Q1 2026 growth at Diodes (NASDAQ: DIOD) lifts revenue and margins
Diodes Incorporated delivered a strong Q1 2026 rebound, returning to profitability on solid top-line growth. Net sales rose 22.1% year over year to $405.5 million, driven by stronger demand across all end markets, with particular strength in automotive, industrial and AI-server related applications.
Gross profit increased to $128.8 million, and gross margin edged up to 31.8% from 31.5% a year earlier as higher-margin automotive and industrial products reached 44% of product revenue and factory utilization improved. Diodes reported net income of $15.0 million, versus a $4.4 million loss in Q1 2025, and diluted earnings per share of $0.32 compared with a loss of $0.10.
Cash generation remained healthy. Operating cash flow was $64.3 million, supporting $31.9 million of capital expenditures focused on manufacturing capacity and efficiency. Cash, cash equivalents, and short-term investments totaled $404.3 million at quarter end, and the company had an undrawn $225.0 million revolving credit facility, giving it substantial liquidity to fund working capital, capital projects, and potential acquisitions.
Positive
- Strong top-line and earnings rebound: Q1 2026 net sales rose 22.1% year over year to $405.5 million, with a swing from a $4.4 million net loss to $15.0 million in net income and diluted EPS of $0.32.
Negative
- None.
Insights
Q1 2026 shows a clear recovery: double-digit growth, margin stability, and solid cash generation.
Diodes grew Q1 2026 net sales to $405.5 million, up 22.1% year over year, while keeping gross margin at 31.8%. That combination of strong volume growth and stable margin supports the narrative of demand recovery across automotive, industrial, and AI-server related applications.
Net income swung from a $4.4 million loss in Q1 2025 to $15.0 million of profit, with diluted EPS at $0.32. Operating expenses rose modestly, and as a percentage of sales fell to 26.9%, indicating improving operating leverage as revenue scales.
Liquidity is a key strength. Operating cash flow of $64.3 million, cash and short-term investments of $404.3 million, and an undrawn $225.0 million revolver provide ample flexibility to fund planned capex of 5–9% of net sales for 2026. Management also reiterates its interim targets of $2 billion annual revenue and $700 million gross profit, framing this quarter as progress toward those goals.
Key Figures
Key Terms
gross profit margin financial
effective tax rate financial
share-based compensation expense financial
variable interest entity financial
noncontrolling interest financial
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Or
For the transition period from to .
Commission file number:
DIODES INCORPORATED
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Emerging growth company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of the registrant’s Common Stock outstanding as of May 4, 2026 was
DIODES INCORPORATED AND SUBSIDIARIES
Table of Contents
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Part I – Financial Information |
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Item 1. Condensed Consolidated Financial Statements (Unaudited) |
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3 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. Controls and Procedures |
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Part II – Other Information |
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Item 1. Legal Proceedings |
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Item 1A. Risk Factors |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. Defaults Upon Senior Securities |
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Item 4. Mine Safety Disclosures |
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Item 5. Other Information |
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Item 6. Exhibits |
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Signatures |
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PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
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March 31, |
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December 31, |
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2026 |
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2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Restricted cash |
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Short-term investments |
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Accounts receivable, net of allowances of $ |
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Inventories |
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Prepaid expenses and other |
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Total current assets |
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Property, plant, and equipment, net |
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Deferred tax assets |
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Goodwill |
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Intangible assets, net |
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Equity investments |
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Operating lease assets |
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Other long-term assets |
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Total assets |
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$ |
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Liabilities |
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Current liabilities: |
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Lines of credit |
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$ |
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Accounts payable |
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Operating lease liabilities, current |
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Accrued liabilities and other |
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Income tax payable |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt, net of current portion |
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Deferred tax liabilities |
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Unrecognized tax benefits |
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Operating lease liabilities |
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Total liabilities |
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Commitments and contingencies (See Note 10) |
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Stockholders' equity |
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Preferred stock - par value $ |
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Common stock - par value $ |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost, |
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Accumulated other comprehensive loss |
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Stockholders' equity |
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Noncontrolling interest |
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Total equity |
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Total liabilities and stockholders' equity |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements. |
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-3-
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Net sales |
$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses |
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Selling, general, and administrative |
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Research and development |
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Amortization of acquisition related intangible assets |
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Loss (gain) on disposal of fixed assets |
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Other operating expense |
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Total operating expense |
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Income from operations |
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Other income (expense) |
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Interest income |
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Interest expense |
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Foreign currency (loss), net |
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Unrealized gain (loss) on investments |
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Impairment of equity investment |
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Other income |
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Total other income (expense) |
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Income (loss) before income taxes, equity in net earnings of equity investments, and noncontrolling interest |
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Income tax provision |
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Equity in net earnings of equity investments |
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Net income (loss) |
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Less net income attributable to noncontrolling interest |
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Net income (loss) attributable to common stockholders |
$ |
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$ |
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Earnings (loss) per share attributable to common stockholders: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Number of shares used in earnings per share computation: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Net income (loss) |
$ |
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$ |
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Unrealized gain on defined benefit plan, net of tax |
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Unrealized (loss) gain on derivative instruments, net of tax |
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Unrealized foreign currency (loss), net of tax |
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Comprehensive income |
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Less: Comprehensive income attributable to noncontrolling interest |
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Total comprehensive income attributable to common stockholders |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
-5-
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
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Common stock |
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Treasury stock |
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Additional |
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Retained |
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Accumulated |
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Total Diodes |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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earnings |
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loss |
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equity |
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interest |
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equity |
Balance, December 31, 2025 |
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$ |
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( |
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$( |
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$ |
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$ |
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$( |
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$ |
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$ |
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$ |
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Total comprehensive income |
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- |
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- |
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- |
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- |
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- |
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( |
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Net changes in noncontrolling interest |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Common stock issued for share-based plans |
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- |
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( |
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Share-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock buyback |
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- |
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- |
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- |
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( |
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( |
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- |
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( |
Tax related to net share settlement |
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- |
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- |
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- |
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- |
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( |
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- |
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- |
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( |
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- |
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( |
Balance, March 31, 2026 |
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$ |
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( |
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$( |
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$ |
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$ |
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$( |
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$ |
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$ |
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$ |
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Common stock |
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Treasury stock |
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Additional |
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Retained |
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Accumulated |
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Total Diodes |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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earnings |
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loss |
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equity |
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interest |
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equity |
Balance, December 31, 2024 |
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$ |
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( |
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$( |
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$ |
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$ |
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$( |
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$ |
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$ |
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$ |
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Total comprehensive income |
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- |
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- |
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- |
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- |
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- |
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( |
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Net changes in noncontrolling interest |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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Common stock issued for share-based plans |
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- |
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( |
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Share-based compensation |
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- |
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- |
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Tax related to net share settlement |
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- |
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- |
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( |
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- |
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- |
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( |
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- |
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( |
Balance, March 31, 2025 |
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$ |
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( |
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$( |
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$ |
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$ |
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$( |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
-6-
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Cash flows from operating activities |
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Net income (loss) |
$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash flows from operating activities, net of effects of acquisitions |
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Depreciation |
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Amortization of intangible assets |
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Share-based compensation expense |
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Deferred income taxes |
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( |
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Investment (gain) loss |
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Impairment of equity investment |
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Gain (loss) on disposal of fixed assets |
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Interest income from derivative financial instruments |
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Other |
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Changes in operating assets: |
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Change in accounts receivable |
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Change in inventory |
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Change in other operating assets |
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Changes in operating liabilities: |
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Change in accounts payable |
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Change in accrued liabilities |
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Change in income tax payable |
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Change in other operating liabilities |
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Net cash flows from operating activities |
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Cash flows from investing activities |
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Acquisition, net of cash acquired |
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Purchases of property, plant, and equipment |
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Proceeds from sale of property, plant, and equipment |
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Proceeds from short-term investments |
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Purchases of short-term investments |
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Purchases of equity securities |
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Cash paid for hedge termination |
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Other |
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( |
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Net cash flows from investing activities |
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Cash flows from financing activities |
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Advances on lines of credit and short-term debt |
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Repayments of lines of credit and short-term debt |
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( |
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Proceeds from long-term debt |
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Repayments of long-term debt |
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( |
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Taxes paid related to net share settlement |
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( |
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( |
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Other |
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( |
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( |
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Net cash flows from financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Change in cash and cash equivalents, including restricted cash |
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Cash and cash equivalents, beginning of period, including restricted cash |
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Cash and cash equivalents, end of period, including restricted cash |
$ |
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$ |
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Supplemental Cash Flow Information |
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Interest paid during the period |
$ |
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$ |
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Taxes paid during the period |
$ |
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$ |
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Non-cash investing and financing activities: |
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Accounts payable balance related to the purchase of |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
-7-
DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – Summary of Operations and Significant Accounting Policies
BACKGROUND
Diodes Incorporated (Nasdaq: DIOD), delivers high-quality semiconductor products to the world’s leading companies in the automotive, industrial, computing, consumer electronics, and communications markets. We leverage our expanded product portfolio of analog and power solutions combined with a flexible hybrid manufacturing model that meet customers’ needs. Our broad range of application-specific products, delivered through a total solutions sales approach and supported by global operations including engineering, testing, manufacturing, and customer service, enable us to be a premier provider for high-growth markets.
Basis of Presentation
The unaudited condensed consolidated financial data at December 31, 2025 are derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 10, 2026 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes necessary for a fair statement of financial position, operating results, and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair statement of the operating results for the periods presented have been included in the interim periods. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2026.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact to the Company’s consolidated financial statements:
In December 2025, the FASB issued ASU 2025-10, “Government Grants (Topic 832) Accounting for Government Grants Received by Business Entities (“ASU 2025-10”). ASU 2025-10 establishes authoritative guidance on the accounting for government grants received by business entities. The amendments in ASU 2025-10 require that a government grant received by a business entity should not be recognized until:
The amendments in this update require that a grant related to an asset be recognized on the balance sheet as a business entity incurs the related costs for which the grant is intended to compensate, either as:
For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact this amended guidance may have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-09 to amend certain aspects of its hedge accounting guidance to better reflect an entity’s risk management activities in the financial statements. The guidance expands the hedged risks permitted to be aggregated in a group of individual forecasted transactions and increases the variable price components eligible to be designated as the hedged risk in the forecasted purchase or sale of non-financial assets. For public business entities, the provisions of ASU 2025-09 are effective for
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fiscal years beginning after December 15, 2026. Early adoption is permitted. Management is currently evaluating the requirements under this new standard.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. In the first quarter of 2026, the Company adopted this standard which did not have a material impact on the Company’s consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, “Business Combination and Consolidation: Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity” (“ASU 2025-03”). ASU 2025-03 provides clarifying guidance on determining the accounting acquirer in certain transactions involving VIEs. The update aims to improve consistency and comparability in financial reporting, especially when companies merge with a special-purpose acquisition company (“SPAC”). ASU 2025-03 requires entities to apply the same factors used for determining the accounting acquirer in other acquisition transactions. Essentially, it aims to make financial reporting more comparable and decision-useful for investors by ensuring that the accounting acquirer is appropriately identified in acquisitions of VIEs, particularly in SPAC transactions. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026 including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact this amended guidance may have on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require that at each interim and annual reporting period an entity disclose:
The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact this amended guidance may have on its consolidated financial statements.
NOTE 2 – Earnings per Share
The table below sets forth the reconciliation between net income and the weighted average shares outstanding used for calculating basic and diluted EPS:
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Earnings (numerator) |
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Net income (loss) attributable to common stockholders |
$ |
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$ |
( |
) |
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Shares (denominator) |
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Weighted average common shares outstanding (basic) |
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Dilutive effect of stock options and stock awards outstanding |
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Adjusted weighted average common shares outstanding (diluted) |
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Earnings (loss) per share attributable to common stockholders |
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Basic |
$ |
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$ |
( |
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Diluted |
$ |
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$ |
( |
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Stock options and stock awards excluded from EPS |
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Note 3 – Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. These two types of inputs create a three-tier fair value hierarchy that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Inputs - Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.
As of March 31, 2026, we had short-term and long-term investments. Long-term investments are included within Equity investments on the consolidated balance sheet. Trading securities held at March 31, 2026, were purchased on the open market and unrealized gains and losses are included in Other income (expense). The trading securities are valued under the fair value hierarchy using Level 1 Inputs. Short-term investments consist of investments such as time deposits, which are highly liquid with maturity dates greater than three months at the date of purchase. Generally, we can access these short-term investments in a relatively short amount of time but in doing so we generally forfeit a portion of earned and future interest income. Long-term investments consist of certain equity securities acquired as part of the LSC acquisition. Deferred compensation investments consist primarily of life insurance policies, but may also include investments in the Company’s stock, mutual funds and cash. See Note 12 for additional information related to our deferred compensation program and Note 11 for additional information related to our derivative financial instruments. The short-term investments, long-term investments and deferred compensation investments are valued under the fair value hierarchy using Level 1 and Level 2 Inputs.
Financial assets and liabilities carried at fair value as of March 31, 2026, are classified in the following table:
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Description |
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Fair Market Value |
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Quoted Prices in Active Markets for Identical Assets (Level 1) |
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Significant Other Observable Inputs (Level 2) |
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Significant |
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Total Changes in Fair Values Included in Current Period Earnings |
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Short-term investments |
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$ |
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$ |
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$ |
- |
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$ |
- |
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$ |
- |
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Long-term investments |
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- |
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- |
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Collared forward asset |
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- |
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- |
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- |
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Collared forward liability |
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( |
) |
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- |
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( |
) |
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- |
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- |
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Deferred compensation investments |
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- |
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( |
) |
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Financial assets and liabilities carried at fair value as of December 31, 2025, are classified in the following table:
Description |
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Fair Market Value |
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Quoted Prices in Active Markets for Identical Assets (Level 1) |
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Significant Other Observable Inputs (Level 2) |
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Significant |
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Total Changes in Fair Values Included in Current Period Earnings |
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Short-term investments |
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$ |
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$ |
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$ |
- |
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$ |
- |
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$ |
- |
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Long-term investments |
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- |
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- |
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( |
) |
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Collared forward asset |
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- |
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- |
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- |
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Collared forward liability |
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( |
) |
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- |
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( |
) |
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- |
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- |
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Deferred compensation investments |
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- |
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Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). We believe our long-term debt under our revolving credit facility approximates fair value and is valued under the fair value hierarchy using Level 2 Inputs. Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at March 31, 2026 and December 31, 2025.
NOTE 4 – Inventories
The table below sets forth inventories which are stated at the lower of cost or net realizable value:
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March 31, 2026 |
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December 31, 2025 |
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Finished goods |
$ |
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$ |
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Work-in-progress |
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Raw materials |
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Total |
$ |
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$ |
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NOTE 5 – Goodwill and Intangible Assets
The table below sets forth the changes in goodwill:
Balance at December 31, 2025 |
$ |
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Foreign currency translation adjustment |
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( |
) |
Balance at March 31, 2026 |
$ |
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The table below sets forth the value of intangible assets, other than goodwill:
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March 31, |
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December 31, |
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2026 |
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2025 |
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Intangible assets subject to amortization: |
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Gross carrying amount |
$ |
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$ |
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Accumulated amortization |
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( |
) |
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( |
) |
Foreign currency translation adjustment |
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( |
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( |
) |
Total intangible assets subject to amortization |
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Intangible assets with indefinite lives: |
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Gross carrying amount |
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Foreign currency translation adjustment |
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( |
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( |
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Total intangible assets with indefinite lives |
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Total intangible assets, net |
$ |
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$ |
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The table below sets forth amortization expense related to intangible assets subject to amortization:
Amortization expense |
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2026 |
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2025 |
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Three Months Ended March 31, |
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$ |
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$ |
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NOTE 6 – Income Tax Provision
The table below sets forth information related to our income tax expense:
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Domestic pre-tax income (loss) |
$ |
( |
) |
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$ |
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Foreign pre-tax (loss) income |
$ |
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$ |
( |
) |
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Income tax provision |
$ |
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$ |
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Effective tax rate |
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% |
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- |
% |
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For the three months ended March 31, 2026, the effective tax rate differs from the
For the three months ended March 31, 2025, the effective tax rate differed from the
The increase in effective tax rate for the three months ended March 31, 2026, when compared to the three months ended March 31, 2025, is primarily due to the change in pre-tax earnings during the comparable periods, including the geographical mix of pre-tax income and loss across tax jurisdictions.
NOTE 7 – Share-Based Compensation
The table below sets forth information related to our share-based compensation expense:
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Three Months Ended |
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March 31, |
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2026 |
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2025 |
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Cost of goods sold |
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$ |
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$ |
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Selling, general, and administrative |
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Research and development |
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Total share-based compensation expense |
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$ |
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$ |
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Share Grants. Share grants consist of restricted stock awards, restricted stock units (“RSUs”) and performance stock units (“PSUs”). Restricted stock awards and RSUs generally vest in equal annual installments over a four-year period and are measured based
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on the fair market value of the underlying stock on the date of grant. Compensation expense is recognized on a straight-line basis over the requisite four-year service period. All new grants are awarded under the Company’s 2022 Equity Incentive Plan.
PSUs are measured based on the fair market value of the underlying stock on the date of grant, and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the probable payout percentage.
As of March 31, 2026, total unrecognized share-based compensation expense related to share grants was approximately $
NOTE 8 – Enterprise-Wide Segment Information and Net Sales
Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. One segment reflects how our chief operating decision maker (“CODM”), which is our chief executive officer, allocates resources, and measures results.
The table below sets forth the number of customers and the amount of sales to that customer, where that customer accounted for 10% or greater of our net sales during the applicable periods:
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For the Three Months |
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2026 |
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2025 |
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Customer 1 |
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$ |
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$ |
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Customer 2 |
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$ |
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$ |
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Each of the customers that accounted for
Disaggregation of Net Sales. We disaggregate net sales with customers into direct sales to end customers and distribution sales to distributors (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We deliver our products to customers around the world for use in the industrial, automotive, computing, consumer, and communications markets. Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months.
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As of and for the |
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Three Months Ended March 31, 2026 |
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Asia |
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Americas |
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Europe |
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Consolidated |
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Total sales |
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$ |
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$ |
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$ |
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Intercompany elimination |
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( |
) |
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( |
) |
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( |
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( |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Property, plant, and equipment, net |
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$ |
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$ |
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$ |
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$ |
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Total assets |
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$ |
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$ |
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$ |
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$ |
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As of and for the |
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Three Months Ended March 31, 2025 |
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Asia |
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Americas |
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Europe |
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Consolidated |
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Total sales |
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$ |
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$ |
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$ |
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$ |
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Intercompany elimination |
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( |
) |
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( |
) |
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( |
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( |
) |
Net sales |
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$ |
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$ |
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$ |
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$ |
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Property, plant, and equipment, net |
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$ |
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$ |
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$ |
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$ |
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Total assets |
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$ |
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$ |
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$ |
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$ |
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The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment destination and by type (direct sales or distributor sales):
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Three months ended March 31, |
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Net Sales by Region |
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2026 |
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2025 |
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Asia |
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$ |
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$ |
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Europe |
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Americas |
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Total net sales |
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$ |
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$ |
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Net Sales by Type |
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Direct sales |
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$ |
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$ |
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Distributor sales |
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Total net sales |
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$ |
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$ |
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The table below sets forth the location to where products were shipped, representing 10% or more of net sales in at least one of the periods shown below:.
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Location |
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Amount |
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For the three months ended March 31, |
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2026 |
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2025 |
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China |
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$ |
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$ |
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Singapore |
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$ |
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$ |
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Taiwan |
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$ |
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$ |
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NOTE 9 – Debt
Borrowings outstanding as of March 31, 2026 and December 31, 2025 are set forth in the table below:
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Description |
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March 31, 2026 |
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December 31, 2025 |
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Interest Rate |
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Current Amount Maturity |
Short-term debt |
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$ |
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$ |
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Various during 2026 |
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Long-term debt |
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Notes payable to Bank of Taiwan |
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June 2033 |
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Notes payable to Bank of Taiwan |
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October 2027 |
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Notes payable to CTBC Bank |
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March 2028 |
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Notes payable to CTBC Bank |
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April 2027 |
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Notes payable to CTBC Bank |
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May 2028 |
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Notes payable to E Sun Bank |
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July 2027 |
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Notes payable to E Sun Bank |
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July 2030 |
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Notes payable to E Sun Bank |
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October 2027 |
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Notes payable to Taishin Bank |
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January 2027 |
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Notes payable to Taishin Bank |
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January 2028 |
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Notes payable to Chang Hwa Bank |
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November 2030 |
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Notes payable to Chang Hwa Bank |
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December 2030 |
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Notes payable to Chang Hwa Bank |
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January 2031 |
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Total long-term debt |
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Less: Current portion of long-term debt |
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( |
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( |
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Total long-term debt, net of current portion |
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$ |
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$ |
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Short-term debt
Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $
Long-term debt
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The Company maintains a long-term credit facility (“Credit Agreement”). The Credit Agreement consists of a Revolving Credit Facility in the amount of $
NOTE 10 – Commitments and Contingencies
Purchase Commitments. We have entered into non-cancelable purchase contracts for capital expenditures, primarily for manufacturing equipment, for approximately $
Contingencies. From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows, or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs and future periods. Based on available information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue estimated legal fees and other directly related costs as they are expensed as incurred. The Company is not currently a party to any pending litigation that we consider material.
NOTE 11 – Derivative Financial Instruments
We use derivative instruments to manage risks related to foreign currencies, interest rates, and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.
Hedges of Foreign Currency Risk. We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. As of March 31, 2026 and December 31, 2025, we had $
Hedges of Interest Rate and Net Investment Risk.
The table below sets forth the fair value, which are Level 2 instruments in the fair-value hierarchy, of the Company’s derivative financial instruments as well as their classification on our condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025:
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Fair Value |
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|
|
|
Other Current or Non-Current Assets |
|
|
|
Other Current Liabilities and Non-Current Liabilities |
|
|
||||||||||
|
|
|
2026 |
|
|
2025 |
|
|
|
2026 |
|
|
2025 |
|
|
||||
Collared forwards |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
||||
The table below sets forth the effect of the Company’s derivative financial instruments on the Consolidated Statements of income for the three months ended March 31, 2026 and 2025:
-15-
Derivative Instruments |
|
Amount of Gain or (Loss) Recognized in OCI on Derivative |
|
|
Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from |
|
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
|
||||||||||
Designated as |
|
March 31, |
|
|
Effectiveness |
|
March 31, |
|
||||||||||
Hedging Instruments |
|
2026 |
|
|
2025 |
|
|
Testing) |
|
2026 |
|
|
2025 |
|
||||
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collared forwards |
|
$ |
( |
) |
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|||
NOTE 12 – Employee Benefit Plans
NOTE 13 – Related Parties
We conduct business with the following related parties: Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (“Keylink”), Nuvoton Technology Corporation (“Nuvoton”), Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”), Atlas Magnetics, Co (“Atlas”), and ATX Semiconductor SDN (“ATX”).
Warren Chen, a member of the Company’s board of directors, serves as a member of the Nuvoton board of directors. We purchase wafers from Nuvoton for use in our production process. We have an agreement to purchase approximately $
JCP is a frequency control product manufacturing company from which we purchase material and in which we have made an equity investment that we account for using the equity method of accounting.
Atlas is an early stage privately held fabless wafer design company in which the Company holds a majority interest. The Company determined that Atlas is a variable interest entity (“VIE”), and the Company does not have the power to direct the activities that most significantly impact Atlas. The Company has therefore determined that the Company is not the primary beneficiary. Consequently, we do not consolidate the assets and liabilities of Atlas in the Company’s financial statements. For additional information related to Atlas see Note 14 - Equity Investments - Unconsolidated VIE, below.
In June 2025, the Company entered into a Joint Venture Agreement to acquire a
The table below sets forth the revenues and expenses with our related parties:
-16-
|
Three Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Keylink: |
|
|
|
|
|
||
Net sales |
$ |
|
|
$ |
|
||
Purchases |
$ |
|
|
$ |
|
||
Plating, rental, and consulting expense |
$ |
|
|
$ |
|
||
Nuvoton: |
|
|
|
|
|
||
Net sales |
$ |
|
|
$ |
|
||
Purchases |
$ |
|
|
$ |
|
||
JCP: |
|
|
|
|
|
||
Purchases |
$ |
|
|
$ |
|
||
Atlas: |
|
|
|
|
|
||
Purchases |
$ |
|
|
$ |
|
||
ATX: |
|
|
|
|
|
||
Purchases |
$ |
|
|
$ |
|
||
The table below sets forth accounts receivable from, and accounts payable to, related parties:
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
Keylink: |
|
|
|
|
|
||
Accounts receivable |
$ |
|
|
$ |
|
||
Accounts payable |
$ |
|
|
$ |
|
||
Nuvoton: |
|
|
|
|
|
||
Accounts receivable |
$ |
|
|
$ |
|
||
Accounts payable |
$ |
|
|
$ |
|
||
Atlas: |
|
|
|
|
|
||
Accounts payable |
$ |
|
|
$ |
|
||
ATX: |
|
|
|
|
|
||
Accounts payable |
$ |
|
|
$ |
|
||
NOTE 14 - Equity Investments
The Company maintains equity investments in companies which are accounted for under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. As of March 31, 2026, and December 31, 2025 the Company had $
Unconsolidated VIE
During July 2021, the Company acquired an interest in Atlas, an early stage privately held fabless wafer design company located in the western United States. The Company’s initial investment in July 2021 was $
• The hiring and firing of officers (i.e., CEO, CFO, etc.) – The hiring and firing of personnel responsible for making the key daily decisions and implementing the strategic operating direction will determine the success the Company has in their initiatives, thereby affecting the economic performance;
• Determining the business plan and budget, including incurring additional indebtedness or issuing additional equity interests – As Atlas is thinly capitalized, the decisions around when and how to obtain cash will influence whether Atlas can continue operating; and
-17-
• Determining the strategic operating direction of Atlas – The decisions made around the significant operating direction of Atlas will significantly impact the overall performance of the Company by determining where and how Atlas limited capital is spent without having significant revenues to keep the Company operating.
As the Company is not the primary beneficiary of Atlas, the Company did not consolidate the assets and liabilities of Atlas in our financial statements and instead accounts for the investment under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair value. As such, the Company’s investment is measured at cost less impairment, and adjusted to fair value if there are any observable price changes for identical or similar investment of the same issuer.
Atlas is funded through debt and equity. The Company's maximum exposure to loss is limited to its investment in Atlas and notes receivable and accrued interest owed to the Company from Atlas.
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
VIE total assets |
|
$ |
|
|
$ |
|
||
VIE total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Diodes' equity in VIE |
|
$ |
|
|
$ |
|
||
Diodes' note receivable from VIE |
|
|
|
|
|
|
||
Diodes' interest receivable from VIE |
|
|
|
|
|
|
||
Diodes' maximum exposure to loss |
|
$ |
|
|
$ |
|
||
ATX Semiconductor SDN
In June 2025, the Company entered into a joint venture agreement with Global Advanced Packaging Test Limited to acquire a
-18-
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except for the historical information contained herein, the matters addressed in this Item 2 constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as identified under the heading “Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995” herein. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed in the subsection “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our most recent Annual Report on Form 10-K, and similar discussions elsewhere in this Quarterly Report on Form 10-Q and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA. We undertake no obligation to publicly release the results of any revisions to our forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “Diodes,” the “Company,” “we,” “us,” and “our” refer to Diodes Incorporated and its subsidiaries. Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted.
This management’s discussion should be read in conjunction with the management’s discussion included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February 10, 2026.
Overview
Diodes Incorporated (Nasdaq: DIOD), delivers high-quality semiconductor products to the world’s leading companies in the automotive, industrial, computing, consumer electronics, and communications markets. We leverage our expanded product portfolio of analog and power solutions combined with a flexible hybrid manufacturing model that meet customers’ needs. Our broad range of application-specific products, delivered through a total solutions sales approach and supported by global operations including engineering, testing, manufacturing, and customer service, enable us to be a premier provider for high-growth markets.
The Company’s diverse product portfolio covers diodes; rectifiers; transistors; MOSFETs; SiC diodes and MOSFETs; protection devices; logic; voltage translators; amplifiers and comparators; sensors; and power management devices such as AC-DC converters, digital isolators and isolated gate drivers, DC-DC switching, photocoupler, linear voltage regulators, voltage references, LED drivers, power switches, and voltage supervisors. We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol switches, interface products, and signal integrity solutions for high-speed signals.
Summary for the three months ended March 31, 2026
As of March 31, 2026, our cash, cash equivalents, and short-term investments were $404.3 million, and we had access to unused borrowing capacity of $225.0 million under the revolving portion of our U.S. Credit Agreement. We believe our liquidity and our borrowing capacity will allow us to cover our cash needs for working capital, capital expenditures, and acquisitions for at least the next 12 months.
For the three months ended March 31, 2026, net sales grew 22.1% year-over-year and an above-seasonal 3.5% sequentially, highlighting the solid demand recovery and momentum the Company is seeing across our key focus area of automotive, industrial and AI-server related applications. The first quarter of 2026 is the fifth consecutive quarter of double-digit year-over-year growth and the highest percentage increase since the fourth quarter of 2021. Revenue in Europe led the growth as the Company continued to benefit from increased opportunities and orders from customers in the automotive and communications markets. Demand also continued to improve across broad industrial applications, which contributed to our revenue growth in the quarter.
-19-
For the three months ended March 31, 2026, gross margin improved 70 basis points sequentially mainly due to the higher revenue contribution from the automotive and industrial markets, which totaled 44% of product revenue, combined with improving utilization.
The Company continues to focus on its previously released 3-year interim financial targets, which include reaching $2 billion in annual revenue and $700 million in gross profit. Content expansion, design win momentum and new product introductions will continue to be the cornerstones of our growth initiatives, combined with increased manufacturing and cost efficiencies to further drive margin expansion.
Results of operations for the three months ended March 31, 2026 and 2025
The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales:
For the Three Months Ended March 31, |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||
Net sales |
|
|
100 |
% |
|
|
100 |
% |
Cost of goods sold |
|
|
(68 |
) |
|
|
(68 |
) |
Gross profit |
|
|
32 |
|
|
|
32 |
|
Total operating expense |
|
|
(27 |
) |
|
|
(31 |
) |
Interest income |
|
|
1 |
|
|
|
2 |
|
Interest expense |
|
|
- |
|
|
|
- |
|
Foreign currency (loss), net |
|
|
(1 |
) |
|
|
- |
|
Unrealized gain (loss) on investments |
|
|
1 |
|
|
|
(1 |
) |
Impairment of equity investment |
|
|
- |
|
|
|
(2 |
) |
Other income |
|
|
- |
|
|
|
- |
|
Income tax provision |
|
|
1 |
|
|
|
- |
|
The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
|
For the Three Months Ended March 31, |
|
|||||||||||||
|
2026 |
|
|
2025 |
|
|
Increase/(Decrease) |
|
|
% Change |
|
||||
Net sales |
$ |
405,467 |
|
|
$ |
332,113 |
|
|
$ |
73,354 |
|
|
|
22.1 |
% |
Cost of goods sold |
|
276,675 |
|
|
|
227,419 |
|
|
|
49,256 |
|
|
|
21.7 |
% |
Gross profit |
|
128,792 |
|
|
|
104,694 |
|
|
|
24,098 |
|
|
|
23.0 |
% |
Total operating expense |
|
109,027 |
|
|
|
103,398 |
|
|
|
5,629 |
|
|
|
5.4 |
% |
Interest income |
|
5,445 |
|
|
|
5,813 |
|
|
|
(368 |
) |
|
|
(6.3 |
%) |
Interest expense |
|
(682 |
) |
|
|
(467 |
) |
|
|
215 |
|
|
|
46.0 |
% |
Foreign currency (loss), net |
|
(3,377 |
) |
|
|
(183 |
) |
|
|
3,194 |
|
|
|
(1745.4 |
%) |
Unrealized gain (loss) on investments |
|
2,450 |
|
|
|
(4,032 |
) |
|
|
6,482 |
|
|
|
(160.8 |
%) |
Impairment of equity investment |
|
(1,249 |
) |
|
|
(5,817 |
) |
|
|
4,568 |
|
|
|
(78.5 |
%) |
Other income |
|
91 |
|
|
|
617 |
|
|
|
(526 |
) |
|
|
(85.3 |
%) |
Income tax provision |
|
4,000 |
|
|
|
20 |
|
|
|
3,980 |
|
|
N/A |
|
|
Net sales increased approximately $73.4 million, or 22.1%, for the three months ended March 31, 2026, compared to the same period last year, driven by stronger demand across all end markets. During the three months ended March 31, 2026, weighted-average sales price decreased 6.9% and volume increased 31.1%, when compared to the same period in 2025. The decrease in weighted-average sales price was primarily due to product mix.
The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the three months ended March 31, 2026 and 2025:
|
Three Months Ended |
||
|
March 31, |
||
|
2026 |
|
2025 |
Industrial |
24% |
|
23% |
Automotive |
20% |
|
19% |
Computing |
26% |
|
27% |
Consumer |
17% |
|
17% |
Communications |
13% |
|
14% |
-20-
For the three months ended March 31, 2026, gross profit increased approximately 23.0% when compared to the same period last year primarily due to higher net sales. Gross profit margin for the three months ended March 31, 2026 and 2025 was 31.8% and 31.5%, respectively.
Operating expenses for the three months ended March 31, 2026, increased $5.6 million when compared to the three months ended March 31, 2025. Operating expenses as a percentage of net sales were 26.9% and 31.1% for the three months ended March 31, 2026 and 2025, respectively. SG&A increased approximately $5.6 million as compared to the same period last year reflecting an increase in salaries and wages of $3.1 million and an increase in freight and duty expense of $1.2 million. The remaining increase in SG&A was made up of normal business expense fluctuations. SG&A, as a percentage of net sales, was 15.9% and 17.7% for the three months ended three months ended March 31, 2026 and 2025 respectively. For the three months ended March 31, 2026, research and development expenses (“R&D”) increased approximately $2.0 million when compared to the three months ended March 31, 2025, due to increased R&D spending in wages and benefits of $1.6 million and increased depreciation and amortization expense of $0.8 million. R&D, as a percentage of net sales, was 10.0% and 11.6% for the three months ended March 31, 2026 and 2025, respectively.
Interest income and interest expense were both relatively flat for the three months ended March 31, 2026, compared to the same period last year. Unrealized gain on investments increased $2.4 million from fair-value adjustments to a previously made equity investments. During the three months ended March 31, 2026, the Company recognized $1.2 million impairment on a previously made equity investment.
We recognized an income tax expense of approximately $4.0 million and $20 thousand for the three months ended March 31, 2026 and 2025, respectively. The increase in income tax expense reflects the increase in pretax earnings.
Financial Condition
Liquidity and Capital Resources
Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments, and our credit facilities. Our cash and cash equivalents and restricted cash increased from $372.3 million at December 31, 2025 to $399.2 million at March 31, 2026. This increase in cash, cash equivalents, and restricted cash reflects normal operations of the Company. As of March 31, 2026, we had short-term investments totaling $10.2 million. These investments are highly liquid with maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short time frame but in doing so we generally forfeit all earned and future interest income.
At March 31, 2026 and December 31, 2025, our working capital was $891.3 million and $878.6 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments, and available borrowing under credit facilities to be sufficient to cover our cash needs for working capital, capital expenditures, and acquisitions for at least the next 12 months.
Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. As of March 31, 2026, our foreign subsidiaries held approximately $239.0 million of cash, cash equivalents and investments of which approximately $94.2 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held. The $94.2 million is held in Asia and Europe.
Short-term debt
Our Asia subsidiaries maintain short-term credit facilities with several financial institutions through our foreign entities worldwide totaling $146.4 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted, and contain no restrictive covenants. These credit facilities bear interest at the Taipei Interbank Offering Rate (or similar indices) plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of March 31, 2026, was approximately $115.9 million, net of $30.0 million advanced under our foreign credit lines and $0.4 million of credit used for import and export guarantee.
Long-term debt
The Company maintains a long-term credit facility (“Credit Agreement”). The Credit Agreement consists of a Revolving Credit Facility in the amount of $225.0 million, including a swing line sublimit equal to the lesser of $50.0 million and the Revolving Credit Facility, a letter of credit sublimit equal to the lesser of $100.0 million and the Revolving Credit Facility, and an alternative currency sublimit equal to the lesser of $40.0 million and the Revolving Credit Facility. The Company has the option to increase the Revolving Credit Facility and/or incur Incremental Term Loans in an aggregate principal amount of up to $350.0 million. The Credit Agreement bears interest at Term SOFR or similar other indices plus a specified margin and matures in May 2028. There was no outstanding balance under the Credit Agreement at March 31, 2026.
Because some of our outstanding debt is subject to variable interest rates, higher interest rates will potentially increase our overall debt service cost. If interest rates rise globally, our cost of capital may increase in the future.
-21-
Discussion of Cash Flows
The table below sets forth a summary of the condensed consolidated statements of cash flows:
|
Three Months Ended March 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Net cash flows from operating activities |
$ |
64,313 |
|
|
$ |
56,743 |
|
Net cash flows from investing activities |
|
(36,679 |
) |
|
|
(28,458 |
) |
Net cash flows from financing activities |
|
(1,094 |
) |
|
|
(1,318 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
320 |
|
|
|
(733 |
) |
Change in cash and cash equivalents, including restricted cash |
$ |
26,860 |
|
|
$ |
26,234 |
|
Operating Activities
Net cash flows from operating activities for the three months ended March 31, 2026 was $64.3 million. The following recurring operating items gave rise to the calculation of net cash flows from operating activities for the three months ended March 31, 2026: Net income of $16.1 million, depreciation and amortization of intangible assets of $35.2 million, a net increase of $6.3 million of changes in working capital accounts, from ongoing operations, and share-based compensation of $7.6 million. These increases in cash flow from operations were partially offset by interest income of $3.4 million recognized related to the Company’s investment hedging.
Net cash flows from operating activities for the three months ended March 31, 2025 was $56.7 million. The following recurring operating items gave rise to the calculation of net cash flows from operating activities for the three months ended March 31, 2025: Depreciation and amortization of intangible assets of $35.9 million, a net increase of $12.1 million of changes in working capital accounts, a $4.0 million non-cash loss on investments related to mark- to-market adjustments to adjust the value of the investment, and share-based compensation of $6.4 million. These increases were partially offset by a net loss of $2.8 million. During the three months ended March 31, 2025, the Company recorded a $5.8 million non-cash impairment charge related to the decrease in value of a previously made equity investment, the result of which is an increase to operating cash flow.
Investing Activities
Net cash and cash equivalents from investing activities was $(36.7) million for the three months ended March 31, 2026. Net cash and cash equivalents from investing activities for the three months ended March 31, 2026 was primarily due to purchases of property, plant, and equipment of $31.9 million, or 7.9% of net sales. We expect capital expenditures for the twelve months ended December 31, 2026 to be within our target model of 5% to 9% of net sales. The Company also paid approximately $3.2 million, net, due to the expiration of hedge instruments.
Net cash and cash equivalents from investing activities was ($28.5) million for the three months ended March 31, 2025. Net cash and cash equivalents from investing activities for the three months ended March 31, 2025 was primarily due to purchases of property, plant, and equipment of $15.9 million, or 4.8% of net sales, the expiration of a hedge instrument of $6.9 million, and the acquisition of the minority interest in a joint venture in Taiwan for approximately $4.1 million, bringing the Company’s ownership to 100%.
Financing Activities
Net cash and cash equivalents from financing activities was $(1.1) million for the three months ended March 31, 2026. Net cash from financing activities in the three months ended March 31, 2026 consisted of taxes paid on net share settlements of $1.5 million partially offset by a $0.5 million of net increases in our debt.
Net cash and cash equivalents from financing activities was ($1.3) million for the three months ended March 31, 2025. Net cash provided by financing activities in the three months ended March 31, 2025 consisted primarily of $0.2 million of net increases in our debt and taxes paid on net share settlements of $1.5 million.
Use of Derivative Instruments and Hedging
We use, or may use, interest rate swaps, foreign exchange forward contracts, and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.
Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps, including interest rate collars, as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
Hedges of Foreign Currency Risk
-22-
We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure and to preserve the economic value of foreign currency denominated monetary assets and liabilities. These instruments are not designated for hedge accounting treatment in accordance with ASC No. 815. The fair value of our foreign exchange hedges approximates zero.
Hedges of Net Investment Risk
We make use of cross-currency swaps and foreign-currency forward contracts to decrease the foreign exchange risk inherent in our investment in some of our foreign subsidiaries.
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements, or other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support, nor do we engage in leasing, swap agreements, or outsourcing of research and development services that could expose us to liability that is not reflected on the face of our financial statements.
Contractual Obligations
There have been no material changes in our Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 10, 2026.
Critical Accounting Estimates
Our critical accounting estimates are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 10, 2026. Any new accounting estimates or updates to existing accounting estimates as a result of new accounting pronouncements have been discussed in the notes to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q in Note 1 – Summary of Operations and Significant Accounting Policies. The application of our critical accounting estimates may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
Recently Issued Accounting Pronouncements
See Note 1 - Summary of Operations and Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements, for detailed information regarding the status of recently issued accounting pronouncements, if any.
Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995
Except for the historical information contained herein, the matters addressed in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934. We generally identify forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” or similar phrases or the negatives of such terms. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed in the subsection “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our most recent Annual Report on Form 10-K, and similar discussions elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The PSLRA provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA.
All forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to, in addition to the other matters described in this Quarterly Report on Form 10-Q, a variety of significant risks and uncertainties. The following discussion highlights some of these risks and uncertainties. Further, from time to time, information provided by us or statements made by our employees may contain forward-looking information. There can be no assurance that actual results or business conditions will not differ materially from those set forth or suggested in such forward-looking statements as a result of various factors, including those discussed below.
For more detailed discussion of these factors, see the “Risk Factors” discussion in Part I. Item 1A of our most recent Annual Report on Form 10-K as filed with the SEC and in Part II, Item 1A of this Quarterly Report The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
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Significant Risks and Uncertainties That may affect Forward-Looking Statements
RISKS RELATED TO OUR BUSINESS
The impact of tariffs assessed or contemplated to be assessed by various governments could have a material adverse effect on our business, financial condition, and results of operations.
The impact of pandemics may have a material adverse effect on our business, financial condition, and results of operations.
During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a negative impact on our business, operating results, and financial condition.
Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating results and financial condition.
The semiconductor business is highly competitive, and increased competition may harm our business, operating results, and financial condition.
Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results, and financial condition.
We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products, which could adversely affect our growth and profit margins.
Our customers may require our products to undergo a lengthy and expensive qualification process without any assurance of product sales and may audit our operations from time to time. A failure to qualify a product or a negative audit finding could adversely affect our net sales, operating results, and financial condition.
Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or reduction in quantities ordered could adversely affect our net sales, operating results, and financial condition.
Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers’ demands and could adversely affect our operating results and financial condition.
New technologies could result in the development of new products by our competitors and a decrease in demand for our products, and we may not be able to develop new products to satisfy changes in demand, which would adversely affect our net sales, market share, operating results, and financial condition.
We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense, reduction in our intellectual property rights and a negative impact on our business, operating results, and financial condition.
We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development, parts, and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results, and financial condition could be adversely affected if we are unable to obtain adequate supplies in a timely manner.
A significant part of our growth strategy involves acquiring companies and businesses. We may be unable to identify suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired companies with our operations, which could adversely affect our business, operating results, and financial condition.
We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our business, operating results, and financial condition.
We may incur additional costs and face emerging risks associated with environmental, social and governance (“ESG”) factors impacting our operations.
Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our business, reputation with our customers, operating results, and financial condition.
We may fail to attract or retain the qualified technical, sales, marketing, finance, and management/executive personnel required to operate our business successfully, which could adversely affect our business, operating results, and financial condition.
We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and resources, which could adversely affect our business, operating results, and financial condition.
Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely affect our business, operating results, and financial condition.
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If our direct sales customers or our distributors’ customers do not design our products into their applications, our net sales may be adversely affected.
We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results, and financial condition.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or our counterparties might not perform as agreed.
We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely affect our business, operating results, financial condition, and our ability to meet payment obligations under such debt.
Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital in the future.
Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely affect our operating results and financial condition.
We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.
Certain of our employees in the U.K. participate in a company-sponsored defined benefit plan which subjects the Company to risks associated with the estimates and assumptions used in calculating expense and funding requirements recorded in the Company’s consolidated financial statements. Inaccuracies or changes in these estimates could require material changes in the expense and funding required.
Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased costs and may have a negative impact on our business, operating results, and financial condition.
If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control over financial reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the trading price of our Common Stock.
RISKS RELATED TO OUR INTERNATIONAL OPERATIONS
Our international operations subject us to risks that could adversely affect our operations.
A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would have a material adverse effect on our business, operating results, and prospects.
Economic regulation in China could materially and adversely affect our business, operating results, and prospects.
We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010, China’s anti-corruption campaign and similar worldwide anti-bribery laws.
We are subject to foreign currency risk as a result of our international operations.
China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our business, operating results, and financial condition.
We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net income.
The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.
We could be adversely affected by the compromise or theft of our technology, know-how, data, or intellectual property or a requirement that we yield rights in technology, know-how, data stored in foreign jurisdictions, or intellectual property that we use in such foreign jurisdictions.
RISKS RELATED TO OUR COMMON STOCK
Variations in our quarterly operating results may cause our stock price to be volatile.
We may enter into future acquisitions and take certain actions in connection with such acquisitions that could adversely affect the price of our Common Stock.
Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over attempt.
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GENERAL RISK FACTORS
The continued hostilities between Ukraine and Russia could negatively impact our business.
The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales, operating results, and financial condition.
We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows, operating results, and financial condition.
Terrorist attacks, or threats or occurrences of other terrorist activities, whether in the U.S. or internationally, may affect the markets in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.
System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation, and adversely affect our stock price.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 10, 2026.
Item 4. Controls and Procedures.
Our Chief Executive Officer, Gary Yu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation, as of March 31, 2026, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this Quarterly Report is:
Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes, or intentional circumvention of the established processes.
Changes in Internal Controls over Financial Reporting
There was no change in our internal control over financial reporting, known to our Chief Executive Officer or Chief Financial Officer, that occurred in the three months ended March 31, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any pending litigation that we consider material.
From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our financial position, cash flows, or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.
Item 1A. Risk Factors.
There have been no material changes to our risk factors from those disclosed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 10, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Insider Trading Arrangements
On
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Item 6. Exhibits.
Number |
|
Description |
|
Form |
|
Date of First Filing |
|
Exhibit |
|
Filed |
3.1 |
|
Certificate of Incorporation, as amended |
|
10-K |
|
February 20, 2018 |
|
3.1 |
|
|
3.2 |
|
Amended By-laws of the Company as of January 6, 2016 |
|
8-K |
|
January 11, 2016 |
|
3.1 |
|
|
4.1 |
|
Form of Certificate for Common Stock, par value $0.66 2/3 per share |
|
S-3 |
|
August 25, 2005 |
|
4.1 |
|
|
31.1 |
|
Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
31.2 |
|
Certification Pursuant to Rule 13a-14(a) /15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
32.1* |
|
Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
32.2* |
|
Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
101.INS |
|
Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
X |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema |
|
|
|
|
|
|
|
X |
104 |
|
Cover Page Interactive Data File, formatted in Inline XBRL |
|
|
|
|
|
|
|
X |
* A certification furnished pursuant to Item 601(b)(32) of the Regulation S-K will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be contained in agreements or other documents filed as exhibits to this Quarterly Report on Form 10-Q. In certain instances the disclosure schedules to such agreements or documents contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants. Moreover, some of the representations and warranties may not be complete or accurate as of a particular date because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders and/or were used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
|
DIODES INCORPORATED |
|
|
(Registrant) |
|
|
|
|
May 7, 2026 |
By: /s/ Gary Yu |
|
Date |
GARY YU |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
May 7, 2026 |
By: /s/ Brett R. Whitmire |
|
Date |
BRETT R. WHITMIRE |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
|
|
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