DIOD - Earnings call transcript Q1 2020

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Operator

Good afternoon and welcome to Diodes Incorporated first quarter 2020 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, Monday, May 11, 2020.

to Group, call Investor like Sievers to now Shelton of Relations. would turn over the Leanne I Leanne, please go ahead.

Leanne Sievers

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

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

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

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

remarks of Safe prepared of additional may management forward-looking the questions. Therefore XXXX. claims contain uncertainties contained Reform is are the response your Private statements, forward-looking make and risks in Securities subject Act to the management's Litigation company addition, Harbor protection In for to statements and that forward-looking in statements which the

and results in with differ Forms Actual and today to risks a company's those and the more XX-Q. may detailed discussed the the of SEC, refer we filings discussion therefore from including you XX-K uncertainties

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

the press provide non-GAAP GAAP information terms. of reconciliations and press include during release certain in Additionally, are and additional this to financial company's release in definitions the conference discussions statements non-GAAP which management and Included GAAP items, details. will company's measures and of call

this throughout as company's management to income net release net attributable the during GAAP call, common statements stockholders press refer conference we income. to and Also

via be a days webcast section this Diodes' of www.diodes.com. you the entire at Investor call Relations will to those recording in For the listen available time, of for at unable to website XX

over Dr. turn President will Dr. I CEO, Diodes' to Lu, the and now, Lu. And call please go ahead. Keh-Shew

Keh-Shew Lu

you everyone safe Leanne. today. to hope our family and joining for are and I start you Welcome this want their saying economy by Thank unprecedented time that staying everyone I Diodes. in and for thank us

top and Our remains well-being our has associates. safety, taken to the priority health people. global measures Diodes of And protect proactive

and employees working Our are and partners. with remain successfully close customers out in remotely contact suppliers,

New our and the Our the first following quarter with results manufacturing delayed production line extended in Year Chinese included original expectation of holiday. our were start

our COVID-XX reflected results the in closure response Our to in late temporary of pandemic. the of further the global U.K. part wafer fabs March

U.K. in operations as returned Our also has resuming with production production, facility today. gradually to full China since our of full

further track environments. only revenue demand, long successfully typical XQ customer revenue XX% more manpower due first North and by only from revenue and than to declined quarter Combined limited than being below Europe to our through managing of results grew sequentially as XQ, America serve record seasonality slightly With Asia testament because our XX% challenging customer of recovery COVID-XX. manufacturing slower while to expected

Highlighting content of Asia. the our significant XX% in revenue to as a in design result quarter including and sequentially the customer was in year-over-year our of which revenue expanding automotive base, new increased end across grew continued a market, an growth gains win

server, Additionally, center notebook. storage, computing to due XXXX quarter the since our second in data our strong products used acquisition highest in the IC revenue high-end and products market demand for the Pericom end had

Our customers end close us benefit these to enabled demand applications. engagement from has with increasing for the equipment

We than to long-standing managing relationships control. within those currently on serve our are factors with customers as of market. strength the COVID-XX better well the carefully the slightly we that resulting to automotive midpoint, and given the diversification in us deliver increasing is and notable which quarter softness from and continue at and the second expect significant uncertainty our The business focus revenue margin first market quarter

Brett, update Lite-On call Approval Semiconductor. to on Commission Taiwan the end Before regulatory Commission provide would over acquisition of I Ministry authority, Investment at last Taiwan Investment of from brief the of we proposed a received to our like Since the Affairs. call, Trade from earnings and March, approval of Fair all turning Foreign required Economic the the our including

Swap processes half Date with accommodate to operational from date of XXXX of completed Outside XX, XX, Share second authorities communicated to previously need May the XXXX. and be the relevant We to in and Chinese included also December review for that XXXX the Agreement will extend expected consistent the associated the the schedule remains close

the With first Brett over now more our to our turn XXXX me to that, let results financial and guidance second quarter call detail. discuss quarter in

Brett Whitmire

afternoon and Thanks good everyone. Dr. Lu

the of review part results financial for our for a will to press the detailed of you of focus review comments my As on line change and our items well as comparisons. will more year-over-year today, each my the refer sequential as release I

million non-GAAP were of were and acquisition and expenses on $XX acquisition of of related to intangible million amortization This which related quarter the million XXXX or million XX.X% basis Gross of of was quarter $X.X the revenue. for first profit of XX.X% of quarter million, a $XXX,XXX of first quarter in XX% $XXX.X expenses as prior compares quarter million was fourth compared to expenses GAAP the operating or first revenue fourth asset $XXX.X or XXXX XX.X% non-GAAP revenue, the of operating to or of revenue million costs. for XXXX. revenue. the quarter for excluded Revenue of $XX.X compared $XX.X XXXX $XXX.X million $XX.X XX.X% or in the

for the before partially $XX,XXX Total in previous other $XXX,XXX income. first $XX the in million approximately the compared was of quarter quarter interest and to $XXX,XXX interest $X.X of million amounted and expense expense, other to quarter. by $XX.X non-controlling Income including taxes million interest XXXX income of offset

taxes. income to Turning

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

net in acquisition income XXXX. fourth first or compares of non-GAAP in $XX.X amortization net and of $X.XX $XX.X Non-GAAP quarter tax, was costs. $XXX,XXX which quarter adjusted adjusted related intangible the approximately share million of This million to acquisition the income diluted share $X.XX non-cash or costs asset net excluded, per of million diluted per $X.X related

to XX.X% revenue in of first prior or compared of for XX.X% quarter quarter. EBITDA $XX.X the million million was $XX.X the or revenue

We which income have adjusted net reconciliation net additional to our income of to EBITDA earnings included a in GAAP details. income provides release GAAP and net non-GAAP

Cash operations the million, expenditures. includes first for term of $XX.X quarter quarter, first which for $XX.X was flow the million long positive of from included the XXXX. quarter. $XX.X flow quarter Free cash capital Net first for the generated paydown million flow million $XX.X first the $XX.X in which million debt cash a was was in

long was investments plus current and balance Working first was equivalents million. sheet. quarter, At million. $XX.X cash cash to Turning the end million of portion approximately capital term totaled $XXX and term $XXX the short the including debt the

XXX a of decrease approximately decrease a $XX.X $XXX.X in of the million quarter and $X.X terms quarter. total million. the and to the XX days dollars increase million end million at first This Finished goods finished $X.X last quarter XXX quarter, inventory, million $X.X fourth increased materials. to work-in-process in at inventory reflects In was Total inventory in compared inventory compared goods in days raw flat to to XXXX. slightly decreased

Capital model X%. expenditures, cash basis, of for at X% to of on is million were which of target the first $XX.X X.X% quarter revenue end our or low the a XXXX

the at the XXXX, remain we target expect year For end our of low full to model.

our to turning Now outlook.

plus second approximately the revenue XXXX, minus quarter be million, expect For or X%. to we of $XXX

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

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

plus million. minus million anticipated note purchasing acquisitions previous non-GAAP be in are is and accounting to calculate included X%. not for rate after-tax $X.X quarter shares of XX.X adjustments expected second be the for Please these And Our are income Pericom that EPS to used XX%, tax to estimates,. approximately diluted or

With that said, I now Yang. turn the call to over Emily

Emily Yang

to March. the impact afternoon. Brett POS quarter, and recovery a decreased North by followed up sequentially. revenue In POS and strong in Coronavirus the of Asia first in the in first good manufacturing Asia inventory slightly in weeks quarter. than of of both Both you Europe America capacity end days was and in revenue expected January the Europe range to terms Thank to X.X% in down weeks. due February, in and was inventory increased XX targeted inventory days due our above recovery. quarter Distributor and America North XX decreased customer slower was

sales quarter. the global Looking in first at the

Asia XX% prior and declined the combined XX% respectively. revenue, XX% and over of to sequentially the total X% the to North quarter to Europe of XX% increased America represent revenue

market, communications XX% XX%, of XX%, of represented revenue, end computing revenue. terms consumer our In of f market end industrial also and XX% XX% automotive

the to greater Now revenue. automotive. accomplishment year-over-year market with Diodes even the decrease to sequentially growing noteworthy COVID-XX market, total details. share related markets in end backdrop the in Starting XX% review gain This pandemic. let both the to end of continue and this is the in more me and current of market

consistent design in few effort the is quarter. in direct significant focus growth result last win recently most in Our win design over new resulted this the of expansion our which new market Asia the and content during years, a

across application. various and design control, We lighting, and new automotive connected grade win TVS, telematic MOSFET, SASP, including products, in-motor infotainment across ADAS, driving also a secured of powertrain number including

in robust becoming more today's increase connected a important. protection cars, With is increasingly electronics rapid of highly ESD

high protection of applications. Our driving high reliability performance growing offers for in protection family products connected and ESD

again supported for range high-speed line protectors our and full CANbus, bus, includes driving. to saw portfolio Ethernet by connected wide Similar that quarter, a last spectrum once applications technology of the success with Our cover proprietary of Line a including Diodes SBR continued Data e-bikes.

sensor build position last backlight also in We to applications control, open the quarters our door proximity momentum broad continued detection. side and for including over business control, two

success had with also hands-free We system. for powertrain switches control calling interface sensors and and

lighting linear viable CMOS and used camera for automotive win sensing ADAS for in design tail Additionally, was secured for LDO applications. released drivers image new our newly LED applications

industrial MOS SGT the numerous of including diodes quarter traction power trench end DC low the industrial and Sales applications brushless technology better supporting MOSFET applications areas. in we LED motor to lighting using security like technology gain density systems. safe light In also and normal MOS printers grew operating products for our system, dimmer with switching loss for and continue key market, for Diodes'

to system being are our lighting ensure system of in broad pumps. drive rectifiers strong mechanical to range automation our demanding luminous heat SMTs, Similarly, used of intensity and systems, application halogen

high-speed capacitance Data Data applications, rapid platform IoT characteristics. and across the is loading while industrial, data important more adoption Line. With interface also type with voltage Line the of protection minimizing features for performance ultralow offers Diodes' multiple clamping becoming and lines. of ESD ESD leading ESD industrial platform best-in-class surge handling on This capacitance this protection

Also driver industrial activity aimed the strong. newly street at the for LED win design linear market, in was released our market lighting

saw for newly and AC box increasing Additionally, applications. product introduced LED we commercial demand and for offline our industrial dimmable

are current driver In backlight monitors family LED the product applications. in DC-DC protection LED and TV, the market, TV seeing LDO we OLED growth Xn our consumer display, and for product high

applications surge continue TV smart to in portable protection expand performance small-sized Our super high footprint protection earphone, devices, platform and products with innovative meters. like our wearables,

the maintain tablets our and gaming that in to leadership quarter, position deployed for we consoles. solutions applications consumer Type USB continued widely C including during Also are

devices, and Our low are traction in applications. mobile switches notebooks tablet also gaining

fire irrigation we have devices Zener design demand sensor smoke medical In and door and as well consumer applications cost like and home for seen like rectifier openers. garage addition, win as in diodes optimizer hall for home alarms,

in we power new and to including products PMOS RF save wins for NMOS power amplifiers, station telecommunications are base products for communications. communications, continues for booth XG power consumption. In drive voltage top-tier order to mobile protect enlarge to in in seeing power demand XG applications XG design brands modules reference XG for

to in with products miniature DFN leveraging and continue launch for challenging density also process We space new our requirements high this CSP MOS market. packaging density to power combined the meet

VBAT mobile key offering Zener to be call, Similarly, market significant our enable penetration charging smartphone and products VBUS, continue growth such dimension and profile of SBR phone functions, as increase Mobile area continues and space-saving. by Schottky protection a compact wireless conference audio, products. to for and to

low DFNXXXX mobile packet For supported leakage SASP, product, strong our diodes. demand a market, within our the switching tiny and handset variety including ultra diodes of for customer we

We also PowerDIXXX supported numerous recovery package as ultrafast our including rectifiers, rectifiers. as the fast and application for well in those SOTXXXF

the portfolio for achieve products in our our highest for result which, centers its increasing strong of traction in across products notebooks. high-end Pericom we quarter to and continue second data gain IC mentioned, a Dr. storage, as computing demand product Lastly, Lu market, as including revenue our servers,

Specifically, commercial Type protection we USB docking our C are and seeing general increasing for signal demand integrity product for and laptops high-end tablets, solutions stations. switching

generators meet Our Express newly buffers clock major that specification server of OEMs are clock and and center data family released X.X worldwide. designed PCI in

Additionally, SBR fans offer environment. operating power in high-temperature in be server to and demand Schottky DC rectifier in our where product continues servers cost Diodes for high performance

applications secured been as for higher also USB server center applications. Our new as power continues adaptors, ATX Ethernet, over delivery voltage Schottky technology rectifier breakdown power, win data Design applications in products such win and are such and power. Power to for wins power design

and first environment. our serve through manage a testament result second summary, Diodes' as to quarter ability guidance a quarter In to further challenging

This our years success automotive design in highlighted momentum the win past market. further the new initiative quarter also several over past the product and

well addition our the with of as as sales total products. IC approach Specifically, solution our Pericom

Operator? now we open the floor that, to questions. With would

Operator

[Operator Instructions].

comes question line the from of Mobley from Fargo. Gary first Our Wells

please. Your question,

Gary Mobley

a been moving linearity through can have be here we some there Thanks Any would the four everybody. American quarter are is end sort of things of second North months. of to afternoon the of the seen start markets, I and had about want there lot parts off Hope asking my staying fully? Good first of European recovery part you or I any in waiting and early navigate for to last the have the you you question. lot the of the open helpful. over taking well by as the quarter. appreciate more your during for bookings manufacturing quarter? color everybody here But has in fact a Or facilities give second safe.

Emily Yang

Hi Gary. is Emily. This Okay.

So me question. let address your

situation all starting So definitely and backlog situation second across region, and Asia. including April, change we week we of in the the beginning the April, seeing of backlog North from would strong Europe a say, Europe America and the see America. I and bookings for North definitely

America I for for and seeing resume, North we mentioned. and also and this still seeing This due and scheduled are North that a through But second Europe America like a and Asia would of that's the are we wait it's But strong say, exactly We of pretty is are in North carry is when, half but And definitely slowdown There overall, to is Europe momentum. we to see. than the have we definitely you to factory and really April the Europe, expected. there down whether some what May. some Asia, factory are still weaker the percentage see. America by strength shut

Gary Mobley

margin in gross is how an and how quarter guidance second the much to gross influenced impact efficiencies? margin that and Okay. the know, And well as of first curious that to I underutilization much your related of am How Brett, for much influencing quarter? COVID-XX

Brett Whitmire

biggest first thing Well, like quarter up was, Chinese had usually which us a time-off impacted you week. Year, that basically in more for the It is weeks. two New being ended the

that we And second recover our into that quarter. had see And think will I we was move demand we biggest so in as and the impact first the with quarter. consistent

Gary Mobley

Okay.

Keh-Shew Lu

another mainly one almost the they to work. to report started if XX% month, Chinese to other we to In than several they from report XX, of quarter, come several really get people men, people can is work, work, the Well, Year people when New quarantine people first the quarantine work, week, Chinese XX%, the XX%. years. delay to cannot just productions. return back, the the normal previous days Previous February about then this who the and to people, years New of probably return before Shanghai, back XX for return you probably get slow not to But year, to the they in they when first due work Year so the actually problem than

report after longer report to when to or So they return as February worker the suppose take XX, fully we possible, we Wuhan March when the they then have Hubei to start cannot of to people longer province, work. XX, other all back. February like first to people as in long in And have week, XX% only work. instead from It until cannot worker come take get work. we XX% be even Therefore, of to the almost could end

quarter. previous utilization our is years than than capacity much So are, say, PV is first the underloaded should therefore, the before. we of negative why low That's this before. several is our in due much than to our GP I And or worse worse

Gary Mobley

And pending not if me but I quite everything Lu, are Okay. Lite-On China. final you did Dr. Correct the for am approval I we catch from waiting said just wrong, about acquisition.

you at Or the second disclosed And end of close the the XXXX? calendar that your comment to so calendar expect very this you year year? half acquisition previously window of did of within

Brett Whitmire

What second is, the No. in we on expect during acquisition, XXXX of close Lite-On Gary. to half the

Keh-Shew Lu

date. date. And Yes. that, the They you means okay. two no typically, deal, have if bypass outside called Once outside

or we But date. The an it originally now how set in expect it's that's okay. to is not we May, date the now XQ, outside of closing we to XQ in we somewhere So now is said set we December. believe, end date, closing the

date. One that's different. is One is So closing date. outside

Gary Mobley

concede I Thank floor. you. Thank you will Okay. the All right. guys.

Operator

you. Thank

question Tristan from Baird. Gerra line of next Our from the comes

Your please. question,

Tristan Gerra

Good afternoon. Hi.

Keh-Shew Lu

Tristan. Hi

Tristan Gerra

Hi. you Can hear me?

Keh-Shew Lu

Yes.

Tristan Gerra

in is inventory POP the will the distributors you to be also levels? be QX? sale expectations QX? in implication distis? Do And What inventory see is there as actually above just for for reduce changing at what which Great. QX, expect POS you of And guided? inventory And deleveraging such levels the will how some point you Okay. your do if

Keh-Shew Lu

I will Emily POS let questions. Well, to you answer the

Emily Yang

Right.

I the think the big because we Europe. is QX we overall strength backlog booking Tristan, North The for the well both actually America that point is really question from view. a would have momentum So feel POS of as as good Asia see and and

soon definitely really will factory on seeing recovery how slow happen. customer end depends It are some We down. the

guidance. And so definitely that we I into think our already you we everything know included know

I And so, than see. actually you our peers, better guidance can is as our most think of

on we that's So that have. based knowledge the really

that continue and quarter kind definitely closely be few changed remain but that XX dynamically of to the XX weeks A the But and we days the our ideal of inventory monitor goal. to days goal. has our is the range continued last to time, of still still that lot situation

depends on of bit help a the as quick really delivery little well. it inventory faster higher short can us turn think I with time and the market and lead definitely recovery

that. of benefit seeing are we So

I guidance. hope QX a estimate it's in we will think, at to provide not and of kind QX. for start But recovery to the market seeing are general this in in we definitely position some difficult moment a

Tristan Gerra

continued Okay. but the has still China, stabilized I China? around automotive share sequentially? total Or actual be quarter-on-quarter? Great. your end in standpoint, think XX% which automotive is it experienced automotive, units declining your that automotive of content say in unit you have From market that given gains in dollar not then And market the exposure, a so you will may that

Emily Yang

Right.

market. unit declined, I think definitely overall That's only not right. in automotive the overall China,

as are seeing definitely well. that we So

our gained on results. started we focusing like share, design win automotive the some I few seeing effort past also and in demand content And mentioned, on years expansion. is market So really the

content thing. one thing, is So market other is our

sockets, on to and for the really to the So that creation, philosophy focus Diodes continue right. has is expand been demand continue expand the

a the point yes, the expansion targeting the are related product from well. content of and drive So right, been unit as focusing continues are new on, how technology I improvement like overall and in we demand seeing view, number not we of really also have really to said to is this area releasing Diodes you quite decrease that's

Keh-Shew Lu

we That's with automotive our So year-over-year win, really even engagement. to or and very quarter-over-quarter, are lot. revenue compare design that accomplish still, in due able quite we our But past still good peers customer weak grow. down the a to market slowed past because

Tristan Gerra

you. Thank Great.

Operator

Instructions]. [Operator

of next comes line Our Tianyan from from question Sidoti. Goellner

Your question, please.

Tianyan Goellner

you for Yes. questions. taking Thank my

clarification, first a one, well, bit on OpEx. the So on little color just

looks to as most bit So higher and revenue a it came percentage compared R&D little like also recent of quarters. SG&A the a

how future? of I near those in drove So was the should think What much And how am driven just Coronavirus? increase wondering else by the we increase? the

Keh-Shew Lu

I dropped fourth or And because in is think are SG&A third year XQ. X%, and last New in Europe, that year with X%. in so holidays. that's XQ, right, X% to X% we the the compared Chinese or quarter XQ and U.S. is our quarter R&D actually then actually you the flat last And holiday go and between Year. Christmas XQ almost And XQ

Asia but for So R&D expenditure Europe slowdown up. is U.S., and is SG&A

So we no they in And that but okay. that. the and slightly most XQ, restrictions travel, are traveling well above, Asia, home. we from of to them don't people encourage can working totally XQ and therefore to XQ down, people go expect to really because Europe, But U.S. from, they the is all don't working travel going more think we above it's

a and go the don't major but reduction expect some with expense So R&D expenses SG&A. operational this, we on down traveling

Tianyan Goellner

we Okay. color talk help you Emily, some to think me really, be about just the And some just color for understand, looks Thank you. we market the on is how would And would weak, like probably be but if industrial. it XXXX? know can I very should next industrial general can about appreciated. one just

Emily Yang

Okay.

like you segment industrial said, overall, actually So overall I down is a right, think segment. just

this continued focus increase demand driving past expansion, been in helping our revenue market it's Design win to we years, continue effort the creation, actually, automotive few to to the design win. on is content Overall So in similar down us but to the have is market. segment.

So within I think segments there is industrial. different definitely

same have to we focus same and really the application to expansion more on the actually that's continuing the content. cars on revenue improvement. really is where gain customer If key the we think the the I selling of

Tianyan Goellner

for it Okay. That's yes. Thank you. me,

Operator

you. hand Thank the back Lu the does for further I This like today's any would remarks. program question-and-answer session to Keh-Shew Dr. conclude of program. to

Keh-Shew Lu

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

Operator

you. conference. today's Everyone conclude and gentlemen, for day. thank have the great And This Thank in you, your program. does ladies a participation

Diodes (DIOD) 11 May 202020 Q1 Earnings call transcript