Diodes Incorporated : EDITED TRANSCRIPT DIOD.OQ - Q1 2021 Diodes Inc Earnings Call (Form 8-K)

EDITED TRANSCRIPT DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

EVENT DATE/TIME: MAY 06, 2021 / 9:00PM GMT

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

CORPORATEPARTICIPANTS

Brett R. WhitmireDiodes Incorporated - CFO

Emily YangDiodes Incorporated - SVP of Worldwide Sales & Marketing

Gary YuDiodes Incorporated - SVP of Business Groups

Keh-Shew LuDiodes Incorporated - Chairman, CEO & President

CONFERENCECALLPARTICIPANTS

David Neil WilliamsLoop Capital Markets LLC, Research Division - VP

Matthew D. RamsayCowen and Company, LLC, Research Division - MD & Senior Technology Analyst

Tristan GerraRobert W. Baird & Co. Incorporated, Research Division - MD & Senior Research Analyst

William SteinTruist Securities, Inc., Research Division - MD

Leanne K. SieversShelton Group - President

PRESENTATION

Operator

Goodafternoon,andwelcometoDiodesInc.FirstQuarter2021FinancialResultsConferenceCall.(OperatorInstructions)Asareminder,thisconference call is being recorded today, Thursday, May 6, 2021.

I would now like to turn the call over to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead.

Leanne K. Sievers- Shelton Group - President

Goodafternoon,andwelcometoDiodesFirstQuarter2021FinancialResultsConferenceCall.I'mLeanneSievers,PresidentofSheltonGroup,Diodes' Investor Relations firm.

JoiningustodayareDiodesChairman,PresidentandCEO,Dr.Keh-ShewLu;ChiefFinancialOfficer,BrettWhitmire;SeniorVicePresidentofWorldwideSales and Marketing; Emily Yang, Senior Vice President, Business Groups, Gary Yu; and Director of Investor Relations, Laura Mehrl.

BeforeIturnthecallovertoDr.Lu,I'dliketoremindourlistenersthattheresultsannouncedtodayarepreliminaryastheyaresubjecttothecompanyfinalizingitsclosingproceduresandcustomaryquarterlyreviewbythecompany'sindependentregisteredpublicaccountingfirm.Assuch, these results are unaudited and subject to revision until the company files its Form 10-Q for its first quarter 2021 ending March 31, 2021.

Inaddition,management'spreparedremarkscontainforward-lookingstatements,whicharesubjecttorisksanduncertaintiesandmanagementmay make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harborforforward-lookingstatementsthatiscontainedinthePrivateSecuritiesLitigationReformActof1995.Actualresultsmaydifferfromthosediscussedtoday,andtherefore,wereferyoutoamoredetaileddiscussionoftherisksanduncertaintiesinthecompany'sfilingswiththeSecuritiesandExchange Commission, including Forms 10-K and 10-Q.

Inaddition,anyprojectionsastothecompany'sfutureperformancerepresentmanagement'sestimatesasoftoday,May6,2021.Diodesassumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicablelaw.

2

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Additionally,thecompany'spressreleaseandmanagementstatementsduringthisconferencecallwillincludediscussionsofcertainmeasuresandfinancialinformationinGAAPandnon-GAAPterms.Includedinthecompany'spressreleasearedefinitionsandreconciliationsofGAAPtonon-GAAPitems,whichprovideadditionaldetails.Also,throughoutthecompany'spressreleaseandmanagementstatementsduringthisconferencecall,werefertonetincomeattributabletocommonstockholdersasGAAPnetincome.Forthoseofyouunabletolistentotheentirecallatthistime, a recording will be available via webcast for 90 days in the Investor Relations section of Diodes website at www.diodes.com.

And now I'll turn the call over to Diodes Chairman, President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Thankyou,Leanne.Welcome,everyone,andthankyouforjoiningustoday.Revenueinthefirstquartersetanewrecord,bothorganicallyandonaconsolidatedbasis,increasing18%sequentiallyandexceedingthehigh-endofourguidancerange,inwhathashistoricallybeenaseasonallydown quarter for our business.

OurgrowthwasdrivenbyrecordtotalPOSrevenueasaresultofrecordsinbothAsiaandEurope,combinedwithstronggrowthinNorthAmerica.Wealsoachievedrecordsinourcomputingendmarket,drivenbyrecordtelecomproductrevenue,andtheautomotivemarketduetostrongorganicgrowthinDiodes'automotivebusiness.Combinedwithourexpensemanagementandoperatingefficiencies,wedeliveredthehighestquarter of adjusted earnings per share, which increased 25% sequentially.

TheintegrationofLSCisalsoprogressingwellandaheadofschedule,aswehavealreadybeguntoharvestthebenefitofmanufacturingsynergiesfrom improved factory loading with both LSC's and Diodes' products. In fact, loading at the LSC facility has reached 70% in the quarter versus ouroriginal target of 50%, resulting in being operationally breakeven at this facility 2 quarters ahead of plan.

Overall,ourglobalmanufacturingfootprintisservingasakeyadvantageatatimewhenthebroadersemiconductorindustryischallengedbysupplyandcapacityconstraints.Wehavebothinternalandexternalcapacityneededtosupporttheincreasingdemandweareseeingforourproducts.Asaresult,weexpecttodeliveranotherquarterofsequentialgrowthinthesecondquarter,coupledwithacontinuedexpansioninbottom-line profitability.

With that, let me now turn the call over to Brett to discuss our first quarter financial results and our second quarter 2021 guidance in more detail.

Brett R. Whitmire- Diodes Incorporated - CFO

Thanks,Dr.Lu,andgoodafternoon,everyone.Aspartofmyfinancialreviewtoday,Iwillfocusmycommentsonthesequentialchangeforeachof the line items and would refer you to our press release for a more detailed review of our results as well as the year-over-year comparisons.

Revenueforthefirstquarter2021wasarecord$413.1million,whichincludedthefirstfullquarterofrevenuefromLSC,anincreaseof17.9%fromthe$350.4millioninfourthquarter2020.Grossprofitforthefirstquarterwasalsoarecordat$138.6millionor33.6%ofrevenueonaconsolidatedbasis and 36.3% for Diodes only. This compares to $122.7 million or 35% of revenue in the fourth quarter 2020.

GAAPoperatingexpensesforthefirstquarter2021were$91.2millionor22.1%ofrevenueandonanon-GAAPbasis,were$86.4millionor20.9%ofrevenue,whichexcludes$4millionofamortizationofacquisition-relatedintangibleassetexpensesand$0.8millionofrestructuringcosts.Thiscompares to non-GAAP operating expenses in the prior quarter of $75 million or 21.4% of revenue.

Totalotherincomeamountedtoapproximately$2.6millionforthequarter,including$6millionofotherincomeand$768,000ofinterestincome,partiallyoffsetby$2.9millionininterestexpenseand$1.3millioninforeigncurrencyloss.Incomebeforetaxesandnoncontrollinginterestinthefirst quarter 2021 was $50 million compared to $36.1 million in the previous quarter.

3

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Turningtoincometaxes.Oureffectiveincometaxrateforthefirstquarterwasapproximately18.9%.GAAPnetincomeforthefirstquarter2021was$39.5millionor$0.87perdilutedsharecomparedtoGAAPnetincomeof$29.7millionor$0.59perdilutedshareinthefourthquarter2020.ThesharecountusedtocomputeGAAPdilutedEPSforthefirstquarter2021was45.2millionshares,whichreflectsareductionintheweightedaverage share count due to the repurchase of approximately 7.8 million Diodes shares from LSC as part of the acquisition.

Non-GAAPadjustednetincomeinthefirstquarterwas$42millionor$0.93perdilutedshare,whichexcludednetoftax$3.3millionofacquisition-relatedintangibleassetcosts,$1.5millionofacquisition-relatedcosts,$0.7millioninrestructuringcostsanda$2.9milliongaininvalueof certain LSC investments. Non-GAAP adjusted net income in the fourth quarter 2020 was $37.3 million or $0.74 per diluted share.

Includedinfirstquarter2021,GAAPnetincomeandnon-GAAPadjustednetincomewasapproximately$4.8millionnetoftaxofnon-cashshare-basedcompensationexpense.Excludingshare-basedcompensationexpense,bothGAAPearningspershareandnon-GAAPadjustedEPSwould have increased by $0.11 per diluted share for first quarter 2021 and $0.10 for the fourth quarter 2020.

EBITDAforthefirstquarterwas$81.7millionor19.8%ofrevenuecomparedto$67.1millionor19.1%ofrevenueinthepriorquarter.WehaveincludedinourearningsreleaseareconciliationofGAAPnetincometonon-GAAPadjustednetincomeandGAAPnetincometoEBITDA,whichprovides additional details.

Cashflowgeneratedfromoperationswas$68.2millionforthefirstquarter2021.Freecashflowwas$51millionforthefirstquarter,whichincluded$17.2 million for capital expenditures. Net cash flow in the first quarter was a positive $10.6 million, which included a paydown of $37.4 million oflong-term debt.

Turningtothebalancesheet.Attheendoffirstquarter,cash,cashequivalents,restrictedcashplusshort-terminvestmentstotaledapproximately$339 million. Working capital was $618 million and total debt, including long-term and short term, was $415 million.

Intermsofinventory,attheendoffirstquarter,totalinventorydaysdecreasedtoapproximately98inthequarteronaconsolidatedbasisascomparedto115lastquarter.Finishedgoodsinventorydaysalsodecreasedto27from31inthefourthquarter2020.Totalinventorydollarsdecreased$17.1milliontoapproximately$290million.Totalinventoryinthequarterconsistedofan$18.2milliondecreaseinrawmaterials,a$3.5million decrease in finished goods and a $4.6 million increase in work in process.

Capitalexpendituresonacashbasisforthefirstquarter2021were$17.2millionor4.2%ofrevenue.Weexpecttoremainwithinourtargetmodelof 5% to 9% for the full year.

Nowturningtoouroutlook.Forthesecondquarterof2021,weexpectrevenuetoincreasetoapproximately$434million,plusorminus3%,whichrepresentsarecordonbothanorganicandaconsolidatedbasisforacombinedincreaseof5%sequentiallyatthemidpoint.WeexpectGAAPgrossmarginonaconsolidatedbasistobe35.6%,plusorminus1%.Non-GAAPoperatingexpenses,whichareGAAPoperatingexpensesadjustedfor amortization of acquisition-related intangible assets, are expected to be approximately 20.5% of revenue, plus or minus 1%.

Weexpectnetinterestexpensetobeapproximately$1.6million.Ourincometaxrateisexpectedtobe19%,plusorminus3%,andsharesusedtocalculatedilutedEPSforthesecondquarterareanticipatedtobeapproximately$45.7million.Pleasenotethatpurchasingaccountingadjustmentsof $3.3 million after-tax for Pericom and previous acquisitions is not included in these non-GAAP estimates.

With that said, I will now turn the call over to Emily Yang.

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Thankyou,Brad,andgoodafternoon.The17.9%sequentialincreaseinthefirstquarterrevenuewasbetterthanthehighendofourguidance,drivenbytherecorddirectrevenueincreasedmorethan30%andrecordPOSrevenueupmorethan10%,ledbyPOSrecordsinAsiaandEuropecombinedwithstronggrowthinNorthAmerica.Distributorinventoryintermsofweeksdecreasedquarter-over-quarterandbelowourdefinednormal range of 11 to 14 weeks.

4

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Lookingattheglobalsalesinthefirstquarter.Asiarepresented81%oftherevenue;Europe,12%;andNorthAmerica,7%.Intermsofourendmarkets,computingrepresented30%oftherevenue;industrial,22%;consumer,19%;communication,17%;andautomotive,12%ofrevenue.Weachievedrecordrevenueinautomotiveendmarket,whichwasstrongacrossallregionsandthecomputingmarket,drivenbyrecordPericomrevenue.

Nowletmereviewtheendmarketingreaterdetails.Startingwithourautomotivemarket.Ourrecordrevenueachievedinthequarterreflectsan18%sequentialincreaseand61%year-over-yearincreaseto12%oftotalrevenue.ThisgrowthwasdrivenbystrongorganicgrowthforDiodesofautomotive products with minimal contribution from LSC since this product has low exposure to this market.

WealsocontinuetogaincontactwithourexpandedautomotiveportfolioofPericomproductsaswesecuredseveralnewdesign-insforourinterface and frequency control product in the automotive applications, ranging from ADAS, infotainment, telematics and DASH Board systems.

Duringthequarter,weintroducedseveralnewautomotive-gradeproducts,includingUSBswitches,IOexpandersand14newfrequencycontrolproducts for the in-vehicle infotainment system, connected driving, lighting and body control applications.

We also introduced a 2-wire automotive LED hall sensor and over 20 DC-to-DC products with design-ins and design wins and multiple customersintheinfotainmentpowersupplies,lighting,instrumentclusters,telematicsandADASapplications.Wealsosecuredadditionaldesignwinsforgatedrivers,LEDdriversandvoltageregulatorswithmajorcarmanufacturersinapplicationslikewirelesscharging,lightingandDC-DCforelectricvehicles.

Alsoduringthequarter,wesawverystrongdemandforourprotectiondevicesinautomotivefusiblelinks,HDMI,LVDSanddatalineprotection.HighervoltagebatterysystemdroveupthedemandforourMOSFETproducts.Alsoreleased2newMOSFETsintheTOLLpackagetohelpaddressthepowerefficiencydemand.Wealsoreleased3channellinearLEDdrivers,7newSBRproductand5voltbipolartransistorautomotiveproductduringthequarter.SBRSKYproductwasdesigned-inbyanumberofcustomersintheEVbatterymanagementsystem,carheadlight,display,onboard computer and portable power bank applications.

Inourindustrialmarket,wealsoachievedveryhealthyrevenuegrowthof13%sequentiallyand25%overtheprioryear.Similartotheautomotivemarket,revenuecontributionfromLSCisveryminimal,whichhighlightsthestronggrowthandmomentumDiodeshascontinuedtoachieveinthe industrial market.

During the quarter, we saw increasing demand for our Wide Vin LDO product family for applications such as power tools, e-meters, IoT and otherindustrialapplications.WehavealsoseenanincreasingnumberofdesignwinsforlinearvoltageregulatorsinDCfanstosupportapplicationssuchas mining machines, communication, MCUs and IT systems.

Additionally,wesawmoredesign-insforSBRandTrenchSchottkyinapplicationslikeindustrialrouter,lightingandheavymachinery.Diodes'MOSFET products continued to gain market share in lots of DC inverter applications, and our success with LED driver chipset continued with newdesign-ins for commercial lighting projects.

Wealsoreleasedour8-port/8-LanePCIExpress3.0packetswitch,whichisdesignedtomeettheneedofindustrialPCmarkettoimprovesignalreliability and increase bandwidth performance.

Intheconsumermarket,wesawstrongdemandforourPiezosounddriverduetotrackermarketgrowth.WealsocontinuetoexpandourbusinessforUSBpowerdeliverydecoderinOEM-ODMquickchargerapplications.TVandmonitordesignwinsalsocontinuetorepresentalargeopportunityforourBJTproducts,andwehaveverygooddesignwinactivitiesforverysmalltransistorsintoroboticvacuumcleanersanddoorbells.Inaddition,we continue to build traction for our products in IoT, smart home and entertainment applications.

Forthecommunicationmarket,wesawtractionfromseveralSchottkyandSBRproductsinthesatelliteradio,5Grouters,accesspointroutersandpoweroverEthernetswitches.DemandforourPericomproductremainsstrongashigh-speeddataprocessingdrovetherampingof200,400,800

5

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

gigconnection.Pericomfrequencycontrolproducts,ultra-lowjitter,smallsizecrystaloscillatorfamily,haveseveraldesign-insintoopticalmodules.We also released more than 11 new devices in frequency control product family for communication applications.

Alsoduringthequarter,ourhighPSRRLDOproductfamilyandomnipolarhallsensorscontinuetoachievedesignwinsanddesign-insinsmartphones.Our low saturated high-voltage transistors would be signed into routers, IP cams and optical network application.

Lastly,inthecomputingmarket,revenueincreased54%quarter-over-quarterand160%year-over-yeartoaquarterlyrecord,primarilydrivenbyrecordPericomrevenuecombinedwithinitialrevenuecontributionfromLSCproducts.Newdesign-inactivitycontinuesinthePCsegment,alongwithincreaseddemandofourexistingPericomproducts,drivenbythegrowthacrossalltheplatforms,includingconsumer,educationandcommercial PCs. In the quarter, we released 3 1.8 volt ReDrivers servicing to USB Type-C and DisplayPort for PCs and 2 additional HDMI ReDriversforhigh-speedmediaapplications.Continuousdemandforhigh-resolutiondisplay,propelledourHDMI/DPReDriverproducttootherunitvolumepeak.NewUSBpowerswitchproductforUSB-AandUSB-Cportsachievedsolidrevenuegrowth,drivenbystrongmarketdemandfornotebooks.Ourdesign-inmomentumcontinuedforDual-unipolarHallsensor,ESDtotalsolutionsforUSBType-C,flashLEDdriverandtheSchottkyproductsin the notebooks, tablets and storage applications.

Alsoduringthequarter,incomputingmarket,wereleasedcloseto100newpowerTVS,HighSearchdatalineprotectionandpowerstageproductsfor power line and VBUS protection for notebooks, mobile phones, panels and charger applications.

Insummary,weareverypleasedwithourstrongstarttothenewyear,ledbyaboveseasonalgrowthresultinginrecordfirstquarterrevenue.Additionally,recordPOSaswellaslowchannelandinternalinventoryindicateastrongsecondquarterwithcontinuedincreasingingrowthandprofitability.WehavealreadybeguntorealizetheinitialbenefitofthemanufacturingsynergyfromtheLSCacquisitionwithsignificantopportunitiesfor upside by capitalizing the additional synergies across products, customers and end markets.

With that, we now open the floor to questions. Operator?

QUESTIONSANDANSWERS

Operator

(Operator Instructions) Our first question comes from the line of Matt Ramsay from Cowen.

Matthew D. Ramsay- Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst

Impressiveresultsforsure.Dr.Lu,IwonderifyoumightgiveusabitofamoredetailedstatusupgradeoftheintegrationontheoperationssidewithLSC.YouIthinkmentionedinyourbriefpreparedcommentsthatyou'renowat70%utilizationinthosefacilities.It'scertainlyagoodenvironmenttohaveextracapacity,giventhetightnessintheindustry.Soifyoucouldgiveusalittlebitofanupdatethereandhowyouseethatutilization rate of those facilities trending in the next couple of quarters?

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Yes. Let me get Gary. He is in charge for the LSC integration to answer your question.

Gary Yu- Diodes Incorporated - SVP of Business Groups

Yes.Hi,everybody,thisisGary.I'mnewtothisconferencecall.Okay.Andtoansweryourquestion,yes,wedoseetheimprovementbythefacilityusageincreasedalotinthesecondquarter.Andwewillcontinueloadingourfactoryinthenextcoupleofquarters,andwewillseemorerealizationin the third and the fourth quarter.

6

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Matthew D. Ramsay- Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst

Gotit.Welcometothecall.Andasmyfollow-upquestion,Iguess,forthewholeteam,it'sbeensomeveryimpressivegrowth,bothconsolidatedinorganically,butnosecretthatthere'salotofdifferentpointsofcapacitytightnessacrosstheindustry.Diodeshappenstobeinapositiontohavesomeextrafoundrycapacity,whichisgreat.Butmaybeyoucouldcalibrateusalittlebitonhowotherthingsinthemarketmaybeaffectingtheupsidethatyoucancontinuetodeliver?I'mthinkingaboutthingsliketestingcapacity,packaging,wafers,substratesandevenlimitationsofsupplyofsomeofyourpeercompaniesthatmaysellintothesamecarsorendmarketdevices.Ifthere'sanybodyyoucouldcalibratehowtheenvironmentis out there versus the strength that your company is seeing, that would be much appreciated.

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Okay.Themostconstraintofthecapacityisthewaferfab.Andfortunately,halfofourwaferfabrequirements,ourwaferrequirementiscomingfromourinternalwaferfabsupport.Andanotheradvantageoranother,fortunately,isbecausein2019,weacquiredthefabfromTexasInstruments,we call GFAB, and that GFAB provide us a very big additional internal capacity.

Andtheotheroneiswearerampingupthe,wecallSFAB2,whichisinShanghai,whenweacquiredBCD,andthatisthefabwearegetting.Andnow we are ramping up for the 8-inch section of the SFAB2. So those 2 fabs are helping us a lot for the wafer requirements.

Theninaddition,whenwepurchasedLSC,andLSCfabisunderloaded.Ifyouremember,we'rejusttalkingaboutthat,whenweacquireditwas50%loading.Sowenow,likeGarywastalkingabout,in1Qit'salreadyupto70%,thenwe'llcontinueincreasethecapacityortheutilizationforthat LSC fab.

Sooverall,wereallyhavegoodroomtogrowourrevenuebytheramp-uporutilizemoreofourinternalfab.Then,yes,sinceweareabletogetmoresupportfromourexternalfabs,sooverall,weseesomeconstraint,butit'snotveryseveretous.Andyoucanseethatinourrevenuegrowth,continued revenue growth in 1Q and continue to 2Q, and we are able to continue to support us in the future -- the rest of the year.

Okay.Andthentherestofitsinceassembly,again,majorityisourownfactory.Sowedocontinuetoexpandourassemblycapacities.Sowedon'treallyseeamajorlimitationforourexpansionfortherevenues.Andtherestofitisreallyaminorconstraint.Therefore,IthinkDiodeshasperformedmuch better than our competitor due to we have a lot of our internal manufacturing capability.

Matthew D. Ramsay- Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst

The results speaks for themselves.

Operator

Our next question comes from the line of William Stein from Truist Securities.

William Stein- Truist Securities, Inc., Research Division - MD

Part of it was answered a moment ago, but I'm maybe looking for more -- maybe the word is a more forceful view. Everyone else is -- all the othercompaniesaretalkingveryclearlyaboutcapacityconstraints.Itsoundslikethey'renotasproblematicforyoubecauseofyourinternalcapacity.Areyouseeingleadtimesinaggregatestretcheitherbecausethecompanyishavingtroubledeliveringonsomeparts?Orbecausecustomersarewillingtoplaceordersatlongerleadtimes?Areyouseeingthatdynamicinyourbusiness?Andifso,maybehowfaroutinthefuturearewestretching today?

7

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Right.ThisisEmily.Letmeanswerthequestion.Sowe'vedefinitelyseentheoverallmarketconstraint,right?Wehavevery,verystrongbook-to-billratio.Wehaveextremelystrongbacklogacrossalltheregions.AndjustlikeIreported,wehavevery,verystrongPOSresultaswell.Sodefinitely,we'veseenalittlebitoftheimbalanceofsupplyanddemandinthemarket.SoIwanttomakesurewe'reseeingthataswell.Whatwe'vebeendoing is actually we are overcoming different bottlenecks by working very closely with the customers to understand their true demand, right? Sodefinitely,weareseeinglonger,I'llsay,bookings,right?People--theleadtimeisstretchingalittlebitlonger.ButI'vebeenemphasizing,it'snotreallyabouttheleadtime,it'sreallytruedemandunderstandingfromthecustomerbyworkingcloselywiththem.Sowe'redefinitelyseeinglongervisibility for the backlog point of view. So yes.

William Stein- Truist Securities, Inc., Research Division - MD

One other, if I can. An idea that's been sort of discussed in the semi industry for some years is competition from local China-based manufacturers.Andthere's,Ithink,anewJVannouncedinthelastcoupleofdaysbetweenYageoandFoxconntoproducesmallICs.Notnecessarilyaboutthatpotentialfuturecompetitorsspecifically,butifyoucancharacterizethecompetitivethreatsgenerallyandspecificallyaboutsortoflocalnewentrants in the market in China?

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Right.Sodefinitely.We--ImeannewcompetitorscomingfromChinaisnothingnew.We'vebeenseeingthat,Iwouldsay,situationforawhilealready.LikeImentionedbefore,whatweusuallyseethesekindofcompetitorsreallymoreonthelowendoftheproductorthetechnology.Soovertheyears,Diodeshasbeenimplementingastrategyofactuallywalkingawayfromthiskindofdeepcommoditymarketareas.Sowhatwe'vebeen doing is actually continue to improve our technology and continue to drive the product mix to the higher end side, right?

So I would say, even having more competition in the low end area, doesn't really have a big impact for the overall Diodes' business, actually it fitsbetter with our new strategy because that has been our direction for the last few years.

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Yes.Iwouldaddfewwordsiswe--whatwe--anotherstrategywedidisconvertoursalesfromthecommodityorindividualsaletothecontentortotalsolutionsaleswiththeverybigorverystrong,verywideproductportfolio.AndthroughallthepasthistoryofM&A,wearenow--ourproductportfolioisverycompletedandverywiderange.Andtherefore,itgivesusanadvantagewhenwegotothecustomer,whenweapproachtothetotalsolution.AndthenewstarcompanyorChinacompany,typically,theyarenotabletohaveaverywiderangeofacompletedoftheproduct portfolio. And so this -- we watch out for our competitor coming, but we apply our strength of the wide range product portfolio.

IthinkthisjustgivesthecreditforourpasthistoryoftheM&Aandtoenableustonowparticipatetothecustomersolutionbyusingourwiderange of product portfolio.

William Stein- Truist Securities, Inc., Research Division - MD

Congratulations on the excellent results.

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Thank you.

8

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Thank you.

Operator

Our next question comes from the line of Tristan Gerra from Baird.

Tristan Gerra- Robert W. Baird & Co. Incorporated, Research Division - MD & Senior Research Analyst

IthinkIheardthatabout50%ofyourproductionisoutsourcedcurrency.AndIthinkthat'smostlyontheanalogsidefollowingtheyearsago,KansasCityshutdown.Areyouexpectingtomeaningfullychangeoverthenextfewyearsandincreasethepercentageofyourmanufacturingthat's going to be in-sourced, notably as you now have more capacity in-house between SFAB2, GFAB and Lite-On?

Gary Yu- Diodes Incorporated - SVP of Business Groups

Yes.Andletmeansweryourquestion.Definitely,wearegoingtohaveadditionalcapacitythatwecanhaveagoodcontrol.ButDr.Lumentionedaboutfromyearsago,weacquiredBCD,sowehaveaSFAB.AndGFABweacquiredfromTI,wegeta6-inchand8-inchwaferfabinScotland.Andalso, just recently, we merged with Lite-On Semi and we have 6-inch wafer fab and 4-inch wafer fab in the Hsinchu and Keelung in Taiwan.

Sowearestilllookingforthegoodcandidatewithagoodcapacitytoincreaseinternallyinthefuture.Sothatprobablyisverysoon,andwewillhave newer capacity, maybe okay. But definitely, just our direction to increase internal capacity and reduce the outside support for subcons.

Tristan Gerra- Robert W. Baird & Co. Incorporated, Research Division - MD & Senior Research Analyst

Okay.Andthengiventherelativesupplyadvantageyouhaveversuspeersandgivensomelargeranalogcompaniesordeemphasizingcertainproductsbeingsupplyconstrained.Doyoubasicallyseemarketsharegainsasyou'rebasicallytakingonproductsthatsomeofyourpeersareeither deemphasizing on purpose, so not able to serve the market with?

Gary Yu- Diodes Incorporated - SVP of Business Groups

Yes, definitely. When the capacity is very high and demand is very strong and whoever the company has a capacity will win the business.

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Right.Soletmejustaddalittlebitontopofthat.IthinkTristanis--it'sallaboutbalancing,right?Sokeepinmind,ourstrategydoesn'treallychange.Whatwe'vebeenfocusingiscontentexpansion,right?Sowewanttocontinuetoexpandtheproductintothecustomerandcontinuetoexpandourcustomerbase,right?Sorightnow,it'saninterestingdynamicofthemarket,butdoesnottakeawayourlong-termfocusasacompany.So what our focus is to continue with our total solution sales, continue to improve our product mix, right?

Sothatisactuallythereasonbecausewedohaveaverycleargoalby2025thatwewanttoachieve$2.5billion,right?SoIwouldsay,yes,there'sshortterm,Iwouldsay,variationsforthedemandandsupplyinbalance,butthatdoesnottakeawayourlong-termstrategyoftheproductmiximprovement as well as content expansion.

Operator

(Operator Instructions) Our next question comes from the line of David Williams from Loop Capital.

9

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

David Neil Williams- Loop Capital Markets LLC, Research Division - VP

Congrats on the solid progress. I guess I wanted to see maybe if you could help size up maybe your backlog or maybe any color around the mathofvelocityoftheordersthroughthequarter.Justkindofhowyou'veseenorderstracking?Andhowyouthinkaboutthataswemovethroughthis quarter or maybe into the third quarter?

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Okay.David,letmeansweryourquestion.Sowedoactuallycontinuetoseestrongbook-to-billratio,muchhigherthanone.Andwe--likeIreportedintheQ1results,right,wehaveseenverystrongPOSresultsandtherecordPOSfromAsiaaswellasforEurope.EvenforNorthAmerica,we'reactually seeing very, very strong net momentum, grow more than 20%.

IfIlookatthedirectPOPbusinesspointofview,theOEMbusiness,Ialsomentionedweactuallygrowmorethan30%,right?Sobasedonallthisdataandbasedonthestrongbacklogthatwecurrentlyhaveonthebook,sooverall,Iwouldsaythemarketisvery,verystrongacrossalltheregions and also across all the segments.

Sowithinthesegments,we'redefinitelyseeingcontinuedextrastrongstrengthfromtheautomotive,andwe'realsoseeingverygoodmomentumintheindustrialcontinuetorecoverandthecomputingwillcontinuetobestrong.Ithinkeveninconsumerandcommunications,wearealsoseeing very strong backlog as well.

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Inaddition,ifyoulookatour--theinventoryfromourdistributorisverylow.Okay.We'retypicallylookingfor11to14weeksofthedistributorinventory,andwearenowevenbelowthe11weeks.Soinaddition,thePOS,strongPOS,theinventoryuseorlowinventoryisactuallygoingtoindicate a very strong business in the future.

David Neil Williams- Loop Capital Markets LLC, Research Division - VP

Okay.Allright.Andthenmaybejustfromyourcustomers,doyougetasensethattheyarebeingfairlyrationalintermsoftheirorders?Obviously,doublebookingsareathingandmaynotmeanmuch.Butdoyougetasensethatmaybethey'rebecomingalittlemorerationalintheirorderingand understanding the lead times and placing orders that are in line with what the real dynamics are?

Emily Yang- Diodes Incorporated - SVP of Worldwide Sales & Marketing

Yes.SoIthink,likeImentionedbefore,weworkverycloselywiththeTier1,Tier2customers,tounderstandtheirtruedemand.Whatweseeis,isveryrational.Butgoingthroughthedistributionside,theTier3,Tier4isnotsomethingwehavethebandwidthtoworkwitheachindividualcustomertounderstandit.Sohowwemeasureitisactually,welookatthePOSresell.Welookatthechannelinventory.Sowithallthisdata,Iwould say, overall, the business seems really solid and strong overall.

Operator

Thisdoesconcludethequestion-and-answersessionoftoday'sprogram.I'dliketohandtheprogrambacktomanagementforanyfurtherremarks.

Keh-Shew Lu- Diodes Incorporated - Chairman, CEO & President

Thank you for your participation on today's call. Operator, you may now disconnect.

10

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

MAY 06, 2021 / 9:00PM, DIOD.OQ - Q1 2021 Diodes Inc Earnings Call

Operator

Thankyou.Andthankyou,ladiesandgentlemen,foryourparticipationintoday'sconference.Thisdoesconcludetheprogram.Youmaynowdisconnect. Good day.

DISCLAIMER

Refinitiv reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes.

IntheconferencecallsuponwhichEventTranscriptsarebased,companiesmaymakeprojectionsorotherforward-lookingstatementsregardingavarietyofitems.Suchforward-lookingstatementsarebaseduponcurrentexpectationsandinvolverisksanduncertainties.Actualresultsmaydiffermateriallyfromthosestatedinanyforward-lookingstatementbasedonanumberofimportantfactorsandrisks,whicharemorespecificallyidentifiedinthecompanies'mostrecentSECfilings.Althoughthecompaniesmayindicateandbelievethattheassumptionsunderlyingtheforward-lookingstatementsarereasonable,anyoftheassumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized.

THEINFORMATIONCONTAINEDINEVENTTRANSCRIPTSISATEXTUALREPRESENTATIONOFTHEAPPLICABLECOMPANY'SCONFERENCECALLANDWHILEEFFORTSAREMADETOPROVIDEANACCURATETRANSCRIPTION,THEREMAYBEMATERIALERRORS,OMISSIONS,ORINACCURACIESINTHEREPORTINGOFTHESUBSTANCEOFTHECONFERENCECALLS.INNOWAYDOESREFINITIVORTHEAPPLICABLECOMPANYASSUMEANYRESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLECOMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

©2021, Refinitiv. All Rights Reserved.

14662845-2021-05-12T17:25:11.310

11

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2021Refinitiv.Allrightsreserved.RepublicationorredistributionofRefinitivcontent,includingbyframingorsimilarmeans,isprohibitedwithoutthepriorwrittenconsent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.