Form 8-K ALPHA & OMEGA SEMICONDUC For: May 05

May 5, 2022 4:03 PM EDT

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Exhibit 99.1

Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Third Quarter of 2022 Ended March 31, 2022

SUNNYVALE, Calif.--(BUSINESS WIRE)--May 5, 2022--Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL) today reported financial results for the fiscal third quarter of 2022 ended March 31, 2022.

The results for the fiscal third quarter of 2022 ended March 31, 2022 were as follows:

GAAP Financial Comparison

Quarterly

(in millions, except percentage and per share data)

(unaudited)

 

 

Three Months Ended

 

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Revenue

 

$

203.2

 

 

$

193.3

 

 

$

169.2

 

Gross Margin

 

 

35.6

%

 

 

35.4

%

 

 

31.1

%

Operating Income

 

$

31.2

 

 

$

27.7

 

 

$

17.8

 

Net Income Attributable to AOS

 

$

31.7

 

 

$

383.0

 

 

$

16.1

 

Net Income Per Share Attributable to AOS - Diluted

 

$

1.11

 

 

$

13.54

 

 

$

0.58

 

Non-GAAP Financial Comparison

Quarterly

(in millions, except percentage and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Revenue

 

$

203.2

 

 

$

193.3

 

 

$

169.2

 

Non-GAAP Gross Margin

 

 

36.7

%

 

 

36.7

%

 

 

31.9

%

Non-GAAP Operating Income

 

$

40.5

 

 

$

37.4

 

 

$

23.0

 

Non-GAAP Net Income Attributable to AOS

 

$

38.2

 

 

$

34.0

 

 

$

21.4

 

Non-GAAP Net Income Per Share Attributable to AOS - Diluted

 

$

1.34

 

 

$

1.20

 

 

$

0.77

 

The non-GAAP financial measures in the schedule above and under the section “Financial Results for Fiscal Q3 Ended March 31, 2022” below exclude the effect of share-based compensation expenses, amortization of purchased intangible, legal costs related to government investigation, income tax effect of non-GAAP adjustments in each of the periods presented, and equity method investment loss from equity investee for the three months ended March 31, 2022, as well as gain on deconsolidation and changes of equity interest in the JV Company for the three months ended March 31, 2022 and December 31, 2021. A detailed reconciliation of GAAP and non-GAAP financial measures is included at the end of this press release.


Financial Results for Fiscal Q3 Ended March 31, 2022

  • Revenue was $203.2 million, an increase of 5.1% from the prior quarter and an increase of 20.1% from the same quarter last year.
  • GAAP gross margin was 35.6%, up from 35.4% in the prior quarter and up from 31.1% in the same quarter last year.
  • Non-GAAP gross margin was 36.7%, same as 36.7% in the prior quarter and up from 31.9% in the same quarter last year.
  • GAAP operating expenses were $41.2 million, up from $40.6 million in the prior quarter and up from $34.9 million in the same quarter last year.
  • Non-GAAP operating expenses were $34.0 million, an increase of $0.4 million from last quarter and an increase of $3.0 million from the same quarter last year.
  • GAAP operating income was $31.2 million, up from $27.7 million in the prior quarter and up from $17.8 million in the same quarter last year.
  • Non-GAAP operating income was $40.5 million as compared to $37.4 million for the prior quarter and $23.0 million for the same quarter last year.
  • GAAP net income per diluted share attributable to AOS was $1.11, compared to $13.54 net income per share for the prior quarter primarily due to the gain on deconsolidation and changes of equity interest in the JV Company, and $0.58 net income per share for the same quarter a year ago.
  • Non-GAAP net income per share attributable to AOS was $1.34 compared to $1.20 for the prior quarter and $0.77 for the same quarter a year ago.
  • Consolidated cash flow provided by operating activities was $61.8 million, which included $6.4 million net customer deposits, as compared to $50.8 million in the prior quarter, which included $11.2 million net customer deposits.
  • The Company closed the quarter with $323.1 million of cash and cash equivalents.
  • In April 2022, we became aware of a cybersecurity incident involving unauthorized access to our internal email system, which resulted in a loss of $1.5 million for the three months ended March 31, 2022.  We are conducting a comprehensive investigation of the incident.  As part of our quarterly review process and in consultation with our independent auditors, the management is currently assessing the impact of this incident on our internal control over financial reporting as of March 31, 2022.  The financial impact of this incident is not material, and we expect there will be no changes to previously released financial results or financial statements.

AOS Chairman and Chief Executive Officer Dr. Mike Chang commented, “Q3 was another great quarter and once again, we succeeded in outperforming our guidance. Our revenue grew 20% year-over-year to a record $203 million, which was the first time in our history to cross the $200 million threshold. This was achieved by securing additional wafer capacity from our existing foundry partners and continuing to optimize product mix. This resulted in a record non-GAAP EPS of $1.34, up 74% year-over-year.”

Dr. Chang continued, “For the June quarter, a good portion of our back-end packaging and testing operations were suspended for three weeks in April due to the city-wide COVID lockdown in Shanghai. Fortunately, at the end of April, the Shanghai government classified AOS as an essential business and cleared us to resume operations. However, the pace at which we can open is still uncertain. We currently estimate the Shanghai lockdown will impact the June quarter revenue by approximately $20 million to $25 million, but expect to recover a good portion of the lost revenue in the second half of the calendar year once things normalize. Looking out further, we believe the impact of the lockdown is temporary and we remain on our growth trajectory to reach $1 billion annual revenue in 2024.”

Business Outlook for Fiscal Q4 Ending June 30, 2022

The following statements are based on management's current expectations. These statements are forward-looking, and actual results may differ materially. AOS undertakes no obligation to update these statements.

Our expectations for the fourth quarter of fiscal year 2022 are as follows:

  • Revenue to be approximately $190 million, plus or minus $10 million, primarily reflecting the suspension of production at our Shanghai packaging and testing facilities due to the impact of the Shanghai COVID lock down. Our Shanghai facilities had resumed partial production at the end of April. This guidance is based on the assumptions that our Shanghai facilities remain COVID free and can continue to ramp up its production gradually in May and return to normal production in June.
  • GAAP gross margin to be 31.9% plus or minus 2%. We anticipate non-GAAP gross margin to be 33.0% plus or minus 2%, reflecting the estimated impact of suspension of operations and incremental expenses required in response to the Shanghai COVID shut down and gradual resumption of production. Non-GAAP gross margin guidance excludes $0.8 million amortization of acquired IP and $1.3 million of estimated share-based compensation charges.
  • GAAP operating expenses to be in the range of $44.3 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $36.0 million plus or minus $1 million. Non-GAAP operating expenses exclude $8.1 million of estimated share-based compensation charges and $0.2 million of estimated legal expenses relating to the government investigation.
  • Interest expense is expected to be approximately $0.8 million.
  • Income tax expense is expected to be in the range of $1.3 million to $1.5 million.

Conference Call and Webcast

AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal third quarter ended March 31, 2022 today, May 5, 2022 at 2:00 p.m. PT / 5:00 p.m. ET. To listen to the live conference call, please dial +1 (844) 200-6205 or +1 (929) 526-1599 if dialing from outside the United States and Canada. The access code is 151277. A live webcast of the call will also be available in the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com. The webcast replay will be available for seven days after the live call on the same website. In addition, a copy of the script of management's prepared remarks and a live webcast of the call will also be available in the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com.


Forward-Looking Statements

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management's judgment, beliefs, current trends, and anticipated product performance. These forward-looking statements include, without limitation, statements relating to resumption of production at our Shanghai facilities and continuing impact of COVID-19 pandemic, anticipated earnings power and non-GAAP EPS on an annual basis, our growth opportunities and new markets, our annual revenue target, projected amount of revenue, gross margin, operating income, income tax expenses, net income, and share-based compensation expenses, non-GAAP gross margin, non-GAAP operating expenses, tax expenses, our objectives to achieve revenue target, our ability to gain new customers and design wins, strategic partnership with customers, and other information under the section entitled “Business Outlook for Fiscal Q4 Ending June 30, 2022”. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, the impact of COVID-19 pandemic on our business and the city-wide lockdown in Shanghai; our lack of control over the joint venture in China; difficulties and challenges in executing our diversification strategy into different market segments; new tariffs on goods from China; ordering pattern from distributors and seasonality; changes in regulatory environment and government investigation; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of PC markets; the actual product performance in volume production; the quality and reliability of our product, our ability to achieve design wins; the general business and economic conditions; the state of semiconductor industry and seasonality of our markets; our ability to maintain factory utilization at a desirable level; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed by AOS with the SEC and other periodic reports we filed with the SEC. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and AOS undertakes no duty to update such information, except as required under applicable law.

Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a basis consistent with U.S. GAAP, we disclose certain non-GAAP financial measures for our historical performance, including non-GAAP gross profit, gross margin, operating income, net loss attributable to AOS, net income, diluted earnings per share ("EPS") and EBITDAS. These supplemental measures exclude, among other items, share-based compensation expenses, legal and profession fees related to government investigation, amortization of purchased intangible, income tax effect of non-GAAP adjustments, and equity method investment loss from equity investee, as well as gain on deconsolidation and changes of equity interest in the JV Company. We also disclose certain non-GAAP financial measures in our guidance for the next quarter, including non-GAAP gross margin, operating expenses and earnings/loss in equity method investment. We believe that these historical and forecast non-GAAP financial measures provide useful information to both management and investors by excluding certain items and expenses that are not indicative of our core operating results or do not reflect our normal business operations. In addition, our management uses non-GAAP measures to compare our performance relative to forecasts and to benchmark our performance externally against competitors. Our use of non-GAAP financial measures has certain limitations in that such non-GAAP financial measures may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP net income (loss) or non-GAAP operating expenses, do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. In addition, we included amount of income tax effect of non-GAAP adjustments in the non-GAAP net income of reconciliation table for all periods presented as the management believes that such non-GAAP presentation provides useful information to investors, even though the amounts are not significant. We seek to compensate for the limitation of our non-GAAP presentation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP measures both in the text in this press release and in the tables attached hereto. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.


About Alpha and Omega Semiconductor

Alpha and Omega Semiconductor Limited, or AOS, is a designer, developer and global supplier of a broad range of power semiconductors, including a wide portfolio of Power MOSFET, IGBT, IPM, TVS, HVIC, GaN/SiC, Power IC and Digital Power products. AOS has developed extensive intellectual property and technical knowledge that encompasses the latest advancements in the power semiconductor industry, which enables us to introduce innovative products to address the increasingly complex power requirements of advanced electronics. AOS differentiates itself by integrating its Discrete and IC semiconductor process technology, product design, and advanced packaging know-how to develop high performance power management solutions. AOS’ portfolio of products targets high-volume applications, including personal and portable computers, graphic cards, flat panel TVs, home appliances, smart phones, battery packs, quick chargers, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. For more information, please visit www.aosmd.com.

The following unaudited consolidated financial statements are prepared in accordance with U.S. GAAP.


 

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

 

March 31,
2022

 

March 31,
2021

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

203,239

 

 

$

193,319

 

 

$

169,212

 

 

$

583,593

 

 

$

479,593

 

Cost of goods sold

 

 

130,837

 

 

 

124,954

 

 

 

116,521

 

 

 

378,259

 

 

 

335,630

 

Gross profit

 

 

72,402

 

 

 

68,365

 

 

 

52,691

 

 

 

205,334

 

 

 

143,963

 

Gross margin

 

 

35.6

%

 

 

35.4

%

 

 

31.1

%

 

 

35.2

%

 

 

30.0

%

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

16,545

 

 

 

16,516

 

 

 

15,557

 

 

 

50,873

 

 

 

45,671

 

Selling, general and administrative

 

 

24,625

 

 

 

24,132

 

 

 

19,338

 

 

 

70,563

 

 

 

56,579

 

Total operating expenses

 

 

41,170

 

 

 

40,648

 

 

 

34,895

 

 

 

121,436

 

 

 

102,250

 

Operating income

 

 

31,232

 

 

 

27,717

 

 

 

17,796

 

 

 

83,898

 

 

 

41,713

 

 

 

 

 

 

 

 

 

 

 

 

Other income (loss), net

 

 

263

 

 

 

473

 

 

 

(253

)

 

 

720

 

 

 

2,087

 

Interest income (expense), net

 

 

(308

)

 

 

(541

)

 

 

(1,562

)

 

 

(3,025

)

 

 

(4,832

)

Gain on deconsolidation of the JV Company

 

 

 

 

 

399,093

 

 

 

 

 

 

399,093

 

 

 

 

Gain (loss) on changes of equity interest in the JV Company, net

 

 

4,501

 

 

 

(7,641

)

 

 

 

 

 

(3,140

)

 

 

 

Net income before income taxes

 

 

35,688

 

 

 

419,101

 

 

 

15,981

 

 

 

477,546

 

 

 

38,968

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

2,902

 

 

 

34,096

 

 

 

1,014

 

 

 

38,318

 

 

 

2,694

 

Net income before loss from equity method investment

 

 

32,786

 

 

 

385,005

 

 

 

14,967

 

 

 

439,228

 

 

 

36,274

 

Equity method investment loss from equity investee

 

 

1,136

 

 

 

 

 

 

 

 

 

1,136

 

 

 

 

Net income

 

 

31,650

 

 

 

385,005

 

 

 

14,967

 

 

 

438,092

 

 

 

36,274

 

Net gain (loss) attributable to noncontrolling interest

 

 

 

 

 

2,007

 

 

 

(1,133

)

 

 

20

 

 

 

(2,303

)

Net income attributable to Alpha and Omega Semiconductor Limited

 

$

31,650

 

 

$

382,998

 

 

$

16,100

 

 

$

438,072

 

 

$

38,577

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Alpha and Omega Semiconductor Limited

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.18

 

 

$

14.40

 

 

$

0.62

 

 

$

16.47

 

 

$

1.51

 

Diluted

 

$

1.11

 

 

$

13.54

 

 

$

0.58

 

 

$

15.58

 

 

$

1.42

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,829

 

 

 

26,593

 

 

 

25,882

 

 

 

26,596

 

 

 

25,631

 

Diluted

 

 

28,423

 

 

 

28,287

 

 

 

27,716

 

 

 

28,116

 

 

 

27,128

 

 

 

 

 

 

 

 

 

 

 

 


Alpha and Omega Semiconductor Limited

Condensed Consolidated Balance Sheets

(in thousands, except par value per share)

(unaudited)

 

 

March 31, 2022

 

June 30, 2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

323,134

 

 

$

202,412

 

Restricted cash

 

 

236

 

 

 

233

 

Accounts receivable, net

 

 

39,207

 

 

 

35,789

 

Inventories

 

 

143,538

 

 

 

154,293

 

Other current assets

 

 

11,698

 

 

 

14,595

 

Total current assets

 

 

517,813

 

 

 

407,322

 

Property, plant and equipment, net

 

 

245,770

 

 

 

436,977

 

Operating lease right-of-use assets, net

 

 

24,971

 

 

 

34,660

 

Intangible assets, net

 

 

10,890

 

 

 

13,410

 

Equity method investment

 

 

379,824

 

 

 

 

Deferred income tax assets

 

 

436

 

 

 

5,167

 

Restricted cash - long-term

 

 

 

 

 

2,168

 

Other long-term assets

 

 

29,465

 

 

 

18,869

 

Total assets

 

$

1,209,169

 

 

$

918,573

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

69,758

 

 

$

80,699

 

Accrued liabilities

 

 

91,333

 

 

 

69,494

 

Other payable, equity investee

 

 

15,171

 

 

 

 

Income taxes payable

 

 

6,733

 

 

 

2,604

 

Short-term debt

 

 

11,332

 

 

 

58,030

 

Finance lease liabilities

 

 

862

 

 

 

16,724

 

Operating lease liabilities

 

 

4,303

 

 

 

5,679

 

Total current liabilities

 

 

199,492

 

 

 

233,230

 

Long-term debt

 

 

53,887

 

 

 

77,990

 

Income taxes payable - long-term

 

 

1,359

 

 

 

1,319

 

Deferred income tax liabilities

 

 

29,192

 

 

 

2,448

 

Finance lease liabilities - long-term

 

 

3,834

 

 

 

12,698

 

Operating lease liabilities - long-term

 

 

22,120

 

 

 

30,440

 

Other long-term liabilities

 

 

72,384

 

 

 

44,123

 

Total liabilities

 

 

382,268

 

 

 

402,248

 

Equity:

 

 

 

 

Preferred shares, par value $0.002 per share:

 

 

 

 

Authorized: 10,000 shares; issued and outstanding: none at March 31, 2022 and June 30, 2021

 

 

 

 

 

 

Common shares, par value $0.002 per share:

 

 

 

 

Authorized: 100,000 shares; issued and outstanding: 33,681 shares and 27,063 shares, respectively at March 31, 2022 and 32,975 shares and 26,350 shares, respectively at June 30, 2021

 

 

67

 

 

 

66

 

Treasury shares at cost: 6,618 shares at March 31, 2022 and 6,625 shares at June 30, 2021

 

 

(66,006

)

 

 

(66,064

)

Additional paid-in capital

 

 

276,509

 

 

 

259,993

 

Accumulated other comprehensive income

 

 

1,422

 

 

 

2,315

 

Retained earnings

 

 

614,909

 

 

 

176,895

 

Total Alpha and Omega Semiconductor Limited shareholder's equity

 

 

826,901

 

 

 

373,205

 

Noncontrolling interest

 

 

 

 

 

143,120

 

Total equity

 

 

826,901

 

 

 

516,325

 

Total liabilities and equity

 

$

1,209,169

 

 

$

918,573

 


Alpha and Omega Semiconductor Limited

Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures

(in thousands, except percentages and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

 

March 31,
2022

 

March 31,
2021

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

72,402

 

 

$

68,365

 

 

$

52,691

 

 

$

205,334

 

 

$

143,963

 

Share-based compensation

 

 

1,282

 

 

 

1,709

 

 

 

427

 

 

 

3,560

 

 

 

1,195

 

Amortization of purchased intangible

 

 

812

 

 

 

811

 

 

 

812

 

 

 

2,435

 

 

 

2,435

 

Production ramp up costs related to joint venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

275

 

Non-GAAP gross profit

 

$

74,496

 

 

$

70,885

 

 

$

53,930

 

 

$

211,329

 

 

$

147,868

 

Non-GAAP gross margin as a % of revenue

 

 

36.7

%

 

 

36.7

%

 

 

31.9

%

 

 

36.2

%

 

 

30.8

%

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expense

 

$

41,170

 

 

$

40,648

 

 

$

34,895

 

 

$

121,436

 

 

$

102,250

 

Share-based compensation

 

 

6,990

 

 

 

6,838

 

 

 

3,398

 

 

 

17,894

 

 

 

8,730

 

Legal costs related to government investigation

 

 

221

 

 

 

293

 

 

 

563

 

 

 

946

 

 

 

2,513

 

Non-GAAP operating expense

 

$

33,959

 

 

$

33,517

 

 

$

30,934

 

 

$

102,596

 

 

$

91,007

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

31,232

 

 

$

27,717

 

 

$

17,796

 

 

$

83,898

 

 

$

41,713

 

Share-based compensation

 

 

8,272

 

 

 

8,547

 

 

 

3,825

 

 

 

21,454

 

 

 

9,925

 

Amortization of purchased intangible

 

 

812

 

 

 

811

 

 

 

812

 

 

 

2,435

 

 

 

2,435

 

Production ramp up costs related to joint venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

275

 

Legal costs related to government investigation

 

 

221

 

 

 

293

 

 

 

563

 

 

 

946

 

 

 

2,513

 

Non-GAAP operating income

 

$

40,537

 

 

$

37,368

 

 

$

22,996

 

 

$

108,733

 

 

$

56,861

 

Non-GAAP operating margin as a % of revenue

 

 

19.9

%

 

 

19.3

%

 

 

13.6

%

 

 

18.6

%

 

 

11.9

%

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to AOS

 

$

31,650

 

 

$

382,998

 

 

$

16,100

 

 

$

438,072

 

 

$

38,577

 

Share-based compensation

 

 

8,272

 

 

 

8,547

 

 

 

3,825

 

 

 

21,454

 

 

 

9,925

 

Amortization of purchased intangible

 

 

812

 

 

 

811

 

 

 

812

 

 

 

2,435

 

 

 

2,435

 

Gain on deconsolidation and changes of the equity interest in the JV Company

 

 

(4,501

)

 

 

(391,452

)

 

 

 

 

 

(395,953

)

 

 

 

Production ramp up costs related to joint venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135

 

Legal costs related to government investigation

 

 

221

 

 

 

293

 

 

 

563

 

 

 

946

 

 

 

2,513

 

Equity method investment loss from equity investee

 

 

1,136

 

 

 

 

 

 

 

 

 

1,136

 

 

 

 

Income tax effect of non-GAAP adjustments

 

 

630

 

 

 

32,800

 

 

 

64

 

 

 

33,431

 

 

 

55

 

Non-GAAP net income attributable to AOS

 

$

38,220

 

 

$

33,997

 

 

$

21,364

 

 

$

101,521

 

 

$

53,640

 

Non-GAAP net margin attributable to AOS as a % of revenue

 

 

18.8

%

 

 

17.6

%

 

 

12.6

%

 

 

17.4

%

 

 

11.2

%

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to AOS

 

$

31,650

 

 

$

382,998

 

 

$

16,100

 

 

$

438,072

 

 

$

38,577

 

Share-based compensation

 

 

8,272

 

 

 

8,547

 

 

 

3,825

 

 

 

21,454

 

 

 

9,925

 

Gain on deconsolidation and changes of the equity interest in the JV Company

 

 

(4,501

)

 

 

(391,452

)

 

 

 

 

 

(395,953

)

 

 

 

Equity method investment loss from equity investee

 

 

1,136

 

 

 

 

 

 

 

 

 

1,136

 

 

 

 

Amortization and depreciation

 

 

8,603

 

 

 

11,938

 

 

 

13,745

 

 

 

34,263

 

 

 

39,434

 

Interest expense (income), net

 

 

308

 

 

 

541

 

 

 

1,562

 

 

 

3,025


 

 

4,832

 

Income tax expense

 

 

2,902

 

 

 

34,096

 

 

 

1,014

 

 

 

38,318

 

 

 

2,694

 

EBITDAS

 

$

48,370

 

 

$

46,668

 

 

$

36,246

 

 

$

140,315

 

 

$

95,462

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per share attributable to AOS

 

$

1.11

 

 

$

13.54

 

 

$

0.58

 

 

$

15.58

 

 

$

1.42

 

Share-based compensation

 

 

0.29

 

 

 

0.30

 

 

 

0.14

 

 

 

0.76

 

 

 

0.37

 

Gain on deconsolidation changes of the equity interest in the JV Company

 

 

(0.16

)

 

 

(13.84

)

 

 

 

 

 

(14.08

)

 

 

 

Equity method investment loss from equity investee

 

 

0.04

 

 

 

 

 

 

 

 

 

0.04

 

 

 

 

Production ramp up costs related to joint venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Legal costs related to government investigation

 

 

0.01

 

 

 

0.01

 

 

 

0.02

 

 

 

0.03

 

 

 

0.09

 

Amortization of purchased intangible

 

 

0.03

 

 

 

0.03

 

 

 

0.03

 

 

 

0.09

 

 

 

0.09

 

Income tax effect of non-GAAP adjustments

 

 

0.02

 

 

 

1.16

 

 

 

0.00

 

 

 

1.19

 

 

 

0.00

 

Non-GAAP diluted net income per share attributable to AOS

 

$

1.34

 

 

$

1.20

 

 

$

0.77

 

 

$

3.61

 

 

$

1.98

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute GAAP diluted net income per share

 

 

28,423

 

 

 

28,287

 

 

 

27,716

 

 

 

28,116

 

 

 

27,128

 

Shares used to compute Non-GAAP diluted net income per share

 

 

28,423

 

 

 

28,287

 

 

 

27,716

 

 

 

28,116

 

 

 

27.128

 

 

 

 

 

 

 

 

 

 

 

 

 

Contacts

The Blueshirt Group
Gary Dvorchak, CFA
In US +1 323 240 5796
In China +86 (138) 1079-1480
[email protected]

Yujia Zhai
The Blueshirt Group
[email protected]
+1 (860) 214-0809

Exhibit 99.2

Alpha and Omega Semiconductor Limited
Prepared Remarks for the Investor Conference Call
for the Quarter Ended March 31, 2022

May 5, 2022

Gary Dvorchak (Moderator)

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2022 third quarter financial results.  I am Gary Dvorchak, Investor Relations representative for AOS.  With me today are Dr. Mike Chang, our CEO, Stephen Chang, our President, and Yifan Liang, our CFO.  This call is being recorded and broadcast live over the Web.  A replay will be available for seven days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows.  Mike will begin with strategic highlights.  Then, Stephen will provide business updates and a detailed segment report.  After that, Yifan will review the financial results and provide guidance for the June quarter.  Finally, we will have the question-and-answer session.

The earnings release was distributed over wire services today, May 5, 2022, after the close of market.  The release is also posted on the company's website.  Our earnings release and this presentation include certain non-GAAP financial measures.  We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections.  These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations.  For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC.  We assume no obligations to update the information provided in today's call.

Now, I will turn the call over to our CEO, Dr. Mike Chang, to provide strategic highlights.  Mike?


 
Mike Chang (Chief Executive Officer)

Thank you, Gary. I would like to welcome everyone to today's call. It is good to be speaking with all of you again.

Q3 was another great quarter and once again, we succeeded in outperforming our guidance. Revenue was a record $203 million, which represented 20 percent growth year-over-year and was the first time in our history to cross the $200 million threshold. This was achieved by obtaining additional wafer capacity from our existing foundry partners and continuing to optimize product mix. This resulted in non-GAAP gross margin of 36.7% and a record non-GAAP operating profit margin of 19.9%. Non-GAAP EPS was $1.34, representing a 74% growth year-over-year.

I am extremely proud of these results and continue to be amazed at our team’s efforts and ability to execute quarter after quarter in such uncertain and challenging times. However, I am very saddened today by the evolving situation in China, particularly the lockdowns in Shanghai. As you know, our in-house packaging and testing facilities are in Shanghai, which handles a good portion of our final packaging and testing requirements prior to shipping.

After the initial lockdowns were imposed in late March, our Shanghai packaging and test facilities remained operating because our dedicated employees made the extraordinary sacrifice to live inside the facilities to keep operations going. However, continuing operations required daily testing and negative COVID results. In early April, a few of our employees tested positive for COVID-19 and our operations were forced to shut down by the Shanghai government. Therefore, our ability to complete the assembly of our products and ship to customers was severely limited.

Fortunately, at the end of April, the Shanghai government classified AOS as an essential business and cleared us to restart operations.  We are quickly getting production started again. However, the pace at which we can resume full operations still remains challenging due to difficulties in bringing back labor workforce, procuring certain raw materials and resolving logistical bottlenecks. At this time, the timing of when the lockdowns will be lifted is still unknown. Even after the lockdown for the city is lifted, we expect sometime before all the supply chain issues are fully resolved and business there return to normal.

As a result, we expect our revenue for the June quarter will be impacted. Based on our latest estimates, including 3 weeks of limited operations during April and ongoing logistical and supply chain challenges, we expect the lockdowns will impact June quarter revenue by approximately $20 million to $25 million. However, we still anticipate June quarter revenue to be around $190 million. This represents 7% growth year-over-year. Excluding this Shanghai lockdown impact, we estimate growth would have been 20% year-over-year for the June quarter.

As our operations ramp back to full capacity and surrounding supply chains normalize, we do anticipate to recover a portion of the lost revenue in the 2nd half of the calendar year as our wafer production was not impacted by the lockdown. As a result, we actually built a stock of pre-assembly stage wafer inventory. Given the global wafer shortage over the past years, we expect this build-up of wafers will help fully utilize our packaging assembly lines once things return to normal.

Yifan will provide more details on our guidance during his portion of this call but please understand gross margin is currently more difficult to forecast as our allocation mix for each business line is still moving around while we re-ramp our assembly lines.



On a positive note, we have been strategically diversifying our packaging and testing operations and have begun to accelerate the pace of these initiatives. Our JV in Chongqing already handles a good portion of our back-end requirements and we also have begun the process to outsource some of these steps to other contract manufacturers, although that will take some time. Also, I think it goes without saying we are very thankful to have our Oregon production facility, which is not exposed to this type of risk. The impact of the Shanghai lockdown to our operations highlights the benefit of our capacity diversification strategy.

We believe this impact will only be temporary and will make us even stronger in the long run. The global trend of electrification of everything is just getting started and our power products sits at the forefront of that trend. We are building a very resilient and diversified global business and remain well on track towards our goal of achieving $1 billion annual revenue and beyond.

Before I turn the call over to Stephen, I want to say our hearts go out to everyone in Shanghai that have been affected by this situation and we pray for a quick resolution. I also want to give a very special thanks to our employees for their extreme sacrifice and dedication during these very challenging times. Their dedication to AOS has really been awe-inspiring and made me realize once again how special our team truly is and I am very grateful to have their support.

Thank you and I will now turn the call over to Stephen for an update on our business and a detailed segment report. Stephen?



Stephen Chang (President)

Thank you, Mike, and good afternoon, everyone.  I will start with an update on our business and then provide color on our segment results.

In the March quarter, we once again set new records for revenue and profitability driven by strong demand across all our business segments, particularly among our Tier 1 customers. The current favorable supply and demand environment has given us more ability to optimize our shipment allocations to higher margin and strategic accounts. Moreover, we can quickly adjust to changes in customer orders by strategically redistributing parts to other parts of the business.

Looking forward, in addition to the challenges of the ongoing lockdown situation in Shanghai, we are beginning to see early signs of a market demand slowdown in certain of our end markets such as PC, smartphones and home appliances. However, our total backlog is still a lot higher than our current capacity to meet it even after baking in macro softness. While the Shanghai situation has been very unfortunate, it serves as a tangible reminder that our strategy to diversify our supply chain is the right one and it further strengthens our commitment in that direction.

In the March quarter, we accelerated our Oregon fab’s R&D facility upgrade and capacity expansion. We purchased more advanced lithography and related production equipment and continued the clean room construction. The project remains on track to be completed at the end of the calendar year and will contribute to approximately $70 million of additional annual revenue once in full production. Further, we also received additional wafer capacity support from our 3rd party foundry partners, as well as our Chongqing JV.

Now, let me drill down into each of our business segments.  Unless otherwise noted, the following figures refer to the March quarter of 2022.

Starting with Computing. Revenue was up 28% year over year, up 2% sequentially and represented 44% of our total revenue. These results were somewhat stronger than our prior expectations as the March quarter is typically our seasonally weakest quarter following strong holiday shipments. The main driver of this outperformance was continued strength in Notebooks, particularly from OEM customers that have a higher concentration of their business serving commercial laptop applications. We believe this was driven by return to office trends and companies refreshing employee work laptops. We deliberately targeted a higher mix of commercial projects during the past years since our Power ICs and Power MOSFETs have higher performance specifications and higher prices that better suit commercial markets. This benefited us as the consumer market is beginning to see weakening demand. Finally, in Computing, we also saw continued strong demand for our products in high-end and gaming desktop PC applications.

Looking ahead, we do see early signs that the PC market is beginning to soften. However, overall demand for our products still remains much higher than what our capacity can fulfill. In the June quarter, we expect the Computing segment to be lower due to temporary operational limitations and lockdown in Shanghai. We are optimistic that we can recover a portion of lost sales in the second half of the year once Shanghai returns to normal and as we ramp for our seasonally strong September quarter ahead of holiday sales.

Turning to the Consumer segment, revenue grew 24% year over year and 14% sequentially, and represented 22% of total revenue.  The year over year growth was driven by share gains in Gaming with a Tier 1 OEM.  The sequential results were largely in-line with our prior guidance, as the timing of some Gaming shipments near the end of the quarter were delayed but we anticipate to catch up in the June quarter.



Looking ahead, Home Appliances are slowing, which is one of the larger revenue contributors to our Consumer segment. We expect the June quarter to decrease high-single digits sequentially but due to overall capacity constraints, we are able to shift production to other segments to offset revenue impacts.

Next, let’s discuss the Communications segment, which was up 6% year-over-year and up 14% sequentially and represented 14% of total revenue. This segment performed slightly better than expected due to stronger demand for our battery protection products from the leading US smartphone maker and share gains with Chinese OEMs. Looking forward, we expect June quarter shipments to remain flat at these levels sequentially.

Finally, let’s talk about the Power Supply and Industrial segment, which accounted for 19% of total revenue.  This segment was up 16% year-over-year and down 0.3% sequentially, which was slightly better than our expectations.  In the March quarter, we strategically reduced allocations to our AC-DC power supply and Quick Charger business following strong consecutive quarters of shipments and anticipated China smartphone weakness. Outperformance was due to strong demand from our Power tools customers. This is an emerging application for us with great synergy given our product strengths in low and medium voltage products targeting battery management and brushless DC motors.  Looking forward to the June quarter, we expect to maintain about the same level of allocations for our Power Supply and Industrial segment and therefore anticipate revenues to remain about flat.

To wrap up, the Shanghai lockdown has temporarily stalled our momentum and really stress tested our entire organization. However, this situation also brought into light aspects about our business that we didn’t appreciate enough before; like the extreme resilience and dedication of our employees and the level of support from our business partners and customers. We are immensely grateful for this and are even more driven to keep working hard towards our goals of $1 billion in revenue.

With that, I will now turn the call over to Yifan for a discussion of our fiscal third quarter financial results and our outlook for the next quarter.

Yifan Liang (Chief Financial Officer)

Thank you, Stephen.  Good afternoon everyone and thank you for joining us.

Once again, March quarter was a record quarter for us from the top line to the bottom line.

Revenue was $203.2 million, up 5.1% sequentially and up 20.1% year-over-year.

In terms of product mix, DMOS revenue was $140.6 million, up 4.1% over last quarter and up 14.6% year-over-year.  Power IC revenue was $60.4 million, up 9.6% from the prior quarter and up 39.1% from a year ago, which puts our Power IC revenue over $200 million annual run-rate. This reflects our strategic actions to drive Power IC business to enhance our product mix.  Assembly service revenue was $2.2 million, as compared to $3.2 million last quarter and last year.

Non-GAAP gross margin was 36.7%, flat quarter-over-quarter, and up from 31.9% a year ago.  Non-GAAP gross margin excluded $1.3 million of share-based compensation charges, as compared to $1.7 million for the prior quarter and $0.4 million last year.  In addition, Non-GAAP gross margin excluded $0.8 million of amortization of purchased IP, the same amount as last quarter and a year ago.



Non-GAAP operating expenses were $34.0 million, compared to $33.5 million for the prior quarter and $30.9 million last year.

Non-GAAP income tax expense was $2.3 million, compared to $1.3 million for last quarter and $1.0 million a year ago.  The quarter-over-quarter increase of tax expense was primarily due to higher profit, as well as increased stock-based compensation for employees from the higher price of our stock in the March quarter.

In sum, non-GAAP EPS was $1.34 per share, as compared to $1.20 for last quarter and $0.77 a year ago.

Moving on to cash flow, GAAP operating cash flow was $61.8 million, which included $6.4 million net customer deposits.  By comparison, operating cash flow in the prior quarter was $50.8 million, which included $11.2 million customer deposits.  Operating cash flow a year ago was $33.3 million, which included $20 million customer deposits.  EBITDAS was $48.4 million, compared to $46.7 million last quarter and $36.2 million a year ago.

Let’s move on to the balance sheet.

We completed the March quarter with cash balance of $323.1 million, compared to $269.3 million at the end of last quarter.  The cash balance a year ago was $192.1 million, which included $33.8 million at the JV Company.

During the March quarter, we drew down a $45 million equipment loan at our Oregon fab and repaid $2.3 million on our existing term loans.  Therefore, at the quarter-end, our bank borrowing balance was $65.2 million, compared to $22.7 million a quarter ago.

In terms of trade receivables and inventory, Days Sales Outstanding for the quarter were 28 days, flat quarter-over-quarter.  Given the uncertainty of the global supply chain, we increased our inventory balance by $14.5 million, mainly in raw materials.  Average days in inventory were 94 days, reduced by 11 days vs. last quarter, primarily due to the impact of deconsolidation of the JV Company.

Finally, Property, Plant and Equipment was $245.8 million, an increase of $49.0 million quarter-over-quarter.  Our capital expenditures for the March quarter were $43.4 million.  We expect a similar level of CapEx for the June quarter.  Our Oregon fab expansion project is on track.  Cleanroom expansion was over 80% done at the quarter-end and a small portion of the equipment has already been moved in.  We expect the cleanroom construction can be completed and majority of the equipment can be moved in during the June quarter, and we anticipate additional capacity to come on line in the December quarter.

Now, I would like to discuss June quarter guidance.

We expect:

Revenue to be approximately $190 million, plus or minus $10 million, primarily reflecting the production lost at our Shanghai factory due to the impact of the Shanghai COVID lockdown.  Our Shanghai factory had resumed partial production at the end of April.  This guidance is based on the assumptions that our Shanghai factory can remain COVID free and continue to gradually ramp up its production in May and return to normal production in June.



GAAP gross margin to be 31.9% plus or minus 2%.  We anticipate non-GAAP gross margin to be 33.0% plus or minus 2%, reflecting the estimated impact of lost production and incremental expenses needed to cope with the Shanghai COVID shut down and production recovery.  Non-GAAP gross margin guidance excludes $0.8 million amortization of acquired IP and $1.3 million of estimated share-based compensation charges.
GAAP operating expenses to be in the range of $44.3 million plus or minus $1 million.  Non-GAAP operating expenses are expected to be in the range of $36.0 million plus or minus $1 million.  Non-GAAP operating expenses exclude $8.1 million of estimated share-based compensation charges and $0.2 million of estimated legal expenses relating to the government investigation.
Interest expense to be approximately $0.8 million, and
Income tax expense to be in the range of $1.3 million to $1.5 million.


With that, we will now open the call for questions.  Operator, please start the Q&A session.

Closing:
This concludes our earnings call today.  Thank you for your interest in AOS and we look forward to talking to you again next quarter.


Special Notes Regarding Forward Looking Statements

This script contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management's judgment, beliefs, current trends, and anticipated product performance.  These forward looking statements include, without limitation, statements relating to projected amount of revenues, gross margin, operating expenses, operating income, tax expenses, net income, noncontrolling interest and share-based compensation expenses, production ramp up costs and annual revenue and growth objectives; statements regarding expected financial performance of market segments; our relationship with the JV Company and impact of deconsolidation; the global capacity constraint; the lockdown in Shanghai and suspension of operations at our packaging facilities in Shanghai, and our ability to resume full production; our ability and strategy to develop new products; projected annual revenue target; fluctuation in customer demand and market segments; the execution of our business plan and strategies; and other information regarding the future development of our business. Forward looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, the impact of COVID-19 pandemic on our business operation; our lack of control over the JV Company; our ability to develop and succeed in the digital power business; difficulties and challenges in executing our diversification strategy into different market segments; new tariffs on goods from China; ordering pattern and seasonality; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of the PC industry and our ability to respond to such decline; the actual product performance in volume production, the quality and reliability of our product, our ability to achieve design wins, the general business and economic conditions, the state of semiconductor industry and seasonality of our markets, our ability to maintain factory utilization at a desirable level; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed by AOS on August 30, 2021. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements.  Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements.  You should not place undue reliance on these forward-looking statements.  All information provided in this press release is as of today's date, unless otherwise stated, and AOS undertakes no duty to update such information, except as required under applicable law.



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