Diodes Inc (DIOD) 2018 Q3 法說會逐字稿

Good afternoon, and welcome to Diodes Incorporated's Third Quarter 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded today, Tuesday, November 6, 2018.

下午好，歡迎參加 Diodes 公司 2018 年第三季財務業績電話會議。（操作員說明）謹此提醒，本次電話會議將於今天（2018 年 11 月 6 日星期二）錄製。

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

我現在想將電話轉給謝爾頓集團投資者關係部的 Leanne Sievers。莉安，請繼續。

Good afternoon, and welcome to Diodes' Third Quarter 2018 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, Diodes' investor relations firm. Joining us today are Diodes' President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Rick White; Vice President of Worldwide Sales and Marketing, Emily Yang; and Director of Investor Relations, Laura Mehrl.

下午好，歡迎參加 Diodes 2018 年第三季財務業績電話會議。我是 Leanne Sievers，Diodes 投資人關係公司 Shelton Group 的總裁。今天加入我們的是 Diodes 總裁兼執行長 Keh-Shew Lu 博士；首席財務官，里克懷特；全球銷售與行銷副總裁 Emily Yang；和投資者關係總監 Laura Mehrl。

Before I turn the call over to Dr. Lu, I'd like to remind our listeners that the results today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are subject to revision until the company files its Form 10-Q for its third quarter 2018.

在我把電話轉給盧博士之前，我想提醒我們的聽眾，今天的結果是初步的，因為它們取決於公司最終確定的結帳程序以及公司獨立註冊會計師事務所的慣例季度審查。因此，在公司提交 2018 年第三季的 10-Q 表格之前，這些結果可能會進行修訂。

In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that 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, including Forms 10-K and 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, November 6, 2018. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change.

此外，管理層準備的言論包含前瞻性陳述，這些陳述存在風險和不確定性，管理層可能會針對您的問題做出額外的前瞻性陳述。因此，該公司聲稱受到 1995 年《私人證券訴訟改革法案》中包含的前瞻性陳述的安全港保護。實際結果可能與今天討論的結果有所不同，因此，我們建議您參閱公司向美國證券交易委員會提交的文件（包括表格 10-K 和 10-Q）中有關風險和不確定性的更詳細討論。此外，對公司未來業績的任何預測均代表管理層截至今天（2018 年 11 月 6 日）的估計。由於市場狀況可能會或可能不會改變，Diodes 不承擔未來更新這些預測的義務。

Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. Also, throughout the company's press release and management statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income.

此外，該公司在本次電話會議期間的新聞稿和管理層聲明將包括以公認會計原則和非公認會計原則術語討論某些措施和財務資訊。該公司的新聞稿中包括 GAAP 與非 GAAP 項目的定義和調節，其中提供了更多詳細資訊。此外，在本次電話會議期間公司的新聞稿和管理層聲明中，我們將歸屬於普通股股東的淨利潤稱為 GAAP 淨利潤。

For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the Investor Relations section of Diodes' website at www.diodes.com. Please see the company's press release for more information.

對於目前無法收聽整個電話會議的人士，可在 Diodes 網站 www.diodes.com 的投資者關係部分透過網路廣播提供為期 90 天的錄音。請參閱該公司的新聞稿以了解更多資訊。

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

現在我將把電話轉給 Diodes 總裁兼執行長 Keh-Shew Lu 博士。盧醫生，請講。

Thank you, Leanne. Welcome, everyone, and thank you for joining us today.

謝謝你，莉安。歡迎大家，感謝您今天加入我們。

The third quarter marked Diodes' best quarterly performance in the company's history, achieving record financial results and the sixth quarter of sequential organic growth in the past 7 quarters. Our consistently strong growth reflects our aggressive past design win activity and the continued market share gains at new and existing customers, which also contributed to record automotive revenue growing 27% year-over-year as well as record industrial revenue increasing 32% over the same time period. This above-average corporate growth has resulted in those 2 end market combined reaching 36% of the total revenue, bringing us closer to our goal of 40%. Diodes' solid positioning with the customers, diversified product line and the end markets as well as continued advancement in technology and packaging innovation has generated exceptional performance across multi-product categories, including continued growth from our Pericom products.

第三季標誌著 Diodes 公司歷史上最好的季度業績，實現了創紀錄的財務業績，並且是過去 7 個季度中連續有機增長的第六季度。我們持續強勁的成長反映了我們過去積極的設計贏得活動以及新客戶和現有客戶的市場份額持續增長，這也促成了創紀錄的汽車收入同比增長 27% 以及創紀錄的工業收入同比增長 32%時間段。這種高於平均的企業成長使得這兩個終端市場的總收入達到了總收入的 36%，使我們更接近 40% 的目標。Diodes 在客戶中的穩固定位、多元化的產品線和終端市場以及技術和封裝創新的持續進步，在多產品類別中產生了卓越的業績，包括我們的 Pericom 產品的持續成長。

Also worth highlighting is Diodes' significant earnings power and cash generation as we drive revenue growth with non-GAAP operating expense at our target model of 20% of revenue, which we achieved in the third quarter. In fact, our trailing 12-month non-GAAP earnings per share exceeds the 2 years combined total for 2016 and 2017.

另外值得強調的是 Diodes 的顯著盈利能力和現金生成能力，我們透過非 GAAP 營運費用以佔收入 20% 的目標模型推動收入成長，我們在第三季度實現了這一目標。事實上，我們過去 12 個月的非公認會計準則每股收益超過了 2016 年和 2017 年兩年的總和。

As we look to the fourth quarter, we expect to further extend our better-than-market performance as a result of our strong past design wins and a strong POS driving ongoing market share gains. Strength in Asia is anticipated to largely offset the typical seasonality in U.S. and Europe, resulting in our guidance for revenue being down only 1.9% sequentially at the midpoint. Based on our current expectations, we are on track to reporting one of the best performing year in Diodes' history.

展望第四季度，由於我們過去的設計勝利和強大的 POS 推動了市場份額的持續成長，我們預計將進一步擴大我們優於市場的表現。預計亞洲的強勢將在很大程度上抵消美國和歐洲的典型季節性，導致我們的收入指引中位數僅比上一季下降 1.9%。根據我們目前的預期，我們有望報告 Diodes 歷史上表現最好的一年之一。

With that, let me now turn the call over to Rick to discuss our third quarter financial results and our fourth quarter guidance in more detail.

現在，讓我將電話轉給 Rick，更詳細地討論我們第三季的財務表現和第四季的指導。

Thanks, Dr. Lu, and good afternoon, everyone. As part of my financial review today, I will focus my comments on the sequential change for each of the line items, and we'd refer you to our press release for a more detailed review of our results as well as the year-over-year comparisons.

謝謝盧博士，大家下午好。作為今天財務審查的一部分，我將集中評論每個項目的連續變化，我們建議您參閱我們的新聞稿，以更詳細地審查我們的業績以及同比情況。年比較。

Revenue for the third quarter 2018 was a record $320.9 million, a 5.5% increase from $304.1 million in the second quarter 2018.

2018 年第三季的營收達到創紀錄的 3.209 億美元，比 2018 年第二季的 3.041 億美元成長 5.5%。

Gross profit for the third quarter 2018 was also a record at $115.2 million or 35.9% of revenue, representing a 7.4% increase on a dollar basis from $107.3 million or 35.3% of revenue in the second quarter 2018. The increase in gross margin was due primarily to favorable product mix as well as improved capacity utilization and the continued 8-inch ramp in SFAB.

2018 年第三季的毛利也創歷史新高，達到 1.152 億美元，佔營收的 35.9%，以美元計算，較 2018 年第二季的 1.073 億美元，佔營收的 35.3% 成長了 7.4%。毛利率的成長主要歸功於有利的產品組合、產能利用率的提高以及 SFAB 8 英吋產能的持續成長。

GAAP operating expenses for third quarter 2018 were $69.4 million or 21.6% of revenue, and $65 million or 20.3% of revenue on a non-GAAP basis, meeting our target model of 20% of revenue. Third quarter non-GAAP operating expenses exclude $4.4 million of amortization of acquisition-related intangible asset expenses. This compares with GAAP operating expenses in the second quarter 2018 of $69.4 million or 22.8% of revenue and $64.2 million or 21.1% of revenue on a non-GAAP basis. Total other expenses, net, amounted to approximately $1.4 million for the quarter, including $2.3 million of interest expense. Income before taxes and noncontrolling interest in the third quarter 2018 amounted to $44.4 million compared to $36.4 million in the second quarter 2018.

2018 年第三季的 GAAP 營運費用為 6,940 萬美元，佔收入的 21.6%，非 GAAP 營運費用為 6,500 萬美元，佔收入的 20.3%，達到了我們佔收入 20% 的目標模型。第三季非 GAAP 營運費用不包括 440 萬美元的收購相關無形資產費用攤銷。相較之下，2018 年第二季 GAAP 營運費用為 6,940 萬美元，佔營收的 22.8%；非 GAAP 營運費用為 6,420 萬美元，佔營收的 21.1%。本季其他費用總額淨額約 140 萬美元，其中包括 230 萬美元的利息費用。2018 年第三季稅前和非控制權益前收入為 4,440 萬美元，而 2018 年第二季為 3,640 萬美元。

Turning to income taxes. Our effective income tax rate for the third quarter 2018 was approximately 29.7%.

轉向所得稅。2018 年第三季我們的有效所得稅率約為 29.7%。

GAAP net income for the third quarter 2018 was a record $30.9 million or a record $0.61 per diluted share compared to GAAP net income of $25.1 million or $0.49 per diluted share in the second quarter 2018. The share count used to compute GAAP diluted EPS for the third quarter 2018 was 51.1 million shares. Third quarter 2018 non-GAAP adjusted net income was $34.5 million or $0.68 per diluted share, both of which are records. The adjusted net income excluded, net of tax, $3.6 million of noncash acquisition-related intangible asset amortization cost. This compares to non-GAAP adjusted net income of $29.3 million or $0.58 per diluted share in the second quarter 2018. We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income, which provides additional details.

2018 年第三季 GAAP 淨利為創紀錄的 3,090 萬美元，創紀錄的每股攤薄收益 0.61 美元，而 2018 年第二季的 GAAP 淨利為 2,510 萬美元，即每股攤薄收益 0.49 美元。用於計算 2018 年第三季 GAAP 攤薄每股盈餘的股票數量為 5,110 萬股。2018 年第三季非 GAAP 調整後淨利為 3,450 萬美元或稀釋後每股 0.68 美元，均創歷史新高。調整後的淨利潤不包括稅後 360 萬美元的非現金收購相關無形資產攤銷成本。相比之下，2018 年第二季非 GAAP 調整後淨利為 2,930 萬美元，即稀釋後每股收益 0.58 美元。我們在收益報告中納入了 GAAP 淨利潤與非 GAAP 調整後淨利潤的調整表，其中提供了更多詳細資訊。

EBITDA was a record $72 million or 22.4% of revenue in the third quarter 2018 compared with $64.5 million or 21.2% of revenue in the second quarter 2018. We have included in our earnings release a reconciliation of GAAP net income to EBITDA, which provides additional details.

2018 年第三季 EBITDA 達到創紀錄的 7,200 萬美元，佔營收的 22.4%，而 2018 年第二季的 EBITDA 為 6,450 萬美元，佔營收的 21.2%。我們在收益報告中納入了 GAAP 淨利潤與 EBITDA 的調整表，其中提供了更多詳細資訊。

Cash flow generated from operations was $35.5 million for the third quarter 2018. Free cash flow was $16.4 million for the third quarter, which included $19.2 million of capital expenditures. Net cash flow was negative $2.7 million, including the paydown of approximately $21.7 million of long-term debt.

2018 年第三季營運產生的現金流為 3,550 萬美元。第三季自由現金流為 1,640 萬美元，其中包括 1,920 萬美元的資本支出。淨現金流為負 270 萬美元，其中包括償還約 2,170 萬美元的長期債務。

Turning to the balance sheet. At the end of the third quarter, cash and cash equivalents plus short-term investments totaled approximately $158 million. Working capital was $386 million, and long-term debt, including the current portion, was $166 million.

轉向資產負債表。截至第三季末，現金和現金等價物加上短期投資總計約1.58億美元。營運資金為 3.86 億美元，長期債務（包括目前部分）為 1.66 億美元。

At the end of the third quarter, inventory decreased by approximately $4 million from the second quarter 2018 to approximately $219 million. The decrease in inventory reflects an $11 million decrease in finished goods, a $2 million increase in work in process, and a $5 million increase in raw materials. This is the second quarter of finished goods inventory decreases, reflecting our focus on reducing finished goods inventory. Finished good inventory days were 30 in the quarter compared to 38 in the second quarter. Total inventory days were 99 in the quarter, down from 106 days in the second quarter 2018.

截至第三季末，庫存較2018年第二季減少約400萬美元，至約2.19億美元。庫存的減少反映出製成品減少了 1,100 萬美元，在製品增加了 200 萬美元，原料增加了 500 萬美元。這是第二季產成品庫存的減少，反映出我們對減少產成品庫存的重視。本季成品庫存天數為 30 天，而第二季為 38 天。本季庫存總天數為 99 天，低於 2018 年第二季的 106 天。

Capital expenditures on a cash basis for the third quarter were $19.2 million or 6% of revenue and within our target model of 5% to 9% of revenue.

第三季以現金為基礎的資本支出為 1,920 萬美元，佔收入的 6%，在我們佔收入 5% 至 9% 的目標模型之內。

Now turning to the outlook. We expect revenue in the fourth quarter 2018 to be approximately $315 million, plus or minus 3%. At the midpoint, this represents growth of 17.3% over the prior year period and down 1.9% sequentially, which is better than our typical seasonality. We expect GAAP gross margin to be 36%, plus or minus 1%. Non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 21% of revenue, plus or minus 1%. We expect interest expense to be approximately $2 million. Our income tax rate is expected to be 29.5%, plus or minus 3%, and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately 52.2 million. Please note that purchasing accounting adjustments of $3.5 million, after tax, for Pericom and previous acquisitions are not included in these non-GAAP estimates.

現在轉向前景。我們預計 2018 年第四季營收約為 3.15 億美元，上下浮動 3%。從中間值來看，這比去年同期增長了 17.3%，比上一季下降了 1.9%，這比我們典型的季節性要好。我們預期 GAAP 毛利率為 36%，上下浮動 1%。非 GAAP 營運費用（即針對收購相關無形資產攤銷進行調整的 GAAP 營運費用）預計約為收入的 21%，上下浮動 1%。我們預計利息支出約為 200 萬美元。我們的所得稅稅率預計為29.5%，正負3%，用於計算第四季攤薄每股盈餘的股票預計約為5,220萬股。請注意，這些非 GAAP 估算中不包括 Pericom 和先前收購的 350 萬美元稅後購買會計調整。

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

話雖如此，我現在將電話轉給艾蜜莉楊。

Thank you, Rick, and good afternoon. As Dr. Lu and Rick highlighted, third quarter revenue was up 5.5% sequentially and up 12.5% year-over-year, setting a new quarterly record. Q3 distributor POS increased by 3.3%, and POP was up by 3%. Channel inventory increased 2.2% sequentially in support of POS. In fact, we had record POS results in both Asia and North America.

謝謝你，瑞克，下午好。正如 Lu 博士和 Rick 所強調的那樣，第三季度收入環比增長 5.5%，同比增長 12.5%，創下新的季度記錄。第三季經銷商 POS 成長 3.3%，POP 成長 3%。為了支援 POS，通路庫存較上季成長 2.2%。事實上，我們在亞洲和北美都取得了創紀錄的 POS 業績。

During the quarter, customer activity remained strong across all regions as we continue to penetrate our key customer base with an expanded sales footprint. We set revenue record in 12 product categories, collectively representing 76% of our total revenue, including AC/DC, BTRX, CMOS LDO, Eris, interface, LED, MOSFET, power protection, SASP, signal integrity, standard linear and switch, along with continued strong momentum in battery management, connect ASIC and DPNS, driven by recent design wins on new products. Going forward, we expect to make continuous progress with expanded revenue growth, new product introductions and design wins.

本季度，隨著我們繼續擴大銷售足跡，滲透我們的主要客戶群，所有地區的客戶活動仍然強勁。我們在12 個產品類別中創造了收入記錄，總計占我們總收入的76%，包括AC/DC、BTRX、CMOS LDO、Eris、介面、LED、MOSFET、電源保護、SASP、訊號完整性、標準線性和開關等在最近新產品設計勝利的推動下，電池管理、連接 ASIC 和 DPNS 的持續強勁勢頭。展望未來，我們期望透過擴大收入成長、新產品推出和設計獲勝來持續取得進展。

Looking at global sales in the third quarter. Asia represented 78% of the revenue; Europe, 11%; and North America, 11%. In terms of our end markets, industrial was once again our largest representative end market at 27% of revenue. Consumer represented 25%; communication, 23%; computing, 16%; and automotive, 9% of revenue.

看看第三季的全球銷量。亞洲佔收入的 78%；歐洲，11%；和北美，11%。就我們的終端市場而言，產業再次成為我們最大的代表性終端市場，佔營收的 27%。消費者佔25%；溝通，23%；計算，16%；和汽車業，佔收入的 9%。

Starting with our automotive market, which remains a key focus area for Diodes. We achieved record revenue in the quarter, increasing 6% sequentially and 27% year-over-year. Our consistent growth in this end market is underpinned by our continued design win momentum across all application areas, particularly our 3 focus areas of connected driving; comfort, style and safety; and powertrain. In connected driving specifically, we saw continued demand for USB Type C charging and packet switches as well as our high demand for production product as our growing automotive protection family offers high reliability and high performance with ESD protection, which is an important factor in today's connected cars. This portfolio includes CANBus/LinBUS, high-speed data line protector that covers the full spectrum for connected driving application. Diodes also continues to secure an increasing number of MOSFET design-ins on brushless DC motor, electric power steering, water pump, power windows, electric horn, infotainment, battery management and advanced driving assistance applications. Standard and application-specific products, (including Diodes bridges, Zeners and TVS), also saw strong demand within automotive. Diodes' proprietary SBR technology continues to penetrate a diverse range of automotive applications, such as running daylight, battery management system and infotainment. We also saw significant revenue growth in hall sensor design-in activities for power window, sunroof, door, tailgate, seat, seatbelts and gearshift applications.

從我們的汽車市場開始，這仍然是 Diodes 的重點領域。我們在本季實現了創紀錄的收入，季增 6%，年增 27%。我們在這一終端市場的持續成長得益於我們在所有應用領域的持續設計獲勝勢頭，特別是我們的互聯駕駛的 3 個重點領域；舒適、時尚和安全；和動力總成。特別是在互聯駕駛領域，我們看到了對USB Type C 充電和資料包開關的持續需求，以及對生產產品的高需求，因為我們不斷增長的汽車保護系列提供高可靠性和高性能以及ESD 保護，這是當今互聯駕駛的重要因素車款。該產品組合包括 CANBus/LinBUS、高速資料線路保護器，涵蓋了互聯駕駛應用的全部範圍。Diodes 也繼續確保無刷直流馬達、電動輔助轉向、水泵、電動車窗、電喇叭、資訊娛樂、電池管理和高級駕駛輔助應用中越來越多的 MOSFET 設計。標準和特定應用產品（包括二極體橋、齊納二極體和 TVS）在汽車領域也有強勁的需求。Diodes 的專有 SBR 技術繼續滲透到各種汽車應用中，例如日間行駛、電池管理系統和資訊娛樂系統。我們還看到電動車窗、天窗、車門、後擋板、座椅、安全帶和變速應用的霍爾感測器設計活動的收入顯著增長。

Turning next to our industrial market. We also achieved record revenue in this end market, growing 6% sequentially and 32% year-over-year. We continue to have strong demand in our product, driven by a broad range of application, such as e-meter, smoke detectors, surveillance, lighting, solar and power tools. We are also seeing increasing design wins for LDOs, audio, hall sensors and as SASP products, along with SBR product. Our SBR products are ideally switches for industrial application as they have excellent performance in high-temperature operating environment due to the proprietary SBR structure, providing low and stable leakage under these conditions. For the same reasons, solar is another fast-growing target market in regions where high-temperature operation and ruggedness in the harsh environment is critical.

接下來轉向我們的工業市場。我們在這一終端市場的收入也創下了紀錄，環比成長 6%，年增 32%。在電子表、煙霧偵測器、監控、照明、太陽能和電動工具等廣泛應用的推動下，我們的產品需求持續強勁。我們還看到 LDO、音訊、霍爾感測器和 SASP 產品以及 SBR 產品的設計勝利不斷增加。我們的 SBR 產品是工業應用的理想開關，由於採用專有的 SBR 結構，它們在高溫工作環境中具有出色的性能，在這些條件下提供低且穩定的洩漏。出於同樣的原因，在高溫運行和惡劣環境下的耐用性至關重要的地區，太陽能是另一個快速成長的目標市場。

Turning to communication market. Related to the cellphone market, our AC/DC product line has seen growing market share in mainstream smartphone charger application. At the same time, high-end AC/DC product line has gained traction in emerging USB PD 3.0 quick chargers or power adapter applications. We also continue to see ongoing success in this market with strong design-in activities, especially our MOSFET, Zener diodes, protection product, SBR, Schottky and hall sensor products. We are also seeing strong demand for MIPI switches to support multiple cameras in the new-generation smartphone.

轉向通訊市場。與手機市場相關，我們的AC/DC產品線在主流智慧型手機充電器應用的市佔率不斷成長。同時，高階AC/DC產品線在新興的USB PD 3.0快速充電器或電源轉接器應用中獲得了關注。我們也繼續看到透過強大的設計活動在這個市場上不斷取得的成功，特別是我們的 MOSFET、齊納二極體、保護產品、SBR、肖特基和霍爾感測器產品。我們也看到對 MIPI 開關的強勁需求，以支援新一代智慧型手機中的多個相機。

In the consumer market, we achieved solid design win momentum across a broad range of applications, such as panels, earphones, wearables, portables, smart speakers, chargers and set-top boxes. We also continue to expand design-in and design win activity with major customers for our LED lighting products, including MR16 LED drivers and linear drivers for halogen lamp replacement. Additionally, our PCIe gen 2 packet switch are gaining traction in applications, like office printers, and our USB Type C ReDrivers are gaining momentum in countless applications.

在消費市場，我們在面板、耳機、穿戴式裝置、便攜式設備、智慧揚聲器、充電器和機上盒等廣泛應用中實現了堅實的設計贏得動力。我們也繼續擴大與主要客戶的 LED 照明產品的設計導入和設計贏得活動，包括 MR16 LED 驅動器和用於替代鹵素燈的線性驅動器。此外，我們的 PCIe gen 2 封包交換器在辦公室印表機等應用中越來越受歡迎，而我們的 USB Type C ReDriver 在無數應用中也越來越受歡迎。

Lastly, in the computing market, we continue to expand our opportunities, especially for our Pericom products. Our SAS/SATA, USB, Display Port, HDMI, PCIe ReDrivers, clock buffers and signal switches, including video and USB Type-C MUX, have been exceptionally strong. We also saw strong design-in activity with our USB Type-A, USB Type-C and Display Port ReDriver products as we've maintained our leading position in the PC and mobile applications. The growing demand for our USB Type C interface, our mobile Internet devices and computing platforms has greatly expanded the USB C/PD interface opportunities for Diodes. As one example, our latest 3A power switch, a USB PD switch, are gaining increasing traction in the notebook and PC segment.

最後，在運算市場，我們繼續擴大我們的機會，特別是我們的 Pericom 產品。我們的 SAS/SATA、USB、顯示埠、HDMI、PCIe 轉接驅動器、時脈緩衝器和訊號開關（包括視訊和 USB Type-C MUX）非常強大。我們還看到了 USB Type-A、USB Type-C 和 Display Port ReDriver 產品的強勁設計活動，因為我們在 PC 和行動應用中保持了領先地位。對 USB Type C 介面、行動互聯網裝置和運算平台不斷增長的需求極大地擴展了 Diodes 的 USB C/PD 介面機會。例如，我們最新的 3A 電源開關（USB PD 開關）在筆記型電腦和 PC 領域越來越受歡迎。

In summary, we are very pleased with our achievement of record results once again this quarter. Our product initiatives and aggressive past design win momentum has led to our above-market growth and continuing market share gains. Additionally, our content and customer expansion effort, specifically in the automotive and industrial markets, has resulted in these end markets growing at a higher rate than our corporate average and reaching 36% of total revenue. We expect to gain increasing traction in this market as we continue to serve as key contributors to our current and future growth.

總之，我們對本季再次取得創紀錄的業績感到非常高興。我們的產品計劃和過去積極的設計贏得動力導致我們高於市場的成長和持續的市場份額成長。此外，我們的內容和客戶拓展工作，特別是在汽車和工業市場，導致這些終端市場的成長速度高於我們公司的平均水平，達到總收入的 36%。隨著我們繼續成為當前和未來成長的關鍵貢獻者，我們預計將在這個市場上獲得越來越多的關注。

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

現在我們開始提問。操作員？

(Operator Instructions) Our first question comes from the line of Tristan Gerra from Baird.

（操作員說明）我們的第一個問題來自 Baird 的 Tristan Gerra。

This is Maggie Sims on for Tristan. The midpoint of gross margin guidance is about flat year-over-year, yet it's on a revenue guidance midpoint inferring 17% growth presumably better mix than ASPs. Are higher raw material costs the offset to the gross margin guidance? Or what are other factors preempting that year-over-year growth? And should we expect that year-over-year gross margin growth to resume?

這是特里斯坦的瑪吉·西姆斯。毛利率指導中位數與去年同期持平，但其收入指導中位數推斷 17% 的成長可能比平均售價更好。較高的原物料成本是否抵銷了毛利率指引？或者還有哪些因素阻礙了年成長？我們是否應該預期毛利率將恢復年增？

So just a second please.

請稍等。

Well, I think we've continued to improve our product mix and, therefore, even the revenue due to the seasonality or actually better than the seasonality. We only guide 1.9% down. We're still able to maintain our gross margin at 36% or improve from 35.9% to 36%. And we did the -- next year is -- the 1Q could be down due to seasonality, but we were hoping we will continue improve our gross margin, especially when we start to ramp our 8-inch fab and continually improve our product mix. I'm hoping all those will be able to help us to maintain the gross margin even we still have guided constantly of price going down, ASP decreased. Totaling by those efforts, rent, the 8-inch product mix and the new product, with all those effort and the cost reduction, all those efforts, I believe we should be able to maintain at least and maybe improve our gross margin.

嗯，我認為我們繼續改善我們的產品組合，因此，甚至由於季節性而產生的收入或實際上比季節性更好。我們僅指導下調 1.9%。我們仍然能夠將毛利率維持在 36% 或從 35.9% 提高到 36%。我們做到了——明年——第一季可能會因為季節性而下降，但我們希望我們能夠繼續提高毛利率，特別是當我們開始擴大我們的8 英寸晶圓廠並不斷改進我們的產品組合時。我希望所有這些都能夠幫助我們維持毛利率，即使我們仍然不斷指導價格下降，平均售價下降。透過這些努力、租金、8吋產品組合和新產品，透過所有這些努力和成本降低，所有這些努力，我相信我們至少應該能夠維持甚至可能提高我們的毛利率。

Okay. And given a more measured outlook into 4Q in the supply chain, do you see any impact on pricing for your products? And also, if you could talk about wafer availability and pricing with that?

好的。鑑於對供應鏈第四季的更慎重的展望，您認為對您的產品定價有什麼影響嗎？另外，您是否可以談談晶圓的可用性和定價？

Well, we typically put in 1.5% ASP reductions per quarter, and that's our model. Sometimes, we improve that ASP erosion by product mix. So currently, we still see the 4Q. We should be able to maintain our gross margin by continuing to improve the product mix. But due to dilution do not improve because our revenue actually guided down. So we don't expect due to dilution going up.

嗯，我們通常每季將 ASP 降低 1.5%，這就是我們的模型。有時，我們會透過產品組合來改善平均售價的下降。所以目前我們仍然看到第四季。我們應該能夠透過持續改善產品結構來維持我們的毛利率。但由於稀釋並沒有改善，因為我們的收入實際上被引導下降了。因此，我們預計稀釋度不會上升。

Or significant.

或者說意義重大。

Yes. But wafer fab, our 8-inch fab will continue to ramp. As in the end of September, we are running about 6,000 wafer per month. Now on our 8-inch fab, we expect about 9,000 wafer per month by end of December. So in 4Q, we still expect the ramping of our 8-inch fab.

是的。但是晶圓廠，我們的8吋晶圓廠將繼續增加。截至 9 月底，我們每月運行約 6,000 片晶圓。目前，我們的 8 吋晶圓廠預計到 12 月底每月產量約 9,000 片晶圓。因此，在第四季度，我們仍然預計 8 吋晶圓廠的產能將會增加。

Our next question comes from the line of Gary Mobley from Benchmark.

我們的下一個問題來自 Benchmark 的 Gary Mobley。

I'll just start with a follow-up question about the gross margin. As I recall correctly, the gross margin was negatively impacted in the second quarter because of some efforts to reduce some internal inventory. Perhaps you overshot there on your internal inventory. How much of an impact did that have on the third quarter gross margin? And I'm assuming it's no longer a headwind looking into the fourth quarter.

我將從有關毛利率的後續問題開始。我沒記錯的話，由於採取了一些減少內部庫存的措施，第二季的毛利率受到了負面影響。也許你的內部庫存超標了。這對第三季毛利率有多大影響？我認為進入第四季度這將不再是一個阻力。

Yes. So in the second quarter, our margin went down from 35.9% in the first quarter to 35.3%. And in the third quarter, it's back at 35.9%. So we think the impact on the margin from the effort to reduce finished goods inventory is basically done, and we're holding that in the fourth quarter at 36% in the guidance.

是的。所以在第二季度，我們的利潤率從第一季的 35.9% 下降到了 35.3%。第三季又回到了 35.9%。因此，我們認為減少成品庫存的努力對利潤率的影響已基本完成，我們在第四季度的指導中將其維持在 36%。

Okay. As you guys...

好的。正如你們...

So basically, the -- as we see inventory, we -- that you see in second quarter position us for this -- for the inventory reduction and slowed it down. So right now, our inventory is at a very good position, and we don't see a need to continue to reduce that internal inventory.

所以基本上，正如我們所看到的庫存，我們在第二季度看到的那樣，我們為此定位了庫存減少並放慢了速度。所以現在，我們的庫存處於非常好的位置，我們認為沒有必要繼續減少內部庫存。

Okay, all right. Just shifting gears on the top -- to the top line. As you guys are well aware, the performance of your competitors has been uneven to say the least. And it's obvious that your -- you've got to be taking share. And so I guess one of the questions I wanted to pose is, which company or group of companies do you think you're taking the most share from? And are you seeing any pockets of weakness as we are wrapping up calendar year 2018?

好吧，好吧。只是在頂部換檔——到頂線。正如你們所知，至少可以說，你們的競爭對手的表現參差不齊。很明顯，你必須分享份額。所以我想我想提出的問題之一是，你認為你從哪家公司或哪家公司集團獲得了最多的份額？在 2018 年即將結束之際，您是否發現了一些弱點？

Well, I think, several times, I did mention before we have a very strong automotive growth. If you just get our CAGR in the last 5 years of automotive, it's like 28% a year. And even this time, you can see our automotive is at the 27% or something across the last year. So you can see we continue to grow faster than market growth. But I think last time, I will say it's not to say we're gaining the -- take the market from so and so. It's really due to the automotive content increase, and we are able to get in there when the content, new start -- new content was put in. And since Diodes was codified for automotive, our customer can just go ahead using our product then they increase their content. Therefore, it's a bit -- very difficult for me to say we get it from so and so. We get it from this. That's not really the case. It's -- since the customer increased the content, our product is available for that, and so we are able to significantly gain the design win, okay. That's in automotive side. And in industrial, we have been continuing to improve our industrial positions. Now you can see our industrial is 27% of our total revenue. And if you remember, I want to do is -- automotive and industrial grows to 40% of our total revenue and that we are improved towards that direction. We will continue introduce a new product, introduce the correct product for industrial and automotive need, okay. So we don't want to say we get it from which company. We just gain it from -- when the market grows. We gain it from the increase of the market. And even the market is affected or go down, we will still continue gaining more market share.

嗯，我想，我之前確實多次提到我們的汽車產業成長非常強勁。如果你看看汽車產業過去 5 年的複合年增長率，大約是每年 28%。即使這一次，你也可以看到我們的汽車產業的成長率是去年的 27% 左右。所以你可以看到我們的成長速度繼續快於市場成長。但我想上次，我會說這並不是說我們正在從某某手中奪取市場。這實際上是由於汽車內容的增加，當內容、新的開始——新的內容被放入時，我們能夠進入那裡。由於 Diodes 已針對汽車行業進行了編碼，因此我們的客戶可以繼續使用我們的產品，然後增加其內容。因此，對我來說，很難說我們是從某某那裡得到的。我們從中得到它。事實並非如此。因為客戶增加了內容，我們的產品就可以實現這一點，所以我們能夠顯著地贏得設計勝利，好吧。那是在汽車方面。在工業方面，我們一直在不斷提高我們的工業地位。現在你可以看到我們的工業占我們總收入的27%。如果你還記得的話，我想做的是——汽車和工業成長到我們總收入的 40%，並且我們正在朝這個方向改進。我們將繼續推出新產品，推出適合工業和汽車需求的正確產品，好嗎。所以我們不想說我們是從哪家公司獲得的。當市場成長時，我們就會從中獲益。我們從市場的成長中獲得它。即使市場受到影響或下跌，我們仍將繼續獲得更多的市場份額。

Right. So we really focus more on extending the contacts and offering more dollars per BOM per box. That has been our focus.

正確的。因此，我們確實更注重擴展聯繫並為每個盒子的每個 BOM 提供更多的美元。這一直是我們的重點。

Got you.

明白你了。

Another one is the total solutions, okay. We are now with the Pericom with BCD. Now we offer -- we are able to offer a total solution for our customer. So we -- while we're working with our customer, we are able to offer them more product portfolio than before, and that's why we came in the market share.

另一種是整體解決方案，好吧。我們現在使用帶有 BCD 的 Pericom。現在我們能夠為客戶提供整體解決方案。因此，當我們與客戶合作時，我們能夠為他們提供比以前更多的產品組合，這就是我們獲得市場份額的原因。

Okay. Last topic from me and then I'm finished. It's can you give us some updated thoughts on the impact of tariffs? And that's it.

好的。我的最後一個主題然後我就完成了。您能給我們一些關於關稅影響的最新想法嗎？就是這樣。

Sure. So we have -- so everybody remembers, there was -- there were 2 tariff lists. One was in the first part of July, and the second tariff list was at the end of August. We have -- basically, all of our products are covered by tariffs now when they're imported into the United States. We are billing those tariffs, charging them to our customers. And we will continue to do that in the fourth quarter and going forward. And we've -- Emily's been dealing with the customers, and it seems to be going okay right now.

當然。所以我們有 - 所以每個人都記得，有 - 有 2 個關稅清單。一份是在7月上旬，第二份關稅清單是在8月底。基本上，我們所有的產品現在進口到美國時都受到關稅。我們正在向我們的客戶收取這些關稅。我們將在第四季及未來繼續這樣做。我們 - 艾米麗一直在與客戶打交道，現在似乎進展順利。

Our next question comes from the line of Edgar Roesch from Sidoti & Company.

我們的下一個問題來自 Sidoti & Company 的 Edgar Roesch。

I wanted to ask about, first of all, European autos. There was, to my understanding, some market disruption related to new fuel economy standards being implemented in that market. And I was wondering if you felt any impact or might in the coming quarter?

我首先想問的是歐洲汽車。據我了解，該市場實施的新燃油經濟性標準造成了一些市場混亂。我想知道您在下一季是否感受到任何影響或可能產生任何影響？

Yes, we definitely understand the change of the policy in Europe. It actually created more opportunity for us because they're a lot more focused on the electric cars and these kind of applications. And from the content point of view, it created more opportunity for Diodes to engage with our partners and customers. So we definitely understand what you're talking about though we actually see it more on the positive side for us.

是的，我們當然理解歐洲政策的改變。它實際上為我們創造了更多機會，因為他們更專注於電動車和此類應用。從內容的角度來看，它為 Diodes 創造了更多與合作夥伴和客戶互動的機會。因此，我們絕對理解您在說什麼，儘管我們實際上認為這對我們來說更多是積極的一面。

Okay. But it sounds like no production disruptions were impacting you. So that's good. And then the second one, will the 6-inch fab complete qualifying at customers by the end of Q4? Could you update us on that? This is the KFAB that was moved over to Shanghai.

好的。但聽起來生產中斷並未對您產生影響。所以這樣很好。那麼第二個問題，6吋晶圓廠能否在第四季末完成客戶驗收？能為我們介紹一下最新情況嗎？這就是搬到上海的KFAB。

Yes.

是的。

KFAB to SFAB 1. KFAB to SFAB. That's what he's asking.

KFAB 至 SFAB 1. KFAB 至 SFAB。這就是他要問的。

Well, actually, KFAB transferred to SFAB 1 is actually completed about the -- complete. It's about end of the first quarter, fully ramped up. It's about end or the second quarter this year. So basically, that's behind us now. And that's why, if you look at our SFAB 1 billing, it's pretty good. And so far, we don't see any problem or interruption to our customer support.

嗯，實際上，KFAB 轉移到 SFAB 1 實際上已經完成了——完成。大約是第一季末，全面啟動。大約今年底或第二季。基本上，現在已經過去了。這就是為什麼，如果您查看我們的 SFAB 1 帳單，您會發現它相當不錯。到目前為止，我們沒有發現客戶支援出現任何問題或中斷。

Right. The majority of the customers has been transferred over to the SFAB. That, I would say, is pretty much completed.

正確的。大多數客戶已轉移到 SFAB。我想說，這已經基本完成了。

Okay, great. And just one last one. I know you've spoken about your capital spending, putting in place enough capacity to get you through the second half of '18. But if growth were to continue at its current pace, let's say, when would the decision be upon you to ramp up more? And how are you feeling about that at this point?

好的，太好了。還有最後一張。我知道您已經談到了您的資本支出，以及建立足夠的能力來支持您度過 18 年下半年。但是，如果成長繼續以目前的速度進行，那麼您什麼時候會決定進一步成長？此時您對此感覺如何？

We do not have a plan to aggressively put up the capacity. We only put up the capacity when we see a very tight supply, okay. So we do not, back in the past, creatively inching up the capacity. We are now at the stage we want to gradually improve our capacity, but not significant increase. And if you look at -- that's why we kept to put in our CapEx is at 5% to 9% of our revenue. And we're going to continue in keeping that area, except our CAT, our Chengdu Assembly site. Our Chengdu Assembly site, if you remember, our Phase I, we built in and creating room, creating area, an office area. And the manufacturing site is going to be fully utilized, the space, probably for another 2 years. We'll be fully occupied. Therefore, we probably need this -- we are doing now for the design, and we'll probably wait for another year, next year at this time, when we start our construction, and then probably take one more year and finish it up. So we are talking about finishing up by end of 2020 and ready for more expansion.

我們沒有積極增加產能的計畫。我們只有在供應非常緊張的時候才會增加產能，好吧。因此，我們不會像過去那樣創造性地提高容量。我們現在處於一個階段，我們要逐步提升我們的能力，但不會大幅增加。如果你看一下——這就是為什麼我們一直將資本支出佔收入的 5% 到 9%。我們將繼續保留該區域，除了我們的 CAT（成都組裝廠）。我們成都組裝廠，如果你還記得的話，我們一期，我們建了一個房間，一個創造區，一個辦公區。生產基地的空間將得到充分利用，可能持續兩年。我們將被完全佔用。因此，我們可能需要這個——我們現在正在做設計，我們可能會再等一年，明年這個時候，我們開始建造，然後可能再花一年時間完成。因此，我們正在討論在 2020 年底之前完成並為進一步擴張做好準備。

And then what we're going to do there is just like we did in CAT 1 in the first building, we would fill it up as it's needed. We won't go just fill up the building with assembly test equipment. We'll put in a minimum line and then start running that and gradually increase it over time. So there won't be this huge increase in capacity that's underutilized.

然後我們要做的就像我們在第一棟建築的 CAT 1 中所做的那樣，我們會根據需要填充它。我們不會只是在大樓裡裝滿組裝測試設備。我們將設定一個最小行，然後開始運行它並隨著時間的推移逐漸增加它。因此，不會出現未充分利用的產能大幅增加的情況。

(Operator Instructions) Our next question comes from the line of Shawn Harrison from Longbow Research.

（操作員說明）我們的下一個問題來自 Longbow Research 的 Shawn Harrison。

I guess the -- Dr. Lu, as you look at the guidance into the fourth quarter and being it better than seasonal, are there any market verticals sequentially where you're seeing the greater strength out of Asia than you would normally see something that you could point to highlight this growth?

我想，盧博士，當您查看第四季度的指導時，它比季節性的要好，是否有任何垂直市場連續出現，您會看到亞洲的實力比您通常看到的要強您能強調一下這種增長嗎？

Well, actually, we're still seeing somebody sell to multi-voltage throw down. But we still see a strong growth for us in automotive area due to the content increase and due to the test design win, okay. So if you look at our second quarter our announcement, we always say we have very strong design win. We have very good POS. And all those is a result us, resulting in better than seasonality for 4Q and that I -- we don't see any particular area. We see communication has increased, automotive has increased, and industrial probably not. But communication, consumer and industrial, we all see a good growth or better-than-seasonality growth.

嗯，實際上，我們仍然看到有人出售多電壓降壓產品。但由於內容的增加和測試設計的勝利，我們仍然看到汽車領域的強勁增長，好吧。因此，如果你看看我們第二季的公告，我們總是說我們有非常強大的設計勝利。我們有非常好的 POS。所有這些都是我們的結果，導致第四季度的季節性好於季節性，而且我 - 我們沒有看到任何特定區域。我們看到通訊增加，汽車增加，但工業可能沒有增加。但在通訊、消費和工業領域，我們都看到了良好的成長或優於季節性的成長。

That's it. And on the other side of that spectrum, you said industrial maybe is not growing. Are you seeing anything with maybe Chinese or Asian distribution partners getting a little bit more cautious given the uncertainty caused by the tariff situation maybe not seeing the same level of voter strength as you've seen in prior months?

就是這樣。另一方面，你說工業可能沒有成長。鑑於關稅情況造成的不確定性，您是否看到中國或亞洲的分銷合作夥伴變得更加謹慎，可能沒有看到與前幾個月相同水平的選民力量？

Always. Actually, it doesn't mean that they have caution or not always in the 4Q but into the 4Q or in the 4Q. This is typically toward the -- carry the inventory, except Asia. U.S. and Europe, obviously, for sure, they all want to, like to carry their inventory over Asia. Now China typically -- are typically different because Chinese New Year is in early February. And therefore, they're going to be much stronger in February. Therefore, the ethnicity in China, typically, will carry an even more inventory by end of second -- end of fourth quarter to support their strong need in January, and then they slow down during the Chinese New Year.

總是。實際上，這並不意味著他們在第四季度保持謹慎或不總是謹慎，而是進入第四季度或在第四季度。這通常是針對庫存的，亞洲除外。顯然，美國和歐洲肯定都希望將庫存轉移到亞洲。現在的中國通常有所不同，因為農曆新年是在二月初。因此，他們在二月份將會更加強勁。因此，中國的少數族裔通常會在第二季末至第四季末持有更多庫存，以支持他們一月份的強勁需求，然後在農曆新年期間放緩。

Okay. And then last question. Rick, the SG&A leverage in particular was impressive on the sequential sales growth this quarter. Was there anything specific to that other than good cost control? I guess that's my question.

好的。然後是最後一個問題。Rick 表示，SG&A 槓桿在本季的環比銷售成長中尤其令人印象深刻。除了良好的成本控制之外，還有什麼具體的內容嗎？我想這就是我的問題。

No, I don't think there's anything specific. If you look at the SG&A plus R&D, it's been fairly stable around the $64 million to $67 million. In the first quarter, it was $67 million; second quarter, it was $64 million; third quarter, $65 million. And if you look at our guidance, the 21% is around $66 million in the fourth quarter. So SG&A plus R&D this year has been just fairly stable every quarter.

不，我不認為有什麼具體的事情。如果你看看 SG&A 加上研發費用，你會發現它相當穩定在 6,400 萬美元到 6,700 萬美元之間。第一季為 6,700 萬美元；第二季為 6,400 萬美元；第三季度，6500萬美元。如果你看看我們的指導，第四季的 21% 約為 6,600 萬美元。因此，今年每季的 SG&A 加上研發費用都相當穩定。

Okay, helpful. And once again, my congratulations...

好的，有幫助。再次表示祝賀...

And remember, our biggest model is R&D and SG&A will be 20% to 21%. And our old model is at 20%, and we said if we start to increase our gross margin from 35% model to 40% model, we might allow R&D increase a little bit. So we have been stick to that business model, and we are currently -- it's at 20%, slightly over...

請記住，我們最大的模式是研發，SG&A 將為 20% 至 21%。我們的舊模型是20%，我們說如果我們開始將毛利率從35%模型提高到40%模型，我們可能會允許研發增加一點。所以我們一直堅持這種商業模式，目前我們的比例是 20%，略高於…

20.3%.

20.3%。

20.3%. So we are maintaining that kind of business model.

20.3%。所以我們正在維持這種商業模式。

This does include the question-and-answer session of today's program. I'd like to hand the program back to Dr. Keh-Shew Lu for any further remarks.

這確實包括今天節目的問答環節。我想將程式交還給 Keh-Shew Lu 博士以供進一步評論。

Thank you for your participation on today's call. We're looking forward to providing an update on our business next quarters. Operator, you may now discontinue.

感謝您參加今天的電話會議。我們期待在下個季度提供有關我們業務的最新資訊。操作員，您現在可以停止操作了。

Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

謝謝。女士們、先生們，感謝你們參加今天的會議。這確實結束了該程式。您現在可以斷開連線。再會。