DIODES INC /DEL/ Q3 FY2024 earnings call

Key Highlights

• Third quarter revenue exceeded expectations, with 9.5% sequential growth and double-digit POS growth in Asia.
• Channel inventory improved in Asia with decreasing inventory dollars and days.
• Automotive revenue rose 18% sequentially to 19% of product revenue due to content expansion and design wins.
• Moderated CapEx investment to below target model as capacity is available to meet future demand.

End Market Details

• Automotive: Revenue 19% of product revenue, up from 18% last quarter; inventory rebalancing continued; 115 new automotive compliance parts introduced.
• Industrial: Revenue 23% of product revenue, flat to last quarter but up in revenue; design wins ongoing.
• Computing: Strong momentum, especially in AI server areas.
• Communication: Upside driven by smartphones.
• Consumer: Q3 is peak, some customers did better than others.

Third quarter revenue was $350.1 million, up 9.5% sequentially. Asia had double-digit POS growth. Revenue contribution by region: Asia 78%, Europe 15%, North America 7%. End market revenue contributions: Industrial 23%, Automotive 19%, Computing 25%, Consumer 18%, Communication 15%. Automotive and industrial combined 42% of product revenue, tenth consecutive quarter above 40%. Automotive revenue increased 18% sequentially to 19% of product revenue, reflecting content expansion and design win initiatives.

For the fourth quarter of 2024, expected revenue is approximately $337 million ±3% (3.7% sequential decrease at midpoint). GAAP gross margin expected 33% ±1%. Non-GAAP operating expenses expected to be approximately 28% of revenue ±1%. Net interest income expected to be approximately $2.5 million. Income tax rate expected to be 18% ±3%.

Risks

• Automotive and industrial markets undergoing inventory and demand adjustments.
• Political and policy uncertainties affecting China operations, though the company has flexibility in manufacturing footprint to adapt.

Q: David Williams asked about demand in Asia and trends.

A: Emily Yang discussed demand improvement in Asia across segments, with auto and industrial expected to be down in Q4, computing flat/slightly up, consumer and communication down due to seasonality.

Q: Brett Whitmire asked about gross margin guidance.

A: Brett explained gross margin pressure from mix, utilization, and strategic investments, expecting recovery in 2025.

Q: David Williams asked about China exposure and politics.

A: Emily Yang and Gary Yu mentioned China revenue portion is small, potential for growth, and flexibility in manufacturing footprint to adapt to policies.

Q: William Stein asked about distribution channel split and seasonality.

A: Emily Yang said 64% distribution, 36% direct in Q3. Seasonality in Q4 is better than typical, but next quarters' trend uncertain.

Q: Tristan Gerra asked about automotive pricing and PCIe packet switches.

A: Emily Yang and Gary Yu discussed automotive pricing negotiation based on account partnership, and PCIe packet switches are early stage but driving momentum for 2025.