UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

Or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 002-25577

DIODES INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	95-2039518
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

4949 Hedgcoxe Road, Suite 200, Plano, Texas	75024
(Address of principal executive offices)	(Zip code)

(972) 987-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.66 2/3	DIOD	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of August 4, 2023 was 45,938,786.

Table of Contents

	Page
Part I – Financial Information
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	29
Part II – Other Information
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. Mine Safety Disclosures	30
Item 5. Other Information	30
Item 6. Exhibits	31
Signatures	32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30,			December 31,
	2023			2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	321,616		$	336,732
Restricted cash		3,120			4,367
Short-term investments		9,042			7,059
Accounts receivable, net of allowances of $5,634 and $5,852 at   June 30, 2023 and December 31, 2022, respectively		393,132			369,233
Inventories		325,733			360,281
Prepaid expenses and other		107,746			83,999
Total current assets		1,160,389			1,161,671
Property, plant and equipment, net		748,115			736,730
Deferred income tax		35,354			35,308
Goodwill		146,138			144,757
Intangible assets, net		71,496			79,137
Other long-term assets		179,579			130,709
Total assets	$	2,341,071		$	2,288,312
Liabilities
Current liabilities:
Lines of credit	$	33,729		$	36,280
Accounts payable		152,192			160,442
Accrued liabilities and other		198,882			214,433
Income tax payable		27,004			19,682
Current portion of long-term debt		1,149			1,693
Total current liabilities		412,956			432,530
Long-term debt, net of current portion		54,575			147,470
Deferred tax liabilities		13,550			12,903
Unrecognized tax benefits		31,594			31,594
Other long-term liabilities		97,818			80,896
Total liabilities		610,493			705,393
Commitments and contingencies (See Note 9)
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; and 45,748,940 shares and 45,469,722 shares issued and   outstanding at June 30, 2023 and December 31, 2022, respectively		36,690			36,503
Additional paid-in capital		501,302			494,773
Retained earnings		1,601,262			1,448,092
Treasury stock, at cost 9,283,481 shares and 9,281,581 shares at June 30, 2023 and   December 31, 2022, respectively		(337,670	)		(337,490	)
Accumulated other comprehensive loss		(139,104	)		(128,233	)
Total stockholders' equity		1,662,480			1,513,645
Noncontrolling interest		68,098			69,274
Total equity		1,730,578			1,582,919
Total liabilities and stockholders' equity	$	2,341,071		$	2,288,312
The accompanying notes are an integral part of these condensed consolidated financial statements.

-3-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net sales	$	467,152		$	500,972		$	934,393		$	983,095
Cost of goods sold		271,776			294,446			544,563			579,872
Gross profit		195,376			206,526			389,830			403,223
Operating expenses
Selling, general and administrative		67,500			69,067			138,491			140,510
Research and development		34,611			30,762			67,843			59,439
Amortization of acquisition related intangible assets		3,816			3,980			7,668			7,842
Other operating income		(118	)		(3,521	)		(166	)		(3,864	)
Total operating expense		105,809			100,288			213,836			203,927
Income from operations		89,567			106,238			175,994			199,296
Other income (expense)
Interest income		2,224			861			3,996			1,687
Interest expense		(2,189	)		(1,590	)		(4,321	)		(2,704	)
Foreign currency (loss) gain, net		(2,217	)		1,819			(4,110	)		3,540
Unrealized gain (loss) on investments		12,172			(7,764	)		16,061			(13,312	)
Other income		1,398			1,647			1,928			3,523
Total other income (expense)		11,388			(5,027	)		13,554			(7,266	)
Income before income taxes and noncontrolling interest		100,955			101,211			189,548			192,030
Income tax provision		17,224			18,461			33,840			35,107
Net income		83,731			82,750			155,708			156,923
Less net income attributable to noncontrolling interest		(1,711	)		(2,595	)		(2,538	)		(4,077	)
Net income attributable to common stockholders	$	82,020		$	80,155		$	153,170		$	152,846
Earnings per share attributable to common stockholders:
Basic	$	1.79		$	1.77		$	3.35		$	3.38
Diluted	$	1.77		$	1.75		$	3.31		$	3.33
Number of shares used in earnings per share computation:
Basic		45,733			45,265			45,667			45,185
Diluted		46,243			45,841			46,263			45,913

The accompanying notes are an integral part of these condensed consolidated financial statements.

-4-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net income	$	83,731		$	82,750		$	155,708		$	156,923
Unrealized (loss) gain on defined benefit plan, net of tax		(627	)		7,133			2,079			5,600
Unrealized gain (loss) on derivative instruments, net of tax		1,663			2,063			(1,679	)		4,894
Unrealized foreign currency loss, net of tax		(22,594	)		(41,366	)		(11,271	)		(53,951	)
Comprehensive income		62,173			50,580			144,837			113,466
Less: Comprehensive income attributable to noncontrolling interest		(1,711	)		(2,595	)		(2,538	)		(4,077	)
Total comprehensive income attributable to common stockholders	$	60,462		$	47,985		$	142,299		$	109,389

The accompanying notes are an integral part of these condensed consolidated financial statements.

-5-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common stock				Treasury stock						Additional  paid-in			Retained		Accumulated  other comprehensive			Total Diodes  Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, March 31, 2023		54,988	$	36,661		(9,282	)	$	(337,490	)	$	494,598		$	1,519,242	$	(117,546	)	$	1,595,465		$	70,208		$	1,665,673
Total comprehensive income (loss)		-		-		-			-			-			82,020		(21,558	)		60,462			1,711			62,173
Net changes in noncontrolling interest		-		-		-			-			-			-		-			-			(3,821	)		(3,821	)
Common stock issued for share-based plans		44		29		-			-			(29	)		-		-			-			-			-
Share-based compensation		-		-		-			-			7,531			-		-			7,531			-			7,531
Deferred compensation plan		-		-		(1	)		(180	)		180			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(978	)		-		-			(978	)		-			(978	)
Balance, June 30, 2023		55,032	$	36,690		(9,283	)	$	(337,670	)	$	501,302		$	1,601,262	$	(139,104	)	$	1,662,480		$	68,098		$	1,730,578
	Common stock				Treasury stock						Additional  paid-in			Retained		Accumulated  other comprehensive			Total Diodes  Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, December 31, 2022		54,751	$	36,503		(9,282	)	$	(337,490	)	$	494,773		$	1,448,092	$	(128,233	)	$	1,513,645		$	69,274		$	1,582,919
Total comprehensive income (loss)		-		-		-			-			-			153,170		(10,871	)		142,299			2,538			144,837
Net changes in noncontrolling interest		-		-		-			-			-			-		-			-			(3,714	)		(3,714	)
Common stock issued for share-based plans		281		187		-			-			(187	)		-