DIOD - Earnings call transcript Q2 2018

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Operator

Good afternoon and welcome to Diodes Incorporated Second Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday August 7th, 2018. 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 second Shelton Leanne firm. Investor and results Group, XXXX conference Relations call. Sievers to afternoon quarter Diodes' financial Diodes' Good President of

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

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

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

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

to instance estimates In change, conditions addition, obligation any projections future today, for except applicable these of as management's Xth, or law. future to August Diodes may the represent projections not as no update as in performance may XXXX. assumes the company's market the

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

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

Keh-Shew Lu

and Diodes Welcome Leanne. [Indiscernible] number growth, you, of thank quarter. driven revenue Thank second and on milestones for metrics, financial gain, continuous reaching for achieved market in key today. traction you record level us by joining further everyone quarter, across the our share market a

both achieved performance extraordinary reflect industrial all sales new Our record a markets, record contributed across revenue in strong end level our which regions. automotive and to

revenue was was representative Our automotive and XX% largest first of time total the our our at was up revenue that XX% year-over-year industrial market. end revenue industrial

growth, to in revenue, contributing expense we EBITDA Additionally, our achievement share operating quarter. to percent per continue and decrease in also, record non-GAAP through earnings as a record revenue of the the of

of XX%. XX% prior compared growth further the in period In non-GAAP This fact, over our XX% operating income the EBITDA as on and leverage to model. net demonstrates significant the year over revenue increased

across to, continued As our is long-term our down strong the growth us a expect flow that our generated highlighting set Also, result, quarter, again, those new solid enabled to business. third further expectation debt. we we where cash pay results for in records

more quarter call turn potential year to guidance our results most with let history. strong company's detail. positioned achieve has and discuss growth our over the quarter the year now to profitable the us With me this second Rick to the Our financial and results that, our third in in

Rick White

afternoon everyone. good Lu Dr. Thanks and

second a profit quarter press $XX.X XXXX release and the million, and was of second Pricing of for the a million operating first million of $XXX.X review the change XX.X% items would revenues amortization on XXXX non-GAAP second a inventory $XXX,XXX gross quarter record compares our GAAP non-GAAP quarter of sequential to year-over-year more quarter the and or revenue approved dollar representing for margin million the in XX.X% $X.X which revenue, or KFAB on on This or a from restructuring XXXX. million XX.X% million Revenue intangible operating the on quarter, which XX.X% a XX.X% as XXXX review revenue the expenses $XX.X expenses excludes revenue $XXX.X GAAP $XX.X some As due of comments for reduction for of also my asset X.X% approximately today, each in increase the the $XX.X in the for record in or part quarter with of the our million at or will sales $XXX.X XXXX increase a of to basis. expenses were second million lower efforts. comparisons. or acquisition-related offset detailed versus GAAP first XX.X% basis was a XXXX. revenue well line of quarter financial inventory from I basis, $XX.X and of quarter million results my refer XX.X% the our of first an focus first as of costs. of you

quarter second the quarter Income including offshore approximately of to expense. expenses, First in amounted in repeated interest which to interest for second the million other million million not XXXX before to $X.X amounted the $X.X taxes and quarter expenses Total of non-controlling the included quarter. of million compared retirement $X.X XXXX. $XX.X were first million in quarter, $XX.X

taxes. income to Turning

$X.XX in share count quarter net income was GAAP per the effective XXXX shares. XX.X share for XXXX was $XX.X EPS $X.XX or or GAAP XX.X%. second tax million for approximately XXXX second used compared for per was income first net quarter Our GAAP diluted the diluted $XX.X of million record XXXX. quarter a quarter income The to to the the share million compute diluted second rate

and share, were records. was per amortization quarter diluted or adjusted This per non-GAAP $XXX,XXX net The acquisition-related million Second income restructuring expenses. diluted of costs quarter to of income the first non-cash which net adjusted of million in share $X.X $X.XX of tax income net adjusted net or of XXXX non-GAAP XXXX. intangible $X.XX excluded $XX.X both $XX.X million compares asset of

or $XX.X XX.X% a amortization, net compared in in have reconciliation GAAP income net EBITDA, earnings of our included which the record depreciation tax, adjusted and expense, was provides second We $XX.X details. release quarter of additional before income revenue million XXXX. was or including the with which $XX.X to from income, represents non-GAAP earnings cash $XX.X a of of XXXX million XX.X% the net was expenditures. capital interest which second included XXXX. flow million of Free first generated million, $XX.X quarter debt. Net of quarter operations $XX.X quarter, approximately million for pay-down the a for long-term revenue Cash flow in flow was million the second million cash negative $XX.X

were second on days Capital was including a XXXX raw expenditures were $X.X million decrease our sheet. $XX.X strong approximately decrease end $XXX of first finished quarter. reflects finished an the reducing half XXXX. work $XXX.X The $XX.X first equivalents inventory Finished million. revenue of of $XXX,XXX in cash CapEx the a goods decreased the compared goods, long-term after put XXX the increase inventory short-term million a inventory the first was Working million. growth and second the compared finished goods in in quarter the to XXX X% million process from million consecutive in goods on quarter, XXXX. second At basis in inventory balance goods in and days reflects approximately the increase in by inventory materials. the in to place cash to capacity for The revenue. This the in approximately in decrease $XX Total finished the of quarter expected end quarters to inventory the to in At XX million the quarter quarter current plus focus days portion, or quarter debt, were or second Turning increases. totaled $XXX.X four XX of quarter, to cash investments of million. and was capital in $XXX the

for CapEx full of our the X% model of year revenue. to XXXX return X% to expect We to target

the quarter strong with midpoint, to a $XXX third sequentially. growth growth outlook. At turning million sequentially million a to $XXX in to or up for the of Now, this quarter, our to range After XX.X% we continued the expect second XXXX. increasing X.X% revenue quarter XXXX, XX.X% represents third growing X.X% versus

margin amortization of plus gross to expenses expenses, assets or XX.X% GAAP are intangible expect XX% be Non-GAAP expected acquisition-related We minus revenue, approximately which for X%. to X%. or GAAP minus are operating of adjusted be operating plus

We expense $X.X to approximately million. expect be interest

be I calculate and approximately acquisitions diluted that expected are income be to Pericom of Our minus Emily used million are call now anticipated million. these quarter rate to estimates. after-tax $X the that XX% note, over for is previous not in shares Please to for third included EPS to purchase X% plus XX.X tax said, turn will non-GAAP the Yang. adjustments accounting and With or

Emily Yang

Rick you, Thank good and afternoon.

sequentially previously record by new and XX.X% year-over-year revenue XX.X% was levels China reached decreased As POS POS revenue quarter record inventory and All by results. XX% up up distributed sequentially. up we was of increased second QX highlighted, POP XX%. X.X% regions

XX and ASIC During management, the including switch. LED, revenue linear, quarter, product we MOSFET, on categories, standard records said battery Interface, AC/DC,

power protection, a integrity, in wins recent Aris signal continued We new [ph], products. momentum design by achieved also on strong CMOS LDO, sensor, driven and

is growth quarters of evidenced momentum, over customers. revenue contract several with our strong success of and past product consistently new expanding Our designing introductions, the

expect half in progress continue making XXXX. additional We of to second the

sales the the X%. represented at America Asia XX%, Looking Europe of in XX% North and second global quarter, revenue,

market, end our for consumer industrial represent driver of continued souvenir lighting of and industrial products the growing applications as a the smoke This computing to alarm-related market, continue market. a increasing In was the X% largest detector, with the industrial demand terms was ends Starting of and features. communication well as first LED XX% see in revenue, that in XX%, as with for expansion time the Diodes audio alarming result of automotive XX%, our audio representative revenue. market demand LDOs strong [ph] of XX%,

coders, mark normal high linear and industrial as trench that We also application, DC the launch Also, and brushless pace impact continue we density, communication meters, sensors quarter, new during are the motor, position products and in designed high demonstrate CMOS brushless in industrial application. motor to such our for lighting. and specifically performance of product technology, slow LED introduced using

up year-over-year. a Turning to for our and focus area remains which Diodes market, key automotive was XX%

last increasing win demand and growth the areas LEDs detail I wins was consists DC USB product in switches successful continues three a the and telemetric Telematics, the electric ramping in style Infotainment our car infotainment, and control, which for conventional application discussed momentum like including driving There brushless comfort strong safety, vehicles. Type design Our lighting design interest and also C of in for covers hybrid quarter. Connected applications motor system, driving, driving Powertrain to the automotive ADAS, in past connected Contributing allow power transistors, is the application. packaged the models lightings. in in and newer for of

ESP electronics robot Additionally, important. cars, today's with protection connected regular of is also in increase highly

We focus on door, window, the expect applications growth for wins product automotive gear applications. mortar new seeing quarters. products seatbelt, also design in by to coming roof, protection seat, see a for our sensor tailgate, We're stick, in and strong with

market, infotainment, Additionally, charger, China, audio, management semiconductors. and continue smart DC achieved system, charger, such charging growth In see battery pump, being smart to we multi and MOSFET in motor, Significant well the strong, as water speakers. charging consumer significant power in as power as automotive for devices, as are the market horn, continue brushless automotive we applications, especially wins and wireless direct to where for quick growth wireless design in windows, be demand electric in such ADAS. applications, IoT see

we see interface devices. mobile growing IoT USB In Type for in addition, and C demand

chargers demand USB certification. such, the USB we for demand strong our expect and to have USB/PD TV is decoder customers' passed market As responding that regarding device devices multiport

panels TV, market; wearable, large as smart selection and of speakers and as notebook earphones, Our mobile, protection the panel in gaining monitor, devices portable, well momentum also are applications.

market. communication to next Turning

mobile see to products. power design discrete new continue wins market and management, for a in We charging,

for seeing USB using demand We strong are and smartphone setting. high-voltage X interface in charging mobile

solution, driven We number switch phones. demand an camera module have increasing wins MiFID secured of increasing design in by for our for mobile

portfolio. the smartphones, has of this consumer. concern DFM and in key actively MOSFET manufacturers this density footprint been remains and area both comprehensive Specifically, a for addressing with smart Diodes market power CFP

most continues Diodes protection of addition, battery release our In to portfolio recent our in with expand QX. MOSFET

along Lastly, in with AI, centers, PCs notebooks. see market, the learning, have for to computing momentum strong and we the continued server, deep growth and storage, data

including products, Packet new Switch, this and PCIe We for launched that are Buffers, PCIe ReDrivers have several Clock applications. Generators, suitable

seeing is major the devices growth since increasing our Type in this C engine also device. in interest USB market computing for protection well are as We a

on it's Our existing things for by all solution received connector, C to type protect been customers. well

design in to PC Operator? levels We product well quarter, with USB with again This With that, our business. Pericom quarter, anticipate we questions. by Type new a C expansion the are contact categories. now financial have switches underpinned success in in metrics [Indiscernible]. growth we across our summary, share With customer traction as record pleased and targets, continued well geographies are [Indiscernible], market open across the our floor markets, in achievement our as initiatives, third our new we of performance current products. once as docking reaching records very gain, continued expected as applications setting the notebook current for number wins DC end the beyond In

Operator

Instructions] Gerra [Operator the first you. Tristan from question of comes And from Baird. Thank line our

now line Your open. is

Tristan Gerra

Hi, like from of also good forward? margin in Could quantify guidance manufacturing strong, impact manufacturing QX And plans higher you trends that costs. [ph] those those mitigate afternoon. you costs? remain have costs demand Looks very industry in embedded higher the in pressure gross going terms seeing but some to perhaps your is the

Rick White

Tristan. Hang a second, on just

Keh-Shew Lu

mix third the due okay? one, efforts, in up, still points. our due a from for So, to quarter, material went the flat effort, guidance Tristan, to margin our able we if our costs some XX.X., of we gross actually but to the improvement number reduction margin basis even XX XX.X increase to see still cost gross you our increased

Tristan Gerra

Okay.

was something pretty the to is channel completed reduce we appreciate I Okay. in can inventory you've expected, offline. feedback. take And do that inventory Also you perhaps much QX? it that reduction further or mentioned expect

Rick White

can reduction about -- Diodes' distributor the comment the reduction talk and Tristan, inventory Emily inventory me inventory. So, about let then

the it from over So, We going you we to going and second in and million inventory. that it had we perspective, bit up was that an goods we significant perspective. reduced our little in a And reduce can quarter, a the it third a Every $XX finished reduction, as up just year. noted last internally we're it's I have not to from that additional reduce was the had the had as Diodes' plan it quarter. see to quarter, a but plan to gone inventory that inventory think had a be

Emily Yang

down the had in Tristan that inventory, you And for as our channel is and actually noticed QX we record QX. went a record inventory in POS

is So, key sustain I a keeping and growth. channel our to the healthy the support in think focus really inventory profile

So, closely. we monitor very this

it. I is healthy think inventory key to support the really

Keh-Shew Lu

down up, would like our quarter we their in the would very revenue to the can Typically, even second in worry you POP. but quarter, that but need [Indiscernible] it when up third in future, is they are reduce such went the we the put the and be more but or and second double in effort much side. don't We thinking the in, to actually see inventory about ordering worry inventory tried [Indiscernible] healthy is -- inventory strong, about keep actually that's revenue not we pushing quarter, inventory to POS the too going we have the because

Emily Yang

stays So, not in will inventory channel, our increase. to goal the is

Tristan Gerra

therefore, In of EMS to the but the there. silicon me. the sold is get potential a OEMs, I'm not how and for your one of exposure subject tariffs, to Diodes' trying potential and U.S. sold much business last just And tariffs, silicon sense to useful. products to very U.S. that's to Okay, context [Indiscernible] final just of shipped

Rick White

Yes, me let answer so that.

into those two all that from products now, tariffs. of the lists. we affected products China, be going States import are are So, the to by United tariff the ultimately Diodes, Right there

cost. it The list list $X.X tariff Xth. first the tariff on of and was July of effective was impact a think million quarter And smaller we per that was about

actually that think is been going put estimate, list and on based the there, we're another $X.X the we place that a is and but implementation that impact looked uncertain at yet, that be quarter. million the about we've date, there's to Now, but hasn't out in list about

you take plan on total we customers. those quarter, if it's two, per of to to our about but the pass charges these So, million tariff $X.X

Tristan Gerra

much. Very useful. great. Okay, Thanks so

Rick White

Okay.

Operator

our Mobley comes Thank Benchmark. next you. And question from Gary from

open. now is line Your

Gary Mobley

for supply have my restricted that been chain Hello in so, everyone. And revenue and even there if what were the Thanks if could taking question. any quarter about revenue. In -- your them the it your the or embedded weren’t quarter, quarter in second capacity-constraint? you speak for can constraints third outlook

Keh-Shew Lu

wafer mouth in degree is coming profit lot do I we give a to demand, and support The type a driving situation. best or really certain we really revenues nine have is forecast a affects no and degree, some shortage cannot you to a hand wafer product our if nine could and I certain for but certain that of able shortage but because order customer can that's -- shortage. MOSFET And are really customer have the lines. from do the most not shortage no cost expect MOSFET. -- us, the has of the We But of is to to start shortage Okay. fortunately, keep to shortage, our not just with limited the situation, the it but we

Gary Mobley

in you or call sitting Okay. your quarter you Typically, sequential of in today, matter sequentially. the see mid-single-digit the seasonality? neighborhood would on you based a revenue Would typical visibility decline fourth atypical as percent the fourth somewhere quarter, -- here is

Keh-Shew Lu

to now or I but third strong really see I above clear It's hoping, to the X% and don't third about than but quarter not far, very the know, it's know focused growth. typically on very yet, growth between X% and I'm so typical, Right okay. -- is Well, able above I'm a quarter quarter X% we quarter are better do okay. to second don't typical, guide X% third we

So, we see better than silicon cycles.

not in and in hope Now, is X% I right still clear, I fourth yet. silicon it's quarter, very out, but know now, better that, hoping okay, better we and the that but don't watch than

Gary Mobley

Very Thanks others ask Okay, questions. all I'll right. everyone. good. let

Operator

our Thank of of from Longbow next question line Research. comes Harrison the you. And Shawn

open. Your line is now

Shawn Harrison

Hi everybody results. the on congrats and

Keh-Shew Lu

you. Thank

Shawn Harrison

maybe negative question the how on first performance a the from for If to presented And with as well into as the the CapEx the gross to margin The off incremental of margin the is rolls has investment inventory be June of quarter. there drawdown much much gross prior delineate do way how impact that quarter? may September quarters?

Keh-Shew Lu

million I exact number, million, good finished the $XX if let's about you're the average, talking we've this that at, probably I look you average. $XX cannot give to the not if in if gone reduce high million the and $X.X assume think but past of TP to say, you've means, it, [Indiscernible] you you the XX% is

numbers. see last you inventory we even quarter, still Basically to I wanted year it's what the third quarter big third do a the the So, can in level is intend third more. of [Indiscernible] end end quarter, to And by reduce of third levels. quarter,

bit, we the percentage the to goal. as it you same own With to based inventory quarter that year our hoping means less. third third would this try in the be revenue a but -- we're much is best, level going -- the year our versus That's the grow last revenue, quarter, -- drive if this a quite compare on

Shawn Harrison

And both? Lu. you're as sites KFAB closer transferring the speak on where ramping follow-up, equipment I on existing well the into from Dr. the of the helpful that's and hoping of progresses capacity you of as at was as Okay, X-inch the could

Keh-Shew Lu

Okay.

Let's about inventory comment. talk

it go we'll as last less the XQ, -- second hoping somewhere know I X,XXX X,XXX Then XXX ramping time, then, think, yet continue continue only talking to wafer X,XXX of around of we third I end ramping we up X,XXX, are around the the not okay, X,XXX we're quarter ramp We fourth to month. but I'm far in up, the per in we wafers By are than up XQ, to quarter, about and continuing something said X,XXX hoping are month. as we ramping the per wafers wafers what, XQ, we to I We per wafer end are ramped somewhere to end don't about quarter, we up. but [Indiscernible] running month. of up, somewhere now

to it continue ramp up. So, we

Rick White

the from a been all we've SFABX. of been X-inch being up, has in equipment of but those has KFAB perspective, moved. qualified of the to everything KFAB equipment, It's process and So, moved ramping closed, all

basically finished. So, it's

Shawn Harrison

Okay. term quarter, the the limit know cash Then increased may. think -- be been in was XXXX down the a some I Chengdu position investments of could to equity may due in the last to -- exiting have it think I debt ability last, there if the year. I But back do are that pay given you'll you now? half net profitability, in your

Rick White

would will probably the that process. We to much the we're able us which the investment debt we make still four, in months. internally, five next that as would be preclude in in fund But to probably from Chengdu, paying We hope like. as down

You and million. operating results are the $XX can is good flow cash see

can So, least, in at we on a debt. continue fact, pretty continue down position should to, some pay good be to then, it

Shawn Harrison

you Thank perfect. much. Okay, very

Operator

Roesch question [Operator of comes Instructions] our Company. from from Edgar Thank the line & And Sidoti you. next

open. now is line Your

Edgar Roesch

Thanks congratulations. and

Emily Yang

you. Thank

Keh-Shew Lu

you. Thank

Rick White

you. Thank

Edgar Roesch

your to of the that a Did gains. I or from lot business? you that off, earlier a really strength So, center industrial of lead broaden in Europe, activity think, saw see that for is year, out still led the

Emily Yang

the North actually but We're the Emily. only well America, Europe, strength in is This as not in in industrial as seeing in across Board segment, also Asia.

is the across Board. this So,

overall we how our market end XX% achieve can that's percentage rate. So,

Edgar Roesch

me, got which would any home and can in fall? Okay, do And category remind have it. that exposure which to appliances you you

Emily Yang

Yes, do. we

appliances that be segment that the home think under consumer include we there. would I over

Keh-Shew Lu

tool. hand like Industrial

Emily Yang

Right.

be in would have consumer, [Indiscernible] lot that but also the but industrial of appliances, applications, So, home a we would be industrial. under that the

Keh-Shew Lu

Yes.

Edgar Roesch

range activity I ICBTs products. the recently you like have And your feel you year, and wondering side power you you an product or to launched some some area earlier augment a pretty where some then Thanks. on will management was higher-voltage portfolio? covered? I Okay. good products, think this of new do And is voltages Or that other you have

Emily Yang

I of we us there's but that area, across products are things product line, really a coverage working that continue targeting the new which you still areas. is good there's expand. overall from quite in for to And to one think higher-voltage we room have of aggressively When look product. at number the higher-voltage the develop products we're

Keh-Shew Lu

as started can Well, is the MOSFET. position into on and in the that get now see just it's past, ICBT we you [Indiscernible] we we are think not our focus our area, areas. to We

buy with all through super start the the we right of ICBT, So, that's but now very junction the parts, our for actions. and to eventually, resale beginning ICBT but gain

Edgar Roesch

Okay, me. for All I that it Thanks. that's right, think does helpful.

Emily Yang

you. Thank

Keh-Shew Lu

Thank you.

Operator

turn And remarks. our like session for to today. Lu that over concludes the call Dr. you. to Thank question-and-answer back I'd for closing

Keh-Shew Lu

now next an Thank on you our you business forward quarter. looking call. providing may for We're Operator, on to your participation update disconnect. today's

Operator

conference. gentlemen, This the and Everyone, and participation you day. have now great you thank Ladies program today's a for concludes disconnect. your in may

Diodes (DIOD) 7 Aug 182018 Q2 Earnings call transcript