Diodes(US:DIOD)2021-11-02 16:00PART I – FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for the periods ended September 30, 2021, detail the company's financial position, operational results, and cash flows Condensed Consolidated Balance Sheets Total assets grew to $2.04 billion while total liabilities decreased to $824.8 million, resulting in a significant increase in total equity to $1.22 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,041,909 | $1,979,457 | | Total current assets | $1,063,883 | $1,023,987 | | Total Liabilities | $824,796 | $963,334 | | Total current liabilities | $444,625 | $509,762 | | Long-term debt, net | $218,000 | $288,179 | | Total Equity | $1,217,113 | $1,016,123 | Condensed Consolidated Statements of Operations The company achieved substantial year-over-year growth in net sales and net income for both the third quarter and the first nine months of 2021 Q3 Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net sales | $471,422 | $309,459 | | Gross profit | $181,231 | $111,090 | | Income from operations | $77,247 | $37,855 | | Net income attributable to common stockholders | $68,424 | $27,152 | | Diluted EPS | $1.50 | $0.51 | Nine Months Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net sales | $1,324,991 | $878,845 | | Gross profit | $479,669 | $308,424 | | Income from operations | $189,994 | $94,576 | | Net income attributable to common stockholders | $163,250 | $68,353 | | Diluted EPS | $3.59 | $1.30 | Condensed Consolidated Statements of Cash Flows For the first nine months of 2021, operating cash flow more than doubled, while significant cash was used for debt repayment and increased capital expenditures Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from Operating Activities | $260,989 | $126,435 | | Net cash used in Investing Activities | ($89,299) | ($51,776) | | Net cash (used in) from Financing Activities | ($210,259) | $294,680 | | Change in cash and cash equivalents | ($35,691) | $380,327 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, sales breakdowns by geography, debt structure, and the significant acquisition of Lite-On Semiconductor (LSC) - For the nine months ended September 30, 2021, net sales to Asia were $1.06 billion, representing approximately 80% of total net sales, while distributor sales accounted for $867.0 million, or about 65% of total net sales53 - The company closed its acquisition of Lite-On Semiconductor Corporation (LSC) on November 30, 2020, for a total consideration of $154.0 million after adjustments to expand its portfolio of 'green' power-related semiconductor devices868788 - In March 2021, the company entered an agreement to sell one of its manufacturing subsidiaries in China for approximately $18.0 million, with the related assets and liabilities classified as held-for-sale8384 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant financial growth in 2021, driven by organic expansion and the LSC acquisition, with strong performance in automotive and computing markets Results of Operations Q3 2021 net sales grew 52.3% year-over-year, fueled by both organic growth and the LSC acquisition, with gross margin improving to 38.4% Q3 2021 vs Q3 2020 Performance (in millions) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $471.4 | $309.5 | 52.3% | | Gross profit | $181.2 | $111.1 | 63.1% | | Gross Margin | 38.4% | 35.9% | +250 bps | - The 52.3% increase in Q3 2021 net sales was driven by 27.8% organic growth from the legacy business and 24.6% related to the LSC acquisition110 Revenue by End-User Market (Q3) | End-User Market | Q3 2021 % of Revenue | Q3 2020 % of Revenue | | :--- | :--- | :--- | | Industrial | 24% | 22% | | Communications | 16% | 21% | | Consumer | 18% | 27% | | Computing | 30% | 19% | | Automotive | 12% | 11% | Financial Condition, Liquidity and Capital Resources Working capital increased to $619.3 million, with liquidity from operations and credit facilities deemed sufficient to cover needs for at least the next 12 months - Working capital increased to $619.3 million at September 30, 2021, from $514.2 million at December 31, 2020133 - Capital expenditures for the nine months ended September 30, 2021, were $100.3 million, compared to $47.5 million for the same period in 2020134 - As of September 30, 2021, foreign subsidiaries held approximately $257.7 million of cash, cash equivalents, and investments135 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks were reported from those disclosed in the 2020 Annual Report on Form 10-K - There have been no material changes to the company's market risks from those disclosed in the 2020 Form 10-K195 Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective as of September 30, 2021, with no material changes to internal controls during Q3 - The CEO and CFO concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective196 - There were no changes in internal control over financial reporting during the third quarter of 2021 that materially affected, or are reasonably likely to materially affect, these controls198 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not party to any material pending litigation and expects no material adverse effect from ordinary-course legal proceedings - The Company is not currently a party to any pending litigation that it considers material200 Item 1A. Risk Factors No material changes to risk factors were reported, except for a new risk related to potential impacts from electricity rationing in China - A new risk factor has been added related to electricity rationing in China, which could lead to higher electricity prices and potential curtailments affecting the company's manufacturing facilities202203204 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None206 Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and Inline XBRL documents - Exhibits filed include certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL data files (Exhibits 101 and 104)214215216