Note: Included in GAAP and non-GAAP adjusted net income was approximately $4.8 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted diluted earnings per share would have improved by $0.11 per share.

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE

The Company’s financial statements present net income and earnings per share that are calculated using accounting principles generally accepted in the United States (“GAAP”). The Company’s management makes adjustments to the GAAP measures that it feels are necessary to allow investors and other readers of the Company’s financial releases to view the Company’s operating results as viewed by the Company’s management, board of directors and research analysts in the semiconductor industry. These non-GAAP measures are not prepared in accordance with, and should not be considered alternatives or necessarily superior to, GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names. The explanation of the adjustments made in the table above, are set forth below:

Detail of non-GAAP adjustments

Amortization of acquisition-related intangible assets – The Company excluded this item, including amortization of developed technologies and customer relationships. The fair value of the acquisition-related intangible assets is amortized using straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful life of the applicable assets. The Company believes that exclusion of this item is appropriate because a significant portion of the purchase price for its acquisitions was allocated to the intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held businesses. In addition, the Company excluded this item because there is significant variability and unpredictability among companies with respect to this expense.

Acquisition related costs – The Company excluded expenses associated with the acquisition of LITE-ON Semiconductor, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed as they were incurred and as services were received, and in which the corresponding tax adjustments were made for the non-deductible portions of these expenses. The Company believes the exclusion of the acquisition related costs provides investors with a more accurate reflection of costs likely to be incurred in the absence of an unusual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.

Non-cash mark-to-market investment adjustments – The Company excluded market to market adjustments on various equity related investments, including certain LSC equity investments. The Company believes this is not reflective of the ongoing operations and exclusion of this provides investors an enhanced view of the Company’s operating results.

Restructuring costs – The Company has recorded restructuring charges related to the shutdown and relocation of one of our assembly and test facilities located in Chengdu, China, restructuring at other China sites, and restructuring of select European entities. These restructuring charges are excluded from management’s assessment of the Company’s operating performance. The Company believes the exclusion of the restructuring charges provides investors an enhanced view of the cost structure of the Company’s operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the first quarter of 2022 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the first quarter of 2022, FCF was $33.8 million, which represents the cash and cash equivalents that we are able to generate after taking into account cash outlays required to maintain or expand property, plant and equipment. FCF is important because it allows us to pursue opportunities to develop new products, make acquisitions and reduce debt.

CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA

EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties, such as financial institutions in extending credit, in evaluating companies in our industry and provides further clarity on our profitability. In addition, management uses EBITDA, along with other GAAP and non-GAAP measures, in evaluating our operating performance compared to that of other companies in our industry. The calculation of EBITDA generally eliminates the effects of financing, operating in different income tax jurisdictions, and accounting effects of capital spending, including the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization expense. EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income from operations and net income, each as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. For example, our EBITDA takes into account all net interest expense, income tax provision, depreciation and amortization without taking into account any amounts attributable to noncontrolling interest. Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.

The following table provides a reconciliation of net income to EBITDA (in thousands, unaudited):

		Three Months Ended
		March 31
		2022			2021
Net income (per-GAAP)		$	72,691		$	39,452
Plus:
Interest expense, net			288			2,096
Income tax provision			16,646			9,434
Depreciation and amortization			28,594			30,675
EBITDA (non-GAAP)		$	118,219		$	81,657

DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
		March 31,				December 31,
		2022				2021
		(unaudited)				(audited)
Assets
Current assets:
Cash and cash equivalents		$	303,295			$	363,599
Restricted Cash			2,710				3,219
Short-term investments			9,241				6,542
Accounts receivable, net of allowances of $5,394 and $4,324 at March 31, 2022 and December 31, 2021, respectively			362,035				358,496
Inventories			370,045				348,622
Prepaid expenses and other			104,763				107,194
Total current assets			1,152,089				1,187,672
Property, plant and equipment, net			589,915				582,079
Deferred income tax			21,755				21,256
Goodwill			147,968				149,890
Intangible assets, net			90,451				94,550
Other long-term assets			163,284				159,048
Total assets		$	2,165,462			$	2,194,495
Liabilities
Current liabilities:
Line of credit		$	28,031			$	18,068
Accounts payable			211,365				221,254
Accrued liabilities			167,392				184,649
Income tax payable			45,603				29,682
Current portion of long-term debt			11,102				17,381
Total current liabilities			463,493				471,034
Long-term debt, net of current portion			192,538				265,574
Deferred tax liabilities			32,432				32,230
Other long-term liabilities			116,980				122,933
Total liabilities			805,443				891,771
Commitments and contingencies
Stockholders' equity
Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no shares issued or outstanding			-				-
Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 45,231,793 and 45,017,774, issued and outstanding at March 31, 2022 and December 31, 2021, respectively			36,338				36,195
Additional paid-in capital			470,363				471,649
Retained earnings			1,189,500				1,116,809
Treasury stock, at cost, 9,272,513 shares held at March 31, 2022 and 9,272,513 shares held at December 31, 2021			(336,894	)			(336,894	)
Accumulated other comprehensive loss			(61,804	)			(50,517	)
Total stockholders' equity			1,297,503				1,237,242
Noncontrolling interest			62,516				65,482
Total equity			1,360,019				1,302,724
Total liabilities and stockholders' equity		$	2,165,462			$	2,194,495

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