Achieves Record Financial Performance in 2018 with 15% Annual Revenue Growth and 22% Increase in Gross Profit Driven By Continued Market Share Gains and Improved Product Mix

PLANO, Texas — (BUSINESS WIRE) — February 13, 2019 — Please replace the release with the following corrected version due to multiple revisions in the Business Outlook section and Safe Harbor Statement.

Diodes Incorporated (Nasdaq: DIOD), a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2018.

Year 2018 Highlights

• Revenue grew to a record $1.2 billion, an increase of 15.2 percent over the $1.05 billion in 2017;
• GAAP gross profit was a record $435.3 million, a 22.0 percent increase from $356.8 million in 2017;
• GAAP gross margin improved 210 basis points to 35.9 percent from 33.8 percent in 2017;
• GAAP operating income increased 94.5 percent to a record $154.5 million, or 12.7 percent of revenue and 14.5 percent on a non-GAAP basis, which compared to 7.5 percent and 10.7 percent, respectively, in 2017;
• GAAP net income was a record $104.0 million, or $2.04 per diluted share, compared to a net loss of ($1.8) million, or ($0.04) per share, in 2017;
• Non-GAAP adjusted net income increased 75.4 percent to a record $121.3 million, or $2.38 per diluted share, compared to $69.1 million, or $1.37 per diluted share, in 2017;
• Excluding $15.0 million, net of tax, non-cash share-based compensation expense, both GAAP net income and non-GAAP adjusted net income would have increased by $0.29 per diluted share;
• EBITDA improved 55.3 percent to a record $261.1 million, or 21.5 percent of revenue, compared to $168.2 million, or 16.0 percent of revenue last year; and
• Achieved $185.6 million cash flow from operations and $98.1 million free cash flow, including $87.5 million of capital expenditures, or 7.2 percent of revenue. Net cash flow was a positive $36.6 million, which includes the pay down of $56.8 million of long-term debt.

Fourth Quarter Highlights

• Revenue was $314.4 million, an increase of 17.1 percent from the $268.4 million in the fourth quarter 2017 and a decrease of 2.0 percent from the $320.9 million in the third quarter 2018;
• GAAP gross profit was $114.2 million, compared to $96.4 million in the fourth quarter 2017 and $115.2 million in the third quarter 2018;
• GAAP gross profit margin was 36.3 percent, compared to 35.9 percent in the fourth quarter 2017 and 35.9 percent in the third quarter 2018;
• GAAP net income was $29.5 million, or $0.58 per diluted share, compared to a GAAP net loss of ($30.7) million, or ($0.62) per share, in the fourth quarter 2017 and GAAP net income of $30.9 million, or $0.61 per diluted share, in the third quarter 2018;
• Non-GAAP adjusted net income was $33.2 million, or $0.65 per diluted share, compared to $21.6 million, or $0.42 per diluted share, in the fourth quarter 2017 and $34.5 million, or $0.68 per diluted share, in the third quarter 2018;
• Excluding $3.8 million, net of tax, of non-cash share-based compensation expense, both GAAP and non-GAAP earnings per share would have increased by $0.07 per diluted share;
• EBITDA was $70.5 million, or 22.4 percent of revenue, compared to $47.0 million, or 17.5 percent of revenue, in the fourth quarter 2017 and $72.0 million, or 22.4 percent of revenue, in the third quarter 2018; and
• Achieved cash flow from operations of $61.6 million and $46.3 million free cash flow, including $15.3 million of capital expenditures. Net cash flow was a positive $90.7 million, which includes $47.4 million of additional long-term debt to fund a previously committed shareholder equity increase in the Company's Chengdu corporate entity.

Commenting on the results, Dr. Keh-Shew Lu, president and chief executive officer, stated, “2018 represented the best performing year in Diodes’ history with the achievement of record financials, 15% organic revenue growth driven by continued market share gains, and a 75% increase in non-GAAP profitability over the prior year. Our ongoing focus on the automotive and industrial sectors resulted in annual revenue growth from these target end markets of 38% and 29%, respectively, and a combined 35% of total revenue. Additionally, our Pericom business, excluding frequency control products, grew 24% year-over-year to almost 10% of revenue primarily as a result of our increased content in high-end PC, server, storage and datacenter markets.

“During 2018, we made significant progress on Diodes’ positioning at key customers and gaining share, not only within product lines but also across multiple applications at the same customer. In fact, some of our largest customers use Diodes content in nearly all products they offer, which provides greater diversification for Diodes as well as a deeper relationship with these customers. Our Pericom products have also provided us greater leverage, creating expanded opportunities in new end equipment and applications as well as additional cross-selling opportunities for our other product offerings.

“More recently, I am pleased to have announced the proposed acquisition of Texas Instruments’ wafer fabrication facility and operation located in Greenock, Scotland (“GFAB”), which aligns well with our long-term strategic objectives. This facility not only adds to Diodes existing global footprint, but also provides expanded wafer capacity to support our product growth, in particular for the automotive market.”

Dr. Lu concluded by stating, “Looking forward to 2019, we expect to continue gaining market share and achieve growth rates that exceed our served available markets, while prioritizing higher-margin opportunities across automotive, industrial and our Pericom products. Underpinning our anticipated growth and serving as a key theme for Diodes in the coming year is content gains across connected cars, high-end servers and storage, 5G and IoT. We are well positioned both operationally and financially to drive increasing profits and cash flow on incremental revenue growth and expect to once again reach new records across our business.”

Fourth Quarter 2018

Revenue for fourth quarter 2018 was $314.4 million, an increase of 17.1 percent from $268.4 million in fourth quarter 2017 and a decrease of 2.0 percent from $320.9 million in the third quarter 2018, which was better than typical seasonality.

GAAP gross profit for the fourth quarter 2018 was $114.2 million, or 36.3 percent of revenue, compared $96.4 million in the fourth quarter 2017, or 35.9 percent of revenue, and $115.2 million in the third quarter 2018, or 35.9 percent of revenue. The sequential increase in gross margin was primarily due to improved product mix as well as the continued 8-inch ramp at the Company’s Shanghai fabrication facility (SFAB).

GAAP operating expenses for fourth quarter 2018 were $70.3 million, or 22.4 percent of revenue, and $65.8 million, or 20.9 percent of revenue, on a non-GAAP basis, which excluded $4.5 million of amortization of acquisition-related intangible asset expenses. GAAP operating expenses in the fourth quarter 2017 were 73.9 million, or 27.5 percent of revenue, and in the third quarter 2018 were $69.4 million, or 21.6 percent of revenue.

Fourth quarter 2018 GAAP net income was $29.5 million, or $0.58 per diluted share, compared to a GAAP net loss of ($30.7) million, or ($0.62) per share, in fourth quarter 2017 and GAAP net income of $30.9 million, or $0.61 per diluted share, in third quarter 2018.

Fourth quarter 2018 non-GAAP adjusted net income was $33.2 million, or $0.65 per diluted share, which excluded, net of tax, $3.7 million of non-cash acquisition-related intangible asset amortization costs. This compares to non-GAAP adjusted net income of $21.6 million, or $0.42 per diluted share, in the fourth quarter 2017 and $34.5 million, or $0.68 per diluted share, in the third quarter 2018.

The following is an unaudited summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (in thousands, except per share data):