# Diodes Inc: Form 10-Q for the period ended Jun 30, 2024

- Company: [Diodes Inc](/companies/diod.md) (CIK 29002)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 17:10 ET
- Period: 2024-06-30
- Accession: 0000950170-24-094180
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/29002/000095017024094180/diod-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/29002/000095017024094180/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $319.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $621.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $212.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $414.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $107.4m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $207.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $33.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $67.2m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $58.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $112.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $3.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $16.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $852.0k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $1.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $2.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $6.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $8.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $22.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.17 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.48 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.17 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.48 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 46,324,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 46,320,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$16.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $38.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $264.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $1.22bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $2.36bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $361.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $509.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $20.3m | us-gaap:LongTermDebt |
| Current portion of debt | at 2024-06-30 | $1.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $1.77bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,193 characters.

*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, 2023 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February 9, 2024.*

### Overview

We are a leading global manufacturer and supplier of high-quality application-specific standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the industrial, automotive, computing, communications, and consumer markets. For more information about our product and markets we serve, see Note 1 – **S**ummary of Operations and Significant Accounting Policies, included in the condensed consolidated financial statements in Item 1 above. Our products are sold primarily throughout Asia, the Americas, and Europe. We believe that our focus on application-specific standard products utilizing innovative, highly efficient packaging and cost-effective process technologies, coupled with our collaborative, customer-focused product development, provides us with a meaningful competitive advantage relative to other semiconductor companies.

### Summary for the Three Months Ended June 30, 2024

- Net sales were $319.8 million, a decrease of 31.5% from the $467.2 million in the second quarter of 2023 and an increase of 5.9% from the $302.0 million in the first quarter of 2024;
- Gross profit was $107.4 million, a decrease of 45.0% from the $195.4 million in the second quarter of 2023 and an increase of 7.8% from the $99.6 million in the first quarter of 2024;
- Gross profit margin was 33.6%, compared to 41.8% in the second quarter of 2023 and 33.0% in the first quarter of 2024;
- Net income attributable to common stockholders was $8.0 million, compared to $82.0 million in the second quarter of 2023 and $14.0 million in the first quarter of 2024;
- Earnings per share attributable to common stockholders was $0.17 per diluted share, compared to $1.77 per diluted share in the second quarter or 2023 and $0.30 per diluted share in the first quarter of 2024; and
- Cash flow provided by operations was $14.4 million. We had $17.9 million of capital expenditures. Net cash flow was a negative $2.9 million.

As of June 30, 2024, our cash, cash equivalents, and short-term investments were $273.9 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.

During the three months ended June 30, 2024, global demand for our products began to recover from the low point experienced in the three months ended March 31, 2024, especially in the computing end market in Asia. Demand improvement during the quarter was most prominent in the computing end market, where Diodes is increasingly participating in the growth of AI servers. Additional positive indicators included improvement in distributor inventory levels with a sequential decrease in channel inventory weeks. Channel resales across the computing, communications, and consumer markets increased in the three months ended June 30, 2024 compared to the three months ended March 31, 2024, and the Company was able to maintain automotive and industrial product revenue at 41% of total, even though the recovery in both markets remained slow due to the ongoing inventory adjustments.

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### Results of Operations for the Three Months Ended June 30, 2024 and 2023

The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales:

|  | Percent of Net Sales Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net sales | 100% | 100% |
| Cost of goods sold | (66) | (58) |
| Gross profit | 34 | 42 |
| Total operating expense | (32) | (23) |
| Income from operations | 1 | 20 |
| Total other income (expense) | 3 | 2 |
| Income before income taxes and noncontrolling interest | 4 | 22 |
| Income tax provision | (1) | (4) |
| Net income | 3 | 18 |
| Net income attributable to common stockholders | 3 | 18 |

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. 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.

|  | Three Months Ended June 30, 2024 | 2023 | Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $319,771 | $467,152 | $(147,381) | (31.5%) |
| Cost of goods sold | 212,385 | 271,776 | (59,391) | (21.9%) |
| Gross profit | 107,386 | 195,376 | (87,990) | (45.0%) |
| Total operating expense | 103,678 | 105,809 | (2,131) | (2.0%) |
| Interest income | 4,237 | 2,224 | 2,013 | 90.5% |
| Interest expense | (852) | (2,189) | (1,337) | (61.0%) |
| Foreign currency gain (loss), net | 799 | (2,217) | 3,016 | 136.0% |
| Unrealized gain on investments | 4,350 | 12,172 | (7,822) | (64.3%) |
| Other income | 562 | 1,398 | (836) | (59.8%) |
| Income tax provision | 2,643 | 17,224 | (14,581) | (84.7%) |

Net sales decreased approximately $147.4 million, or 31.5%, for the three months ended June 30, 2024, compared to the same period last year, driven by lower product shipments caused by lower demand across all regions and all end markets. During the three months ended June 30, 2024, weighted-average sales price decreased 19.2% and volume decreased 15.3%, when compared to the same period in 2023. The decline in weighted-average sales price was primarily due to weaker end-user demand in the automotive and industrial markets which collectively comprised 41% and 48% of product revenue for the three months ended June 30, 2024 and 2023, respectively.

The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the three months ended June 30, 2024 and 2023:

|  | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Industrial | 23% | 29% |
| Automotive | 18% | 19% |
| Computing | 26% | 22% |
| Consumer | 19% | 18% |
| Communications | 14% | 12% |

Cost of goods sold decreased approximately $59.4 million for the three months ended June 30, 2024, compared to the same period last year, due to the decreased net sales during the three months ended June 30, 2024. As a percent of sales, cost of goods sold was 66.4% for the three months ended June 30, 2024, compared to 58.2% for the same period last year. Average unit cost decreased approximately 7.8% for the three months ended June 30, 2024, compared to the same period last year.

For the three months ended June 30, 2024, gross profit decreased approximately 45.0% when compared to the same period last year primarily due to lower net sales, caused by lower demand in all regions and all end-markets. Gross profit margin for the three month periods ended June 30, 2024 and 2023 was 33.6% and 41.8%, respectively. The decrease in gross profit margin was primarily due to

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the lower average sales price related to end-market mix and secondarily from lower loadings from the overall lower demand, particularly in our wafer fabrication plants associated with foundry service agreements.

Operating expenses for the three months ended June 30, 2024, decreased $2.1 million when compared to the three months ended June 30, 2023. Operating expenses as a percentage of net sales was 32.4% and 22.7% for the three months ended June 30, 2024 and 2023, respectively. SG&A decreased approximately $9.0 million as compared to the same period last year primarily driven by lower amounts of wages and benefits, specifically equity award related expenses and discretionary benefits being lower. SG&A, as a percentage of net sales, was 18.3% and 14.4% for the three months ended June 30, 2024 and 2023, respectively. Research and development expenses (“R&D”) decreased approximately $1.4 million primarily due to lower amounts of wages and benefits, specifically discretionary benefits. The lower levels of discretionary benefits in SG&A and R&D reflect lower accruals based on the Company’s 2024 performance being lower than in 2023. R&D, as a percentage of net sales, was 10.4% and 7.4% for the three months ended June 30, 2024 and 2023, respectively. Also included in operating expenses for the three months ended was $8.3 million related to restructuring activities undertaken by the Company during the three months ended June 30, 2024.

Interest income increased $2.0 million for the three months ended June 30, 2024, compared to the same period last year due to income earned on financial instruments to hedge the Company’s net investment risk as well as higher interest rates earned on short-term investments. Interest expense decreased $1.3 million, or 61.1% for the three months ended June 30, 2024, compared to the same period last year due to lower debt levels partially offset by higher interest rates. Unrealized gain on investments decreased from 2023 due to mark to market adjustments on investments recorded in 2023 and not repeated in 2024.

We recognized an income tax expense of approximately $2.6 million and $17.2 million for the three months ended June, 2024, and 2023, respectively. The decrease in income taxes for 2024 compared to 2023 was primarily attributable to a decrease in pretax book income.

### Results of Operations for the Six Months Ended June 30, 2024 and 2023

The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales:

|  | Percent of Net Sales Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net sales | 100% | 100% |
| Cost of goods sold | (67) | (58) |
| Gross profit | 33 | 42 |
| Total operating expense | (31) | (23) |
| Income from operations | 3 | 19 |
| Total other income (expense) | 2 | 1 |
| Income before income taxes and noncontrolling interest | 5 | 20 |
| Income tax provision | (1) | (4) |
| Net income | 4 | 16 |
| Net income attributable to common stockholders | 4 | 16 |

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. 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.

|  | Six Months Ended June 30, 2024 | 2023 | Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $621,743 | $934,393 | $(312,650) | (33.5%) |
| Cost of goods sold | 414,773 | 544,563 | (129,790) | (23.8%) |
| Gross profit | 206,970 | 389,830 | (182,860) | (46.9%) |
| Total operating expense | 190,314 | 213,836 | (23,522) | (11.0%) |
| Interest income | 8,851 | 3,996 | 4,855 | 121.5% |
| Interest expense | (1,384) | (4,321) | (2,937) | (68.0%) |
| Foreign currency (loss) gain | 1,771 | (4,110) | (5,881) | 143.1% |
| Unrealized gain on investments | 4,720 | 16,061 | (11,341) | 70.6% |
| Other income | 996 | 1,928 | (932) | (48.3%) |
| Income tax provision | 6,180 | 33,840 | (27,660) | (81.7%) |

Net sales decreased approximately $312.7 million, or 33.5%, for the six months ended June 30, 2024, compared to the same period last year, compared to the same period last year, driven by lower product shipments caused by lower demand across all regions and all end markets. During the six months ended June 30, 2024, weighted-average sales price decreased 23.5% and volumes decreased 13%,

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when compared to the same period in 2023. The decline in weighted-average sales price was primarily due to weaker end-user demand in the automotive and industrial markets which collectively comprised 41% and 47% of product revenue for the six months ended June 30, 2024 and 2023, respectively.

The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the six months ended June 30, 2024 and 2023:

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Industrial | 23% | 29% |
| Automotive | 18% | 18% |
| Computing | 26% | 22% |
| Consumer | 19% | 18% |
| Communications | 14% | 13% |

Cost of goods sold decreased approximately $129.8 million for the six months ended June 30, 2024, compared to the same period last year, due to the decreased net sales during the six months ended June 30, 2024. As a percent of sales, cost of goods sold was 66.7% for the six months ended June 30, 2024, compared to 58.3% for the same period last year. Average unit cost decreased approximately 12.4% for the six months ended June 30, 2024, compared to the same period last year.

For the six months ended June 30, 2024, gross profit decreased approximately 46.9% when compared to the same period last year primarily due to lower net sales, caused by lower demand in all regions and all end-markets. Gross profit margin for the six month periods ended June 30, 2024 and 2023 was 33.3% and 41.7%, respectively. The decrease in gross profit margin was primarily due to the lower average sales price related to end-market mix and secondarily from lower loadings from the overall lower demand, particularly in our wafer fabrication plants associated with foundry service agreements.

Operating expenses for the six months ended June 30, 2024, decreased $23.5 million when compared to the six months ended June 30, 2023. Operating expenses as a percentage of net sales was 30.6% and 22.9% for the six months ended June 30, 2024 and 2023, respectively. SG&A decreased approximately $26.2 million as compared to the same period last year primarily driven by lower amounts of wages and benefits, specifically payroll and variable compensation due to the lower Company performance. Also included in the lower SG&A was lower selling expense, a result of the lower revenue levels. SG&A, as a percentage of net sales, was 18.0% and 14.8% for the six months ended June 30, 2024 and 2023, respectively. R&D decreased approximately $0.7 million as compared to the same period last year. R&D, as a percentage of net sales, was 10.8% and 7.3% for the six months ended June 30, 2024 and 2023, respectively. Gain on disposal of fixed assets increased $4.8 million for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. Also included in operating expenses for the six months ended June 30, 2024 was $8.3 million related to restructuring activities undertaken by us during the period to consolidate operations.

Interest income increased $4.9 million for the six months ended June 30, 2024, compared to the same period last year due to income earned on financial instruments to hedge our net investment risk as well as higher interest rates earned on short-term investments. Interest expense decreased $2.9 million, or 68.0% for the six months ended June 30, 2024, compared to the same period last year due to lower debt levels partially offset by higher interest rates. Unrealized gain on investments decreased from 2023 due to mark-to-market adjustments on investments recorded in 2023 and not repeated in 2024.

We recognized an income tax expense of approximately $6.2 million and $33.8 million for the six months ended June 30, 2024 and 2023, respectively. The decrease in income taxes for 2024 compared to 2023 was primarily attributable to a decrease in pretax book income.

### 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 decreased from $318.5 million at December 31, 2023 to $267.7 million at June 30, 2024. This decrease in cash, cash equivalents, and restricted cash reflects normal operations of the Company. As of June 30, 2024, we had short-term investments totaling $9.2 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 June 30, 2024 and December 31, 2023, our working capital was $859.5 million and $793.9 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.

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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 June 30, 2024, our foreign subsidiaries held approximately $209.2 million of cash, cash equivalents and investments of which approximately $67.8 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 $67.8 million is held in Germany, China, Korea, and Taiwan.

#### Short-term debt

Our Asia subsidiaries maintain short-term credit facilities with several financial institutions through our foreign entities worldwide totaling $149.6 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 SOFR 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 June 30, 2024, was approximately $122.9 million, net of $26.3 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 June 30, 2024.

Because some of our outstanding debt is subject to variable interest rates, the recent rise in interest rates will potentially increase our overall debt service cost. If interest rates continue to rise globally, our cost of capital may increase in the future.

### Discussion of Cash Flows

The table below sets forth a summary of the condensed consolidated statements of cash flows:

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash flows from operating activities | $(16,744) | $192,428 |
| Net cash flows from investing activities | (30,840) | (97,491) |
| Net cash flows from financing activities | (16,974) | (106,659) |
| Effect of exchange rate changes on cash and cash equivalents | 13,732 | (4,641) |
| Change in cash and cash equivalents, including restricted cash | $(50,826) | $(16,363) |

### Operating Activities

Net cash flows from operating activities for the six months ended June 30, 2024 was ($16.7) million. Our net use of cash from operating activities for the six months ended June 30, 2024 resulted from net income of $25.4 million, depreciation and amortization of intangible assets of $68.6 million and share-based compensation of $9.3 million. The increases were offset by a net decrease of $104.4 million due to changes in operating asset and liability accounts, and non-cash gains and other income of $15.8 million.

During the six months ended June 30, 2024, we used cash to fund increases in accounts receivable as sales began to improve in the second quarter of 2024, and used cash to fund increases in inventories, particularly in finished goods, to improve our product availability in a dynamic market environment. We also used cash to decrease accounts payable and accrued liabilities by as part of normal business operations.

Net cash flows provided by operating activities for the six months ended June 30, 2023 resulted from net income of $155.7 million, depreciation and amortization of intangible assets of $67.9 million, and share-based compensation of $17.5 million. The increases were partially offset by a decrease in operating asset and liability accounts of $32.0 million and a non-cash investment gain of $16.0 million.

### Investing Activities

Net cash and cash equivalents from investing activities was ($30.8) million for the six months ended June 30, 2024. Net cash and cash equivalents used in investing activities for the six months ended June 30, 2024 was primarily due to purchases of property, plant, and equipment of $38.3 million, or 6.2% of net sales. We expect capital expenditures for the twelve months ended December 31, 2024 to be within our target model of 5% to 9% of net sales. Net cash and cash equivalents used in investing activities was $97.5 million for the six months ended June 30, 2023. Net cash and cash equivalents used in investing activities for the six months ended June 30, 2023 was primarily due to purchases of property, plant, and equipment of $85.0 million, or 9.1% of net sales, due to the expansion of a wafer fabrication facility located in Hsinchu Science Park in Taiwan and the additional investment of $13.9 million in a privately held wafer design company.

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### Financing Activities

Net cash and cash equivalents from financing activities was ($17.0) million for the six months ended June 30, 2024. Net cash provided by financing activities in the six months ended June 30, 2024 consisted primarily of $13.5 million of net decreases in our debt and taxes paid on net share settlements of $5.7 million. Net cash and cash equivalents used in financing activities was $106.7 million for the six months ended June 30, 2023. Net cash used in financing activities in the six months ended June 30, 2023 consisted primarily of $95.2 million of net reductions in our debt and taxes paid on net share settlements of $10.6 million.

### Use of Derivative Instruments and Hedging

We 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 its 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

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, 2023, filed with the SEC on February 9, 2024.

### 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, 2023, filed with the SEC on February 9, 2024. 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

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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 the continuing COVID-19 pandemic may have a material adverse effect on our business, financial condition, and results of operations.*

*Shanghai, China experienced government-imposed lockdowns due to a resurgence of the COVID-19 virus.*

*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 require our products to undergo a lengthy and expensive qualification process without any assurance of product sales and may demand to 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 Risks

#### The invasion of Ukraine by 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.*

## Market risk

As filed, 187 characters.

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, 2023, filed with the SEC on February 9, 2024.

## Controls and procedures

As filed, 1,847 characters.

Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation, as of June 30, 2024, 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:

- recorded, processed, summarized, and reported within the time period specified in the Commission’s rules and forms; and
- accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions on required disclosure.

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 six months ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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## Risk factors

As filed, 247 characters.

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, 2023, filed with the Securities and Exchange Commission on February 9, 2024.

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-094180. Last ingested by Listed: Nov 5, 2026, 20:05 ET. No prices; not investment advice.