DIOD 10-K & 10-Q changes, risk factors and insider trading

The Chinese government has provided various incentives to technology companies, including our manufacturing facilities located in Chengdu and Shanghai, China, in ordercompanies to encourage development of the high-tech industry. TheseWe incentiveshave includethree reducedmanufacturing facilities located in China that were approved for High and New Technology Enterprise (“HNTE”) status for the tax ratesyears 2024-2026 and otherone measures.manufacturing facility approved for the tax years 2025-2027. As a result, we are entitled to a preferential enterprise income tax rate of 15% and other measures so long as our manufacturing facilities continue to maintain their High and New Technology Enterprise (“HNTE”) status. If we were to no longer meet the HNTE requirements, our statutory tax rate for our approved ShanghaiChina facilities would increase to 25% for any period in which an audit shows we were not compliant, which could adversely affect our operating results and financial condition. Two of our manufacturing facilities and one of our wafer fabrication facilities located in Shanghai were approved for HNTE status for the tax years 2024-2026 and continue to qualify for the 15% tax rate. The Company expects to continue to meet HNTE requirements in future years. HNTE qualification requires, but is not limited to, metrics based on China research and development expenditures as well as research and development headcount and overall college-degreed headcount. Any prior years that have already been approved are subject to audit requirements. If we were to no longer meet the HNTE requirements, our statutory tax rate for our approved Shanghai facilities would increase to 25% for any period in which an audit shows we were not compliant, which could adversely affect our operating results and financial condition.

We have qualified for tax incentives offered in the Go West Initiative (“Go West”), where companies are entitled to a preferential income tax rate of 15% for doing business in western China. If we were to no longer meet the Go West requirements, our statutory tax rate foron thisapplicable joint ventureincome would increase to 25%, which could adversely affect our operating results and financial condition.

The impactExclusive of ourone-time HNTEdeferred tax charges of $0.9 million and Go West status, collectively called tax holidays, decreased our tax expense by approximately $1.1 million, $0.7 million, and $0.2$1.6 million for the twelve months ended December 31, 2025 and 2024, the impact of tax holidays decreased our tax expense by approximately $1.3 million, $1.1 million, and $0.7 million for the twelve months ended December 31, 2025, 2024, and 2023, and 2022, respectively. TheThere were no one-time deferred tax charges for the twelve months ended December 31, 2023. Exclusive of the deferred tax charges, the benefit of the tax holidays on basic and diluted earnings per share was $0.03, $0.02, and $0.02 for the twelve months ended December 31, 2025, 2024, and 2023, and 2022 was approximately $0.02, $0.02, and $0.00, respectively.

Hong Kong, Shanghai, Beijing, Shenzhen, Wuhan, Guangzhou, Qingdao, and Xiamen, China Frankfurt and Munich, Germany Milan, Italy Tokyo, Japan Singapore Seongnam-si, South Korea New Taipei City, Taiwan Milpitas, California and Plano, Texas, United States The Company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO 9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016 and the Company is also C-TPAT certified. We believe these quality awards reflect the superior quality-control techniques established at the Company and further enhance our credibility as a vendor-of-choice to original equipment manufacturers (“OEMs”) increasingly concerned with quality and consistency.

Automotive: connected driving, comfort/style/safety, and electrification/powertrain;

Computing: cloudArtificial computing:Intelligence server,(“AI”) data center including AI server, storage, data centers, and edge AI;

Gross profit margin wasdeclined to 33.2% compared to 39.6% in 2023;

Operating income decreased 79.9% to $50.4$50.5 million, or 3.8% of revenue,net sales, compared to $250.6 million, or 15.1% of revenue,net sales, in 2023;

Earnings per share was $0.95 per diluted share, ana 80.7%80.6% decrease from the $4.91$4.9 per diluted share in 2023;

Our net sales decreasedincreased approximately $350.6$171.0 million, or 21.1%,13.0%, for the twelve months ended December 31, 2024,2025, compared to the prior year, due to widespread decreased demand for our semiconductor products and the continued inventory adjustments by the customers thatas we serve.experienced stronger sales across all end markets. For the twelve months ended December 31, 2024,2025, weighted-average sales price of the Company’s products decreased 14.9%1.7% and volumes decreasedincreased 7.3%15.0% when compared to the prior year. The decline in weighted-average sales price was primarily due to weaker end-user demand in the automotive and industrial markets which collectively comprised 42% and 46% of product revenue for the twelve months ended December 31, 2024 and 2023, respectively.mix.

For the twelve months ended December 31, 2024,2025, gross profit decreasedincreased approximately 33.8%6.1% when compared to the prior year, reflective of the lowerincreased revenue in 2024.2025. Gross profit margin for the twelve month periods ended December 31, 20242025 and 2023,2024, was 33.2%31.2% and 39.6%,33.2%, respectively. The decrease in gross profit margin was primarily due to theproduct overallmix reductionand inslower end-market demand driving our overall revenue down, continued inventory reductions by our customers, decreased customer demandgrowth in the automotive and industrial marketsend which lowers the mix of our automotive and industrial revenue as a percentage of the total and lower utilization in our factories. This decrease in gross profit margin includes an decrease in cost of goods sold related to a change in accounting estimate of $4.5 million, however cost of goods sold increased approximately $5.6 million related to total inventory reserves.market. Average unit cost decreasedincreased 6.0%1.3% for the twelve months ended December 31, 2024,2025, compared to the same period last year, due to the mix of the product being on lower margin/lower cost products, cost decreases from various foundries, as well as costraw reductionsmaterial fromprice ourincreases, ownincluding factories.gold.

We recognized income tax expense of approximately $14.8 million for the twelve months ended December 31, 2025, and income tax expense of approximately $11.8 million for the twelve months ended December 31, 2024, and income tax expense of approximately $47.3 million for the twelve months ended December 31, 2023, resulting in effective income tax rates of 18.9%17.6% and 17.0%,18.9%, respectively. The increasedecrease in the effective tax rate for 20242025 compared to 20232024 is primarily attributable to aan decreaseincrease in overall pre-tax book income,income and the impact of the geographical mix of pre-tax income and the impact of changes to the outside basis difference in foreign subsidiaries where the Company does not assert permanent reinvestment.income. Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income tax but may be subject to foreign withholding taxes. The Company has recorded outside basis differences in the limited instances where they do not assert permanent reinvestment. As of December 31, 2024,2025, our foreign subsidiaries held approximately $236.3$221.2 million of cash, cash equivalentsequivalents, and investments, of which approximately $76.7$80.1 million would be subject to foreign withholding tax if distributed outside the country in which the related earnings were generated.

Our primary liquidity requirements have been to meet our capital expenditure needs and to fund ongoing operations. For 20242025 and 20232024 our working capital was $848.6$878.6 million and $793.9$848.6 million, respectively. InThe 2024, ourCompany’s working capital increasedaccount primarilybalances duereflect tofluctuations increasesfrom innormal accountsbusiness receivable and inventories, and a decrease in our short-term debt and accounts payable.activities. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments, and other liquidity requirements associated with our existing operations for at least the next 12 months.

Cash and cash equivalents, including restricted cash, decreasedincreased approximately $3.8$57.6 million to $372.3 million in 2025 from $314.7 million in 2024 from $318.5 million in 2023.2024. The table below sets forth summary information from our statements of cash flows:

Net cash flows from operating activities for 20242025 was approximately $119.4$215.5 million, due primarily to $50.8$69.2 million of net income, $137.1$143.7 million in depreciation expense and amortization of intangible assets expense and $22.8$25.7 million from non-cash share-based compensation expense.expense, The increases were partially offset byand a net decreaseincrease in cash attributable to changes in operating assets and liabilities of $70.6$36.5 million,million. These increases were partially offset by interest income from forwardderivative andfinancial collarsinstruments of $10.4$20.0 million, gain on disposal of property, plant and equipment of $7.6$0.6 million, non-cash gains on investments of $0.3$25.9 million, and a decrease in deferred income taxes of $1.0$7.5 million.

Net cash flows from investing activities for 20242025 was approximately $($118.0116.2) million. The Company invested approximately $73.0$78.4 million in property, plant, and equipment, primarily at its production facilities in Asia. InThe Company made purchases of equity securities of $49.3 million, including making an investment in ATX of approximately $30.0 million, increasing its continuedinvestment growthin efforts,Atlas by approximately $17.3 million, and the Companyacquisition investedof the minority interest in a joint venture in Taiwan for approximately $56.7$4.1 millionmillion, inbringing acquisitions,the netCompany’s ownership to 100%. The Company also paid approximately $4.0 million, net, due to the expiration of a hedge instrument. These uses of cash received. Thesefor investing cash outflows arewere partially offset by the receipt of governmentapproximately subsidies$16.0 ofmillion $8.7 million, insurance recoveries from previous damagerelated to property, plant, and equipment of $4.8 million, and net proceeds from the sale of short-termTF investmentsSemiconductor ofSolutions, $2.3 million.Inc.

Net cash flows from financing activities for 20242025 was approximately $($19.354.8) million, due primarily to repurchases of our common stock of $33.8 million, net changes in noncontrolling interests of $18.1 million, taxes on net share settlements of $4.3 million, and the net reduction in our outstanding indebtedness of $7.6 million, taxes on net share settlements of $9.6 million, and net changes in noncontrolling interests of $2.1$1.2 million.

There have been no material changes to our risk factors from those disclosed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 10, 2026.2026 except as set forth below.

Summary for the three months ended MarchJune 31,30, 2026

Net sales were $405.5$445.5 million, an increase of 22.1%21.7% from the $332.1$366.2 million in the three months ended MarchJune 31,30, 2025 and an increase of 3.5%9.9% from the $391.6$405.5 million in three months ended DecemberMarch 31, 20252026;

Gross profit was $128.8$147.6 million, an increase of 23.0%28.0% from the $104.7$115.3 million in the three months ended June 30, 2025 and an increase of 14.6% from the $128.8 million in the three months ended March 31, 2025 and an increase of 5.6% from the $121.9 million in the three months ended December 31, 20252026;

Gross profit margin was 31.8%,33.1%, compared to 31.5% in the three months ended MarchJune 31,30, 2025 and 31.1%31.8% in the three months ended DecemberMarch 31, 20252026;

Earnings per share attributable to common stockholders was $0.32$1.00 per diluted share, compared to $(0.10)$0.99 per diluted share in the three months ended June 30, 2025 and $0.32 per diluted share in the three months ended March 31, 2025 and $0.22 per diluted share in the three months ended December 31, 20252026; and Cash flow provided by operations was $64.3$68.5 million. We had $31.9$33.6 million of capital expenditures. Net cash flow was $26.9$32.9 million.

As of MarchJune 31,30, 2026, our cash, cash equivalents, and short-term investments were $404.3$440.0 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.

Results of operations for the three months ended MarchJune 31,30, 2026 and 2025

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

Net sales increased approximately $73.4$79.3 million, or 22.1%,21.7%, for the three months ended MarchJune 31,30, 2026, compared to the same period last year, drivenprimarily bydue strongerto strong demand acrossin allthe endcomputing markets.market, especially for artificial intelligence related server applications as well as data center and edge computing. During the three months ended MarchJune 31,30, 2026, weighted-average sales price decreased 6.9%2.5% and volume increased 31.1%,24.8%, when compared to the same period in 2025. The decrease in weighted-average sales price was primarily due to productlower mix.market pricing.

The table below sets forth our product revenue as a percentage of total product revenue by end-user market for the three months ended MarchJune 31,30, 2026 and 2025:

For the three months ended MarchJune 31,30, 2026, gross profit increased approximately 23.0%28.0% when compared to the same period last year primarily due to higher net sales. Gross profit margin for the three months ended MarchJune 31,30, 2026 and 2025 was 31.8%33.1% and 31.5%, respectively.

Operating expenses for the three months ended MarchJune 31,30, 2026, increased $5.6$8.3 million when compared to the three months ended MarchJune 31,30, 2025. Operating expenses as a percentage of net sales were 26.9%25.6% and 31.1%28.9% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. SG&A increased approximately $5.6$10.3 million as compared to the same period last year reflecting an increase in salaries and wages of $3.1$8.6 million and an increase in freight and duty expense of $1.2$1.7 million. The remaining increase in SG&A was made up of normal business expense fluctuations. SG&A, as a percentage of net sales, was 15.9%15.7% and 17.7%16.2% for the three months ended threeJune months ended March 31,30, 2026 and 2025 respectively. For the three months ended MarchJune 31,30, 2026, research and development expenses (“R&D”) increasedwas approximately $2.0 millionflat when compared to the three months ended MarchJune 31,30, 2025, due to increased R&D spending in wages and benefits of $1.6 million and increased depreciation and amortization expense of $0.8 million.2025. R&D, as a percentage of net sales, was 10.0%9.1% and 11.6%11.1% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

We recognized an income tax expense of approximately $4.0$6.8 million and $20$9.1 thousandmillion for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increasedecrease in income taxtaxes expensefor reflects2026 compared to 2025 is primarily attributable to the increasegeographical inmix pretaxof earnings.pre-tax income and loss across tax jurisdictions.

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments, and our credit facilities. Our cash and cash equivalents and restricted cash increased from $372.3 million at December 31, 2025 to $399.2$432.1 million at MarchJune 31,30, 2026. This increase in cash, cash equivalents, and restricted cash reflects normal operations of the Company. As of MarchJune 31,30, 2026, we had short-term investments totaling $10.2$9.5 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 MarchJune 31,30, 2026 and December 31, 2025, our working capital was $891.3$930.7 million and $878.6 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments, and available borrowing under credit facilities to be sufficient to cover our cash needs for working capital, capital expenditures, and acquisitions for at least the next 12 months.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. As of MarchJune 31,30, 2026, our foreign subsidiaries held approximately $239.0$253.2 million of cash, cash equivalents and investments of which approximately $94.2$91.2 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held. The $94.2$92.1 million is held in Asia and Europe.

Our Asia subsidiaries maintain short-term credit facilities with several financial institutions through our foreign entities worldwide totaling $146.4$148.9 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted, and contain no restrictive covenants. These credit facilities bear interest at the Taipei Interbank Offering Rate (or similar indices) plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of MarchJune 31,30, 2026, was approximately $115.9$129.9 million, net of $30.0$18.6 million advanced under our foreign credit lines and $0.4 million of credit used for import and export guarantee.

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. The Company’s obligations under the Credit Agreement are secured by a lien on substantially all assets of the Company and certain of its subsidiaries. There was no outstanding balance under the Credit Agreement at MarchJune 30, 2026. In addition to our U.S. Credit Agreement, our 53% owned subsidiary, ERIS, had long-term debt of $20.9 million and $25.0 million, at June 30, 2026 and December 31, 2026.2025, respectively, from local Taiwan banks. The outstanding ERIS debt matures in various periods from 2026 through 2033.

Net cash flows from operating activities for the threesix months ended MarchJune 31,30, 2026 was $64.3$132.8 million. The following recurring operating items gave rise to the calculation of net cash flows from operating activities for the threesix months ended MarchJune 31,30, 2026: Net income of $16.1$64.9 million, depreciation and amortization of intangible assets of $35.2$70.4 million, share-based compensation of $18.9 million, and a net increase of $6.3$0.6 million of changes in working capital accounts, from ongoing operations, and share-based compensation of $7.6 million.accounts. These increases in cash flow from operations were partially offset by interestthe incomerecognition of $3.4 million recognized related to the Company’snet investment hedging.gains of $17.8 million, including $22.5 million, net, of non-cash mark-to-market increases.

Net cash flows from operating activities for the threesix months ended MarchJune 31,30, 2025 was $56.7$98.3 million. The following recurring operating items gave rise to the calculation of net cash flows from operating activities for the threesix months ended MarchJune 31,30, 2025: DepreciationNet income of $41.4 million, depreciation and amortization of intangible assets of $35.9$71.8 million, a net increase of $12.1$15.3 million of changes in working capital accounts, and share-based compensation of $12.2 million. During the six months ended June 30, 2025 the Company also recognized net investment gains of $39.4 million, including a $4.0$33.3 million non-cash lossmark-to-market onincrease investments related to mark- to-market adjustments to adjustin the value of the investment,Company’s andinvestment share-basedin compensationAtlas, a non-cash mark-to-market decrease of $6.4 million. These increases were partially offset by a net loss of $2.8 million. During the three months ended March 31, 2025, the Company recorded a $5.8$7.7 million non-cash impairment charge related to the decrease in value of a previously made equity investment,investments, and a gain on the resultdisposal of whicha issubsidiary anfor increase$13.7 to operating cash flow.million.

Net cash and cash equivalents from investing activities was $(36.775.2) million for the threesix months ended MarchJune 31,30, 2026. Net cash and cash equivalents from investing activities for the threesix months ended MarchJune 31,30, 2026 was primarily due to purchases of property, plant, and equipment of $31.9$65.5 million, or 7.9%7.7% of net sales. We expect capital expenditures for the twelve months ended December 31, 2026 to be within our target model of 5% to 9% of net sales. The Company also paid approximately $3.2$6.5 million, net,million due to the expirationtermination of a hedge instruments.instrument and made a $2.4 million payment from an escrow account related to the previously made acquisition.

Net cash and cash equivalents from investing activities was ($28.5$78.6) million for the threesix months ended MarchJune 31,30, 2025. Net cash and cash equivalents from investing activities for the threesix months ended MarchJune 31,30, 2025 was primarily due to purchases of property, plant, and equipment of $15.9$36.3 million, or 4.8%5.2% of net sales,sales. theThe expirationCompany made purchases of aequity hedgesecurities, instrumentincluding making an investment in ATX of $6.9approximately $30.0 million, increasing its investment in Atlas by approximately $17.3 million, and the acquisition of the minority interest in a joint venture in Taiwan for approximately $4.1 million, bringing the Company’s ownership to 100%. The Company also paid approximately $6.9 million due to the expiration of a hedge instrument. These uses of cash for investing were partially offset by the receipt of approximately $16.0 million related to the sale of TFS.

Net cash and cash equivalents from financing activities was $($1.32.0) million for the threesix months ended MarchJune 31,30, 2025.2026. Net cash provided byfrom financing activities in the threesix months ended MarchJune 31,30, 20252026 consisted primarilyof stock repurchases of $0.2$10.2 million, $14.8 million of net increasesdecreases in our debtdebt, and taxes paid on net share settlements of $1.5$1.9 million. These uses of cash were partially offset by net changes in non-controlling interests of $25.1 million.

We use, or may use, interest rate swaps, commodity swaps, foreign exchange forward contracts, and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.