DGAP-News: Dialog Semiconductor Plc. / Key word(s): Quarter Results 
Q2 2021 revenue at US$318 million, up 5% year-on-year. Underlying operating profit at US$62.9 million, 1% above Q2 
2020. 
2021-08-11 / 07:30 
The issuer is solely responsible for the content of this announcement. 
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Dialog Semiconductor reports results for the second quarter ended 2 July 2021 
Revenue excluding legacy licensed PMICs was up 33% year-on-year. 
London, UK, 11 August 2021 - Dialog Semiconductor Plc (XETRA: DLG) today reports unaudited results for the second 
quarter ended 2 July 2021. 
IFRS basis (unaudited) Underlying basis1 (unaudited) 
US$ millions unless stated otherwise Q2 2021 Q2 2020 Q2 2021 Q2 2020  Change 
Revenue                                317.8   302.3   317.8   302.3     +5% 
Gross margin                           51.0%   50.2%   51.2%   50.6%  +60bps 
Operating expenses2                    132.2   120.3   101.3    97.8     +4% 
Operating profit                        31.1    40.5    62.9    62.4     +1% 
Operating margin                        9.8%   13.4%   19.8%   20.6% (80)bps 
Diluted EPS                            $0.30   $0.45   $0.67   $0.69    (3)% 
Free cash flow                           N/A     N/A   (9.4)    24.0      nm

1 Underlying measures and free cash flow quoted in this Press Release are non-IFRS measures (see page 5).

2 Comprising SG&A and R&D expenses.

Q2 2021 Financial highlights

- Revenue of US$317.8 million, including acquisitions, 5% above Q2 2020.

- Strength across the product portfolio with revenue excluding legacy licensed main Power Management ICs ("PMICs") up 33% year-on-year.

- Gross margin at 51.0% (Q2 2020: 50.2%), and underlying gross margin at 51.2% (Q2 2020: 50.6%).

- Operating profit of US$31.1 million (Q2 2020: US$40.5 million), and underlying operating profit of US$62.9 million (Q2 2020: US$62.4 million).

- Diluted EPS of US$0.30 (Q2 2020: US$0.45) and underlying diluted EPS of US$0.67 (Q2 2020: US$0.69).

- Q2 2021 cash flow from operating activities of US$7.4 million (Q2 2020: US$33.1 million) which included US$12.5 million recoupment of the prepayment relating to the license agreement.

Q2 2021 Operational highlights

- Continued design-in momentum at our largest customers for the development and supply of several mixed-signal integrated circuits for 2022 and 2023. We have made significant progress on a number of designs scheduled for 2022 production.

- Strong operational performance despite evolving lockdown restrictions.

- Revenue from new mixed-signal products in Custom Mixed Signal business segment from our largest customer was up 11% year-on-year.

- Q2 2021 revenue from Advanced Mixed Signal segment up 26% year-on-year driven by strong demand for backlighting products.

- In Q2 2021 we launch our innovative digital Zero Voltage Switching (ZVS) rapid charge chipset, to enable 100 Watt and beyond High Power Density (HPD) Power Supply Units (PSUs) that are 30-50% smaller than conventional high power PSUs.

- Q2 2021 revenue in Connectivity & Audio segment up 32% mostly driven by strong demand for Bluetooth(R) low energy ("BLE") and audio products.

- In Q2 2021 we launched the AT25EU family of SPI NOR Flash devices, supporting the development of power- conscious, size-constrained connected devices.

- During Q2 2021, industry-wide capacity constraints continued to impact our ability to meet incremental customer demand.

Update on COVID-19 Throughout the pandemic, our main focus has been to protect the health and wellbeing of our employees and business partners. As lockdown restrictions continue to evolve and change, we are following applicable Health and Safety guidelines and where appropriate, opening our offices, albeit at a low capacity. We continued to maintain a minimal staff presence in our test labs, where required, and adhered to recommended safe working practices. Our supply chain has remained stable with tightness in supply of certain products and most suppliers continued to operate at full capacity. Customer engagements continued to be effectively managed remotely and we continue to make good progress.

Our business remains resilient. Our fabless business model and the strength of our balance sheet provide us with financial resilience and operational flexibility to navigate the current circumstances.

Q2 2021 Financial overview Revenue increased 5% over Q2 2020 at US$317.8 million due to strong performance across the product portfolio partially offset by the decline in legacy licensed main PMICs. Excluding the contribution of Adesto, revenue was 2% below Q2 2020. In particular, sales growth of PMICs, backlighting, audio, and BLE was driven by the continuing strength of consumer demand for headphones, fitness trackers, digital watches, and tablets. Group revenue excluding legacy licensed main PMICs was up 33% year-on-year.

Gross margin was 51.0%, 80 bps above Q2 2020 (Q2 2020: 50.2%). Underlying gross margin was 51.2% 60bps above Q2 2020 (Q2 2020: 50.6%). This increase was mainly the result of product mix.

Operating expenses ("OPEX"), comprising SG&A and R&D expenses, in Q2 2021 were 10% higher than in Q2 2020, representing 41.6% of revenue (Q2 2020: 39.8%). The increase in OPEX was mainly due to the acquisition of Adesto, and costs related to the recommended acquisition by Renesas. In Q2 2021, we incurred US$4.2 million related to the Renesas transaction and US$0.8 million integration costs related to the acquisition of Adesto. Underlying OPEX in Q2 2021 was 4% above Q2 2020 (Q2 2020: US$97.8 million), representing 31.9% of revenue (Q2 2020: 32.4%). The increase in underlying OPEX was mainly driven by the additional OPEX from Adesto.

In Q2 2021, the Company continued to make good progress on the execution of the planned cost synergies. This aims to improve efficiency, protect profitability, and strengthen cash flow generation.

R&D expenses were broadly in line with Q2 2020 representing 24.2% of revenue (Q2 2020: 25.6%). Underlying R&D expenses in Q2 2021 were 3% below Q2 2020 representing 21.0% of revenue (Q2 2020: 22.8%). The decrease in underlying R& D expenses was mainly due to the increase in the amount of R&D capitalisation.

SG&A expenses in Q2 2021 were 29% higher than in Q2 2020, representing 17.4% of revenue (Q2 2020: 14.2%).

The year-on-year increase was mainly due to the acquisition of Adesto, and costs related to the recommended acquisition by Renesas. Underlying SG&A expenses in Q2 2021 were 19% above Q2 2020 representing 10.9% of revenue (Q2

2020: 9.6%). The increase in SG&A and underlying SG&A expenses was mainly the result of additional expenses from the acquisition of Adesto.

In Q2 2021, other operating income and underlying operating income, which mainly comprised income from R&D contracts, were below Q2 2020 at US$1.4 million (Q2 2020: US$9.0 million and US$7.4 million respectively).

Operating profit in Q2 2021 was US$31.1 million, 23% below Q2 2020 (Q2 2020: US$40.5 million), mainly due to costs related to the recommended acquisition by Renesas and the incremental operating expenses from the acquisition of Adesto, partially offset by higher revenue and gross margin. Underlying operating profit was 1% above Q2 2020, at US$62.9 million (Q2 2020: US$62.4 million) driven by the increase in revenue offsetting additional operating expenses from the acquisition of Adesto.

The effective tax rate in H1 2021 was 27.3% (H1 2020: 23.2%) and in Q2 2021 was 24.9% (Q2 2020: 19.7%). Our relatively high effective tax rates for H1 2021 and Q2 2021 are principally due to the distorting effect on our income tax expense of the tax and accounting treatments of share-based compensation and business combinations. The underlying effective tax rate in Q2 2021 was 20.5%, up 80bps on the Q2 2020 underlying effective tax rate of 19.7%.

In Q2 2021, net income was US$21.8 million, 33% below Q2 2020 (Q2 2020: US$32.4 million). This decrease was mostly due to the decrease in operating profit. Underlying net income was US$48.4 million, 3% lower year-on-year. The decrease was mainly driven by the lower interest income together with a slightly higher underlying effective tax rate.

Diluted EPS in Q2 2021 was 33% below Q2 2020 at US$0.30 (Q2 2020: US$0.45). Underlying diluted EPS in Q2 2021 was 3% lower year-on-year to US$0.67 (Q2 2020: US$0.69).

At the end of Q2 2021, our total inventory level was US$186 million, 30% above the previous quarter. This is equivalent to 107 days of inventory representing a 37-day increase in our days of inventory from Q1 2021 ahead of new product launches.

At the end of Q2 2021, we held cash and cash equivalents of US$524 million (Q2 2020: US$957 million). The year-on-year movement was mostly due to the acquisition of Adesto. Cash flow from operating activities in Q2 2021 was US$7.4 million which was below Q2 2020 (Q2 2020: US$33.1 million). The year-on-year movement was mainly due to working capital.

In Q2 2021, the Group generated negative free cash flow of US$9.4 million, which was below Q2 2020 (Q2 2020: free cash inflow US$24.0 million) due to the lower cash flow from operating activities and higher capital expenditure. At the end of the quarter, the remaining principal amount of the US$300 million prepayment from our largest customer that is outstanding was US$37.5 million. Subsequent to quarter end, the remaining principal amount outstanding was settled.

In April 2021, we entered into a capacity reservation agreement to secure our medium-term wafer requirements from one of our major foundry suppliers.

Subject to obtaining the necessary approvals and satisfying the other closing conditions, it is expected that the acquisition of the entire issued and to be issued share capital of the Company by Renesas Electronics Corporation, will become effective during the second half of 2021.

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