Earnings call transcript Q1 2023

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Operator

Good afternoon everyone, and welcome to Diodes Incorporated First Quarter 2023 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, May 9, 2023.

I would now like to turn the floor over to Leanne Sievers of Shelton Group Investor relations. begin. please Leanne,

Leanne Sievers

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

Keh-Shew Chairman, Joining Relations, are of Gurmeet of Officer, Worldwide Emily Whitmire; President Gary Lu; Marketing, President Chief and Dhaliwal. Chief and Senior us Vice Financial Diodes’ Investor CEO, Yang; today Sales Yu Brett Officer, Director Dr. Operating and

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

for results As ended revision and year the its March are XX, to XXXX. XX-K subject full unaudited such, fiscal company these until Form files its

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

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

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

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

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

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

Keh-Shew Lu

Welcome thank you, us today. Thank and for you everyone joining Leanne.

Our strength revenue were which in end was margin highlighted slowdown by seasonally communications results first our and the of gross economic lower quarter and the in guidance. continued at Despite the performance, markets. our computing consumer, high

remained and on our of over four In the product XX% initiatives above model and fact, quarters improvements. new target product mix has execution our underscoring gross margin past of XX%,

mix record and A to success of key improved together contributor our expanding into XX% has represented which markets, revenue in a the automotive quarter. product been total our industrial the

to which allowed factor New during Year reductions to despite healthy contributing also our COVID-related margins the is manufacturing maintain consistent have operational holiday our the cost margin Another efficiencies, and and improvement disruptions us the Chinese quarter.

introductions and as environment. favorable total during several diversified the not focused only geographies groups, factors Today, position across applications, supported past of profile as and and have approach, new team on solutions a design taken business fundamental we has but well These markets market manufacturing wins. in and economic well our slowdown, further sales extensive Over product business based sustainable sustain a a that execution even driving profitability positioning an and margin steps transform as well highly our are by cash flexible more and also our that to performance. continue economic a model is end significant consistent flow quarterly us higher as customer pipeline Diodes years, product on to

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

Brett Whitmire

to first the $XXX.X XXXX quarter quarter the million Thanks quarter in million, $XXX.X Revenue $XXX.X down XXXX. in X.X% and or million of of million for XX.X% Dr. Gross from prior decreasing XX.X% quarter, of in in revenue from revenue profit Lu and the the $XXX.X year first XXXX fourth million first prior compared of $XXX.X and X.X% million was good was $XXX.X of quarter. for or everyone. the quarter or afternoon, XX.X% the revenue

XX.X% or amortization related XX.X% were million operating related GAAP asset first and to quarter of expenses intangible million $X.X or were and or quarter $XXX.X XX.X% were retirement. or in of This revenue, for on of compares of of Non-GAAP XXXX a of million revenue, first to revenue the the the which in $XXX.X expenses $XXX.X of in the quarter of million operating $XXX acquisition quarter XX.X% revenue. XX.X% or prior basis operating non-GAAP excludes and $X.X revenue. officer million XXXX fourth million of GAAP expenses million $XXX.X expenses

and of approximately million million in amounted $X.X investments, loss. Total by the quarter foreign before million million to year $XX.X of for the in million million and offset expense interest $X.X partially income, of quarter was $XX.X interest previous $XXX,XXX $X.X non-controlling XXXX first other income, the and compared on in quarter. income other Income prior $X.X quarter, the a $XX.X unrealized gain million $X.X to interest currency taxes million consisting a in

to Turning taxes. income

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

was of million in quarter. XXXX $X.XX which asset LSC net diluted a diluted $X.X or prior to compares officer or $XX.X gain per excluded diluted first in first investment. in $X.XX or adjusted and net share to million $XX.X related tax intangible the million $X.XX in million and This $XX.X income million Non-GAAP an of $X.X per $X.X costs, per share quarter retirement related share, the million expenses quarter the acquisition

quarter both the based diluted earnings non-GAAP non-cash share EBITDA per GAAP $X.X share EPS share. XX.X% or the compensation for per $XXX.X first quarter revenue tax in to million increased XXXX $XXX.X net quarter. million million of Excluding of prior of first XX.X% expense $X.XX and would’ve the of compared of million revenue by quarter was in first adjusted and $XXX.X or the XX.X% revenue for or

to earnings in which was from cash flow non-GAAP was which $XX.X first included release for of provides net operations negative capital debt. Net Free included paydown million GAAP We net flow for $XX.X cash flow expenditures. million additional have quarter. income adjusted GAAP million to $XX.X generated the $XX income including net Cash $XX.X the reconciliation and income a total details. million, in a our was million, EBITDA, of

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

inventory, end approximately inventory quarter In days total terms of first XXX were of the at

the compared in XXX days quarter. decrease quarter, million million Total $X.X decrease million. dollars a a work to decrease inventory finished million in compared inventory days the XX million days raw goods days $XX.X in $XXX.X $XX.X a in approximately materials, inventory decreased and in of consisted quarter $X.X process. Total last quarter to to prior from finished were last days goods XX

the quarter on XX.X% revenue. million Capital basis $XX a expenditures cash first were of for were

within CapEx in target we quarter to due our First for the of our be would this our in than been Hsinchu full to wafer range was expansion JK XXXX. that model and the Park model target have Science year investment, strategic expect to in higher Without fab X% X% of Taiwan. we

Now turning to outlook. our

the minus in with slower second the markets. approximately consumer expected computing recovery be to than quarter communications million revenue plus For expect XXXX, or a we and X% $XXX

to and guiding XC inventory. are midpoint flat remain are markets sequentially We to the at strong. automotive channel industrial The expected reduce

strategy of and We also continued guiding margin gross plus are XX.X%, product GAAP or a X%. driving expect to mix be minus record improved our

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

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

for tax previous non-GAAP million. Not rate $X.X million is after estimates of minus these be is approximately and to expected income to used anticipated XX%, to acquisitions. second are plus calculate for tax included in amortization or XX.X the Our X%, EPS be shares quarter

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

Emily Yang

afternoon. the quarter, Chinese New XC and In the X.X% to revenue typical with first markets. good in you, due to Brett, related decreased a combined slowdown quarter-over-quarter Year Thank the seasonality holiday

in Europe, to revenue was to the China XX higher POS expected normal closely record weeks in XX than is in and recovery channel. inventory of due at a and mainly it’s first increased in more weeks increase range of sequentially slower defined than terms distributor our XC This quarter, market weeks. the Looking

of computing news good see and consumer started The we the to that signs in markets. is recovery

is quarter, faster guidance. some address continuous is to on expectation industrial plan Our which strategically second demand our channel seminar recovery remain our reflected second Automotive strong in channel in and to business. [ph] in decrease dynamic we and our the so quarter. market We can position inventory for are inventory of the believe that the expected

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

XX% industrial at revenue. of product XX%, of revenue. a consumer record XX%, was record was terms market also computing XX% our communication Diodes’ a and In end Automotive of XX% product

is the our reach a the This success fifth of seven underscored strategy quarters and above record ongoing industrial the which automotive, is gain. Our achievement combined consecutive our market contact market expansion point and revenue, XX% share percentage product end XXXX target. above XX% of

end let with Now in Starting details. our market. the automotive market me review end greater

unit control PCI X.X As focus crystal PCI applications. connected controllers, designed growth and clock telematics, product and infotainment, I multi-level year-over-year. of electric first generators, area are shifters mentioned, switches, switches, Express Express delivery XX% expanders clock In revenue a our XX% USB domain packet power buffers, driving, and record IO of revenue into reach representative control of our being oscillators, ADAS, USB units

TVS seeing the type safety, also and Diodes and Ideal tractions demand comfort as vehicles. ReDrivers buck to same in crossbar bipolar DC-DC and In strong We’re the Controllers, style increase transistors converters, adoption the USB application. gain for continue continues C switches end in for product to we LDOs,

solution Our a driver selling momentum. key to approach this is

USB charging our include deliver power the our in protocol been Additionally, solutions devices. for for the that TVS vehicle deliver and along decoder designs ReDrivers usbmuxd [ph], we power winning with have

wins diodes management products. transistors also design taillight, SBR junction drivers lighting number transistors an ideal thermal And headlight stoplight, of products, being monitor We’re system seeing in LDLs in Thin, LED our current systems. are wireless bipolar with several linear cluster chargers. designed our and controllers, increasing and regulator lower, and

power electric conventional which In hybrid the vehicles. trend, covers

and train SBR also for in protection support cargo products and towing applications product towing, and system. well seeing helps Our plug-in system switching are battery diode traction as management in as vehicles conventional [indiscernible] electronics applications hybrid as electric control such electric management battery drive in vehicles.

management new and We also [ph] number SBR compliance MPN designed of battery that a recently been transistors MOSFET into power system. has automotive introduced in

the XX focus compliance improvement. mix In quarter, first grows we applications In automotive year-over-year a a of percentage industrial revenue product. This also good product automotive is total reach on to demonstration record our market product various of revenue X% XX%. and our introduced a new at

sensors to and PC, for LDLs tools, systems, and systems. applications millimeters, strong converters, continue power buck breakers, such circuit as precision power demand control embedded see supplies, Our

are Additionally, high to harsh applications industrial environment. traction gaining voltage voltage switches our low the newly latch requiring released from

embedded in product SBR being also and over power ethernet widely applications. Our used

in the While our XX adapted applications. robotic LED channel being linear are drivers

new one units Our control the surfers storage in as energy interface gate and enlighting have for board. addressable ICs well power lighting digital driver sockets as for supply

Our diodes systems. also for high inverters transmission solar in residential performance have one switching transistors and green high energy voltage generation and desizing

for are that LED boards, test functional systems, switching traction controls, lightings, circle and circuits gaining printing control machines, applications and medical system. security press products systems in HVAC aviation our utilized diodes for we are Additionally, for increased imaging array including digital printed numerous assembly and

at our rated series X,XXX the Early volt. product at other we’ll to quarter, volt barrier product diodes. eight of a pleased in series XXX includes of set of Schottky release first first rated and XX That silicon carbide

first and high density AC-DC vehicle have carbide solar drivers, for address inverters, silicon as such power efficiency well center, applications supplies, also demand motor as data chargers. high converters, release electric MOSFET and We battery our the to as power telecom industrial

SBR across our of ReDrivers, for momentum USB a our Despite the product in continues in MOSFET, high including market, design desktops, and computing portfolio applications broad charging global detectors, speed C and include servers, type This in cards softness USB line wings TVS products. retimers, notebooks, data cards, graphic switches, protection. [ph] design the

of adaption gigabit docking content retimers applications. our image activities in directional and X.X second HDMI ReDriver, gaming printers for go XX consoles multifunction well active markers New X.X sensors as and continue per second design in as EMMC XX win without and dunk five per gigabit in cable

win applications In and PSRR in new market, IO the high communication switches, switches, XG continue designs USB to we for Schottky expanders, LDO’s audio products.

signal small product diodes communication field system gain growing traction industrial our of and in Additionally, the cyber rapid security.

new transistor gain cameras, in applications. and bipolar design While router IP GPON wings

USB wins adapt switches, rectifier in camera our consoles Lastly, the models. displays been power new and bridge we’ve securing of switches, gaming of market, their for limit current transistor in in devices. Manufacturers internet bipolar panels to continue new offering consumer adapters, power and design MOSFET sports TV

safety care, in Diodes and devices [indiscernible] system TVS power as We for product and also LED growth monitor monoxide and applications sync wearable, healthcare drivers, tracker personal continue SBR, carbon our to fire see the the well driver, and controllers, solid in health USB switching as delivery displays, sensors.

performance progress Contributing automotive improvement. increasing contact we mix share overall the gain our our made markets. science have industrial and summary, highlights quarter product market this to In in

margin Our operating success total and solution drive been key continue as sustainable growth performance. to our to a sales we approach factor efficiency have and

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

Operator

today Our Instructions] Cowen. question. your Matt ahead go Please [Operator question from with comes from Ramsay first

Matt Ramsay

afternoon Yes, thank everybody. much. Good you very

it’s I and first the the on of macro recovery lot a great predicated growth and think question gauge for moving momentum the for are to anybody’s environment of Asia how I’m when recovery across these I’m wise seeing, as sort do parts think obviously we the to the win a just design strength momentum for macro seeing quarters how it guess is content Thanks. secular China. you’re business? trying and wise guess so markets about year-over-year auto has relative happens, that and in mean, that trying you get few but of and consumer growth of selling, in here hear a industrial the for to the team, that your I and business I sort about the to there’s gauge levers But a the a return content there. my or potential the to next on guys lot expectations to sort the company. your company in of versus on

Emily Yang

is Yes, This hi, Matt. Emily.

Let your me address questions first.

market recovery slower expectation, I well we also consumer. it news I of than but assumption mentioned start the do is we communication to well. peak think good I in see say our area signs the part as our all the very seeing is recovery. overall right, computing QX our that’s start so this I mean also It’s usually some of of segments, as for like earlier, as and would

Matt Ramsay

that Got for you it. you thank very No, much. that Emily. Thank

be revenue coming done XX% bit better that. metrics, auto mixed As to than longer my company’s industrial those much and pasted getting, around much, them have think more of the up the or follow from the and some business question, of the far model one guys of financial are you term that some is metrics, shared of a I now you and older

would the think of sort business the XX% new just put XX%, margin team and out, in margin you to then really, the at great is sort be quarter down level business think of the mix profile guided we up a thinking now figure move I’m mix just business that, come XCs if up range, I of sequentially. this out just this strong that foreseeable if future. up the Thank really we’re fact about the point and should I’m that back the or for is should XX%, trying and we about thinks markets with margins. sort at trying the of if of you. in some that but figure this way to or the in about growth the margin XX%

Keh-Shew Lu

Okay.

the are inventory up therefore, channel second XC and answer, Now come a on start should be the half okay, our this that automotive second back then, situation, the the business year recovery are just still you and to very and decrease, as we XC half market, customer their said, we overall after inventory let building the of me number the but the as or some hoping strong one, of stronger. product see market industrial

versus in believe, first this general half than half half, half could That higher. more Okay? and is for quarter first be second second I second probably be, year, than more, somewhere, right? It should much XX-XX. In

down we probably go you more at look traditionally two next is of of I should the this will the a Then growth will because second it year, after be down, that, this think year. year, of you business, and at next if a and year, years half by since should point down then believe this won’t semiconductor semiconductor think, when year last XXXX semiconductor view. typical we’ll a already I year half than one [ph] growth end for business start business That’s go total for be so year be year

Emily Yang

Right.

Keh-Shew Lu

Okay.

Emily Yang

more add So mentioned. margin me let one maybe improvement just related you that to comment the

been if you and good total total combined these product will big for of a as as and revenue QX XX confident with focus mix drive we’ll our look for definitely for of QX result has result, margin efficiency as guidance well plus improvement So the as well that of is XX.X%. a continue are to product all three, continue approach our initiative at overall the manufacturing demonstration and auto we industrial improvement this right, the few sales diodes we years, solution the and to last

to be believe the the to will and the and So all direction. will improvement for If now will I margin change focus company we initiative continue. continue we this continue execute that think, focus, the

Keh-Shew Lu

back to margin things, growth. able XC we because their about, talking so the the the when in coming two industrial Yes, you my answer sustain market the is yes, up, improvement and when but even gross continue automotive

Okay.

are better a XC market market come much back. even they so in and And consumer or the

think I away commodity could Emily we mention are the from getting about

Emily Yang

Decommodity

Keh-Shew Lu

type product. commodity the of And

have, to are grow differentiation, you get we on are price type and commodity we we and high So competition NPC the commodity area, if stuff. or the have do intentionally XG XC in the and communication at, concentrate from we that look Therefore, premium, deep of the carefully center, more market product. grow compete have, IoT we away data our we the

is able excellence. improve have to gross our addition that been to margin the we So in continue way operational

Okay.

So volume on manufacturing volume the we are not focus and that to margin. the gross get to us

We are reduction more focused operational cost on mix plus efficiency improvement. product

Matt Ramsay

Thank the color, appreciate do you really I all Emily. in it. very much back queue. Lu I'll jump the Dr. you. for and Thank

Keh-Shew Lu

you. Thank

Operator

comes Wells Fargo your next from with question. Our ahead Mobley Gary from go Please question Securities.

Gary Mobley

afternoon wrong first the reduction I The comments normal the with arms to of a to expect Good for should guess, is my that Dr. that inventory Lu understanding $XX the in the distribution half my second wanted taking the year you're in half, better of on and get revenue. question. what, uptick to inventory distribution above weeks Thanks XX and seasonal if week September by presumably me going around worth Correct you're that impact there, indicates quarter. I'm million be than the I each everybody. normal the the XX in

is for the guide we June distribution sub talking about reduction that digestion So weeks or here seasonal the influencing how are many inventory, of quarter?

Emily Yang

Gary, let answer that question. me so Yes,

number our about in range detail define of we weeks, the but weeks than disclose it's as the my higher to really mention XX I that don't did normal. XX speech we So

some at POS deplete we same inventory. quarter the expect actually and will grow second is in channel the goal our time of channel the to want So

the market have number what weeks So based of so based that's the we we information on we down, believe so far. and on the will come see do

Keh-Shew Lu

in difficult And – the is is very very industrial, true-up XC at the just Or channel it inventory, Because which channel still most Asia. business, strong. due inventory okay. – look we to really is they're overall inventory to the overall channel The week. automotive,

deduce Okay. XC really And the we Brett sign intentionally inventory. to already quarter we guide channel is and see this the on

want industrial commodity and commodity still the as looking and especially the the don't of inventory, We that's Okay. channel say, those want area not do to our to want automotive, – area therefore, we compete we area strong very to debrief on the we that's intentionally we deduce channel that XC, but – inventory.

Gary Mobley

follow up The wanted that. your for I China. in operations ask you Thank to about Okay.

case you benefit During whether already closed-loop and Can there's many a you not, operating cost or whether any anticipated realized environment. so from that's on for were us you in the update that? COVID, an give years know, if still

Gary Yu

the in our actually fab China, is assembly no right and this Gary, now. matter No, the are operation Gary normal

Okay.

we why reduction operation that's the want for the say, So excellence. drive is a China to cost more okay, we operational will and

Okay.

this special So any moment. there's closed-loop no lockdown on at operation

Gary Mobley

Gary. you, Thank right. All

Gary Yu

No problem.

Operator

Benchmark. Our comes your from with Williams next question David question. go Please ahead from

David Williams

curious Hey, of moderate to see and you I'm maybe I thanks that we off execution is what automotive or improving, there, bit the in see that's what from would if impact? start about or automotive would of a leverage think down I much earlier, environment expect do and If on significant a this and and congrats – backdrop. XCs you'd questions guess how a my guess think that profile margin, be touched a about think on can control see but you come an margin little one saw I back navigating the to Do this you you strong? have challenging you kind margin so that. you the guess really maybe to less you of kind and you bit

Emily Yang

right, we Yes, represented There's growth. if XX% at so momentum with the general, percentage that overall XX% of end seeing record QX have in we automotive, strong actually a a of pretty look adjustment, the inventory right. the still little we at year-over-year bit growth, but actually actually

to continue share. gain we So market

good that we in are without in pipeline pretty shape. with confident opportunities So have place the pretty we are have in we we place,

portion we mentioned right. I the the premium the think With XCs, earlier, on within little a bit focus Lu XCs, really Dr.

commodity definitely chasing commodity the or business. deep are not We

the with on focusing the really storage, We higher timing applications, really of the block. power are the surfers, or the block, consumer. end it's whether XG IoT even the We the center, the block the data or on focus more

So focus the continue to years the the improvement to and improvement, mix we over actually confident come. with continue margin, product this the that we drive drive to over

Keh-Shew Lu

more people want the and mindset to slow to thing XX% the add Yes. is it. growth? thinking is CAGR be automotive start Because I maintain still a we but is to you almost business very continue are we XXXX, business One since year established able globe. down hard of that automotive your And going to XX years ago, focused,

So on we coming market the are really not growth.

We’re additional to coming market on the growth.

on We’re automotive Diodes are that still business that is business we and and data of as therefore, to total much business. coming module, for group. than data continue believe each because on able percent our automotive is module I our of that module growth a except increase focus do a revenue what And is value better automotive we'll

XX% and said, already Emily you Okay. XQ XXXX, in back go X%.

Okay.

in do on how we business is volume the is automotive that So coming drive growth. just not

coming the module growth. on We’re other

David Williams

the you're you inventory outperformed And Excellent Diodes still couple more you What the secondly, relative has around very then thank Any even you. or digestion you the last maybe it but for there even improved just channel last peers. the seeing from to so just quarters, managing Okay. that heard is same – you're you're growth why the quarters, color not where outperforming given the the that I color, maybe magnitude it has others? we've of seeing? dynamics and that. several over more Thank helpful think think. of do over the market be would of Is of

Emily Yang

Lu of Dr. mentioned right. Well, I think earlier, kind

on the markets, of each right. more expansion, the focus content really So actually we

to that's and also to So total purely also price the I a problem. solution the help customers We really increase talked but the the solving automotive sell sales area. just for us three strategically build their the about key, customers, relationship dodge with proposition choose the to then really And last price not to especially in actually years. two, value approach remember, the think we the up.

So has a So there’s strategy always efficiency a initiatives, I improvement spot product including mix lot sweet of course, right? long-term think overall. for manufacturing us the of

guidance So right? this initiatives QX good you actually a direction a we to way of I delivered think our or And again and that and is margin, I all that think different when on overall combine of percentage the then the the XX.X% overall, that’s with demonstration margin far, margin confident dollar the you focus demonstrating result improvement. so the of

Keh-Shew Lu

the it the from not is even revenues from coming spread, utilization. Yes, tell us, the coming pure just lowering, our are margin

big Our mix, focused portion coming product is what a is is which we are on.

Okay. one And product – product new new do we automotive, in just is automation we in XX this XQ. okay, the for every announced another in

and we manage So are improve you the can see can generated one the believe even We our initiative. of we product growth. is driving new by a that lot the revenue focus on continue new we product

Operator

question question. from ahead from next with your Gerra Tristan comes Our Please go Baird.

Tristan Gerra

be implementing to kind into call. QX on Is you this in be recovery? assume Hi. X% top of the on question reduction QX, Gary’s you’re revenue? will on this Thank without impact a in at channel the of inventories look you. I Maybe may Is fair earlier issue a with tweak normal be that in expected there’s quarter of that little it you in – And into to up seasonality, the in you the do China a the other what’s your And the that reduction one shipping line If about that inventory anticipation or do ballpark? that linger previously X% to delta QX? sequentially. finally, dynamic expect expect normally

Emily Yang

seeing right some computing is I consumer start news the we think Well, we in Tristan, and the in market. – did good mention especially signs of

news. that’s So a good

flash We channel that in the also also don’t right? So expected to inventory recovery the market plan inventory definitely China expectation, we costing slower we second settlement unfortunately than quarter, higher some deplete kind and our of but than in the mentioned a that channel XC in inventory we guidance that. improvement will or like in anything POS guidance weeks see the start depleting how the provide the you with are some. really the second quarter, But with you see channel the expectation of confident many that

what So much that’s can this pretty moment. share we at

Tristan Gerra

in the interested in you’ve from if And to think you mean less think you your analog? than whole but standpoint, further? Do for last capacity supply-demand constraint dynamic Obviously of then having ask particularly can you year. on at supply your supply-demand to notably industry capacity been gain I what that Okay. management, constrained? terms peers that guys weaken able competition, get as we just end trends a and your a market are them point still result view in in supply the that share of equilibrium whether some demand were And does question,

Keh-Shew Lu

Okay.

Firstly, are about grow. want have capacity enough if we when do to capacity, talking you

XC really can capacity is for use it just anything. And say, I cannot Okay.

we away XC or then we when are sometimes it’s already decided different. Okay. point Automotive industrial and it. it’s type from XC same, we market. most capacity, We the from Then And convert capacity to it. time convert from spend need graduate you our for commodity consumer a need commodity, of versus port, the to view, the but we effort getting capacity of strategic of auto

Okay.

will look we market, spend and and And need. so look money the at convert at the gradually to demand the the

Okay.

get especially is and XC marketing the the business, that to support just then try the and waiting away business not from focused focused business competition strategy, will with which higher convert automotive we back. we see strong, now on, China We supplier. come there for XC our area intentionally industrial. sitting we three support to get we We long-term and growth And are capacity very the

We are from that. getting away

XC improve can our back. even the continue gross come margin business see you So to will continue

Emily Yang

Yes.

I focus think it’s the view, is All There’s right, not moment. in everything at we the commodity, there’s is versus a supply shortage more mentioned this lot chasing not bit still I in point think dynamic. all, a after. pockets that a are useful from area of we still of little supplies, deep which of

this So I would moment, say dynamic. still not everything pretty at equal

Tristan Gerra

Great. Thank much. you very

Operator

question ahead comes Stein your go Please Truist William next from Our with Securities. from question.

William Stein

had you. Thank your about Great. management. I question a inventory

quarters of seems builds and at balance it have sheet, channel. in the I you’ve real it own I know have regard. sheet shipping to on last into seen conservatively, if exactly the in I recall anything inventory very to pretty the different a change again. built like you’ve significant be and Certainly little sounds can What I’m a And I’m approach, well there’s restraint seems great built managed a balance very done, certainly what most reason but couple in sheet diode taken hoping done semis quarter this think bit? last the approach a this was don’t it’s you. quarter you’ve You’ve for bit sure a is Thank in explain opposite, us on from to this a your many taken that but we’ve you channel. little balance but but others you

Emily Yang

think, Yes, quarter more China last of Also so I expectation inventory the of the market reason we we the recovery. building XC recovery. the start the segment expectation mentioned is channel

speed. recovery the overestimated we think I

getting well. in inventory quarter. still inventory channel and going second channel That’s position product a for happen. what just some the the channel inventory overall shelf, We the have speed. on believe good we to actually the strategically in matter actually a very is the the increased of recovery believe do really to also is the good Diodes reason the start seeing little we as this We actually decided quarter also deplete that’s It we So position.

still us right? having inventory actually we really market business, keep dynamic. well So once happens as the the the the the fast confident as recovery We the And that in shelf, dynamic support product will are better demand depleted. be believe on to term position also it channel the right mind

Keh-Shew Lu

your you to going talking your right? smoothly, that, additional, cost, be cost, look to deal intentionally I then And again one think building is because cost quite a in under actually loaded bit. if a reason your it we operation I way get inventory, of the at Emily what a hit another want then doing But gross if our too. are build inventory And to about, therefore, you consistently. way maintain is very internal margin okay, if best Yes. build it, But inventory, and we

up revenue the get down much. don’t You so

want and margin. don’t want and your manage get you okay? the depreciation don’t your margin. produce other to What, don’t you manufacturing gross number, the smoothly, your spent people, Because be have get spend carefully you You the to some Therefore, want you eating gross operation. much overtime intentionally we be so

gross time, accidents the gross guide because maintain this to I execution, quarter same a but and quarter get much are keep have manufacturing, why our have margin, very smooth freight operation That’s don’t we above the to able at revenue margin. so that four our way regular down still we and even we XX% the very margin or same smooth we up

that the So control of an the Okay? to the reduction accident the the cost such of in operational make very manufacturing the inventory balance, is smoothly, best from cost door this our you had output really cost cost. to

that You’ll we best cost try and to to do margin to balance gross get the that. continue

William Stein

is more acknowledge that a we in I on. more them. going helpful to those what less one I of I’ll follow is want two think a you’re appreciate calls end, but – two just you of and maybe know what’s one, three understand describe lot on it. been higher us shifting excellence, Yes. Both improve is it, into we’ve measure, that clarifying. there’ve to for drivers of of to about of about commodity. think could Historically, Operational been want in to and sure which I products unique, harder I improvement. margin focused the specialized margin trained sort however major leaning automotive mix this. the Emily mix, product market If then make industrial we’ve were the been well up But end very I drivers I think questions I more towards think deep with few

go what driver. you’re going trying perhaps maybe because interpreting the It what I matter Am sounds more bigger forward, excellence there’s is call a that over this on like less mix operational and continues mix to and is market room end the communicate product to will you’re saying? Or…

Keh-Shew Lu

over Yes. a record but four up the and we revenue, this the Yes, explain go maintain interpreting, down to able guidance quarter is year quarters of to are I’m through, can are even the the in plus and steady you gross you see last margin. trying very second

both. is mix that product operational is coming coming from so And and excellence

So the then maintain assume when and it like probably we now, That product from us, revenue continue we are going able XC we But to maintained. okay. we coming have going is okay, when or go the when start up, are improve operation. mix down, give better, is up say this

what what we are of to slow good. to that do tell already want to margin second Even this proof market to and we us the year, record. continue is start quarter how due for down. focus setting gross year, to thing second able is, we think good, two I so that’s maintain And margin, is doing. do and do down. And quarter, that gross continue we very the start can we first the we on that new year us to regardless right of are quarter the slow down, real even of and the this half improve up can this know Then that’s we first a It but

William Stein

you. Thank

Operator

And to I’d Dr. today’s Lu you. we’ll to that for turn ladies any like floor gentlemen, concluding and question-and-answer session. be the with over closing back remarks. Thank

Keh-Shew Lu

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

Operator

gentlemen. for evening. and have call presentation. great Please today’s conclude call. With and conference that, we’ll today’s Ladies joining you We thank a

Diodes (DIOD) 9 May 232023 Q1 Earnings call transcript