DIOD - Earnings call transcript Q3 2017

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Operator

Good afternoon and welcome to Diodes Incorporated Third Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instruction will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, November 7, 2017. I would now like to turn the call over to Leanne Sievers of Shelton Group, Investor Relations. ahead. go please Leanne,

Leanne Sievers

welcome I'm third Shelton Leanne firm. Investor and results Group, XXXX conference Relations call. Sievers, to afternoon, quarter Diodes' financial Diodes' Good President of

Lu; Diodes President Vice Sales Relations, and and CEO, Joining Laura White; King; of President Mark of today Officer, Rick are Dr. us Keh-Shew Director Chief Marketing, Mehrl. Financial Senior and Investor

the announced independent Before company by are our listeners remind I'd like I to they procedures closing turn the its accounting the as the finalizing call today results and over subject review preliminary to to registered Dr. Lu, quarterly firm. are that customary public company's

results As third these files XXXX. its revision XX-Q are such, until quarter the company subject to its for Form

Act and in that In additional in of may prepared results risks Securities addition, and forward-looking the you to Commission company for response the Private statements, detailed forward-looking XX-K Exchange management's the to statements is of contain and risk of refer forms Securities filings XX-Q. with forward-looking uncertainties, discussion company's make remarks statements XXXX. and a we including to from questions. safe harbor protection Litigation may those which uncertainties today, claims therefore Actual and contained Therefore, Reform more and your the the management subject the discussed the differ are in

the today, in In addition, projections XXXX. X, November Diodes may of as represent any update not assumes may as these or projections as obligation estimates to performance the market company's management's change. no to conditions future future

and to and income. the and income release and release details. the attributable common discussions refer will financial press are in definitions items, as to in GAAP press this statements stockholders call during to GAAP call, company's conference include release terms. statements which non-GAAP of Included Additionally, we GAAP Also management's net net this additional certain throughout provide and during management company's non-GAAP press the measures conference reconciliations information of company's

to Relations the over website listen www.diodes.com. President a available and of Diodes' Dr. this Dr. Lu. unable the in time, entire be go call you call webcast recording And turn of Investor ahead. to please Diodes' will section Lu, Keh-Shew the to days those For via XX I'll at now CEO, at for

Keh-Shew Lu

Welcome gross you results. for joining income. Diodes profit Leanne. achieved operating and to I'm quarter new record everyone report you and pleased Thank heights today. thank another revenue, of us of Taking that

Our growth be continues across markets. all to and regions broad-based end

our year-over-year both computing We by in end XX% in and markets also growth achieved industrial. and record complemented revenue communication automotive

end considering the automotive even record offerings. grow customer revenue revenue continued high more of the to contribution integrate from base. complete Pericom products is we as market a into margin In reached our X% last those quarter, also fact with from solid achieved which notable our the level higher Revenue

Additional, utilization continued of the product quarter. model results facilities, target our our margin in across improvement XX% mix the in gross to non-GAAP and across in

expanding vendor shareholder with and financial completed XX%. gross recently which and We of XX% track Consistent on at on long-term value. return KFAB demand new of and We November margin the facility have manufacturing targets, XX. increased driving focus property the to our our wafer margin operating by to established profitability includes

introducing we those serving as of taken the expansion basis earnings we targets. result to increased strategic over past the years, a the actions business As significant have few positioned drive a have of

potential future expansion of amount debts cash well initiatives, is Our allocating significant cash. long-term the plan as existing flexibility to reducing acquisition continue support generating to as We our our also also strategic our maintaining business while toward buyback.

guidance profitability results that to leverage and call not in Looking discuss financial Rick fourth third to shareholder value. more deliver positioned benefit With forward detail. over our our to quarter turn from quarter operating well to will we I increased solid and the our

Rick White

basis, the quarter million third margin on XX.X% or business. of KFAB revenue increase quarter. revenue operating second Dr. million $XX.X utilization and expenses, in revenue $XX.X non-GAAP. of or profit charges million and in and the another $X restructuring expenses quarter the of The XXXX. expenses these growth geographies gross $XXX.X afternoon continued of million in XXXX an million product million of increase or well or XX.X% an in in of million for This quarter on XXXX third quarter across markets related million strong quarter was quarter or amortization of the XX.X% GAAP approximately million, products. $X.X or XX.X% for and costs. the compares million costs. Non-GAAP in due $XX.X XX.X% third primarily KFAB Pericom of second revenue $X the or and in due to sequential the to Lu combined Europe for as of to continued revenue end continued XXXX million The from the and X% of mix increase compares XX.X% was improvements previous the with GAAP operating was $X.X profit primarily GAAP million $XX with of $XXX.X as fixed of from gross $XXX.X our million XX.X% $XX.X million acquisition for $XX.X of everyone. of profit Thanks Pericom the closure or America which impairment third revenue was to quarter prior-year combined This a and of including XX.X% revenue excluding non-GAAP target gross of quarter assets. revenue the $XX.X of were good of of excludes million $XX.X Revenue XXXX asset and in in North increase of XX.X% was intangible and strength revenues,

last third approximately and to operating revenue, in X.X% and Looking Combined or of or quarter year third for taxes in costs a operations XX.X% revenue million quarter $XX.X quarter compares excluding $XX.X for third our in the revenue. XX.X% $XX.X $XX.X and quarter for previous specifically to $X.X million plus quarter and last quarter of was intangible amounted from record and is costs million X.X% Non-GAAP and to income was XXXX quarter ago expense million quarter. at research XXXX. interest XX.X% quarter the million XXXX. million Total or third to selling, $XX.X was was XX% revenue currency of approximately general XXXX and or million the quarter Investment of This SG&A million development XXXX. quarter XX.X% X.X% R&D $XX.X and impact. or other This KFAB $XX.X the non-controlling for $XX.X quarter, or administrative previous or for GAAP shutdown quarter Income XX.X% of $XX.X or revenue operations negative or in amounted third the the million of last revenue X.X% million revenue. of million in $XX.X the of or million of in XX.X% million third the $XX.X the was $XX.X the of $X.X before $XX.X of million quarter, including the revenue. of to compared quarter from a million compared amortization which compared model. third million and XX.X% SG&A to approximately expenses $XX.X in asset compared to in income the of revenue million or third This or XXXX. $XX.X $XX.X of or revenue XX.X% revenue

XXXX per to $X.XX income quarter the quarter was third diluted $XX.X quarter XXXX or XX.X%. taxes, in share quarter for million or was million $X.XX The share GAAP income shares. XXXX effective for third tax second the third quarter diluted our diluted per to of for GAAP diluted million share count or Turning income XXXX and was of XX.X of the the compared $XX.X in rate compute $XX.X to per third XXXX. net EPS approximately $X.XX used million share the

$XX.X income Third share XXXX. $X.X or $X.X per costs impairment non-GAAP or quarter non-GAAP of $X.XX the in million per income KFAB net per of and quarter of share million restructuring fixed diluted in quarter asset million $XX.X compares charges. and adjusted This as XXXX million amortization $X.XX $X.XX noncash net million was asset diluted intangible which excluded or third costs, as to $XX.X last net tax, share, acquisition-related $X.X closure diluted well million

net the third in in income release income We reconciliation earnings included adjusted Included was net a noncash net compensation of net and GAAP our expense. non-GAAP to share-based net details. GAAP XXXX income million approximately of of have quarter of provides additional which adjusted tax $X.X non-GAAP income

operations of non-GAAP the $XX both Free capital share expense EPS of million the compensation would which generated $X.X have million third share-based GAAP of the third flow negative million was cash approximately for and per the XXXX. by was quarter, Net million quarter. down diluted flow third million additional million during included diluted adjusted $XX.X $XX.X $X.XX flow increased diluted $XX Cash Excluding in for long-term quarter including of from was cash debt quarter. and the pay expenditures. $XX.X CapEx a EPS

in days packaging third approximately current approximately $XXX.X an is of Turning CapEx approximately expansion was XXXX market for end cash from portion of or $XXX current revenue Working last the operations raw XXX favorable was cash of was the by quarter, third related goods, quarter were accounts Depreciation $XX quarter. $X.X with The million from of approximately reflects XX the expenditures and inventory finished in XXXX AR the our to compared million. increase capacity will revenue, of XXXX capacity approximately revenue, equivalents million inventory the assembly at $X which to the in end third majority the increase including investments compared and in the million full-year At be At our believe of Capital million. higher of short-term for quarter increased last expense debt We amortization third quarter, the sheet, than days the projections test million be quarter. decrease million, focused XX.X% $XXX to expansion Inventory balance were growth X% quarter approximately second materials a XXX the work were last for in the million. million plus expenditures environment was totaled capital a and days the to the quarter, million. process. will to $XX.X in Long-term $X.X in million. on which $X.X advanced $XXX.X model. X% XX% and newer receivable in increase to XX to related million $X.X a increase $XXX.X quarter quarter. the end China.

to outlook, Now million $XXX quarter revenue XXXX, our expect typical turning seasonality with between sequentially. range million down to for we X.X to X.X% and or the $XXX fourth

KFAB for XX.X% minus be costs XX% which asset to operating to expenses or minus to margin non-GAAP be closure expenses GAAP revenue XX.X% acquisition-related expect amortization or retention operating or gross We and expenses GAAP of are approximately plus intangible X% X%. Non-GAAP gross adjusted of plus and margin minus X%. are plus expected be and

to We be million. expense approximately expect $X interest

of that be turn Please said Our I note purchase closure Pericom are of XX% $X.X are and million, to EPS income expected calculate for or to adjustments tax acquisitions rate XX.X anticipated and over these not plus approximately and to million. included minus will after now costs tax call KFAB shares for With be is used to previous the both quarter the in Mark fourth million diluted King. that accounting $X.X X% numbers.

Mark King

afternoon. Rick, and good you Thank

Lu quarter of set another X% Dr. third top As sequentially record, a quarter. on Rick up revenues almost increase XX% and last highlighted

rose end globally our end the sales inventory strong inventory Europe distributor markets Distributor by since Asia range. driven in best and was XX.X% in down up all North be records to including Channel quarter XXXX America days of X.X% and in while of record from the well regionally both regions within and POS. POS revenue XXXX. QX at expanded QX QX continues support set and are and growth in target both Our

As our was customers design and sales, activity design third record increasing in regions quarter strong indicated wins. the activity all with in by

CMOS nine products product connect footprint, We hall timing, with basic record on cross-selling continue battery and and see LDOs, new the management. to penetrate broader past ramping reflect records MOSFETs opportunities quarter revenue sensors, products. products an wins including significant during ICs, We sales into results Pericom set design switching, These interface expanded the base line on our with key and customer production. protection,

and new our drive continued wins. growth product expect with to introductions momentum design We expanding and revenue

in global of revenue, and XX% the Asia Turning America sales represented XX% to Europe North quarter, XX%.

consumer represented markets, and industrial of In our terms XX, computing end communications of of X% revenue. XX revenue, automotive XX% XX%,

in audio Let products power now the of detail me strong IoT each and In more market, markets. our continue provide the gain within area. end acceptance LDOs to our CMOS consumer ultralow

in Our activity advanced that run changes next pilot CMOS activity. breathing generation ultralow LDOs as supported tracker bio physical as monitors well quiescent an the current new of

at XX function already being low mobile driver Sounder peak applications volt produce highly is Bluetooth a quarter efficient sounder use peak used Our released Piezo output last that energy multiple technology. to tracking in

in also In well multiple design significant wins camera. the secured new line optical for a and card wins as switch, several across CMOS and application set-top new wins LDO activity major as product we and market, headset boxes product had We timing low CVR switch applications line communications applications. IP with in seven our router Bluetooth

adaptive for fast micropower communications ramped Notable leading market compatible constant including market a adapters sensors new quick side hall protocols. current in During for the smartphone the smartphone aggressively book quarter, releases charging platform. with secondary voltage/constant and control our charge product

for specifically Diodes of device Express communication networking and mobile TVS devices and six Also launches designed released applications. developed a for specifically devices for switch including applications also customers. PCI charging telecom wearables, including [indiscernible] new two mobile We X-line key portable

space We mobile with that pair suited switching bidirectional is common-drain a resistance ideally ultrathin and applications. load constrained for also and extremely a launched with footprint small MOSFET source-to-source low

customers. and this For at market RDS high very computing drives to sub-one two for MOSFETs These excellent low MOSFETs performance. technology market, market additional applications drives applications. computing leading motherboard vCORE at strong require extend solid as devices applications, see on are MUX Diodes space Split based for the thermal and launched state these enterprise and to Also efficiency the tractions ramping two on continue mOhm with our in targeted offering Diodes quarter properties Gate

line also Our integrity exceed high saw space, support engagements signal socket. the CMOS performance LDO notebooks, for with including We a wins serial best-in-class Also, family. in rates including our by we APA in MUX new product voltage our XXX several SSD new Express data server offer a product multiple devices bandwidth socket PCI for ReDriver significant new line, our to per new that megabits and second. secured LDO high

connected range conservation XX replacing launched for again launched together regulator automotive any power to For voltage at launched with HVAC portfolio meet due superior system, and new of a the of our and a Other applications. low dimmable to for This in lastly, series DC adoption volt we ramping applications, Increasingly, driving industrial device system second the four motors channel two space for of synchronous environment, our Super DC strong is is that a lighting a a range new tool. were rugged converter of needs connected also applications. market, efficiency, TRIAC more MOSFETs lighting technology at driving. brushless in device RDS(NASDAQ:ON) Diodes' Also offerings, boost a LED dual tunable product for efficient a MOSFETS hall is security high device motor quarter the process for with release compact wins performance the supplies. received at are this already to include aimed synchronous in the volt DC brush the motor targeted machinery once power one early LED applications. lamps and we MOSFET the market, green power their in devices industrial split trend first gate motors new the three in power was win sensor process drivers and setting AC a industrial end including to gate another XXX voltage controllers second These from well suited Also I in LED an designed notable newly application. of supply is gate just a rectification. expanded investor in demanding technology we driver aimed And and introduced buck MOSFETs industrial mentioned Junction buck socket at split a DC DC MOSFETs lighting complemented by size. our

among activity Also continues wafer qualified of degree MOSFET customer the and extended full temperature in release the automotive qualification with fourth The to successful shielded design XXX technology our auto customers. packaging quarter, expected first together ins strong automotive [indiscernible] Our superior rating. Diodes' MOSFET Key product penetration major C at factors our be our continue drive sampled to gate the we in reliability. market our quarter. and products power capability with during is

devices compliant well power of Additionally, mapping a Express automotive power offer but cost our voltage for power advanced yet the the automotive reflects states and presence. family hall generating record in we solutions. results space infotainment such specifically as low high and summary, systems another support PCI performance, as new of we high momentum include business. linked unipolar vehicle as and released sockets These LED In of the further wins are switches, safety platforms. across traffic effective and quarter switch achievement features lighting for Key designed management operation multiple our expansion automotive security, of significant for

on of design and focus expanding markets. product content our success continues new existing Our to win at evidence across customers activity show and new introductions, end

only beginning Importantly, Pericom of from at terms cross the of we're margin a the contribution. in of expansion as well gross full the as stages benefit selling opportunities, acquisition realization revenue

a continued finish year to position floor to open Operator? out the drive growth in With expect to that, in questions. We will I the XXXX. solid

Operator

Baird. first Our comes line Instructions] the question RW [Operator of from Gerra Tristan with

Tristan Gerra

call. just markets expansion the particularly seen context in time we're in we've that with that's analog. seeing end in strengths the of terms Looking guidance, or more which growth, sequentially, QX Trying mentioned reconcile year my to at you've seasonal your also what strong the is revenue that lead over of the recent less on obviously also end your seasonal, year but on guidance

end is expected supply it QX? So striking bigger are in that little a bit any than perhaps constrained there you or specific markets are

Rick White

marketplace softest obviously, the I see - is I would consumer say everything QX. the that will say, would tracking

think of and alleviated I we're I that constraints some will have think supply in the in pretty area. We tight, be relatively fourth certain shape some products the quarter. but be will in good packages that still pretty

Tristan Gerra

And to weeks return to you then lead XX what percent do normal products and of when currently above times times have expect lead levels? your

Rick White

I remain that things, think New after some I certain of We the of probably at the and because the timing our of will Chinese in that - our Tristan, year, look based way, things difficult somewhat can't be the ourselves thing some times for but we've normalize prepared CapEx, tighter XXXX. certain into on to maybe will catch don't products expect we, really products launches year, will next mid into position we MOSFET the mid Year late and this but lead say. next marketplace for

good So to pretty shape out we the supply. we're in level think

Tristan Gerra

then And where give one, Okay. is whole in if for quick us rates just BCDX utilization and one company also could last the and the also currently? both you QX

Keh-Shew Lu

to Okay. XX% being leave The CAT I'm XX%. in out, China, shut Manchester, SFABX and assembly test at SFABX at XX%. in KFAB at and going which down. was both XX%. is the fab since was Shanghai OFAB, facilities were in was it's England

Operator

question Benchmark with Thank you. Co. Gary the next of from Mobley And our comes line

Gary Mobley

have the Lu, third been thrown the revenue the into might out capacity of have Dr. in fourth revenue how quarter. that would constraint you constrained quarter what third because much and quarter if weren't of

Keh-Shew Lu

we through we situations. have the really actually even that quarter in in for Well, you, really I still are surprised fourth limitation are quarter, limitation and third and don't similar the certainly data the but

go look we still cynical we to down, than cynical, seasonality, history. if but at, but with are the do Now, you come just

Gary Mobley

the Is guide to flowing explain is P&L Okay. or midpoint margin of of third product me how your away Help despite a produced the function from a the of switchover on function fourth sequential sequentially, based it quarter albeit the KFAB? cheaper through the quarter manufacturing decline. X% revenue that modestly revenue in in gross the you of increase expect

Keh-Shew Lu

okay, Well, excess is technology. and margins. it's best, new really all improve coming above, product but packaging is or All and KFAP but new mix from our really expect its majority those utilization, products

Gary Mobley

been once talked of you start basis XXX the gross think past, might on the point the margin, or fully KFAB, clarify the when margin? have you might in is gross benefit you manufacturing benefit In the see it from overall away over amount maybe Could Okay. impact about to so. a switched positive the and I influence

Keh-Shew Lu

but one, down in we Okay. that are we've rented Number shifting yet respect. out not

go for surprise, one The in actually some Now, Q start the if subcom see third to OFAB. And and SFAB the from year. of of probably and not, some that offer of there that are the shutdown qualified now KFAB incumbent. thing to portion, is QX are end shutdown September demand probably into waiting also we to to the more and moving but in to is SFAB, we equipment then we're the SFAB in but

see need next cannot really the first rented see year a you of acceptance. customer qualification you ramp the because quarter create then until and So to or and out, we

third the showing in which So majority the of some point can effect is from year. quarter, you next that accounting benefit subcom in but not see KFAB third qualified, already benefit quarter, effect, the up one here into KFAB until the

Okay.

won't see fully next year. but XQ, it of You start some it to until second probably half benefit in

Gary Mobley

Okay. on gross any ping you of the And in down margin? benefit quantifiable kind

Rick White

said quarter, that. Yeah. we to think about $XX like previously it's going a year, be somewhere something a $X We've million million that

Keh-Shew Lu

Yeah.

said second and been of XX to it's when what fully year. rent, okay said half and we XX until I think XX. that XX we ramped we next to we've fully always is said effect,

Operator

[Operator And from question Harrison Longbow our with Instructions] Research. next of the Shawn line comes

Shawn Harrison

you'll XX% be increase like XX% at The to this - quarter. it looks target the of margin from gross

on Let's transfer, is verses, term the say function how KFAB you of of I'm margin we're factors, XXX versus points, mix better if and much comment basis pushing up long your other targets. tied of in remaining is a assuming, that a that pricing closure a environment the point that to but

Rick White

that term out what focus focus the as forth the a And work of proper and course to so it pricing of with our better has and so at get within the think is be area. value our our in I in to and forth going focus and drive lot do product mix. we driving to really and discipline long areas products organization that

supplier, over direction. be that So our and customers our key commodity be based. I is key a our key that broad a to less time, you'll be equipments drive we'll products us on but end light think see going will We'll focus still and within in

Keh-Shew Lu

when analyst, our in around to know do if we somewhere investor this you September, it's Currently, XX years visit our and advance and I it's segment, actually is ago. automotive I - And percent okay? something mention XX look come market and you industrial, probably at our improved from our

what or I today, think the and on X% said in we in the the it's revenue so to change market to therefore, and give hoping up be of communication. right accomplish mix continue automotive get change industrial And near the the talking then overall and we really higher automotive I XX% other industrial industrial. the our XX%. two coming from term by of already I it's goal, about our communication gross XX% and quarter, mentioned than should tend only I segments average, am we revenue. coming market I you And consumer, that third and automotive, revenue from margin of These computer, long to our three in from computer, think focus from higher the to to automotive. XX% coming today, if segment, And focusing want term, consumer, focus is XX% trying focus the and of able our our now XX%, and margin XX% gross on continue on XX% And automotive. to then industrial industrial on we I'm already from to the to

Shawn Harrison

range Do will X% normalized to at may. still, And next I be for year, this it for for I sales enough you X% at if be that range of spending year's that down need out we or you'll you to but look far to still XXXX above if capacity? will next kind know to XX% two drop add follow-ups believe in of capital year.

Keh-Shew Lu

to a capacity have packaging but last say think but type to, didn't got therefore to in CapEx our big year, continue I go I growth think shortage we're right year, yet, back due year, now, next - we year, due this X%. and we new high to and we going I shortage, down, the This to hoping X% the areas. we're we're performance putting been

So mentioned reasons in X-inch capacity by I I'd think of midpoint I we in money, the to the the Those X%. continue X%, to costs, with the the as have to higher CapEx past. like the and spend that than we respect are will what X% money slightly

Shawn Harrison

now gains of cash is go what gains further in first at and made And days that number? more maybe as a the question kind pretty XX are good well. year-over-year, to there are the think guess right drove so forward or down days AR being your then a I some lastly, bit the precipitously cycle Rick, I year-over-year or of than you're little where cycle and cash is down maybe

Rick White

right Well, is I are good a think we now pretty where number.

You're down three the over right. gone or last four It's quarters.

strong huge days. AR and going also in forward, and I the of Europe strong; are see will And being won't paying have Asian terms. think terms probably reduction a amount it, less than being so US you - North But America you payment the their

Operator

And time. you. I'm further Thank no questions showing this at

So like I'd return to the remarks. Dr. to Lu any closing call for

Keh-Shew Lu

you may now on Thank participation disconnect. call. today's Operator, your for you

Operator

call. Everyone, have and may does you participating the Ladies all great day. for program This today's and disconnect. a conclude in thank gentlemen, you

Diodes (DIOD) 7 Nov 172017 Q3 Earnings call transcript