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Diodes Incorporated (DIOD)
Q2 2011 Earnings Call
August 09, 2011, 05:00 pm ET
Leanne Sievers - EVP of Shelton Group
Dr. Keh-Shew Lu - President and CEO
Rick White - CFO
Mark King - SVP, Sales and Marketing
Laura Mehrl - Director of IR
Steve Smigie - Raymond James
Shawn Harrison - Longbow Research
Gary Mobley - The Benchmark
Suji De Silva - ThinkEquity
Ramesh Misra - Brigantine Advisors
Tristan Gerra - Robert W. Baird
Steven Chin - UBS
Christopher Longiaru - Sidoti & Company
Vijay Rakesh - Sterne Agee
Previous Statements by DIOD
» Diodes' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Diodes CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Diodes Incorporated Q1 2010 Earnings Call Transcript
Leanne Sievers - Investor Relations
Welcome to Diodes’ second quarter 2011 earnings conference call. I am Leanne Sievers, Executive Vice President of Shelton Group, Diodes’ Investor Relations firm. With us today are Diodes' President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King; and Director of Investor Relations, Laura Mehrl.
Before I turn the call over to Dr. Lu, I would like to remind our listeners that management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission.
In addition, any projection as to the company's future performance represent management's estimates as of today, August 9, 2011. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures, financial information and GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP net income to non-GAAP adjusted net income, and GAAP net income to EBITDA which provide additional details.
Also, throughout the company's press release and management statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via web cast for 60 days in the Investor Relations' section of Diodes website at www.diodes.com.
And now I will turn the call over to Diodes' President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.
Dr. Keh-Shew Lu
Thank you, Diane. Welcome everyone, and thank you for joining us today. Revenue during the quarter increased over $20 million or 14% from the prior year period reaching a rate of $170 million. We gained additional market share due to continued focus on focus on Diodes new products and customer expansion. In the second quarter, Asia and the North American revenue increased sequentially while Europe declined in this region again to showed signs of increasing weakness during the quarter due to the economic instability in a number of European countries.
In fact in May we started to see a general market slow down on a global basis specifically in the consumer computer and LCD TV markets. And these trends continued to accelerate during the last several weeks of the quarter. Orders did not materialize as expected in Q1. As the customer (inaudible) greater currency on the global environment. We believe the current climate also result in weaker consumer confidence during the quarter.
This weakness impact several of our customers that specifically for the US and the Europe market. Distributor inventory base were down slightly in the second quarter. While channel inventory was at the high end of preferred range as we exited the quarter.
In July we experienced continued weakening in the consumer and the computer market and the demand for the rest of the quarter remains uncertain.
Gross margin in the second quarter was also impacted. But softened demand which caused a mixed change to low margin commodity product to support revenue. Additionally there was a slower than expected ramp in productivity due to the change in requirements for replacing operators as a result as previously announced.
Overall it can take longer than anticipated. We currently expect to have full trained operators in place by the end of third quarter. Because of the poor macroeconomic conditions around the world and all unstable market conditions, we have taken actions to minimize the impact on our financials. We have deferred approximately 40% of our planned expenditures for the second half of 2011. Now according to our strategy we are maintaining our current account until we see how the market develops.
Despite those short-term market challenges I am confident that we are well positioned with our customers. We have a broader product portfolio which result in the momentum I in the installed capacity, which will enable us to expand our revenue and the margin as the demand improves.
One other comment I would like to make before turning the call over to Rick is about our Chengdu facility. On July 19, Diodes broke ground for a new productions sites in the high tech industrial development zone in Chengdu, China.