false000002900200000290022025-02-112025-02-11
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): February 11, 2025 |
DIODES INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
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Delaware |
002-25577 |
95-2039518 |
(State or Other Jurisdiction
of Incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
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4949 Hedgcoxe Road, Suite 200 |
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Plano, Texas |
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75024 |
(Address of Principal Executive Offices) |
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(Zip Code) |
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Registrant’s Telephone Number, Including Area Code: 972 987-3900 |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
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Name of each exchange on which registered
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Common Stock, Par Value $0.66 2/3 |
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DIOD |
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The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 11, 2025, Gary Yu, President of Diodes Incorporated, (the “Company”), as well as Brett R. Whitmire, Chief Financial Officer of the Company, Emily Yang, Senior Vice President, Worldwide Sales and Marketing of the Company and Gurmeet Dhaliwal, Director of Investor Relations for the Company, participated in a conference call to discuss the Company’s fourth quarter and fiscal year 2024 financial results. A recording of the conference call has been posted on the Company’s website at www.diodes.com, and copy of a transcript of the conference call is furnished as Exhibit 99.1 to this Report. Information contained in or accessible through the Company’s website shall not be deemed to be incorporated by reference into this Report.
In the earnings conference call, the Company utilizes financial measures and terms not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in order to provide investors with an alternative method for assessing the Company’s operating results in a manner that enables investors to more thoroughly evaluate its current performance as compared to past performance. The Company also believes these non-GAAP measures provide investors with a more informed baseline for modeling the Company’s future financial performance. Management uses these non-GAAP measures for the same purpose. The Company believes that investors should have access to the same set of tools that management uses in analyzing results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results and may differ from similar measures used by other companies. For a description, and reconciliation with GAAP, of these non-GAAP measures see the Company’s press release dated February 11, 2025, announcing the Company’s fourth quarter and fiscal year 2024 financial results, a copy of which was furnished as Exhibit 99.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 11, 2025. The information furnished in this Item 2.02, including the exhibit incorporated by reference, will not be treated as “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or into another filing under the Exchange Act, unless that filing expressly refers to specific information in this Report.
Item 7.01 Regulation FD Disclosure.
The transcript of the earnings conference call furnished as Exhibit 99.1 also provides an update on the Company’s business outlook, that is intended to be within the safe harbor provided by the Private Securities Litigation Reform Act of 1995 (the “Act”) as comprising forward looking statements within the meaning of the Act.
The information furnished in this Item 7.01, including the exhibit incorporated by reference, will not be treated as “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into any filing under the Securities Act, or into another filing under the Exchange Act, unless that filing expressly refers to specific information in this Report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DIODES INCORPORATED |
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Date: |
February 14, 2025 |
By: |
/s/Brett R. Whitmire |
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Brett R. Whitmire
Chief Financial Officer |
Exhibit 99.1
REFINITIV STREETEVENTS
EDITED TRANSCRIPT DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
EVENT DATE/TIME: FEBRUARY 11, 2025 / 10:00PM GMT
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FARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
C O R P O R A T E P A R T I C I P A N T S
Leanne Sievers Shelton Group - Investor Relations
Gary Yu Diodes Inc - President, Director
Brett Whitmire Diodes Inc - Chief Financial Officer
Emily Yang Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
C O N F E R E N C E C A L L P A R T I C I P A N T S
David Williams The Benchmark Company, LLC - Analyst
William Stein Truist Securities, Inc. - Analyst
P R E S E N T A T I O N
Operator
Good afternoon, and welcome to Diodes Inc. fourth quarter and Fiscal 2024 financial results conference call. (Operator Instructions). As a reminder,
this conference call is being recorded today, Tuesday, February 11, 2025.
I would now like to turn the call over to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead.
Leanne Sievers - Shelton Group - Investor Relations
Good afternoon, and welcome to Diodes fourth quarter and fiscal 2024 financial results conference call. I'm Leanne Sievers, President of Shelton
Group, Diode's Investor Relations firm. Joining us today are Diodes President, Gary Yu, Chief Financial Officer, Brett Whitmire; Senior Vice President
of Worldwide Sales and Marketing, Emily Yang; and Director of Investor Relations, Gurmeet Dhaliwal.
I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures
and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject
to revision until the company files its Form 10-K for its fiscal year ended December 31, 2024. In addition, 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 and in the company's filings with the Securities and Exchange Commission, including Form 10-K and 10-Q.
In addition, any projections as to the company's future performance represent management's estimates as of today, February 11, 2025. Diodes
assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by
applicable law.
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 to
non-GAAP items, which provide additional details. Also, throughout the company's press release and management statements during the 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 90 days in the Investor Relations section
of Diodes' website at www.diodes.com.
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:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
And now I'll turn the call over to Diodes President, Gary Yu. Gary, please go ahead.
Gary Yu - Diodes Inc - President, Director
Welcome, everyone, and thank you for joining us on today's conference call. Our above seasonal revenue results in the fourth quarter reflect the
improving momentum we have seen over the past few quarters as the markets in Asia gradually improved, especially in China and the Southeast
Asia region. We achieved 5% growth over the fourth quarter of 2023, which marks a return to year-over-year growth following the multi-year market
slowdown. Even though the overall global demand environment remains challenging, especially in Europe and North America, we were able to
maintain our automotive and industrial mix percentage at 42% of total product revenue. which is a testament to the progress we have made on
our new product and content expansion initiatives.
Diodes entered a new year having strong POS in Asia for 2024, improved level of channel inventory and a solid balance sheet, combined with a
committed focus on expanding growth in our target market, especially the automotive and industrial markets and capitalizing on new opportunities
in AI-related applications. Based on current data available, we expect 2025 to be a stronger year for Diodes than 2024.
In addition to our past efforts to lower manufacturing costs and further develop our process technology and capabilities, we are qualifying and
are running more products in our internal facilities to minimize near-term underloading costs until demand improves. Our focus remains on
prioritizing investments in the automotive and industrial markets, with our analog and power discreet products, to further improve the quality
and the mix of our portfolio. With our revenue contribution from auto and industrial remaining consistently above our target model, we are well
positioned for growth and margin expansion as market recovery broadens across our end markets in 2025 and beyond.
With that, let me now turn the call over to Brett to discuss our fourth quarter and fiscal 2024 financial results as well as our first quarter 2025 guidance
in more detail.
Brett Whitmire - Diodes Inc - Chief Financial Officer
Thanks, Gary, and good afternoon, everyone. Revenue for the fourth quarter of 2024 was $339.3 million, compared to $350.1 million in the third
quarter 2024, and $322.7 million in the fourth quarter of 2023. Full year 2024 revenue was $1.3 billion, compared to $1.7 billion in 2023.
Gross profit for the fourth quarter was $110.9 million or 32.7% of revenue, compared to $118 million or 33.7% of revenue in the prior quarter, and
$112.5 million or 34.9% of revenue in the prior year quarter. For the full year, GAAP gross profit was $435.9 million or 33.2% of revenue.
GAAP operating expenses for the fourth quarter were $99 million or 29.2% of revenue, and on a non-GAAP basis, were $95.5 million or 28.1% of
revenue, which excludes $5 million amortization of acquisition-related intangible asset expenses, $0.6 million restructuring charge, $0.3 million in
acquisition-related costs, and $2.3 million for insurance recovery for a manufacturing facility. This compares to GAAP operating expenses in the
prior quarter of $96.1 million or 27.5% of revenue, and in the fourth quarter 2023 of $91.8 million or 28.4% of revenue. Non-GAAP operating expenses
in the prior quarter were $91.7 million or 26.2% of revenue.
Total other income amounted to approximately $0.4 million for the quarter, consisting of $4.9 million of interest income, $1.2 million of other
income, $3.7 million of foreign currency loss, $1.6 million in unrealized losses from investments and $0.5 million in interest expense.
Income before taxes and noncontrolling interest in the fourth quarter of 2024 was $12.3 million, compared to $18.8 million in the previous quarter,
and $27.9 million in the prior year quarter.
Turning to income taxes. Our effective income tax rate for the fourth quarter was approximately 16.6%. For the full year 2024, the tax rate was
approximately 18.9%.
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ARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
The GAAP net income for the fourth quarter was $8.2 million or $0.18 per diluted share, compared to $13.7 million or $0.30 per diluted share last
quarter, and $25.3 million or $0.55 per diluted share in the prior year quarter. Full year GAAP net income was $44 million or $0.95 per diluted share,
compared to $227.2 million or $4.91 per diluted share in 2023. The share count used to compute GAAP diluted EPS was 46.4 million shares for both
fourth quarter 2024 and the full year.
Non-GAAP adjusted net income in the fourth quarter was $12.5 million or $0.27 per diluted share, which excluded, net of tax, $4.1 million for
amortization of acquisition-related intangible assets and $1.3 million non-cash mark-to-market investment value adjustment, $0.5 million restructuring
charges, $0.2 million of acquisition-related costs and $1.9 million of insurance recovery. This compares to $20.1 million or $0.43 per diluted share
in the prior quarter, and $23.4 million or $0.51 per diluted share in the fourth quarter of 2023. For the full year, non-GAAP adjusted net income was
$61 million or $1.31 per diluted share as compared to $222.8 million or $4.81 per diluted share in 2023.
Excluding non-cash share-based compensation expense of $5.3 million for the fourth quarter, net of tax, both GAAP earnings per share and
non-GAAP adjusted EPS would have increased by $0.11 per diluted share. For the full year, excluding GAAP and non-GAAP non-cash share-based
compensation expense of $18 million and $17.4 million, respectively, net of tax, GAAP and non-GAAP diluted earnings per share would have
improved by $0.40 and $0.39, respectively.
EBITDA for the fourth quarter was $40.7 million or 12% of revenue, compared to $46.9 million or 13.4% of revenue in the prior quarter, and $58.4
million or 18.1% of revenue in the fourth quarter 2023. For the full year, EBITDA was $177.1 million or 13.5% of revenue, compared to $404.2 million
or 24.3% of revenue in 2023.
We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA,
which provides additional details.
Cash flow provided by operations was $81.8 million for the fourth quarter and $119.4 million for the full year. Cash flow was $62.1 million, which
included $19.7 million for capital expenditures, and for the full year, free cash flow was $46.4 million including $73 million for CapEx. Net cash flow
was a negative $2.4 million, which includes the net paydown of $3.8 million of total debt, and for the full year, net cash flow was a negative $3.8
million which includes the net paydown of $7.6 million of total debt as well as total net consideration of $52.6 million for the acquisition of
Fortemedia, a global company, which operates in Asia, that develops high-quality solutions and semiconductor products to enhance human-to-human
and human-to-machine voice communications. Diodes acquired Fortemedia to expand our product portfolio and enhance the company's footprint
in advanced voice processing technologies, primarily targeted at automotive and compute markets.
Turning to our balance sheet, at the end of fourth quarter, cash, cash equivalents, restricted cash plus short-term investments totaled approximately
$322 million. Working capital was approximately $849 million in total debt, including long term and short term, was approximately $52 million.
In terms of inventory at the end of the fourth quarter, total inventory days were approximately 193 as compared to 187 last quarter. Finished goods
inventory days were 82 compared to 79 last quarter. Total inventory dollars decreased $7.1 million from the prior quarter to $475 million. Total
inventory in the quarter consisted of an $18.3 million decrease in raw materials, a $9.7 million increase in work in process and a $1.5 million increase
in finished goods.
Capital expenditures on a cash basis were $19.7 million for the fourth quarter or 5.8% of revenue, and $73 million or 5.6% of revenue for the full
year, which were both at the low end of our targeted range of 5% to 9% of revenue.
Now turning to our outlook. For the first quarter of 2025, we expect revenue to be approximately $323 million, plus or minus 3%, and representing
a 4.8% sequential decrease at the midpoint due to Chinese New Year holiday, but slightly better than typical seasonality.
Importantly, the midpoint of guidance represents 7% year-over-year growth and extends our momentum in support of our expectation for growth
in 2025. GAAP gross margin is expected to be 32.5% plus or minus 1%. Non-GAAP operating expenses, which are GAAP operating expenses adjusted
for amortization of acquisition-related intangible assets, are expected to be approximately 30% of revenue, plus or minus 1%. We expect net interest
income to be approximately $1.5 million.
4
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
Our income tax rate is expected to be 18.5%, plus or minus 3%, and shares used to calculate EPS for the first quarter are anticipated to be approximately
46.7 million. Not included in these non-GAAP estimates is amortization of $5.8 million after tax for previous acquisitions.
With that said, I now turn the call over to Emily Yang.
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Thank you, Brett, and good afternoon. Revenue in the fourth quarter was above the midpoint of our guidance. and slightly better than typical
seasonality. Our global POS decreased in the quarter, but the good news is our channel inventory was lower both in terms of dollars and weeks. I
will also note, POS in Asia for 2024 was strong, especially the second half of the year where we saw double-digit growth over the same period in
2023.
Looking at the global sales in the fourth quarter. Asia represented 80% of revenue; Europe, 12%; and North America, 8%.
In terms of our end markets, industrial was 23% of Diodes product revenue, Automotive, 19%; Compute, 25%; Consumer, 18%; and Communications
15% of product revenue. Our automotive industrial revenue combined totaled 42% of the product revenue which is the same as last quarter.
Maintaining our product mix above our target model reflects our ongoing content expansion and design win initiatives, even though both of these
markets continue to undergo inventory and demand adjustments.
A key component of Diodes ‘successful increase of content at new and existing customers has been our focus on technology and product development
over the past several years. In 2024 alone, we introduced 755 new part numbers with 330 of these specifically for automotive market, where we
have increased our addressable content per car over 30% this past year from approximately $160 to $213.
Now let me review the end market in greater details. Starting with the automotive market. We maintained the product revenue at 19% and even
though the inventory rebalancing continues throughout the quarter. We expect inventory adjustments and slower demand to persist into the first
quarter. Our focus continues to be on content expansion and market share gain to position Diodes for the growth as the auto market recovers.
As I mentioned earlier, Diodes introduced a high number of new automotive compliant- products during the year. These products are targeted at
our key focus areas of connected driving; comfort, style, safety; and electrification applications.
In terms of product adoption and demand creation, we're seeing strong momentum for our small-lane count PCI Express packet switches, USB
Type-C Re-Drivers and active cross muxes for the real seat entertainment and smart copy applications. Our LDO product family received solid
demand for ADAS, infotainment and wireless charging applications and our SBR products are seeing design wins in auto display applications.
We also experienced strong growth in the quarter from our switching power DC/DC products for connected driving applications. Additionally, our
power discrete product, including MOS power, TVS, SBR and bipolar junction transistors are seeing demand growth across multiple auto applications.
We have also been ramping up new designs wins for our high-voltage Hall switches, being used in the tail-gate lift door harnesses, and electric
steering control across multiple customers around the world.
Also in automotive, our LED driver business continued to see strong demand in various lighting applications, while our buck LED drivers and
multi-mode LED driver controllers gained traction in applications such as front high/low beams as well as rear and exterior lighting.
In the industrial market, the inventory correction continues similar to automotive end market. We expect this may last into the second quarter.
Despite the demand softness, we continued to make progress on our design-in/design-win initiatives. Our high-voltage Hall switches are seeing
design wins for window openers, DC fans and motor applications, while our photo couplers and LDOs are seeing traction in e-meter, industrial
equipment, motor control fans and power tools. Additionally, our protection devices are being designed into battery backup units as well as
programmable logic control units. Our bridge rectifiers had multiple design wins in the switch-mode power supply for server power. We also saw
several new Silicon Carbide SBD design-in activities in rail power supply and electric motors as well as Tier 1 energy storage applications.
5
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
In the computing market, we continue to see strong growth momentum the PCI Express packet switches, USB signal conditioners and ultra low
jitter crystal oscillators in AI server and data center applications, including 800G and 1.6T switches and optical modules. Our high-speed serial
interface, logic crystal oscillators and PCI Express clocks are being adopted in Nic cards and GPU cards for the system reference clocks. Our addressable
content in the AI server today is approximately $90 per box, which compared to $53 per box last year for traditional servers.
Also in the computing market, we received solid demand for our LDOs across various applications as well as our ideal diode controllers, MOSFETs
and compact power switches for input power ORings and power path sequencing control applications. Additionally, our bus switch solutions for
enterprise SSD and next-generation portable gaming consoles are being well received as they have helped SSD customers double the supported
capacity without redesign of their storage controllers and also protect again software piracy for gaming console customers.
Lastly, high-bandwidth cameras in the notebook are driving demand for our MIPI D-PHY ReDrivers, and we continue to achieve momentum for
our Schottky and protection products in notebook and docking station applications.
In the communication market, our eUSB2 repeaters have become the standard interface for CPUs and SoC processors in the mobile communication
where our 1- and 2-channel USB repeaters are gaining traction. Diodes LDOs are also seeing solid demand, and our production devices are winning
new designs in smartphones.
Also in the communication market, our bi-polar junction transistors, Schottky and SBR products are seeing new design-ins for 5G CPE and 5G
modules. We also saw strong momentum for USB power delivery and AC-DC PWM controller products in smartphone charging applications.
Lastly, in the consumer market, our SBR and SBD products in chip-scale packages are securing new designs in power delivery charger and battery
pack applications. Additionally, our bridge rectifiers are being designed into gaming applications, while our high-voltage buck converters are being
adopted in the smart home IoT applications. We also have new design wins for bi-polar junction transistor products in personal care devices.
In summary, we're pleased to achieve the first quarter of year-over-year growth in the fourth quarter following the multi-year market slowdown.
Although we have not yet seen a broad market recovery, especially across the automotive and industrial markets, we continue to focus on demand
creation and executing on our new product initiatives to drive increasing content opportunities as the global markets recover.
With that, we now open the floor to questions. Operator?
Q U E S T I O N S A N D A N S W E R S
Operator
(Operator Instructions)
David Williams, Benchmark.
David Williams - The Benchmark Company, LLC - Analyst
Hey, good afternoon. Thanks for taking the question and congratulations on the returning growth here.
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Thank you, David.
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
David Williams - The Benchmark Company, LLC - Analyst
Emily, maybe you could speak a little bit to the seasonality that you're talking to and how that's affecting you in China, especially with the Chinese
New Year and maybe as it relates to automotive and industrial, kind of what you're seeing there? Are you expecting that to be down maybe further
than some of the other segments? Or just any color around the demand trends in China would be helpful, I think.
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Yeah. So first of all, I think Chinese New Year, I think, is pretty much within our expectation. We didn't see anything abnormal. I think there are some
customers with extended shutdowns, but not all the customers. I think overall, it's actually within our expectation.
I think we actually included the new year -- Chinese New Year return of employees and overall market, everything together, we actually guided
4.8% down for the Q1, which is actually slightly better than our usual seasonality and Q1 never was a strong quarter for us because of Chinese New
Year impact, I would say, all in all, is actually within our expectation.
David Williams - The Benchmark Company, LLC - Analyst
Great. I certainly appreciate that. And then maybe, Brett, on the gross margin, the sequential improvement there feels a little stronger than I would
have anticipated. What are you kind of seeing on the gross margin, I guess, just given the nice bump sequentially there?
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Yeah. So, I think from the gross margin point of view, and usually revenue goes hand-in-hand with the gross margin. So, I think what we really try
to do is really more on the product initiative improvement overall. We continue to focus on introducing new products. As an example, I think I just
talked about it. We released more than 700 new part numbers in 2024. And out of that, more than 330 is actually automotive part. So you can
actually see the commitment and driving of the new product and new technology continued to expand our available content market expansion
overall. So that will continue to be the focus, right?
So a couple of things that really drive the margin improvement. So one is on the product improvement, product mix improvement initiative. The
other side is actually on the underloading situation. So like Gary mentioned, right, we continue to actually minimize the impact, continue to port
additional products into our own internal fab as the alternative, right? Unfortunately, that takes time, but slowly, we're going to see some of the
results.
So I would say that's the reason you're actually seeing probably better than your expected margin -- gross profit margin overall, based on the
guidance.
David Williams - The Benchmark Company, LLC - Analyst
Okay. Is there a way to think about how far you are through that porting over process? Is there a threshold or maybe just a way to think about the
magnitude that's happening to the gross margin at this point?
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
I think that will be ongoing quarter-by-quarter effort, right? I think not only do we need to qualify the process, the technology, the devices, we also
need to work with the customers to qualify that device onto their boards. So I would say it's an ongoing process, and it's probably going to take
another number of quarters, continue to improve over time. But we strongly believe that with believe 2025 is actually going to be a better year.
7
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
So that's also going to drive some of the revenue at the same time, driving some of the loading. So we're actually pretty confident that overall,
you're going to see improvements throughout the quarters within 2025.
David Williams - The Benchmark Company, LLC - Analyst
Great, thanks so much.
Operator
William Stein, Truist Securities.
William Stein - Truist Securities, Inc. - Analyst
Great for taking my question. First, I'm hoping you might give us some clues as to how you expect revenue to perform in each of the end markets
in Q1.
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Okay. All right. So automotive, still going through inventory rebalancing and coupled with weaker demand overall, right, especially from the Europe
territory. So, we think Q1 is going to be a challenging quarter overall. As you can see, I mean, even with the Q4 challenges, we try to maintain the
19% overall of the product revenue I think that will continue to be the focus. It's actually focused on the content expansion and the market share
gain overall. So over the industrial market, we're still seeing ongoing inventory rebalancing. Some customers’ situations are worse than the others,
definitely some are better, so not everything equal. But all in all, we see that will continue probably linger through the second quarter.
And for the compute market segment for Q1, we expect it probably to be slightly down because also Chinese New Year manufacturing, a lot of
that is in Asia. So that will be impacted overall.
And the consumer was never a strong quarter in the first quarter so we don't expect consumer to be a growth quarter as well as communication.
I think on the communications side, on the enterprise traditional networking, we're actually seeing some of the inventory rebalancing improving
overall, so that might give us some of the upside, but the smartphone is actually going to probably be challenged in the first quarter. So I would
say, all in all, it's still going to be a down quarter. So, as a conclusion, right, so we guided 4.8% down for the whole quarter.
Gary Yu - Diodes Inc - President, Director
But that's still the better seasonality first quarter.
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Yeah.
William Stein - Truist Securities, Inc. - Analyst
Okay. Let me ask about operating leverage. Compared to the December of 2022 quarters 2 years ago, but your revenue is down 32%. Your OpEx
is only down 10%, which is fine. I assume it means there's significant fixed cost in your OpEx.
8
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
But as your revenue recovers, assuming we, even if we don't get back to that exact level, but as you grow should we think there's going to be sort
of similar positive operating leverage on the way up? Or have you added costs that make that might make the leverage less severe or less significant
as it was on the way down?
Brett Whitmire - Diodes Inc - Chief Financial Officer
I would say that to you, Will, that we have, there's no real structural things that we've added across that window. We basically had picked up the
Onsemi and the Texas Instruments factory across the last number of years. And then what we've done is you saw that across the last couple of
years, we brought down overall OpEx spend from '22 to '23 and then '23 to '24. I think what you'll see is there's a good bit of leverage to that as we
go forward. I think we get -- a lot of that will -- we've talked about the leverage we get in our margin, not only as we start to grow, we get the benefit
of pulling those, some of the sourcing of those products inside versus out. And then that infrastructure, obviously, is inside the company now
versus outside in terms of some of the manufacturing footprint. But I think you're going to see the leverage is good. There's not -- I don't expect
that to scale back up. I actually think that what you're going to see is that OpEx as a percentage of revenue will start coming back down, kind of
plateau and then start coming back down as revenue starts to grow, which we feel strongly that fourth quarter was year-over-year growth. First
quarter, we're guiding year-over-year growth, and we expect that to continue through the year. We don't guide out further officially, but that's our
feeling, that's our expectation. And that's what you'll see on the OpEx side is that it will continue to kind of come down across the quarters.
William Stein - Truist Securities, Inc. - Analyst
Great. Thanks, guys.
Operator
(Operator Instructions)
David Williams, Benchmark.
David Williams - The Benchmark Company, LLC - Analyst
Hey, thanks for taking the follow up and forgive me if I missed this as my line dropped out, but I wanted to ask maybe on pricing trends, what you're
seeing there, have you seen erosion is greater than you would typically see or does that seem to calm down a bit just from a pricing perspective?
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
Yeah, David. I think the pricing is pretty stable. We think our -- remember, I talked about 1.5% to 2% built in per quarter. still within that range. So,
I wouldn't say the overall environment changed a lot.
We see more price competition from the deep commodity and commodity area. That's also the area we have been strategically defocusing. And
so I would say all in all, it's actually stable.
Gary Yu - Diodes Inc - President, Director
And another important thing is we're probably going to emphasize a lot on our product portfolio enhancement on that we introduced a lot of new
products, not only limited automotive but also for the different kind of segments that we can enjoy a much better ASP than GP percent on those
kind of new products we introduced to the market. So, we can balance it like commodity loss in some markets.
9
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FEBRUARY 11, 2025 / 10:00PM, DIOD.OQ - Q4 2024 Diodes Inc Earnings Call
David Williams - The Benchmark Company, LLC - Analyst
Okay. Great. And then one -- just one last one, if I may. On the AI side, you've seen some really nice growth this year per box, as you mentioned. Is
that driven more by the just greater sockets available? Or is it your product portfolio? Or what's really driving that opportunity within that certain
kind of market for you?
Emily Yang - Diodes Inc - Senior Vice President - Worldwide Sales and Marketing
I think it's combined of all right. So we are expanding our product portfolio. We're having some of the newer products overall supporting the server
or the AI server applications. We also see with the AI server application with certain chipsets there is additional PCI Express ports required, and we
actually have this PCI Express packet switch portfolio that's very well suited to really support this kind of application with the requirement of
additional PCIe ports. So, I would say a combination of quite a number of different things. Of course, the volume and the change overall market,
it's all beneficial to our overall growth.
David Williams - The Benchmark Company, LLC - Analyst
Great thanks again certainly appreciate it.
Operator
That concludes our question-and-answer session. I would like to turn the conference back over to Gary Yu for any closing remarks.
Gary Yu - Diodes Inc - President, Director
Thank you, everyone, for participating on today's call. We look forward to reporting our progress on next quarter's conference call. Operator, you
may now disconnect.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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