Good afternoon, and welcome to Diodes Inc. Fourth Quarter and Fiscal 2024 Financial Results Conference Call. 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.

Good afternoon, and welcome to Diodes Fourth Quarter and Fiscal 2024 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, Diodes' 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 are 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. And now I'll turn the call over to Diodes' President, Gary Yu. Gary, please go ahead.

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 market 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 multiyear market slowdown. Even though the overall global demand environment remains challenging, particularly in Europe and North America, we are 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 the new year having strong POS in Asia for 2024, improved channel inventory levels, and a solid balance sheet, combined with a committed focus on expanding growth in our target markets, particularly 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 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 products to further improve the quality and mix of our portfolio. With our revenue contribution from automotive and industrial consistently above our target model, we are well positioned for growth and margin expansion as the market recovers 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.

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 of 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 related to acquisition 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 of 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 from 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% and for the full year 2024, the tax rate was approximately 18.9%. 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 the fourth quarter of 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 noncash mark-to-market investment value adjustment, restructuring charges of $0.2 million, and acquisition-related costs of $1.9 million. 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 noncash 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 noncash share-based compensation expense of $18 million and $17.4 million, respectively, net of tax, 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 18.1% of revenue in the fourth quarter of 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 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 Fort Media, a global company that operates in Asia and develops high-quality solutions and semiconductor products to enhance human and human to machine voice communications. Diodes acquired Fort Media to expand our product portfolio and enhance the company's footprint in advanced voice processing technologies, primarily targeted at the automotive and compute markets. Turning to our balance sheet, at the end of the 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%, representing a 4.8% sequential decrease at the midpoint due to the 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 of 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. 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 estimates is amortization of $5.8 million after tax for previous acquisitions.

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 that our channel inventory was lower both in terms of dollars and weeks. I will also note that POS in Asia for 2024 was strong, especially in the second half of the year where we saw double-digit growth over the same period in 2023. Looking at 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 communication 15% of product revenue. Our automotive and 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 with 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 the 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 detail. Starting with the automotive market, we maintained the product revenue at 19%, 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 gains to position Diodes for growth as the auto market recovers. As I mentioned earlier, Diodes introduced a high number of new automotive compliance 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 form-factor PCI Express packet switches, USB Type C re-drivers, and active cross boxes for the rear seat entertainment and smart cockpit 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 products, including MOS power, TVS SBR, and bipolar junction transistors, are seeing demand growth across multiple automotive applications. We have also been ramping up new designs for our high-voltage products, which are being used in the tailgate lift door harness and electric steering control across multiple customers worldwide. Also in automotive, our LED driver business continued to see strong demand in various lighting applications, while our ultimo LED driver controllers gained traction in applications such as front high and low beams, as well as rear and interior lighting. In the industrial market, the inventory correction continues similarly to the automotive end market. We expect this may last into the second quarter. Despite the demand softness, we continue to make progress in our design-in and design-win initiatives. Our high-voltage switches are seeing design wins for window openers, DC fans, and motor applications, while our phototransistors and LDOs are seeing traction in e-meters, industrial equipment, motor control systems, and power tools. Additionally, our protection devices are being designed into battery backup units as well as programmable larger control units. A bridge rectifier had multiple design wins in the switching-mode power supply for server power. We also saw several new silicon carbide SBD design activities in real power supply and electric motor, as well as Tier 1 energy storage applications. In the computing market, we continue to see strong growth momentum in 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, compared to $53 per box last year for traditional servers. Also in the computing market, we received solid demand for our products across various applications, as well as our ideal diode controllers, MOSFETs, and compact power switches for input power management and power path sequencing control applications. Additionally, our bus switches solutions for enterprise SSD and next-generation portable gaming consoles are being well received, as they have helped our customers double the supported capacity with our redesign of their storage controllers and help protect against software piracy for gaming console customers. Lastly, high-bandwidth cameras in notebooks are driving demand for our MPD re-drivers, and we continue to achieve momentum for our shock and protection products in notebook and docking station applications. In the communication market, our eUSB 2.0 repeaters have become the standard interface for CPUs and SoC processors in mobile communication, where our one and two-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 bipolar junction transistors, shockers, and SBR products are seeing new designs for 5G CPE and 5G modules. We also saw strong momentum for USB power management and ACDCPWM 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 chargers and battery pad applications. Additionally, our bridge rectifiers are being designed into gaming applications, while our high-voltage buck converters are being adopted in smart home IoT applications. We also have new design wins for bipolar junction transistor products in personal care devices. In summary, we're pleased to achieve year-over-year growth in the fourth quarter after a 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 our new product initiatives to drive increasing content opportunities as the global market recovers. With that, we now open the floor to questions. Operator?

And your first question today will come from David Williams with Benchmark.

Congratulations on the return growth here.

Thank you, David.

Emily, maybe you could speak a little bit to the seasonality that you're talking to and how that's taking you in China, expected both 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.

Yes, the Chinese New Year aligns with our expectations. We haven't observed anything unusual, although some customers experienced extended shutdowns, not all of them did. Overall, it's within what we anticipated. We factored in the return of employees after the Chinese New Year, and combined with the overall market, we've guided a 4.8% decline for Q1, which is actually slightly better than our typical seasonality. Historically, Q1 has not been a strong quarter for us due to the effects of Chinese New Year. Overall, everything is within our expectations.

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 in the gross margin, I guess, just given the nice bump sequentially there?

Yes. 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 focus on product initiative improvements overall. We continue to introduce 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 are actually automotive parts. So you can actually see our commitment to driving new products and new technology, which continue to expand our available content market overall. So that will continue to be the focus, right? So a couple of things that drive the margin improvement. One is on product improvement and product mix improvement initiative. The other side is actually on the underloading situation. So like Gary mentioned, we continue to minimize the impact, continuing to bring in additional products into our own internal fab as an 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 expected gross profit margin overall based on the guidance.

Okay. Is there a way to think about how far you are through that 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?

I think that will be an ongoing effort, right? We not only need to qualify the process, the technology, and the devices, but we also need to work with the customers to qualify that device as well. So I would say it's an ongoing process, and it's probably going to take a number of quarters to continue to improve over time. But we strongly believe that 2025 is actually going to be a better year, so that's also going to drive some of the revenue while driving some of the loading. So we're actually pretty confident that overall, you're going to see improvements throughout the quarters within 2025.

And your next question today will come from William Stein with Truist Securities.

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.

Okay. All right. So the automotive market is still going through inventory rebalancing and coupled with weaker demand overall, especially from the Europe territory. So we think Q1 is going to be a challenging quarter overall. As you can see, even with the Q4 challenging, we tried to maintain the 19% overall of product revenue, and I think that will continue to be the focus. It's actually focused on content expansion and market share gains overall. For the industrial market, we're still seeing ongoing inventory rebalancing. Some customer situations are worse than others, definitely some are better, so not everything's equal. But all in all, we see that this will continue to linger through the second quarter. In the compute market segment for Q1, we expect it probably to be slightly down as well because the Chinese New Year manufacturing, a lot of that is in Asia, and that will be impacted overall. The consumer segment was never a strong quarter in Q1, so we don't expect consumer to grow as well as communication. I think on the communications side, in the enterprise traditional networking, we're actually seeing some improvement in inventory rebalancing overall, so that might give us some upside, but the smartphone sector is probably going to 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, we guided 4.8% down for the whole quarter.

But that's still a better seasonality for the first quarter.

Okay. Let me ask about operating leverage. Compared to December of 2022, 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. But as your revenue recovers, should we think there's going to be similar positive operating leverage on the way up? Or have you added costs that might make the leverage less severe or less significant as it was on the way down?

I would say that we haven't made any significant structural changes during that time. Over the past few years, we've focused on our TIC instruments factory, which has improved our operations. As you can see, we've reduced overall operating expenses from 2022 to 2023 and expect to continue that trend into 2024. I believe we're going to see good margins as we grow, especially since we're bringing some sourcing in-house instead of outsourcing. The manufacturing capability is now part of our infrastructure. I anticipate good leverage going forward and don't expect costs to rise back up significantly. Instead, as a percentage of revenue, costs should decrease or plateau before declining again as revenue increases, which we are confident will continue, following last year's growth in the fourth quarter.

Your next question today will come from David Williams of Benchmark with a follow-up.

And forgive me if I missed it, my line dropped out. But I wanted to ask maybe on pricing trends, what you're seeing there? Have you seen erosion greater than you would typically see? Or does that seem to come down a bit just from a pricing perspective?

Yes, David. I believe pricing remains fairly stable. We are still within the range of a 1.5% to 2% increase per quarter. Overall, I wouldn’t say the environment has changed significantly. There is more price competition in the commodity sector, which we have been intentionally moving away from. So, overall, it is stable.

Another important thing is we're probably going to emphasize a lot on our product portfolio enhancement. We've introduced a lot of new products, not only limited to automotive, but also in different segments where we can achieve a much better average selling price and gross profit percentage with those new products we've introduced to the market. So we can balance like commodity loss in some markets.

Okay. Great. And then 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 additional sockets available? Or is it your product portfolio? Or what's really driving that opportunity within that certain kind of market for you?

I think it's a combination of everything, right? We are expanding our product portfolio. We're introducing newer products overall supporting AI server applications. We also see that with the AI server application, with certain chipsets, there are additional PCI Express ports required, and we actually have this PCI Express packet switch portfolio that's very well suited to support these kinds of applications with the requirement of additional PCIe ports. So I would say it’s a combination of a number of different things. Of course, the volume and the change of the overall market, it's all beneficial to our growth.

That concludes our question-and-answer session. I would like to turn the conference back over to Gary Yu for any closing remarks.

Thank you, everyone, for participating in today's call. We look forward to reporting our progress on next quarter's conference call. Operator, you may now disconnect.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.