Diodes CEO Discusses Q3 2010 Results - Earnings Call Transcript
Diodes Inc. (
)
Q3 2010 Earnings Call Transcript
November 8, 2010 5:00 pm ET
Executives
Leanne Sievers – IR, Shelton Group
Keh-Shew Lu – President & CEO
Rick White – CFO, Treasurer and Secretary
Mark King – SVP, Sales & Marketing
Analysts
Shawn Harrison – Longbow Research
Harsh Kumar – Morgan Keegan
Steve Smigie – Raymond James
Ramesh Misra – Brigantine Advisors
John Vinh – Collins Stewart
Gary Mobley – Benchmark
Tristan Gerra – Robert W. Baird
Brian Piccioni – BMO Capital Markets
Stephen Chin – UBS
Presentation
Operator
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Good afternoon, and welcome to Diodes Incorporated third quarter 2010 financial results conference call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session. As a reminder, this conference call is being recorded today, Monday, November 8, 2010.
I would now like to turn the call to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead.
Leanne Sievers
Good afternoon, and welcome to Diodes third quarter 2010 earnings conference call. I am Leanne Sievers, Executive Vice President, Shelton Group, Diodes’ Investor Relations firm.
With us today are Diodes’ President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King; and Director of Investor Relations, Laura Mehrl.
Before I turn the call over to Dr. Lu, I would like to remind our listeners that management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions.
Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission.
In addition, any projections as to the company’s future performance represent management’s estimates as of today, November 8, 2010. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change.
Additionally, the company’s press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms.
Included in the company’s press release are definitions and reconciliations of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details.
Also throughout the company’s press release and management’s statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income.
For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes’ Web site at www.diodes.com.
Now I will turn the call over to Diodes’ President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.
Keh-Shew Lu
Thank you, Leanne. Welcome, everyone, and thank you for joining us today. I am very pleased to report Diodes’ achievement of our sixth consecutive quarter of sequential revenue growth, which established another quarterly record for revenue and was complemented by our achievement of record gross margin and record net income in the third quarter.
Revenue increased in the quarter due to strong demand for all products across all of our worldwide markets. The successful capturing of Zetex product synergies has allowed us to take advantage of European and the North American market strength, which has resulted in higher revenue growth in those regions. The improvement in gross margin was due to a favorable mix of higher margin product combined with generally stable ASP.
Over the past six quarters we have consistently executed on our new product development plans and expanded our design wins, which have contributed to market share gains at key customers.
In addition, the capital investments we made to expand capacity at our packaging facilities over the last 12 months have enabled us to achieve record output in the third quarter and has positioned us well for remainder of the year.
Also during the quarter, in support of our profitable growth region we announced an Investment Agreement with the Management Committee of the Chengdu Hi-Tech Industrial Development Zone to establish a manufacturing facility for assembly and testing. This is a long-term multi-year project that will provide the next assembly test site, once we have reached maximum production capacity at our Shanghai site in next few years.
As we look into the fourth quarter, the market supply shortage appears to be easing and the supply and the demand are becoming more balanced. As such, we expect to return to more seasonal trend for the fourth quarter.
Our consistent extrusion and the record quarterly results reflect Diodes’ continued commitment to growing faster than our addressable market, as we secure greater market share in key end-equipment, launching additional product in new markets and leverage our broadened product portfolio to maintain a high level of design wins.
For example, our recent entry into the standard logic market has expanded our addressable market and they provide opportunity to drive additional revenue growth in 2011 and beyond.
With that I would turn the call over to Rick to discuss our third quarter financial results and the fourth quarter guidance in more detail.
Rick White
Thanks, Dr. Lu and good afternoon everyone. As Dr. Lu mentioned, revenue for the third quarter was a record $163.1 million, an increase of 33.6% over the $122.1 million in the third quarter of 2009 and a sequential increase of 9.4% over the $149.2 million in the second quarter of 2010.
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