ended June 30,
	Nine Months Ended
Net Sales by Region	2022		2021		2023		2022
Asia	$	1,120,107	$	1,064,001	$	637,922	$	736,871
Europe		209,965		160,643		169,229		132,803
Americas		174,296		100,347		127,242		113,421
Total net sales	$	1,504,368	$	1,324,991	$	934,393	$	983,095

Net Sales by Type
Direct sales	$	449,399	$	458,017	$	279,028	$	295,667
Distributor sales		1,054,969		866,974		655,365		687,428
Total net sales	$	1,504,368	$	1,324,991	$	934,393	$	983,095

-14-

Net sales from products shipped to China was $~~246.2~~171.9 million and $~~244.2~~240.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Net sales from products shipped to China was $~~717.2~~351.6 million and $~~695.8~~471.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

NOTE 8 – Debt

Short-term debt

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $~~155.2~~139.1 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted and contain no restrictive covenants. These credit facilities bear interest at LIBOR or similar indices plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of ~~September~~June 30, ~~2022,~~2023, was approximately $~~119.5~~106.6 million, net of $~~35.3~~33.7 million advanced under our foreign credit lines and $0.4 million credit used for import and export guarantee.

Long-term debt

~~The~~On May 26, 2023, the Company, ~~maintains~~Diodes Holdings UK Limited (the “Foreign Borrower” and, collectively with the Company, the “Borrowers”), and certain subsidiaries of the Company as guarantors, entered into a ~~long-term credit facility (“U.S.~~Third Amended and Restated Credit Agreement (the “Credit Agreement”) that amends and restates that certain Second Amended and Restated Credit Agreement dated as of May 29, 2020 (as amended, modified and/or supplemented from time to time prior to the date of the Credit Agreement, the “Existing Credit Agreement”) ~~consisting~~. Certain capitalized terms used in this description of the Credit Agreement have the meanings given to them in the Credit Agreement, which is attached as Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on June 2, 2023.

The Existing Credit Agreement consisted of a term loan with ~~a current~~no outstanding balance as of $~~61.5~~ ~~million~~the date of the Credit Agreement and a $~~200.0~~225.0 million revolving senior credit facility with $~~55.0~~ ~~million~~nothing drawn as of ~~September 30, 2022.~~ the date of the Credit Agreement.

The Credit Agreement, which represented a complete amendment and restatement of the Existing Credit Agreement, consists of a Revolving Credit Facility in the amount of $225.0 million, including a swing line sublimit equal to the lesser of $50.0 million and the Revolving Credit Facility, a letter of credit sublimit equal to the lesser of $100.0 million and the Revolving Credit Facility, and an alternative currency sublimit equal to the lesser of $40.0 million and the Revolving Credit Facility. The Borrowers have the option to increase the Revolving Facility and/or incur Incremental Term Loans in an aggregate principal amount of up to $350.0 million. The Revolving Credit Facility bears interest at Term SOFR or similar other indices plus a specified margin. The Credit Agreement contains certain financial and non-financial covenants, including, but not limited to, a maximum Consolidated Leverage Ratio, a minimum Consolidated Interest Coverage Ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and restricted payments (including dividends and share repurchases). Furthermore, under the Credit Agreement, restricted payments, including dividends and share repurchases, are permitted in certain circumstances, including while the pro forma Consolidated Leverage Ratio is, both before and after giving effect to any such restricted payment, at least 0.25 to 1.00 less than the maximum permitted under the Credit Agreement.

The Revolving Credit Facility matures on May 26, 2028. The Company plans to use a portion of the proceeds available under the Credit Agreement (i) to refinance certain existing indebtedness of the Borrowers and their subsidiaries under the Existing Credit Agreement and (ii) for working capital, capital expenditures, and other general corporate purposes, including, without limitation, financing permitted acquisitions.

Borrowings outstanding as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, are set forth in the table below:

-15-


	September 30,			December 31,				Current Amount	June 30,			December 31,				Current Amount
Description	2022			2021			Interest Rate	Maturity	2023			2022			Interest Rate	Maturity
Short-term debt	$	35,258		$	18,068		Various indices plus margin	Various during 2022	$	33,730		$	36,280		Various indices plus margin	Various during 2023 & 2024

Long-term debt
U.S. term loan and revolver	$	116,527		$	155,122		Libor plus margin	May 2024
Notes payable to Bank of Taiwan		2,038			2,492		Variable, 1.3% base	June 2033		1,946			2,063		2-yr deposit rate floating plus 0.1148%	June-2033
Notes payable to Bank of China Trust Company		13,557			16,168		Taibor 3 month rate + 0.5%	May 2024
Notes payable to Bank of China Trust Company		3,148			3,614		Taibor 3 month rate + 0.5%	December 2023
Notes payable to Bank of Taiwan										1,606			1,628		2-yr deposit rate floating plus 0.082%	September-2024
Notes payable to CTBC Bank										3,212			3,256		TAIBOR 3M plus 0.5%	December-2024
Notes payable to CTBC Bank										13,295			13,840		TAIBOR 3M plus 0.5%	May-2028
Notes payable to E Sun Bank		3,148			3,614		1-M deposit rate plus 0.08%	December 2023		3,212			3,256		1-M deposit rate floating plus 0.08%	December-2024
Notes payable to E Sun Bank		281			371		1-M deposit rate plus 0.08%	June 2027		243			276		1-M deposit rate floating plus 0.08%	June-2027
Notes payable to E Sun Bank		1,512			1,771		1-M deposit rate plus 0.08%	June 2030		1,404			1,516		1-M deposit rate floating plus 0.08%	June-2030
Notes payable to Bank of Taiwan		1,574			1,807		2-yr deposit rate floating	September 2024
Notes payable to HSBC		100,000			100,000		Libor plus margin	January 2024		32,000			105,000		1M SOFR+Margin	January-2025
Notes payable to HSBC		20,000			-		Libor plus margin	December 2023		-			18,558		1M Libor+Margin	January-2025
Notes Payable to E Sun Bank										-			166		2-yr deposit rate plus annual rate floating	September-2023
Notes Payable to Taishin International Bank										-			43		Annual rate plus cost of capital	April-2023
Notes Payable to Taishin International Bank										-			11		Fixed annual rate	April-2023
Notes Payable to Taishin International Bank										-			217		Fixed annual rate	April-2024
Notes payable to Chang Hwa Bank										-			518		2-yr deposit rate floating plus 1.405% - 1.655%	June-July 2026
Total long-term debt		261,785			284,959					56,918			150,348
Less: Current portion of long-term debt		(9,259	)		(17,381	)				(1,149	)		(1,693	)
Less: Unamortized debt costs		(1,352	)		(2,004	)				(1,194	)		(1,185	)
Total long-term debt, net of current portion	$	251,174		$	265,574				$	54,575		$	147,470

NOTE 9 – Commitments and Contingencies

Purchase commitments – We have entered into non-cancelable purchase contracts for capital expenditures, primarily for manufacturing equipment, for approximately $~~115.9~~49.3 million at ~~September~~June 30, ~~2022.~~2023. As of ~~September~~June 30, ~~2022,~~2023, we also had a commitment to purchase approximately $~~174.1~~92.8 million of wafers to be used in our manufacturing process. These wafer purchases ~~will~~are scheduled to occur through 2025.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom. As of ~~September~~June 30, ~~2022,~~2023, the underfunded liability for this defined benefit plan was approximately $~~3.9~~6.8 million. We have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $~~2.4~~2.6 million based on a GBP: USD exchange rate of 1:~~1.2~~1.3~~:1)~~ ) to be paid inannually with effect from January 1, 2023 to address the deficit revealed by the valuation (with the annual ~~installments that began on March 31, 2021, and~~ payments to be made by December 31, ~~each year thereafter). These contributions, together with the assumed asset performance, are expected to eliminate the deficit by~~2023 through December 31, 2028. ~~Further, we will pay~~A final payment of GBP ~~0.2~~1.5 million (approximately $~~0.2~~2.0 million based on a GBP: USD ~~exchange~~ rate of 1:~~1.2~~1.3~~:1) in annual installments to cover expenses.~~ ) will be made by December 31, 2029.

Contingencies – From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods. Based on information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred. The Company is not currently a party to any pending litigation that ~~the Company considers~~we consider material.

Note 10 – Derivative Financial Instruments

We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. ~~At September~~As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had $~~257.5~~219.2 million and $~~195.2~~183.1 million, respectively, of outstanding foreign currency forward agreements that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with Accounting Standards Codification ("ASC") No. 815.

-16-

Hedges of Interest Rate and Net Investment Risk -The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company makes use of ~~cross currency~~cross-currency swaps and foreign-currency forward contracts to decrease the foreign exchange risk inherent in the Company’s investment in some of its foreign subsidiaries.

The table below sets forth the fair value of the Company’s ~~currency swap related~~ derivative financial instruments as well as their classification on our condensed consolidated balance sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

Other Assets

Other Liabilities

2022

2021

2022

2021

Currency swaps

$
13,104

$
-

$
4,083

$
1,330


	Fair Value
		Other Assets				Other Liabilities
		2023		2022		2023		2022
Cross-currency swaps		$	8,125	$	1,427	$	10,735	$	6,314
Foreign-currency forward contracts			-		-		3,001		-

NOTE 11 – Leases

The Company leases certain assets used in its business, including land, buildings and equipment. These leased assets are used for operational and administrative purposes.

The components of lease expense are set forth in the table below:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022

Operating lease expense	$	3,265	$	4,004	$	10,124	$	12,388	$	3,331	$	3,349	$	6,604	$	6,859
Finance lease expense:
Amortization of assets		4		5		9		218		8		3		15		5
Interest on lease liabilities		–		–		–		1		1		–		2		–
Short-term lease expense		231		234		757		725		527		256		705		526
Variable lease expense		855		1,193		2,692		3,483		1,050		862		2,080		1,837
Total lease expense	$	4,355	$	5,436	$	13,582	$	16,815	$	4,917	$	4,470	$	9,406	$	9,227

-17-

The table below sets forth supplemental balance sheet information related to leases. In our condensed consolidated balance sheets, right of use (“ROU”) assets are included in other long-term assets while lease liabilities are located in accrued liabilities and other for the current portion and other long-term liabilities for the non-current portion:

September 30, 2022

December 31, 2021

Operating leases:

Operating lease ROU assets

$
44,969

$
49,703

Current operating lease liabilities

8,162

11,199

Noncurrent operating lease liabilities

20,759

22,291

Total operating lease liabilities

$
28,921

$
33,490

Finance leases:

Finance lease ROU assets

$
2,613

$
2,561

Accumulated amortization

(2,537
)

(2,524
)
Finance lease ROU assets, net

$
76

$
37

Current finance lease liabilities

$
28

$
15

Non-current finance lease liabilities

49

23

Total finance lease liabilities

$
77

$
38

Weighted average remaining lease term (in years):

Operating leases

8.0

6.9

Finance leases

2.9

2.3

Weighted average discount rate:

Operating leases

4.1
%

4.0
%
Finance leases

3.6
%

3.7
%

-17-


	June 30, 2023			December 31, 2022
Operating leases:
Operating lease ROU assets	$	54,137		$	43,907

Current operating lease liabilities		8,726			7,390
Noncurrent operating lease liabilities		29,959			20,765
Total operating lease liabilities	$	38,685		$	28,155

Finance leases:
Finance lease ROU assets	$	2,627		$	2,618
Accumulated amortization		(2,552	)		(2,542	)
Finance lease ROU assets, net	$	75		$	76

Current finance lease liabilities	$	37		$	30
Non-current finance lease liabilities		40			46
Total finance lease liabilities	$	77		$	76

Weighted average remaining lease term (in years):
Operating leases		7.7			8.2
Finance leases		2.2			2.6

Weighted average discount rate:
Operating leases		4.1	%		4.2	%
Finance leases		3.6	%		3.6	%

The table below sets forth supplemental cash flow and other information related to leases:


	Nine Months Ended				Six Months Ended
	September 30, 2022		September 30, 2021		June 30, 2023		June 30, 2022
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases	$	14,104	$	16,365	$	9,242	$	9,494
Operating cash outflows from finance leases		–		1		2		–
Financing cash outflow from finance leases		61		181		23		12

ROU assets obtained in exchange for lease liabilities incurred:
Operating leases		6,845		12,915		13,013		2,186

The table below sets forth information about lease liability maturities:


	September 30, 2022						June 30, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
2022	$	2,979		$	8
2023		7,855			30		$	6,622		$	20
2024		5,153			26			9,018			37
2025		4,513			16			7,668			21
2026		3,127			1			5,918			2
2027		1,130			-			3,728			-
2028 and thereafter		10,295			-
2028								1,676			-
2029 and thereafter								11,016			-
Total lease payments		35,052			81			45,646			80
Less: imputed interest		(6,131	)		(4	)		(6,961	)		(3	)
Total lease obligations		28,921			77			38,685			77
Less: current obligations		(8,162	)		(28	)		(8,726	)		(37	)
Long-term lease obligations	$	20,759		$	49		$	29,959		$	40

-18-

NOTE 12 – Employee Benefit Plans

We maintain a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key employees and members of the Board of Directors. The Deferred Compensation Plan allows eligible participants to defer the receipt of eligible compensation, including equity awards, until designated future dates. We offset our obligations under the Deferred Compensation Plan primarily by investing in the actual underlying investments. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, these investments totaled approximately $~~11.9~~13.6 million and $~~15.5~~12.1 million, respectively.

NOTE 13 – Related Parties

We conduct business with the following related parties: Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (“Keylink”), Nuvoton Technology Corporation (“Nuvoton”) and Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”).

Keylink is a 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory from, companies owned by Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to Keylink. We also pay a consulting fee to Keylink.

~~Our Chairman and CEO served as a member of the Nuvoton board of directors and we~~We purchase wafers from Nuvoton for use in our production process and we have an agreement to purchase approximately $~~38.2~~23.8 million of wafers from Nuvoton that ends in the fourth quarter of 2025. We consider our relationships Nuvoton to be mutually beneficial and plan to continue our strategic alliance with Nuvoton.

JCP is a frequency control product manufacturing company from which we purchase material and in which we have made an equity investment. We account for this investment using the equity method of accounting.

The table below set forth the net sales, purchases and expenses with our related parties for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30:

-18-


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Keylink:
Net sales	$	4,760	$	4,872	$	14,675	$	14,771	$	3,081	$	4,149	$	6,488	$	9,915
Purchases	$	608	$	558	$	1,536	$	1,538	$	363	$	506	$	719	$	928
Plating, rental and consulting expense	$	4,803	$	4,497	$	13,768	$	13,153	$	4,225	$	4,418	$	8,680	$	8,965
Nuvoton:
Net sales	$	76	$	56	$	119	$	56	$	-	$	8	$	7	$	43
Purchases	$	3,526	$	2,749	$	10,686	$	6,444	$	2,466	$	4,094	$	5,444	$	7,160
JCP:
Purchases	$	86	$	334	$	456	$	1,021	$	35	$	157	$	134	$	370

The table below sets forth accounts receivable from, and accounts payable to, related parties:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Keylink:
Accounts receivable	$	40,530	$	39,530	$	34,900	$	40,510
Accounts payable	$	37,739	$	36,090	$	34,502	$	33,733
Nuvoton:
Accounts receivable	$	55	$	-	$	8	$	30
Accounts payable	$	2,105	$	2,014	$	1,460	$	2,859
JCP:
Accounts payable	$	93	$	235	$	45	$	133

Note 14 - ~~Equity Investments~~

Equity Investments

The Company maintains equity investments in companies which are accounted for under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. As of June 30, 2023, the Company had $58.1 million of investments accounted for under the measurement alternative. During the ~~nine~~three months ended ~~September~~June 30, 2023 and six months ended June 30, 2022, the Company recognized upward adjustments in value of $15.3 million and $3.9 million, respectively, for a cumulative total of upward ~~fair value~~ adjustments of $19.2 million on these investments. These adjustments were based on the valuation of additional equity issued by the investee which was deemed to be an observable transaction of a similar investment under ASC 321. The ~~gain was~~upward adjustments were recorded within ~~Other~~other income, in the condensed consolidated statement of operations. The upward fair value adjustment represents a nonrecurring fair value measurement based on observable price changes.

Variable Interest Entities

-19-

The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. Each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.

Unconsolidated Variable Interest Entity

During July 2021, the Company acquired an interest in an early stage privately held fabless wafer design company (“PWDC”), located in the western United States. The Company’s initial investment was $10.0 million of preferred stock and a $5.0 million convertible promissory note. In May 2023, the Company acquired an additional interest in PWDC by purchasing $13.9 million of preferred stock. As part of the agreement, the Company’s previously held convertible note converted to $5.2 million of preferred stock. The Company has determined that PWDC is a VIE and while the Company does no business with PWDC, the Company determined PWDC is a related party. The Company does not have the power to direct the activities that most significantly impact PWDC, and therefore, has determined that the Company is not the primary beneficiary. As the Company is not the primary beneficiary, the Company did not consolidate the assets and liabilities of the VIE in our financial statements and instead accounted for the investment using the measurement alternative described in ASC 321-10-35-2 using the available measurement alternative for equity securities that lack readily determinable fair value. As such, the Company’s investment is measured at cost less impairment, and adjusted to fair value if there are any observable price changes for identical or similar investment of the same issuer.

As a result of entering into an additional interest in PWDC, the Company recorded an upward adjustment of $15.3 million during the three months ended June 30, 2023. The variable interest entity is funded through debt and equity. The Company's maximum exposure to loss is limited to the investment in the VIE and notes receivable and accrued interest owed to the Company from the VIE.

The following is a summary of the Company’s holdings in the VIE, in which we are not the primary beneficiary:


	June 30, 2023		December 31, 2022
Privately Held Wafer Design Company
VIE total assets	$	27,534	$	13,671
VIE total liabilities		1,255		6,625

Diodes' equity in VIE	$	44,420	$	10,000
Diodes' note receivable from VIE		-		5,000
Diodes' interest receivable from VIE		-		222
Diodes' maximum exposure to loss	$	44,420	$	15,222

Note 15 –Acquisitions and Divestitures

Wafer Fabrication Plant in South Portland, Maine

On June 3, 2022, the Company completed the previously announced acquisition of onsemi's wafer fabrication facility and operations located in South Portland, Maine. The South Portland Facility ("SPFAB") was purchased to provide additional 200mm wafer fabrication capacity for analog products to accelerate the Company's growth initiatives in the automotive and industrial end markets. This US-based facility, together with the Company's existing wafer fabrication facilities in Asia and Europe, will further enhance the Company's global manufacturing operations. The Company recorded the purchase of SPFAB as a business combination. Total consideration paid by the Company was $80.4 million and was funded by existing cash and advances under the revolving portion of our U.S. Credit Agreement. The SPFAB facility and assets were wholly acquired, and there is no remaining minority interest. The goodwill is assigned to the standard semiconductor products segment and will not be tax deductible. The Company also incurred acquisition costs of approximately $0.5 million that were recognized in selling, general and administrative expense. The table below sets forth the fair value of the assets and liabilities recorded in the SPFAB acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet. Due to a lack of data we are unable to provide historical financial pro forma data. ~~These estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values.~~


Assets
Spare parts and inventories	$	1,257
Prepaid expenses		257
Property, plant and equipment		77,115
Goodwill		1,779
Total assets purchased	$	80,408

-19-

-20-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information contained herein, the matters addressed in this Item 2 constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as identified under the heading “Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995” herein. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by our management. The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA. We undertake no obligation to publicly release the results of any revisions to our forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “Diodes,” the “Company,” “we,” “us” and “our” refer to Diodes Incorporated and its subsidiaries. Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted.

This management’s discussion should be read in conjunction with the management’s discussion included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February ~~18, 2022.~~10, 2023.

Overview

We are a leading global manufacturer and supplier of high-quality application-specific standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the ~~consumer electronics,~~industrial, automotive, computing, communications ~~industrial,~~ and ~~automotive~~consumer markets. For detailed information, see Note 1 – Summary of Operations and Significant Accounting Policies, included in the condensed consolidated financial statements in Item 1 above. Our products are sold primarily throughout Asia, the Americas and Europe. We believe that our focus on application-specific standard products utilizing innovative, highly efficient packaging and cost-effective process technologies, coupled with our collaborative, customer-focused product development, provides us with a meaningful competitive advantage relative to other semiconductor companies.

Summary for the Three Months Ended ~~September~~June 30, ~~2022~~2023

•

Net sales were ~~$521.3~~$467.2 million, ~~an increase~~a decrease of ~~10.6% from the $471.4 million in the third quarter 2021 and 4.1%~~6.8% from the $501.0 million in the second quarter ~~2022;~~2022 and flat when compared to the first quarter 2023;

•

Gross profit was ~~$217.8~~$195.4 million, ~~an increase~~a decrease of ~~20.2% from the $181.2 million in the third quarter 2021 and 5.5%~~5.4% from the $206.5 million in the second quarter ~~2022;~~2022 and an increase of 0.5% from the $194.5 million in the first quarter 2023;

•

Gross profit margin was 41.8%, an increase of ~~340 basis points from the 38.4% in the third quarter 2021 and~~ 60 basis points from the 41.2% in the second quarter ~~2022;~~2022 and an increase of 20 basis points when compared to the first quarter 2023;

•

Net income attributable to common stockholders was ~~$86.4~~$82.0 million, compared to ~~$68.4 million in the third quarter 2021 and~~ $80.2 million in the second quarter ~~2022;~~2022 and $71.2 million in the first quarter 2023;

•

Earnings per share attributable to common stockholders was ~~$1.88~~$1.77 per diluted share, ~~a 25.3% improvement from the $1.50 per diluted share in the third quarter 2021 and a 7.4% increase~~ compared to ~~the~~ $1.75 per diluted share in the second quarter ~~2022;~~2022 and $1.54 per diluted share in the first quarter of 2023; and

•

We achieved ~~$132.2~~$92.6 million cash flow from operations. We had cash capital expenditures of ~~$69.8~~$37.0 million, or ~~13.4%~~7.9% of net sales and ~~an increase~~a decrease in debt of ~~$34.3~~$34.4 million.

COVID-19

We remain focused on the safety and well-being of our stakeholders and on the service to our customers. We will continuously review and assess the rapidly-changing COVID-19 pandemic and its impacts on our customers, our suppliers and our business so that we can seek to address those impacts. With the current lockdowns being experienced in Shanghai, China, there can be no assurances we will not be required to close or reduce our manufacturing production in the future in response to the COVID-19 pandemic or other events beyond our control. In response to these lockdowns in Shanghai, the Company has been providing relief assistance for the impacted employees, including sleeping and shower arrangements at our local facilities, in addition to providing meals for employees. COVID-19 has caused disruptions in the supply chain, creating worldwide shortages and delays in receiving goods and products. These shortages and delays have led to increased inflation and could result in a world-wide recession.

As of ~~September~~June 30, ~~2022,~~2023, our cash, cash equivalents, and short-term investments were ~~$385.9~~$330.7 million, and we had access to additional borrowing capacity of ~~$145.0~~$225.0 million under the revolving portion of our U.S. Credit Agreement, which we believe assures us adequate liquidity to manage the impacts of the COVID-19 pandemic on our business and to cover cash needs for working capital, capital expenditures and acquisitions for at least the next 12 months.

-21-

~~See “Risk Factors~~ -~~Shanghai, China has been experiencing government imposed lockdowns due to a resurgence of the Covid-19 virus"~~ ~~in Item 1A of this Quarterly Report on Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.~~

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales:


	Percent of Net Sales						Percent of Net Sales
	Three Months Ended September 30,						Three Months Ended June 30,
	2022			2021			2023			2022
Net sales		100	%		100	%		100	%		100	%
Cost of goods sold		(58	)		(62	)		(58	)		(59	)
Gross profit		42			38			42			41
Total operating expense		20			22			23			20
Income from operations		22			16			20			21
Total other (expense) income		(1	)		2
Total other income (expense)								2			(1	)
Income before income taxes and noncontrolling interest		21			18			22			20
Income tax provision		(4	)		(3	)		(4	)		(4	)
Net income		17			15			18			17
Net income attributable to common stockholders		17			15			18			16

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the three months ended ~~September~~June 30, ~~2021.~~2022. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.


	Three Months Ended												Three Months Ended
	September 30,												June 30,
	2022			2021			Increase/(Decrease)			% Change			2023			2022			Increase/(Decrease)			% Change
Net sales	$	521,273		$	471,422		$	49,851			10.6	%	$	467,152		$	500,972		$	(33,820	)		(6.8	%)
Cost of goods sold		303,455			290,191			13,264			4.6	%		271,776			294,446			(22,670	)		(7.7	%)
Gross profit		217,818			181,231			36,587			20.2	%		195,376			206,526			(11,150	)		(5.4	%)
Total operating expense		105,372			103,984			1,388			1.3	%		105,809			100,288			5,521			5.5	%
Interest income		862			765			97			12.7	%		2,224			861			1,363			158.3	%
Interest expense		(2,724	)		(1,417	)		1,307			92.2	%		(2,189	)		(1,590	)		599			37.7	%
Foreign currency gain (loss), net		(1,008	)		805			(1,813	)		(225.2	%)
Unrealized (loss) gain on investments		(2,648	)		5,922			(8,570	)	N/A
Foreign currency (loss) gain, net														(2,217	)		1,819			4,036			221.9	%
Unrealized gain (loss) on investments														12,172			(7,764	)		19,936			256.8	%
Other income		2,218			2,244			(26	)		(1.2	%)		1,398			1,647			(249	)		(15.1	%)
Income tax provision		20,172			14,766			5,406			36.6	%		17,224			18,461			(1,237	)		(6.7	%)

Net sales ~~increased~~decreased approximately ~~$49.9~~$33.8 million, or ~~10.6%~~6.8%, for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year. This ~~increase~~decrease was the result of an economic slowdown resulting in less demand for our products, partially offset by improvements in product mix. During the second quarter of 2023, the Company experienced strong margin performance driven by execution on new product initiatives and product mix ~~improvements and revenue growth~~improvements. During the three months ended June 30, 2023, weighted-average sales price increased 9.9%, when compared to the same period in 2022. A key contributor to the improved product mix has been the Company's success in the automotive and industrial end ~~markets. The expansion~~markets, which together accounted for 48% of ~~gross margin is attributable to a greater mix of higher margin products, as weighted-average sales price increased 33.5% when compared to~~our total product revenue for the ~~same period last year, along with expanded factory utilization and loading.~~three months ended June 30, 2023.

The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended

September 30,

2022

2021
Industrial
28%

24%
Communications
15%

16%
Consumer
18%

18%
Computing
23%

30%
Automotive
16%

12%

Strong revenue and margin performance continues to be driven by records achieved in the automotive and industrial end markets, that together totaled 44% or our total product revenue. Growth in the automotive business, representing 16% of our total product revenue, reflects the success of our customer and content expansion initiatives as well as share gains in the automotive market.


	Three Months Ended
	June 30,
	2023	2022
Industrial	29%	27%
Automotive	19%	14%
Computing	22%	24%
Consumer	18%	19%
Communications	12%	16%

Cost of goods sold ~~increased~~decreased approximately ~~$13.3~~$22.7 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year, due to the ~~increased~~decreased net sales during the three months ended ~~September~~June 30, ~~2021.~~2023. As a percent of sales, cost of goods

-22-

sold was 58.2% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~61.6%~~58.8% for the same period last year. Average unit cost increased approximately ~~26.2%~~8.8% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year due to cost increases from various subcontractors and foundries and the improvement in product mix. For the three months ended ~~September~~June 30, ~~2022,~~2023, gross profit ~~increased~~ decreased

-22-

approximately ~~20.2%~~5.4% when compared to the same period last year. Gross profit margin for the three month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was 41.8% and ~~38.4%~~41.2%, respectively.

Operating expenses for the three months ended ~~September~~June 30, ~~2022,~~2023, increased ~~$1.4~~$5.5 million when compared to the three months ended ~~September~~June 30, ~~2021.~~2022. Operating expenses as a percentage of net sales was ~~20.2%~~22.7% and ~~22.1%~~20.0% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Selling, general and administrative expenses (“SG&A”) ~~increased~~decreased approximately ~~$0.7~~$1.6 million ~~due to increases in freight and duty expenses, depreciation expense and facilities expense~~ as compared to the same period last year. Research and development expenses (“R&D”) increased approximately ~~$1.3~~$3.8 million due to increases in ~~supplies,~~materials, wages and benefits and depreciation, partially offset by decreases in ~~fees~~supplies and professional services fees as compared to the same period last year. SG&A, as a percentage of net sales, was ~~13.1%~~14.4% and ~~14.4%~~13.8% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. R&D, as a percentage of net sales, was ~~6.3%~~7.4% and ~~6.7%~~6.1% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Interest income ~~was flat~~increased $1.4 million, or 158.3% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last ~~year.~~year due to higher interest rates and increased investment levels. Interest expense increased ~~92.2%~~$0.6 million, or 37.7% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year, due to an increase in ~~the~~ interest rates and the costs associated with a debt modification, partially offset by lower debt levels. Unrealized gain on investments ~~decreased~~increased from ~~2021~~2022 due to mark to market adjustments on investments.

We recognized an income tax expense of approximately ~~$20.2~~$17.2 million and ~~$14.8~~$18.5 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase~~decrease in income ~~taxes~~tax expense for ~~2022~~the three months ended June 30, 2023 compared to ~~2021~~the same period in 2022 was primarily attributable to ~~an increase~~a decrease in pretax book ~~income.~~income and the impact of changes to the outside basis difference in foreign subsidiaries where the Company does not assert permanent reinvestment.

Results of Operations for the ~~nine months~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales:


	Percent of Net Sales						Percent of Net Sales
	Nine Months Ended September 30,						Six Months Ended June 30,
	2022			2021			2023			2022
Net sales		100	%		100	%		100	%		100	%
Cost of goods sold		(59	)		(64	)		(58	)		(59	)
Gross profit		41			36			42			41
Total operating expense		21			22			23			21
Income from operations		21			14			19			20
Total other (expense) income		(1	)		1
Total other income (expense)								1			(1	)
Income before income taxes and noncontrolling interest		20			16			20			20
Income tax provision		(4	)		(3	)		(4	)		(4	)
Net income		16			13			16			16
Net income attributable to common stockholders		16			13			16			16

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.


	Nine Months Ended												Six Months Ended
	September 30,												June 30,
	2022			2021			Increase/(Decrease)			% Change			2023			2022			Increase/(Decrease)			% Change
Net sales	$	1,504,368		$	1,324,991		$	179,377			13.5	%	$	934,393		$	983,095		$	(48,702	)		(5.0	%)
Cost of goods sold		883,327			845,322			38,005			4.5	%		544,563			579,872			(35,309	)		(6.1	%)
Gross profit		621,041			479,669			141,372			29.5	%		389,830			403,223			(13,393	)		(3.3	%)
Total operating expense		309,299			289,675			19,624			6.8	%		213,836			203,927			9,909			4.9	%
Interest income		2,549			2,351			198			8.4	%		3,996			1,687			2,309			136.9	%
Interest expense		(5,428	)		(6,298	)		(870	)		(13.8	%)		(4,321	)		(2,704	)		1,617			59.8	%
Foreign currency gain (loss), net		2,532			(984	)		3,516			357.3	%
Unrealized (loss) gain on investments		(15,960	)		14,838			(30,798	)	N/A
Foreign currency (loss) gain, net														(4,110	)		3,540			7,650			216.1	%
Unrealized gain (loss) on investments														16,061			(13,312	)		29,373			220.7	%
Other income		5,741			6,398			(657	)		(10.3	%)		1,928			3,523			(1,595	)		(45.3	%)
Income tax provision		55,279			36,320			18,959			52.2	%		33,840			35,107			(1,267	)		(3.6	%)

Net sales decreased approximately $48.7 million, or 5.0%, for the six months ended June 30, 2023, compared to the same period last year. This decrease was the result of an economic slowdown resulting in less demand for our products, partially offset by improvements in product mix. During the first six months of 2023, the Company experienced strong margin performance driven by execution on new product initiatives and product mix improvements. During the six months ended June 30, 2023, weighted-average sales price increased 13.3%, when compared to the same period in 2022. A key contributor to the improved product mix has been the

-23-

~~Net sales increased approximately $179.4 million, or 13.5%,~~Company's success in the automotive and industrial end markets, which together accounted for 47% of our total product revenue for the ~~nine~~six months ended ~~September~~June 30, 2022, compared to the same period last year. The increase in gross margin is attributable to a greater mix of higher margin products, as weighted-average sales price increased 26.9% when compared to the same period last year.2023.

The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Nine Months Ended

September 30,

2022

2021
Industrial
27%

23%
Communications
16%

17%
Consumer
18%

18%
Computing
25%

30%
Automotive
14%

12%

Strong revenue and margin performance continues to be driven by records achieved in the automotive end market, which reached 14% of revenue, the industrial market, as well as for our Pericom products. Gross margin expanded 510 basis points year-over-year due to a greater mix of higher margin products along with expanded factory utilization and loading. Another key factor to our ongoing success has been our content expansion initiatives and our total solution sales approach, resulting in expanded customer relationships and increasing design win momentum.


	Six Months Ended
	June 30,
	2023	2022
Industrial	29%	27%
Automotive	18%	14%
Computing	22%	25%
Consumer	18%	18%
Communications	13%	16%

Cost of goods sold ~~increased~~decreased approximately ~~$38.0~~$35.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year, due to the ~~increased~~decreased net sales during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2023. As a percent of sales, cost of goods sold was ~~58.7%~~58.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~63.8%~~59.0% for the same period last year. Average unit cost increased approximately ~~18.5%~~11.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year due to cost increases from various subcontractors and foundries and the improvement in product mix. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, gross profit ~~increased~~decreased approximately ~~29.5%~~3.3% when compared to the same period last year. Gross profit margin for the ~~nine~~six month periods ended ~~September~~June 30, 2023 and 2022 was 41.7% and ~~2021 was 41.3% and 36.2%~~41.0%, respectively.

Operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, increased ~~$19.6~~$9.9 million when compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Operating expenses as a percentage of net sales was ~~20.6%~~22.9% and ~~21.9%~~20.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. SG&A ~~increased~~decreased approximately ~~$22.3~~$2.0 million ~~due to increases in wages and benefits, freight and duty expenses, fees and services and taxes and insurance~~ as compared to the same period last year. R&D increased approximately ~~$3.1~~$8.4 million due to increases in materials, supplies, wages and benefits ~~depreciation~~ and ~~supplies,~~depreciation, partially offset by decreases in ~~fees and~~professional services ~~materials and~~fees as compared to the same period last year. SG&A, as a percentage of net sales, was ~~13.9%~~14.8% and ~~14.1%~~14.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. R&D, as a percentage of net sales, was ~~6.1%~~7.3% and ~~6.7%~~6.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Interest income ~~was flat~~increased $2.3 million, or 136.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2022, compared to the same period last year. Interest expense decreased 13.8% for the nine months ended September 30, 2022,~~2023, compared to the same period last year due to higher interest rates and increased investment levels. Interest expense increased $1.6 million, or 59.8% for the six months ended June 30, 2023, compared to the same period last year, due to an increase in interest rates and the costs associated with a ~~decrease in the borrowing levels~~debt modification, partially offset by ~~an increase in the rate on our floating rate debt.~~lower debt levels. Unrealized gain on investments ~~decreased~~increased from ~~2021~~2022 due to mark to market adjustments on ~~investments held in China.~~investments.

We recognized an income tax expense of approximately ~~$55.3~~$33.8 million and ~~$36.3~~$35.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase~~decrease in income ~~taxes~~tax expense for ~~2022~~the six months ended June 30, 2023 compared to ~~2021~~the same period in 2022 was primarily attributable to ~~an increase~~a decrease in pretax book ~~income.~~income and the impact of changes to the outside basis difference in foreign subsidiaries where the Company does not assert permanent reinvestment.

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Financial Condition

Liquidity and Capital Resources

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and our credit facilities. Our cash and cash equivalents and restricted cash ~~increased~~decreased from ~~$366.8~~$341.1 million at December 31, ~~2021~~2022 to ~~$385.8~~$324.7 million at ~~September~~June 30, ~~2022.~~2023. This ~~increase~~decrease in cash, cash equivalents and restricted cash reflects normal operations of the Company. As of ~~September~~June 30, ~~2022,~~2023, we had short-term investments totaling ~~$6.9~~$9.0 million. These investments are highly liquid with maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short time frame but in doing so we generally forfeit all earned and future interest income.

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our working capital was ~~$765.0~~$747.4 million and ~~$716.6~~$729.1 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to cover cash needs for working capital, capital expenditures and acquisitions for at least the next 12 months.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. As of ~~September~~June 30, ~~2022,~~2023, our foreign subsidiaries held approximately ~~$251.6~~$252.1 million of cash, cash equivalents and investments of which approximately ~~$63.2~~$52.9 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held. The ~~$63.2~~$52.9 million is held in Germany, China, Korea, and Taiwan.

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Short-term debt

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling ~~$155.2~~$139.1 million. At ~~September~~June 30, ~~2022,~~2023, outstanding borrowings were ~~$35.3~~$33.7 million and outstanding letters of credit were $0.4 million under the Asia credit facilities.

Long-term debt

The Company maintains a long-term credit facility (“U.S. Credit Agreement”) consisting of a ~~term loan with a current balance of $61.5 million and a $200.0~~$225.0 million revolving senior credit facility, ~~of which $55.0 million was drawn on September~~with no outstanding balance at June 30, ~~2022.~~2023. The U.S. Credit Agreement matures in May ~~2024.~~2028.

In addition to the liquidity provided by the U.S. Credit Agreement, our 51% owned subsidiary, Eris Technology Company ("ERIS"), borrowed ~~$25.3~~$24.9 million on a long-term basis from local Taiwan banks. The ERIS debt matures in periods through 2033.

Because some of our outstanding debt is subject to variable interest rates, the recent rise in interest rates will potentially increase our overall debt service cost. If interest rates continue to rise globally, our cost of capital may increase in the future.

Discussion of Cash Flow

The table below sets forth a summary of the condensed consolidated statements of cash flows:


	Nine Months Ended September 30,						Six Months Ended June 30,
	2022			2021			2023			2022
Net cash flows provided by operating activities	$	289,566		$	260,989		$	192,428		$	157,339
Net cash and cash equivalents used in investing activities		(225,600	)		(89,299	)		(97,491	)		(164,568	)
Net cash and cash equivalents used in financing activities		(11,377	)		(210,259	)		(106,659	)		(38,790	)
Effect of exchange rate changes on cash and cash equivalents		(33,575	)		2,878			(4,641	)		(13,252	)
Change in cash and cash equivalents, including restricted cash	$	19,014		$	(35,691	)	$	(16,363	)	$	(59,271	)

Operating Activities

Net cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$289.6~~$192.4 million. Net cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 resulted from net income of ~~$245.9~~$155.7 million, depreciation and amortization of intangible assets of ~~$93.4~~$67.9 million and share-based compensation of ~~$26.7~~$17.5 million. The increases were partially offset by a decrease in operating asset and liability accounts of ~~$82.2~~$32.0 million and a non-cash investment gain of $16.0 million. Net cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$261.0~~$157.3 million. Net cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 resulted from net income of ~~$170.0~~$156.9 million, depreciation and amortization of intangible assets of ~~$91.9~~$59.9 million, share-based compensation of ~~$24.9~~$16.5 million and ~~an increase in deferred taxes~~net non-cash investment losses of ~~$1.0~~$13.2 million. The increases were partially offset by a ~~noncash gain on an investment~~decrease in operating asset and liability accounts of ~~$15.1~~$80.9 million and a ~~decrease~~gain in ~~noncash working capital accounts~~the disposal of ~~$12.5~~property, plant and equipment of $3.8 million.

Investing Activities

Net cash and cash equivalents used in investing activities was ~~$225.6~~$97.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. Net cash and cash equivalents used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was primarily due to purchases of property, plant and equipment of ~~$147.9,~~$85.0 million, or ~~9.8% of net sales, and the acquisition of SPFAB for $80.4 million. Our capital expenditures~~

-25-

~~for the nine months ended September 30, 2022 are greater than our target model or 5% - 9%~~9.1% of net sales, due to ~~capacity~~the expansion ~~at certain~~ of ~~our assembly/test and~~a wafer fabrication ~~facilities.~~facility located in Hsinchu Science Park in Taiwan and the additional investment of $13.9 million in a privately held wafer design company. We expect capital expenditures for the twelve months ended December 31, ~~2022~~2023 to be within our target model. Net cash and cash equivalents used in investing activities was ~~$89.3~~$164.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Net cash and cash equivalents used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily due to the ~~purchase~~acquisition of SPFAB for $80.4 million and purchases of property, plant and equipment of ~~$86.1~~$78.1 million ~~$15.0 million~~or 7.9% of ~~investment in an early stage, privately held fabless wafer facility, consisting of $10.0 million of preferred stock and a $5.0 million convertible promissory note, and the~~ net purchase of short-term investments of $1.1 million, partially offset by the proceeds from the sale of property, plant and equipment of $3.1 million and other investing cash inflows of $11.0 million for the nine months ended September 30, 2021.sales.

Financing Activities

Net cash and cash equivalents used in financing activities was ~~$11.4~~$106.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. Net cash used in financing activities in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 consisted primarily of ~~$1.8~~$95.2 million of net reductions in our debt and taxes paid on net share settlements of ~~$12.3~~$10.6 million. Net cash and cash equivalents used in financing activities was ~~$210.3~~$38.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Net cash used in financing activities in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 consisted primarily of ~~$201.2~~$32.5 million of net reductions in our debt and taxes paid on net share settlements of ~~$14.7 million, partially offset by a capital contribution for a noncontrolling interest of $4.0~~$8.9 million.

Use of Derivative Instruments and Hedging

We use interest rate swaps, foreign exchange forward contracts and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.

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Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Hedges of Foreign Currency Risk

We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure and to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC No. 815. The fair value of our foreign exchange hedges approximates zero.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements or other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, swap agreements, or outsourcing of research and development services that could expose us to liability that is not reflected on the face of our financial statements.

Contractual Obligations

There have been no material changes in our Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed with the SEC on February ~~18, 2022.~~10, 2023.

Critical Accounting Estimates

Our critical accounting estimates are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed with the SEC on February ~~18, 2022.~~10, 2023. Any new accounting estimates or updates to existing accounting estimates as a result of new accounting pronouncements have been discussed in the notes to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q in Note 1 – Summary of Operations and Significant Accounting Policies. The application of our critical accounting estimates may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Recently Issued Accounting Pronouncements

See Note 1 - Summary of Operations and Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements, for detailed information regarding the status of recently issued accounting pronouncements, if any.

-26-

Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters addressed in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934. We generally identify forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” or similar phrases or the negatives of such terms. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The PSLRA provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA.

All forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to, in addition to the other matters described in this Quarterly Report on Form 10-Q, a variety of significant risks and uncertainties. The following discussion highlights some of these risks and uncertainties. Further, from time to time, information provided by us or statements made by our employees may contain forward-looking information. There can be no assurance that actual results or business conditions will not differ materially from those set forth or suggested in such forward-looking statements as a result of various factors, including those discussed below.

For more detailed discussion of these factors, see the “Risk Factors” discussion in Item 1A of our most recent Annual Report on Form 10-K as filed with the SEC and in Part II, Item 1A of this Quarterly Report The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

Risk Factors

-26-

RISKS RELATED TO OUR BUSINESS

The impact of the continuing COVID-19 pandemic may have a material adverse effect on our business, financial condition and results of operations.

Shanghai, China experienced government imposed lockdowns due to a resurgence of the COVID-19 virus.

During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a negative impact on our business, operating results and financial condition.

Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating results and financial condition.

The semiconductor business is highly competitive, and increased competition may harm our business, operating results and financial condition.

Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results and financial condition.

We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products, which could adversely affect our growth and profit margins.

Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales and may demand to audit our operations from time to time. A failure to qualify a product or a negative audit finding could adversely affect our net sales, operating results and financial condition.

Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or reduction in quantities ordered could adversely affect our net sales, operating results and financial condition.

Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers’ demands and could adversely affect our operating results and financial condition.

New technologies could result in the development of new products by our competitors and a decrease in demand for our products, and we may not be able to develop new products to satisfy changes in demand, which would adversely affect our net sales, market share, operating results and financial condition.

We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense, reduction in our intellectual property rights and a negative impact on our business, operating results and financial condition.

We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development, parts and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results and financial condition could be adversely affected if we are unable to obtain adequate supplies in a timely manner.

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A significant part of our growth strategy involves acquiring companies. We may be unable to identify suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired companies with our operations, which could adversely affect our business, operating results and financial condition.

We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our business, operating results and financial condition.

We may incur additional costs and face emerging risks associated environmental, social and governance (“ESG”) factors impacting our operations.

Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our business, reputation with our customers, operating results and financial condition.

We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to operate our business successfully, which could adversely affect our business, operating results and financial condition.

We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and resources, which could adversely affect our business, operating results and financial condition.

Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely affect our business, operating results and financial condition.

If our direct sales customers or our distributors’ customers do not design our products into their applications, our net sales may be adversely affected.

-27-

We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results and financial condition.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or our counterparties might not perform as agreed.

We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely affect our business, operating results, financial condition and our ability to meet payment obligations under such debt.

Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital in the future.

Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely affect our operating results and financial condition.

We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.

Certain of our employees in the U.K. participate in a company-sponsored defined benefit plan which subjects the Company to risks associated with the estimates and assumptions used in calculating expense and funding requirements recorded in the Company’s consolidated financial statements. Inaccuracies or changes in these estimates could require material changes in the expense and funding required.

Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased costs and may have a negative impact on our business, operating results and financial condition.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control over financial reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the trading price of our Common Stock.

RISKS RELATED TO OUR INTERNATIONAL OPERATIONS

Our international operations subject us to risks that could adversely affect our operations.

A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would have a material adverse effect on our business, operating results and prospects.

Economic regulation in China could materially and adversely affect our business, operating results and prospects.

We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010, China’s anti-corruption campaign and similar worldwide anti-bribery laws.

We are subject to foreign currency risk as a result of our international operations.

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China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our business, operating results and financial condition.

We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net income.

The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.

We could be adversely affected by the compromise or theft of our technology, know-how, data or intellectual property or a requirement that we yield rights in technology, know-how, data stored in foreign jurisdictions or intellectual property that we use in such foreign jurisdictions.

RISKS RELATED TO OUR COMMON STOCK

Variations in our quarterly operating results may cause our stock price to be volatile.

We may enter into future acquisitions and take certain actions in connection with such acquisitions that could adversely affect the price of our Common Stock.

Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over attempt.

GENERAL RISK FACTORS

The invasion of Ukraine by Russia could negatively impact our business.

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The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.

We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows, operating results and financial condition.

Terrorist attacks, or threats or occurrences of other terrorist activities, whether in the U.S. or internationally, may affect the markets in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.

System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely affect our stock price.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed with the SEC on February ~~18, 2022.~~10, 2023.

Item 4. Controls and Procedures.

Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation, as of ~~September~~June 30, ~~2022,~~2023, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this Quarterly Report is:

•

recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms; and

•

accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions on required disclosure.

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes.

Changes in Internal Controls over Financial Reporting

There was no change in our internal control over financial reporting, known to our Chief Executive Officer or Chief Financial Officer, that occurred in the three months ended ~~September~~June 30, ~~2022,~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not a party to any pending litigation that we consider material.

From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.

Item 1A. Risk Factors.

There have been no material changes to our risk factors from those disclosed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the Securities and Exchange Commission on February ~~18, 2022, other than the additional risk factors below related to the lockdown of Shanghai, China and the ongoing conflict between Ukraine and Russia.~~10, 2023.

~~Shanghai, China has been experiencing government imposed lockdowns due to a resurgence of the Covid-19 virus.~~

We have manufacturing facilities located in Shanghai, China, where operations are subject to being shut-down by the Chinese government due to a resurgence in the Covid-19 virus. An extended shut-down of our Shanghai facilities could have a material adverse effect on the operations, results of operations, financial condition, liquidity and business outlook of our business.

~~The invasion of Ukraine by Russia could negatively impact our business.~~

Russia’s recent military invasion of Ukraine has led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia’s military invasion and the resulting sanctions have had an adverse effect on global markets. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond our control. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on the operations, results of operations, financial condition, liquidity and business outlook of our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~Rule 10b5-1 Trading Plans

On May 26, 2023, Andy (Kuo-Ting) Tsong, President of the Company's Asia Pacific Region, entered into a 10b5-1 sales plan (the “Tsong 10b5-1 Sales Plan”) intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Tsong 10b5-1 Sales Plan will be in effect until the earlier of (1) November 24, 2023 and (2) the date on which an aggregate of 1,670 shares of the Company’s common stock have been sold under the 10b5-1 Sales Plan.

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Item 6. Exhibits.

Number

Description

Form

Date of First Filing

Exhibit
Number

Filed
Herewith

Description

Form

Date of First Filing

Exhibit
Number

Filed
Herewith

3.1

Certificate of Incorporation, as amended

10-K

February 20, 2018

3.1

Certificate of Incorporation, as amended

10-K

February 20, 2018

3.1

3.2

Amended By-laws of the Company as of January 6, 2016

8-K

January 11, 2016

3.1

Amended By-laws of the Company as of January 6, 2016

8-K

January 11, 2016

3.1

4.1

Form of Certificate for Common Stock, par value $0.66 2/3 per share

S-3

August 25, 2005

4.1

Form of Certificate for Common Stock, par value $0.66 2/3 per share

S-3

August 25, 2005

4.1

10.1

Third Amended and Restated Credit Agreement, dated as of May 26, 2023, by and among Diodes Incorporated, Diodes Holding UK Limited, Diodes Zetex Limited, Diodes US Manufacturing Incorporated, Bank of America, N.A., as Administrative Agent, Lender, L/C Issuer, and Swing Line Lender, and the other Lenders party thereto.

8-K

June 2, 2023

10.1

31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification Pursuant to Rule 13a-14(a) /15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

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* A certification furnished pursuant to Item 601(b)(32) of the Regulation S-K will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be contained in agreements or other documents filed as exhibits to this Quarterly Report on Form 10-Q. In certain instances the disclosure schedules to such agreements or documents contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants. Moreover, some of the representations and warranties may not be complete or accurate as of a particular date because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders and/or were used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

-31-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.


	DIODES INCORPORATED
	(Registrant)

~~November 7, 2022~~August 8, 2023	By: /s/ Keh-Shew Lu
Date	KEH-SHEW LU
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)



~~November 7, 2022~~August 8, 2023	By: /s/ Brett R. Whitmire
Date	BRETT R. WHITMIRE
	Chief Financial Officer
	(Principal Financial Officer)

-32-


	Nine Months
	September 30,
	2022			2021
Cash flows from operating activities
Net income	$	245,897		$	169,979
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation		81,622			79,731
Amortization of intangible assets		11,780			12,139
Share-based compensation expense		26,724			24,925
Deferred income taxes		(2,723	)		635
Investment loss (gain)		15,778			(15,133	)
(Gain) loss on disposal of property, plant and equipment		(3,677	)		69
Other		(3,614	)		1,137
Changes in operating assets:
Change in accounts receivable		(33,819	)		(27,936	)
Change in inventory		(51,402	)		(20,570	)
Change in other operating assets		(40,587	)		(16,451	)
Changes in operating liabilities:
Change in accounts payable		(10,522	)		32,155
Change in accrued liabilities		35,552			18,353
Change in income tax payable		23,124			4,627
Change in other operating liabilities		(4,567	)		(2,671	)
Net cash flows provided by operating activities		289,566			260,989

Cash flows from investing activities
Acquisitions, net of cash received		(85,692	)		(157	)
Purchases of property, plant and equipment		(147,927	)		(86,150	)
Proceeds from sale of property, plant and equipment		414			3,145
Proceeds from short-term investments		5,081			5,632
Purchases of short-term investments		(6,500	)		(6,759	)
Purchase of equity securities		(4,051	)		-
Other		13,075			(5,010	)
Net cash and cash equivalents used in investing activities		(225,600	)		(89,299	)

Cash flows from financing activities
Advances on lines of credit and short-term debt		56,839			16,138
Repayments of lines of credit and short-term debt		(35,382	)		(142,873	)
Proceeds from long-term debt		324,718			419,810
Repayments of long-term debt		(344,390	)		(494,238	)
Net proceeds from issuance of common stock		139			4,337
Repayment of and proceeds from finance lease obligation		(61	)		(181	)
Taxes paid related to net share settlement		(12,280	)		(14,750	)
Net changes in noncontrolling interests		2,756			1,998
Other		(3,716	)		(500	)
Net cash and cash equivalents used in financing activities		(11,377	)		(210,259	)

Effect of exchange rate changes on cash and cash equivalents		(33,575	)		2,878
Change in cash and cash equivalents, including restricted cash		19,014			(35,691	)
Cash and cash equivalents, beginning of period, including restricted cash		366,818			320,529
Cash and cash equivalents, end of period, including restricted cash	$	385,832		$	284,838


Balance at December 31, 2021	$	149,890
Acquisition	$	1,779
Foreign currency translation adjustment		(10,494	)
Balance at September 30, 2022	$	141,175


Three Months Ended September 30, 2022	Asia			Americas			Europe			Consolidated
Total sales	$	473,454		$	373,663		$	98,100		$	945,217
Intercompany elimination		(201,487	)		(189,643	)		(32,814	)		(423,944	)
Net sales	$	271,967		$	184,020		$	65,286		$	521,273


Three Months Ended September 30, 2021	Asia			Americas			Europe			Consolidated
Total sales	$	503,968		$	300,055		$	74,335		$	878,358
Intercompany elimination		(196,858	)		(180,396	)		(29,682	)		(406,936	)
Net sales	$	307,110		$	119,659		$	44,653		$	471,422

As of and for the
Nine Months Ended September 30, 2022	Asia			Americas			Europe			Consolidated
Total sales	$	1,388,493		$	981,317		$	262,556		$	2,632,366
Intercompany elimination		(525,306	)		(513,814	)		(88,878	)		(1,127,998	)
Net sales	$	863,187		$	467,503		$	173,678		$	1,504,368

Property, plant and equipment, net	$	500,534		$	96,691		$	101,227		$	698,452
Total assets	$	1,614,300		$	509,439		$	238,825		$	2,362,564

As of and for the
Nine Months Ended September 30, 2021	Asia			Americas			Europe			Consolidated
Total sales	$	1,458,120		$	808,607		$	202,107		$	2,468,834
Intercompany elimination		(552,212	)		(508,543	)		(83,088	)		(1,143,843	)
Net sales	$	905,908		$	300,064		$	119,019		$	1,324,991

Property, plant and equipment, net	$	421,254		$	23,792		$	95,474		$	540,520
Total assets	$	1,456,670		$	345,471		$	239,768		$	2,041,909

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company