- Earnings call transcript Q1 2023

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Operator

Good afternoon, and thank you for attending today's Alpha and Omega Semiconductor Fiscal First Quarter 2023 Earnings Call. My name is Amber, and I will be your moderator for today's call. [Operator Instructions]. It is now my pleasure to hand the conference over to our host, Yujia Zhai with Alpha and Omega. Yujia, please proceed.

Yujia Zhai

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

detailed as strategic business guidance will proceed results follows report. a highlights; updates Stephen call will financial with today: Yifan Our begin for that, provide then, will and the quarter. will segment After Mike the review December provide and

posted have will the X, we distributed after company's over The wire the Finally, also earnings XXXX, release The was on Q&A session. closed. the website. November today, market the is release

and considered presentation We is measures the the the outlook These release. based in differ in provide and uncertainties management's that measures our results will from measures useful GAAP included of non-GAAP cause financial release of these make financial GAAP measures we performance actual earnings remind to operating by provide. that during and certain current be to our earnings materially forward-looking non-GAAP you the we and include this that forward-looking believe discussions comparable including measures. expectations. statements call, involve risks because conference projections. will statements, this We should are investors expectations we on information they A non-GAAP business that reconciliation use with Our conjunction for could such

We today's subsequent information refer these filings uncertainties, call. to update in and the to recent detailed assume more For obligations description please of and no a with the SEC. provided our risks

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

Mike Chang

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

million. of a year-over-year Our expectations. our Non-GAAP $X.XX. XX.X% and Revenue fiscal XX.X% high in were results was record grew gross non-GAAP was $XXX.X QX to margin EPS line with

We are pleased with these results.

by impacted inventory PCs smartphones. Looking and forward, particularly in industry correction, to we be expect

our a As historical result, experienced period. XXXX seasonality typically be QX during somewhat calendar than we this results the that anticipate weaker we to

occur begin data normalize couple process next and consumer will be that to this before balance with end orders the more quarters over demand. Our in suggests the

While our near-term total somewhat, think our XX% calendar units to that PC slightly XXXX, against a results I PC including revenue grow will for is quarter December be it decline impacted our will in to DIGITIMES. highlight actually year-over-year according outlook, important

is the strength shipments XX% revenue the long the will to PC we smartphone in of demonstrates very consumer a of slowing have fundamentals for to markets year-over-year, underlying to to is in global components also up X demand success due improving mix in This Even decline products. gained XXXX. though more X that these spending and traction product our smartphone in expected and business' near-term, our time. premium major deliberately XXXX also tier be increasing these important towards the be BOM This calendar continue content, our is and share, despite smartphone Our is gaining forecasted X.X% markets.

quality periods testimony of our been to provides us Another X more the device with X these and to customers a believe services. the typically products AOS, Tier share our is the customers. our the more us capabilities flagship Tier it are in with since our advertising slowdowns that, less with example and fundamentals Seeing in of tier economy. We the of chip for best marketing prospective Moreover, make Tier strongest and X relationships it's highest and will make products attractive because them our solid sensitive premium this our customers is ever are our in partnerships resilient in recessionary history.

meetings, Over a year, for this just sales proactively been samples customers and initiated the and new as request of approached product them. us going trend last to us for instead noticeable more has our people

diversified much consumer, that, commercial product that portfolio end is have of markets, more use cycles. across broader with is example set Another a and serving cases business we a industrial different

and has one of This more a console weakening example, over to the the past consumer to our grow revenue a is growth areas than even For is biggest major for have now with #X and gaming, continue gaming for us year-over-year leading where we contributor doubled year manufacturer. been share demand in AOS expected business environment.

into section. We new go applications Stephen are his more trends that will similar in multiple other seeing detail in growth

active ever, many is product we previously Today, closing, are and supply the In taking spending. customer base slowdown, technology, Tier more our we line diversified paying steps Finally, of been our still majority in X XX America. were our us expanding our Today, lot that history, segments, when planned market beginning, help capability diversified manufacturing that is and much solutions reduce navigated have our and position and top Asia. strong distributed, more dedicated said, management in business doesn't sheet. stronger resiliency, not paused are in immune surprise. and globally have In our of X leading cycles, bust stronger more North a discretionary when our already our and business are experienced some we headcount Diversification all the serve. business our demand. and is we of foundation. are customers even a were Tier far as customers hiring to and our from a X global we years come portfolio, geographies the including with Over growth we balanced these to smaller boom our than thriving off. has solid was With balance current small, more and surviving business the of of in derisk chain, team than been supported in that to by strategy recognize now. of more total terms Europe we while execution and market we enhanced Today, To has environment qualities day slowdowns proliferation

that's underlying electrification the providing our the trend. for power everything our here sit that to business is more importantly, stay. power forefront tailwind and of of started trends products More getting is at The just to a

that our We the detailed and can Stephen you. call will we our to turn ourselves even environment over and the are current segment that. achieve next a years, now after are of to economic revenue confident Thank in I more business the update on for navigate annual position target and billion an actively to investing achieve couple $X report.

Stephen Chang

afternoon, everyone. Thank you, Mike, good and

our I want overview on expand of areas. Before new to growth discussed around what Mike I detailed segments, give our a

strong been demand Mike major as for As the already we expect us gaming story mentioned, a #X gaming our console to year ramps next continue over success up manufacturer has and production. very

customer products. such products, consoles won are factors, last significant as essentially support we the provide Looking with during well since products. we the more switch products strong differentiated are performance and as this power Further, bands, service under smart ICs, high-end of across performance advanced the sockets alternative as and over PCs, a our bit, have Because built high-performance and DrMOS our on higher-end shipments MOSFETs, load at including significantly multiple year, a against competitive partnership through great hood gaming multiple solutions challenging times. our these advantages

for chargers. providing highlight power been has history long medium-voltage rectification area increased has I over success quick the in our want address that has of to AOS growth time. MOSFETs particularly a secondary high-performance this charging fast-charging Another to application, side MOSFETs of as

U.S. high-voltage rectification, on content primary focus thereby performance our the product to #X the tripling also we of our now result at this leading expanded for key a BOM a footprint As effectively we customer and side OEM. our supplying have this smartphone Recently, customer become MOSFET application. BOM with supplier in customer support,

Revenue to in that our new our have possible the All by the customers different customers. with focus the showed but a represented data enables adoption the medium-voltage low- of of will by with centers existing Starting of relationship investment portfolio high-performance and solutions and XX.X% growth our and driven for providers. significant was programs area sequentially this up as quarter. flat revenue. our some total year-over-year, that our and now applications growth guidance Computing. was year-over-year success cloud of particularly results strong several next across this The ability provide year-over-year MOSFETs on XX.X% made I segment leading leverage total R&D been and and cross-selling offer cover demand product by

tablets In to show addition, graphics notebooks cards, and continued strength.

over Computing expect and revenue the segment down the be by sequentially smaller to in in PCs, inventory December driven XX% degree, seasonality. correction to largely quarter, a ahead, Looking we

share annual PC gains year-over-year decline actually XXXX However, expected volumes still a is higher result as of PC a our BOM to against device total global in XX% content. be up and slightly revenue

been to these center in tablets results the our safe mind MOSFETs which keep elevated Data of with PC data high-reliability investors area should remain has of softness think as fundamentals analyzing the an deliver to offers some never centers helps PCs. are stronger. our in quarter, strong expected performance next I AOS dampen infrastructure. and this when business for operating designed

and expectations driven These XXX.X% Turning to of the with and total up results grew represented year-over-year our XX% revenue volumes and XX.X% sequentially. XX% by XX.X% gaming year-over-year in was revenue. sequentially, Consumer were segment, line which record

gaming record driven low our where manufacturer, console ahead, remain continued we leading strong anticipate Looking #X with we gaming particularly share. consumer sequentially to the shipments, segment double-digit from growth have by

typically let's the as customer delivered quarter during U.S. XX.X% as our is revenue. smartphone XX.X% Next, quarter. Communications sequentially shipments, and discuss the This this and X.X% represented especially of normally refreshes strong devices was their season growth up total segment, year-over-year for segment September peak our which #X smartphone

was in tier. also the growth at gains premium customer driven share by this Our

digits in share high-performance as China. December U.S., China. In Korea, ability particularly we with our high-end industry have and our in this customers. products, with decrease smartphone correction, well to fact, high-end is strong protection quarter, our all market high-single in segment partnerships we to result markets in of due inventory to serve models the the as a our the This strong battery of X expect In as

still the is strong, smartphone about market telecom to in is expected lower Korea Our growth be somewhat U.S. XG flat. business Offsetting demand with in infrastructure.

gains increase about for quick growth and the revenue. segment in share This X% was let's our tools. total at in The leading mainly chargers segment, XX.X% XX.X% due sequentially. accounted Power power which and U.S. up of and year-over-year Now, to maker phone Industrial, talk last was Supply

segment from we phone designs continued chargers growth not quick For mostly to the U.S. digits to with grow December our multiple market inventory leading are correction. In expand maker. of devices closing, we as we high-single the overall immune the and sequentially, quarter, anticipate this in

of number the lot portfolio and result will than record the However, servicing our a AOS capability a believe recovers. Further, execute our Tier quarter. strategic market as diversified the continue as fiscal end market customers more more outlook to diversified we we product that, X product financial discussion old and our we the Yifan turn share. for roadmaps, manufacturing enhancing quarter is and now call have resilient markets and multiple which business a our much and deepening over in for first our relationships, should to of With growth results I customer next technology

Yifan Liang

you year-over-year. everyone, joining thank and was Revenue for million, XX.X% sequentially Thank up and you, Stephen. $XXX.X Good quarter the up afternoon, X.X% us. for

a and of up was quarter last was $XXX.X up terms $XX.X sequentially grow. lines up ago. revenue XX.X% product XX% continued revenue product In million, and year. IC Power X.X% up DMOS mix, the from to both over from prior year XX.X% million,

Assembly compared same was quarter million million as and last million, the service $X for revenue year. quarter to $X last $X.X

was non-GAAP mainly control non-GAAP a and In in in XX.X% assembly ago. citywide the gross lockdown. costs. and compared prior expenses facility the XX.X% Holding non-GAAP discretionary mentioned, at absorption expenses COVID the The Shanghai year. and year reflects increase facility was to the measures were quarter margin million and our test operating to at operating July, Non-GAAP shut driven $XX.X Shanghai. Shanghai $XX.X Since has normal expenses was quarter, in our factory our to $XX.X compared Mike gross been by due production better As quarter down June for margin XX.X%, flat to quarter-over-quarter our our last partially million, prior operating capacity. million

compared share, year As quarter per $X.XX and $X.XX a such, non-GAAP $X.XX last quarterly EPS was ago. to

to Consolidated $XX.X AOS $XX.X EBITDAS last $X.X million the $XX.X compared net ago cash cash was prior $XX.X million customer was basis healthy $XX.X million, operating cash on Operating deposits. customer Moving million on generate cash $XX.X a million, in million net million, GAAP included comparison, $XX.X to deposits. flow operating $X.X flow. stand-alone deposits. million, continue a to we for flow which included customer year of By was cash and which refund million flow, which last was included quarter flow quarter year.

in We cash million our XX the balance for to quarter Net sales end was compared the turn last JV quarter. million, due to ago was the and raw me quarter quarter. completed facility days September Let as company. cash uneven $XXX.X the were XXX $XX.X of last balance $XXX.X due The XXX a partially million was mainly million increase $XX.X quarter from caused compared with June $XXX.X at of XX the balance excluding quarter sheet. quarter. was was million last million days, in shut prior toward a at Shanghai year. $XXX the quarter-over-quarter down the year compared outstanding days September days of versus quarter at Days to the receivables second in trade the quarter-end reduced the balance at quarter. higher million inventory by prior were our to half $XX.X The Net end Average days, decrease The $XXX.X in quarter-over-quarter slightly last were the prior inventory materials. $XXX.X to of to shipments up to million million, COVID. to

from and million The million. company. was ago $XXX.X the balance was property, was million, $XXX.X Finally, CapEx at for JV assets up plant excluding the equipment last year million, $XXX.X a million quarter $XXX.X fixed $XX.X quarter.

equipment to and to qualification, in the you, to the We progress fab in a we expect $XX continued online drop project million quarter. Oregon in CapEx XXXX. To capacity March anticipate installation make and additional update level expansion December of quarter come our to

to like would I guidance. Now, discuss quarter December

gross absorption to inventory reflects due The expected plus mainly XX%, plus X%. the $XXX minus of product minus to revenue and GAAP the lower plus decrease to changes XX%, margin expect We margin to be be million, approximately gross the minus or production or We be anticipate million. X%. $X mix quarter-over-quarter or impact non-GAAP factory correction.

also open expense to this million, $XX.X of quarter. of $XX.X normal plus be Operator, approximately range call the $X in million. be start tax to in million, for expense guidance million addition, or range that, plus minus million, the minus In the session. or now Interest $X.X million. $X Non-GAAP will and December be expenses expected questions. for the expenses be operating to to seasonality please to in million. $X.X operating reflects of GAAP income $X are range With the we Q&A the

Operator

[Operator Instructions].

Our from first with question Williams comes David Benchmark.

David Williams

next should the Congrats margin mix just for on quarter, revenue is if of will has differential and fourth as similar -- curious of the utilization as resiliency charges be for lot the utilization quarter. $X.X one kind I into well. your million But about you've your with into first margin. about just that And go the we're just that do levels profile Obviously, this I'm about guess, should me, some of And could quarter, charges like a thinking where fourth in But it a I profile what the that come lower of looks what level, March kind there's here. also Yifan, in kind that look you quarter, seeing quarter. in think to expect potentially we maybe fiscal demand I if realize to? then back got that? margin

Yifan Liang

of effect and the correction. areas. of to more smartphone mean, kind are expect to the December the correction, less favorable mean, us, mix relatively mainly in shipping inventory expecting less I speaking, products we PC lower-margin particularly and result for December ship current I products. quarter quarter's guidance basically, in product reflects David, in we margin Sure. inventory higher-margin which This

correction. this from inventory resulted mix product the basically, So

the unfavorably. quite bit -- So product changes mix changing a cost

the So guidance. major the for quarter's December that's impact

David Williams

Okay.

and So the this just most is product of mix less on utilization charges.

be. kind of maybe what to a charges have of baseline those You expected are

Yifan Liang

Well, yes, factory I is kind absorptions. extended than larger of -- to less a mean, I mean, the mix utilization, the effect is effect the is impact

David Williams

then script, And good. touching, deposit you that Okay. was about on $X.X million Very refund. customer a there maybe noted the just

just of kind and your that's trending, kind behavior talk and into about seeing of how gotten backlog, especially November order kind of and curious cancellations here? Just how customer October you're maybe we've

Yifan Liang

of Sure. Yes, mean, million incurred deposits. about refund $X.X customer we I Okay. in net

us. I those received about back a I deposits year amount to we normally require recall, ago -- customer you As mean, probably we X/X customer or so and they deposits some deposits year, each or first mean, X/X -- certain from of the refund ordered after

the million. deposits. expected December net-net, And the received some time, started refunding. So at actually, this the effect $X.X we in -- mean, customer quarter September September we was I net quarter, same also

recently, in quite overall, to mean, so orders mix us and some orders production terms the in for increased. backlog, products mean, a downwards. mean, I shift I I changed schedule some yes, I the quite bit. In dynamics been bit, also these have turn adjusting has backlog total customers of adjusted been backlog. a decreased our mean, which caused

So mix changes. our reflects dynamic guidance December quarter's those

David Williams

me, -- you got helpful. with are one lot guess, of you you of just board, of go the in as how out And How about across are channel, there? think the the your kind if don't a comfortable you you then the to confident there? mind. disty. on Very visibility X just into for kind level Okay. last I inventory And to visibility

Yifan Liang

our mean, still inventory kind of a disty lean For ourselves, I is at position.

range is disty So below months. of our to inventory X actually, targeted X still our

level. ODM, So is retail OEM correction this at even inventory or at mainly an the occurred

relatively own for at inventory still disty our is level. So a comfortable

Operator

comes Securities. line B. with Riley Ellis Craig question next of the Our from

Craig Ellis

maybe and on question, that Can Nice how bit Supply? direct see channel segment Communications in wanted I the whether look Consumer, and on a you of last and at downstream, might Industrial or inventory a a not and fiscal ship quarter. question gives it's little takes Power job take the for some a detail that be or in get a get to for basis. tough the sense lower inventory names but with Compute, where just just characterize asking regarding at and across what first customers maybe your inventory and to trying relatively you customer it higher environment more navigating into are

Stephen Chang

Sure. you. to Craig, talk and good to

least outlook. specifically inventory taking we is kind for the consumer-facing So I bigger the see we affecting current and this where particularly see correction inventory applications, mean, at of correction, PCs. place

So, it's we they and the disty OEM also working there's controlling inventory, at throughout also ODM but the the the supply inventory chain, and at are through. are that

a So over probably it's there, pronounced. little more

On the impact there. phone is we're premium general, some makers, models. smartphone side, in there U.S. also their fairly especially But well in at doing the

So supporting our with in we're and those to shifting grow areas, still support them.

probably PC to the been smaller mid-tier area especially the inventory in smartphones main So affected. and bigger is of I think more yes, is degree the those low- And correction, have ones. the some

Craig Ellis

we ahead dynamics pretty fiscal around this the as Year the is beyond quarter, and a year, some in early the February. product the of always occurrence quarter and of of fiscal that, And of Got timing to New Lunar third it. one builds it's look that second third things week the impacts the

where extent that related XQ that to a is, XQ? the of saying the extent impact into some And that of So of timing would does behave you're it it that build customers that to you demand Or the would be the sub-seasonal think more question bias? what is fiscal the pulled think XQ? on would your give component this, seasonally? fiscal how starting are to that Do to some pull about fiscal way

Stephen Chang

pull But back, a current the is term that's much going will to too. in, this normally that the a in for we third And at for the we'll shorter it this normally, expecting of only general, couple see season there. past hurt fiscal just all, in or I years. but terms not start quarter us, a that also third haven't of pull is, quarter seen be first is the there our think quarter a to in for I seasonality towards more whether lower turn -- fiscal there's think be as we and are end too point, in the whether in quarter, customers, a of of

that whether of planning do the lower to shorter for of a in, to season month, this with pulled actual in end dynamics see terms quarter. maintenance the our customers also We February -- us. the closer is and typically, have is have But we'll and

Craig Ellis

will maintenance Year. typically shutdowns New you during or And fab activity Is Stephen? Yes. Lunar that do correct,

Stephen Chang

Yes. We then. time It try too. usually in around to makes sense,

Craig Ellis

get know that's as you don't backlog? and I starting one characterize and if Yifan. price up to to mid- XXXX? to are out X may late-XXXX lastly, Is just what more not you're the of for in environment starting into or extent then may you pricing seeing to more And and Or come we And Can in pricing or that portfolio? out impacting firmly there be the we is that this Yes. saw some what it early that its competitive? AOSL's Tier see players the holding as realizing there for

Yifan Liang

I said turn Well, yes, environment But overall expect situation. competitive, -- And September the to things of I mean, having factors could other similar expect. more and the dollars. those is would to I in the same and correction stronger I -- mean, like the current the inventory then slowdown all given some that, demand mean,

Craig Ellis

inventory then that I company start a fab $XXX and customers in quarter. up, million fiscal helpful, And correction, in were company to I expansion production are that the the am plans surprised lastly, Yifan. in third it. a that having light That's bit Got the little pretty appreciate to invested given meaningful but going that things we the Oregon

extent the X months the you thinking been changed just might has that the which you X some versus or we now around have you're considerations that of through capacity, considering backdrop up or walk can firing output up the down ago? to demand about that have given and So what

Stephen Chang

Sure.

that with our in fab. our originate we most still our are ahead X-inch new And internal of technologies actually steam just of and do fab our going that our full We develop expansion remember fab, X-inch is fab.

of fab as is so, fully today, utilized. even still And that

running fab can running And using the capacity. aren't of we some fab it be still our And foundries, will full But full capacity capacity. once comes we our additional is at and to the current when online. we

directly in it output can our the immediately help So help short-term. and

this The are much products in needed. performance think hot that that general. are I geared our products So now coming very It towards higher capacity is is fab. more from

Craig Ellis

Yes, you then, I some sourcing the appreciate capacity. point foundry on and when that get doing

Operator

with next question Jeremy Kwan Our comes from Stifel.

Jeremy Kwan

Yes. on from coming not follow-up more products on the you with question just an how local on that, pricing? emerging on I you're a out, on mentioned maybe new the ASPs the A some a quarter, question last like-for-like update And having what bit you Can ICs you impact -- the stable. along versus discrete on Can color the be competitors. questions know power us think just give but basis. give on I us pricing pricing earlier. And to on there you're a terms much maybe more of or to detail in ICs. probably side seeing tend power

Stephen Chang

Yes.

in of have pricing, pricing product terms product the more So differentiated we leverage it in negotiations. depend more on is The the force. does

inventory much the pressure, which but for little used the correction. seeing still too. in it's power and are bit it's our business not ICs PC either, So Power of performance higher is largely also the less products, including a ICs,

have also standard even too. spectrum of there, competitive in less kind competitive, have general be of Discretes versus more their products, performance we pressure to products. own standardized but relative So it's to still

starting end. less this to more, compete at where lower we pressure we seen against. But is can to there's are that where competitors differentiate aggressive, and higher-end, we've at that's to players end, come -- the local the in So be more more the

So on depends product. it the

Jeremy Kwan

maybe like the the utilization. past sounds optimizing on a customers than you've is when situation function Great. had And, guess, now utilization? of reallocating Is allocation, side, margin gross Is for effect I where mix larger in -- you're a on margin. you it mix this a having the this

Yifan Liang

we inventory constraints Yes. now, of the short, we higher-margin correction, quarter, the in the changes. mean, allocated because when the more past, -- mix some I seeing products. yes, mean, yes, right we I In supply towards are product in had the December this

is unfavorable So the change point. at this

right margin, impacted is our more by it is it more So product mix. the now, impacted

Jeremy Kwan

Fair enough. us like I It sounds with to that keep question help understand utilization And able you, can still maybe the here. you're -- relatively guess, you're high.

change adds quarters I With margin your you're is kind look targets trends in and but your the expect terms there, outlook, couple ahead as seeing longer-term of does with anything balance capacity per the of new we gross might maybe what out of of it maybe you -- guess, not here over maybe kind se, mix? next utilization

Yifan Liang

I just Oregon high-performance Sure. Okay. mean, Stephen those as is more products. mentioned, for our fab's expansion

are those in high So still products demand.

we So the additional can we're confident capacity well. that up quite fill

margin this impact, of terms In expect we those point, at would similar margins in products would produce.

neutral towards overall at impact more point. probably margin So, this

Jeremy Kwan

before of terms that and I in on give the a JV How just is -- And Chongqing inventory I utilization of impact lever in things jump much do the look flexibility us on if you an question, reallocating last you as update back. you that to maybe if Oregon can Can from correction? the could, one the the it. have pull JV? Got out you margin

Yifan Liang

CQ is similar services JV Yes, still test and the and providing wafers to assembly us.

So capital in process they additional are the investors. from outside raising of

is back now, fab pull In of our back to Oregon right terms our Oregon fab, full. and anything

we room -- we more take production. to on don't need So don't have

producing right the is So now, JV level. previous their at still

Operator

Instructions]. are There you. [Operator no currently queue. in questions further Thank

in will additional back the team for to conference there further queue, questions I no As any or management the over pass currently are closing remarks.

Yifan Liang

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

Mike Chang

you. Thank

Stephen Chang

Thank you.

Operator

first This for XXXX concludes your you today's quarter Thank Alpha participation. and earnings Omega Semiconductor fiscal call.

You may disconnect your now lines.

Alpha and Omega Semiconductor Limited (AOSL) 4 Nov 222023 Q1 Earnings call transcript