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 September 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 November 2, 2023 was 45,938,233.

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	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
Part II – Other Information
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults Upon Senior Securities	31
Item 4. Mine Safety Disclosures	31
Item 5. Other Information	31
Item 6. Exhibits	32
Signatures	33

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	September 30,			December 31,
	2023			2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	295,045		$	336,732
Restricted cash		2,592			4,367
Short-term investments		9,872			7,059
Accounts receivable, net of allowances of $4,686 and $5,852 at   September 30, 2023 and December 31, 2022, respectively		414,188			369,233
Inventories		343,694			360,281
Prepaid expenses and other		117,191			83,999
Total current assets		1,182,582			1,161,671
Property, plant and equipment, net		736,126			736,730
Deferred income tax		35,788			35,308
Goodwill		143,745			144,757
Intangible assets, net		67,445			79,137
Other long-term assets		174,536			130,709
Total assets	$	2,340,222		$	2,288,312
Liabilities
Current liabilities:
Lines of credit	$	29,429		$	36,280
Accounts payable		161,079			160,442
Accrued liabilities and other		193,383			214,433
Income tax payable		29,892			19,682
Current portion of long-term debt		1,124			1,693
Total current liabilities		414,907			432,530
Long-term debt, net of current portion		22,645			147,470
Deferred tax liabilities		12,982			12,903
Unrecognized tax benefits		31,595			31,594
Other long-term liabilities		99,210			80,896
Total liabilities		581,339			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 45,936,090 shares and 45,469,722 shares issued and   outstanding at September 30, 2023 and December 31, 2022, respectively		36,817			36,503
Additional paid-in capital		502,482			494,773
Retained earnings		1,649,982			1,448,092
Treasury stock, at cost 9,286,862 shares and 9,281,581 shares at September 30, 2023 and   December 31, 2022, respectively		(337,986	)		(337,490	)
Accumulated other comprehensive loss		(161,633	)		(128,233	)
Total stockholders' equity		1,689,662			1,513,645
Noncontrolling interest		69,221			69,274
Total equity		1,758,883			1,582,919
Total liabilities and stockholders' equity	$	2,340,222		$	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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net sales	$	404,647		$	521,273		$	1,339,040		$	1,504,368
Cost of goods sold		248,771			303,455			793,334			883,327
Gross profit		155,876			217,818			545,706			621,041
Operating expenses
Selling, general and administrative		62,964			68,545			201,455			209,055
Research and development		34,068			32,787			101,911			92,226
Amortization of acquisition related intangible assets		3,808			3,938			11,476			11,780
Restructuring cost		2,566			-			2,566			-
Other operating (income) expense		(1,404	)		102			(1,570	)		(3,762	)
Total operating expense		102,002			105,372			315,838			309,299
Income from operations		53,874			112,446			229,868			311,742
Other income (expense)
Interest income		4,507			862			8,503			2,549
Interest expense		(898	)		(2,724	)		(5,219	)		(5,428	)
Foreign currency gain (loss), net		1,314			(1,008	)		(2,796	)		2,532
Unrealized gain (loss) on investments		401			(2,648	)		16,462			(15,960	)
Other income		1,309			2,218			3,237			5,741
Total other income (expense)		6,633			(3,300	)		20,187			(10,566	)
Income before income taxes and noncontrolling interest		60,507			109,146			250,055			301,176
Income tax provision		10,674			20,172			44,514			55,279
Net income		49,833			88,974			205,541			245,897
Less net income attributable to noncontrolling interest		(1,113	)		(2,588	)		(3,651	)		(6,665	)
Net income attributable to common stockholders	$	48,720		$	86,386		$	201,890		$	239,232
Earnings per share attributable to common stockholders:
Basic	$	1.06		$	1.90		$	4.41		$	5.28
Diluted	$	1.05		$	1.88		$	4.36		$	5.21
Number of shares used in earnings per share computation:
Basic		45,936			45,475			45,758			45,283
Diluted		46,320			46,014			46,296			45,938

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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net income	$	49,833		$	88,974		$	205,541		$	245,897
Unrealized (loss) gain on defined benefit plan, net of tax		(4,009	)		(391	)		(1,930	)		5,209
Unrealized (loss) gain on derivative instruments, net of tax		(2,464	)		4,939			(4,143	)		9,833
Unrealized foreign currency loss, net of tax		(16,056	)		(55,054	)		(27,327	)		(109,005	)
Comprehensive income		27,304			38,468			172,141			151,934
Less: Comprehensive income attributable to noncontrolling interest		(1,113	)		(2,588	)		(3,651	)		(6,665	)
Total comprehensive income attributable to common stockholders	$	26,191		$	35,880		$	168,490		$	145,269

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, 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
Total comprehensive income (loss)		-		-		-			-			-			48,720		(22,529	)		26,191			1,113			27,304
Net changes in noncontrolling interest		-		-		-			-			-			-		-			-			10			10
Common stock issued for share-based plans		191		127		-			-			(127	)		-		-			-			-			-
Share-based compensation		-		-		-			-			5,928			-		-			5,928			-			5,928
Deferred compensation plan		-		-		(4	)		(316	)		316			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(4,937	)		-		-			(4,937	)		-			(4,937	)
Balance, September 30, 2023		55,223	$	36,817		(9,287	)	$	(337,986	)	$	502,482		$	1,649,982	$	(161,633	)	$	1,689,662		$	69,221		$	1,758,883
	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)		-		-		-			-			-			201,890		(33,400	)		168,490			3,651			172,141
Net changes in noncontrolling interest		-		-		-			-			-			-		-			-			(3,704	)		(3,704	)
Common stock issued for share-based plans		472		314		-			-			(314	)		-		-			-			-			-
Share-based compensation		-		-		-			-			23,111			-		-			23,111			-			23,111
Deferred compensation plan		-		-		(5	)		(496	)		496			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(15,584	)		-		-			(15,584	)		-			(15,584	)
Balance, September 30, 2023		55,223	$	36,817		(9,287	)	$	(337,986	)	$	502,482		$	1,649,982	$	(161,633	)	$	1,689,662		$	69,221		$	1,758,883

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

-6-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONT.)

(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, June 30, 2022		54,562	$