Q2 2020 Earnings Call
Ladies and gentlemen.
Thank you for standing by welcome to the Alpha and Omega Semiconductor report financial results for the fiscal second quarter 2020, <unk> Conference call.
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I would now like to handle conference over to your speaker today, So young John.
You may begin.
Thank you good afternoon, everyone and welcome to Atlanta Semiconductors conference call to be Scott, they've called 2022nd quarter financial without.
I am still young zone Investor Relations representative for the company.
With me today are Dr., Mike Chang, our CEO keep on young our CFO.
When chain, our executive Vice President.
This call is being recorded and broadcast live over the web and can be accessed for seven days following the coal Gotta link in the Investor Relations section on our website at Www <unk> a.
And the Dot com.
Keep on will begin with <unk> financial results for the quarter and Michael the Buda business highlights followed by Steven will provide a detailed segment to report.
After that you find will conclude the guidance for the next quarter.
And we'll have to question and answer session.
The earnings release was just beauty side. This is why are today February 2020, after the close at the market.
The release also post paid on the company's website.
Our earnings release in 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 our earnings release.
We remind you that during the course of the conference call will make certain forward looking statements, including discussions up business outlook and financial protection.
These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results may differ materially from such expectations.
For more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with the FCC, we assume no obligation to update information provided in today's call.
Now I'll turn the call overtime, our CFO he began to provide an overview of the second fiscal quarter financial results.
[music].
Thank you so yeah. Good afternoon, everyone and thank you for joining us.
Revenue for the December quarter was one adrianne $17.9 million flat when compared to the park quarter.
Up 2.6% from those same quarter last year.
In terms of product mix MOSFET revenue was one Andre and $1.5 million.
Up 49% sequentially and up 8.8% year over year.
Oh I see revenue was $14.7 million down 6.8 person from the park holder and down.
24.4 person from a year ago.
Somebody service revenue was 1.7 million daughters, as compared to $1.6 million for the park holder and $2.2 million for the same quarter last year.
Regarding the segment mix.
Coding represented 41.3% older total revenue.
Consumer 18%.
Power supply on the industrial 21.3%.
Communications, 17.9% and service 1.5%.
Non-GAAP gross margin for the December quarter was 28.3% unchanged from the park water and down from 29.2% photos same quarter last year.
Non-GAAP gross margin excluded point $4 million soap share based compensation charge for the December quarter.
That's compared to $2.4 million for the par at quarter end point $5 million for the same quarter last year.
Non-GAAP gross margin also excluded $8.5 million, so production ramp up costs related to the trenching joint venture for the December quarter <unk>.
As compared to $6 million for the par colder and $3.5 million for this last year.
Non-GAAP operating expenses for the December quarter were $25.7 million compared to $25.6 million for the park colder and $25.1 million for the same quarter last year.
Non-GAAP operating expenses excluded $2.1 billion soap share based compensation charge as compared to $1.9 million for the park quarter, a $3.9 million for the same quarter last year.
Both GAAP and non-GAAP operating expenses included $3 million, So digital power team expenses for the quarter.
As compared to $2.8 million for the par quarter and $3.1 billion for the same quarter last year.
Our digital power controller team continues to engage with customers in part of these borrowings and he is making steady progress toward our product road map.
Non-GAAP P.P.S. attributable to a wise for the quarter was 23 cents per share that's compared to 26 cents for the park water. That's 30 cents for the same quarter last year.
Hey was generated 12.5 million daughters operating.
Cash flow in the December quarter, as compared to $4.2 million not Kashi, you see an operating activities and $22.1 million operating cash flow generated in the same quarter last year.
Cash flow used in operations attributable to the JV company was $3.5 million for the December quarter.
Compared to $3 million provided.
Operating by operating activities for the park quarter, a $9.1 billion that you see an operating activities for the same quarter last year.
Consolidated it you'd be das for the December quarter was $13.9 million compared to $14.5 million for the par a quarter and $13.5 million for the same quarter last year.
He'd be das attributable to a was for the quarter was $12.5 million as compared to $13.8 million for the par a quarter and a $15.7 billion for the same quarter last year.
Now, let's look at the balance sheet.
We completed the December quarter, with cash and cash equivalents of $107.2 million, including $86.1 million I know your west.
And $21.1 billion at the JV company.
This compares to $103.1 billion at the end of last quarter, which included $88 million at a awareness and $15.1 million had the JV company.
Our cash balance a year ago was one outdry and $46.6 million, including $93.6 million at U.S. and $53 million at the JV company.
Bank borrowing file and study and of the December quarter was 148.5 million daughters, including $36.9 billion at A.O.S., and a $111.6 million either JV company.
In the.
You summer quarter, a wise and the JV company repaid $4.1 million and $16.4 million over the existing loans respectively.
The JV comedy also called $30.9 billion working capital.
Not trade receivables were.
$33.9 billion as compared to $39.3 million IDN doesn't last quarter and $33.9 billion for the same quarter last year.
Day sales outstanding for the quarter was 28 days compared to 25 days into par quarter.
[noise] that inventory was $117.6 million at quarter end down from 100, an $18.6 million last quarter.
From $103 million in the prior year.
I have reached days in inventory was 114 days for the quarter.
Not as compared to the par a quarter.
Net property plant and equipment to was 416.1 dollars.
As compared to.
$404 million last quarter and $380.8 million last year.
Capital expenditures were $15.4 million for the quarter, including $12.1 million had a west and $3.3 million at the JV golf.
We estimate that the capital expenditure for it was core business to stay at 6% to 8% up the total revenue for the fiscal year 2020.
Oh, I turn the call over to Mike I would like to update you on the progress so far with JV company.
During the December quarter.
The.
12 inch Fab and assembly and test production continued to make progress as expected.
Our goal remains the same.
That is.
To ramp up to phase one of the 12 inch fab to approach the targeted run rate by the September quarter up this calendar year.
Subject to general and overall market conditions.
With that now I will like to turn the call over to our CEO Dr., Mike Chang, who will provide the business highlights for the quarter bike.
Thank you goodbye.
Despite.
The challenging conditions, we remain focused and continue to to ask you to well you wouldn't that December quarter.
You can mean within the guidance range.
Cheap imports you over here and a sequential revenue growth.
Meanwhile.
Of course Monte benefited.
From improved operational efficiency.
Most importantly, it with reported healthy non-GAAP earnings.
And all called business generated strong operating cash flow.
Looking ahead put much quarter.
We expect weaker than normal seasonality in our business.
I will speak to one factor that is creating a headwind.
And the if I'm will provide more details on a total outlook in his comments.
They are being wide coverage off the call not virus outbreak in China.
Oh employees, well being is our top.
Peracchi.
I'm grateful if that's all employee Aussie.
In addition to the mandatory extended it Chinese new year Hardy.
We have implemented additional capital bank.
Screening procedures I swear sale.
One thing majors.
Well I wouldn't Ken what we meant tend to parse your production through out at Hardy, we anticipated that it will take longer fall factory to return.
To full production.
During the March quarter.
We have factored that impact Oh, this disruption intuitive guidance.
We are providing today.
As you can imagine.
This is it you brought in situation and so yes, its potential effects on the global supply chain.
We will continue to evaluate the impact.
Well not busy this business.
Yes for the developments warrant.
We have been consistently push it forward without trying to create demand we see the differentiated products across key markets seconds.
And out of seven time, we have been accelerating the penetration and the diversification into more people grow were Brendan customers.
For computing, our customers increasing value.
Hi performance products.
Yes on the line trends such as artificial intelligence.
Big data and the intent on things are reshaping the computer industry.
With all highly efficient products.
We were able to penetrate every single key PC OEM.
Maintaining a strong position.
All of them.
Coming to the IGBT business.
We demonstrate a saudi destruction by posting 40% you obese gross.
Once again in calendar 2019.
We continue to expand our footprint out a broad base of home apprised customers.
We suppose discrete and that module solutions.
Our mobile mobile business, including smartphone battery Park and quick charger applications.
What's the was the fastest growing business in percentage terms last year.
That's where we'd rep.
The high volume production for multiple group or yet.
As we secure additional leaders all business at a multiple Oems and OTN.
We remain confident about the strength of all mobile business.
In order to address it's growing demand from global brand name customers with Caf, what do you plan to the supply chain expansion.
Which is centered on the talking to fab and assembly and test facility in <unk>.
All customers appreciate all commitment to you neighboring their growth and to support all goals.
Looking beyond much corner.
We think that we are well positioned to capitalize on that demand we have created.
Last year, although we've gone are the mini 40 that wins.
We were not able to 40 satisfied pick season demand due to supply constraints at all Oregon Fab.
As a result.
We had to make did quote allocation decisions.
As to which customer and applications to support.
And it is hinder the all growth last year.
This year was added capacity at trunking JV, we are in a much better petition to supply all customers as they ramp up their production volumes.
Especially since both smartphone and a PC applications are expected to hit the usual seasonal pick in the September quarter.
Therefore, we do you expect to approaching the faced one cockett run rate by the September quarter. This year.
This expanded capacity will allow us to better capture potential growth opportunities.
And the fuel all diversification effort as we benefited from the moment and see a crossing across a broad array of growing.
Publications.
We have to ride strategy in place.
Yeah outstanding team.
Two executed.
We have demonstrated a remarkable progress, especially in street key areas.
Creating demand penetrant top tier global Oems with value added solutions.
And expanding production capacity.
To fulfill demand.
These in return.
Disputing great momentum with ever increasing design wins in the pipeline and the sheer again, Adam water for customers across key markets segment.
Which.
Validates our competency in driving sustainable growth.
We remain encouraged by the opportunities I had a bus and a 40 committed to moving it forward with all growth plans.
And then navigating they had a wins and the volatility we are facing in the short term.
Now I tend to call over to Steven for detailed segment report.
Steven.
Thank you, Mike and good afternoon.
Let me start with computing.
It represented 41.3% up our total revenue in the December quarter revenue was up 5.4% sequentially and down 12.8% year over year.
During the quarter, the CP, you supply eased a bit but it was still not enough to fully satisfy the market demand. However, the wrap up high and tablet application and the continued migration into high value products, such as V core and graphics cards enabled modest growth in this sector.
<unk> business.
The CPQ shortage is anticipated to persist at least through the first half of calendar twentytwenty, especially with small core.
This has been compounded by the impact of Corona virus RPC customers.
The results we are estimating a mid digit that's mid single digit sequential decrease in the computing segment.
Now turning to the consumer segment, which represented 18% of total revenue in the December quarter.
Revenue decreased 1.3% sequentially and was up 13.8% year over year.
We had originally expected to see a double digit sequential decrease due to TV seasonality.
However, we saw healthy demand for various consumer applications during the quarter.
As Mike mentioned earlier strong customer momentum with our leading a portfolio of IGBT solutions continued, especially with home appliance applications.
Bolstered by high performance and reliability required by these applications are RGB two product line posted a 40% any increase in calendar year 2019, after growing 40% in calendar 2018 year over year.
As we expand our customer base in home appliances, and the celebrate production ramp out a global Oems, we expect to IGBT business to increase another 40% in calendar year Twentytwenty.
Looking into the March quarter, we expect a moderate seasonal decline in the consumer segment.
Next let's discuss the power supply and industrial segment.
The segment accounted for 21.3% of total revenue.
Down, 7.6% sequentially and up 13.5% year over year.
Well, we grew in applications, such as solar power and industrial advance the seasonal decrease in other AC DC power supply applications, what's sharper than anticipated.
As one of the key suppliers of quick charging solutions. We believe that we are well positioned to benefit from the introduction of fiveg phones with larger batteries paired with higher wattage power supplies.
However, entering into what is typically those seasonal low point for a quick charger business, we expect to see a double digit revenue decline in this segment during the March quarter.
Finally, let's move onto the communications segment, which was 17.9% of revenue in the quarter down, 1.1% and to up 32, and a half a percent year over year.
Our highly efficient battery protection business continues to be strong during the December quarter, and we maintained this segment's revenue similar to the peak level.
Since each global smartphone OEM launches new models at different times throughout the year, serving multiple global Oems helps us offset some seasonality.
For the March quarter, we expect the recovery in Fiveg telecom to drive growth on top of continued strength in the battery pack protection products.
Therefore, we anticipate a modest increase in the communications segment in the March quarter.
With that I will now turn the call over to EEP on for additional comments and guidance.
Thank you Stephen.
As disclosed in our press release, we are cooperating with the federal authorities in the recent investigation. So for export control practices with walk away and is a fit is.
We have maintained and export control compliance program and have been.
Committed to fully complying with all applicable laws and regulations.
In connection with this investigation, we have suspended shipment of our products too far away based on the older issue the by Department of Commerce.
This suspension is expected to reduce our revenue for the March quarter by approximately $4 million to $5 million.
We are working with deals seed to resolve this issue.
Although currently we do not know when we will be able to resume shipment to fly away if at all.
In addition.
We expect to incur $1 million to $2 million, so professional fees during the March quarter.
In connection with the ongoing government investigation.
Please note that the deal we'll see older applies to only our shipments too far away.
Our sales to other customers you expected to continue.
Grow beyond the March quarter.
Affected the by the older.
Since this is a pending and confidential matter, we will not be making additional comments beyond the facts that we have shared with you this call.
Our press release and the related financial impact that we can assess at this time, except as required by law.
Future inquiries will be directed to these statements.
Based on this development and estimated production loss in China due to the Corona virus outbreak and extended the Chinese new year holiday.
Oh, what your expectations for the third quarter of fiscal year 2020 are as follows.
We expect a revenue to be between $106 million and $110 million.
In addition to the impact of suspended shipment to walk away.
Our guidance also reflects an estimate of $6 million to $7 million reduction year revenue due to the production loss resulted from the Corona virus.
Outbreak and extended Chinese new year holiday.
Based on the information we have as of today.
We expect that GAAP gross margin to be 17.3 person plus or minus 1%.
We anticipate.
Non-GAAP gross margin to be 26% plus or minus 1%.
Gross margin guidance reflects the efficiency cost by production disruptions due to the corner virus as well as.
Suspended shipment to walk away.
No thought non-GAAP gross margin exclusive point $4 million <unk> estimated share based compensation and $8.5 million. So estimated production ramp up costs relating to the JV company.
We expect GAAP operating expenses to be in the range of $29 million plus or minus $1 billion.
Non-GAAP operating expenses are expected to be in the range of $25.5 million plus or minus $1 billion.
Both GAAP and non-GAAP operating expenses include $3 million to $3.3 million of estimated expenses relating to the development of our digital power business.
Non-GAAP operating expenses exclude $1 million $2 million of estimated professional fees related to the investigation and $2 million over estimated share based compensation.
Tax expense should be approximately <unk> point $4 million $2.6 million.
We anticipate a loss attributable to non controlling interest to be around $4.7 million.
Our non-GAAP basis.
Excluding estimated production ramp up costs relating to the JV company.
This item is expected to be approximately <unk> point $3 million.
As part of our normal practice, we're not assuming any obligations to update this information.
With that we'll open up the floor for questions.
Operator.
[noise] and at this time if he likes axle question. Please press Star then the number one way or telephone keypad.
Yes.
[noise] candidly do you have a question from the line of David Williams.
Good afternoon, and thanks for taking my question I certainly appreciate it.
Quickly I guess, if we're kind of thinking about.
The different moving pieces here, obviously, we're always a is a drag.
And if I can recall correctly pretty clean that was a fairly.
Negligible part of the business can you kinda talk about how that has trended I guess since we started.
Process.
The ban until now and kind of has that.
The revenue change much in that time had to come down are you should think about the same as you were previously just kind of how those revenues have trended I guess for the last several quarters.
Sure David.
[music].
As we mentioned and you know we have maintained and export control compliance program you know wellbeing.
Committed to 40 complying with all applicable laws and regulations. So right now we are.
Cooperating with the government agencies.
There you investigations are by no. So this.
Because of this Oh this is a pending on done.
Confidential bad or.
We said and you know, we do not intend to make additional comments and the beyond the facts and that nothing though we have shared and on this call and Oh earnings release, so except as required by law, So I'm not.
That's a.
Ah you will stop there you know our the March quarter guidance, we factor in those impacts and you know we have already said and about $4 million to $5 million a revenue impact.
Hello March quarter, and it and then the.
<unk> expense impact that we also disclose their so what was the so to me I mean this is a.
[noise] near term short term headwinds and so well I guess fluid and <unk> and one press on.
With our growth plans longer term and so that will will continue to.
Grow and diversify old customer base and.
Applications, we serve so and then.
You know our motto some so no no smartdose and are still there or the uinta shooting range, even though with some.
The additional challenges so that will face and marching though.
And this is Stephen and just want to speak on behalf of or the overall you know our push towards diversification.
Our biggest markets right now already know PC and smartphones and Oh and the past few years and there's been a big push on by the company to actually diversified.
Customer base within those core segments, and we've been pretty successful at expanding that customer base and geographically I'm also in order to reach all the major customers and each of those spaces. So we are encouraged by that progress and that helps US also as we move forward because.
Isn't that base is wide.
Okay.
Thank you.
And then if I'm thinking about the segment that a is that the largest contributor I should be thinking about that 4 million coming from is it the dispersed amongst the different units or is it more heavily related to one of the other.
Oh, we can't comment specifically again about always specifically, but we did you know our guidance a in overall as well as in each of the segments is on reflecting the impact of that.
Okay. Thank you and then just.
Kind of thinking about from an opex perspective understanding some of the lumpiness. So at the moment and it looks like the 25 million dollar guide for next quarter is coming down from from the prior quarter can you talk a little bit about what you're doing in terms of that the opex, what those trends our cost containment strategies anything that's what that might help us get a better handle on.
Opex longer term.
Sure.
This in March quarters, Opex guidance, non-GAAP guidance and $25.5 million.
Pretty much the flattish compared to the December quarters actual numbers. So it's not so our current reveal a that will.
Maintain all with the.
Oh packs at this level and the then we'll continue to invest it you know a certain the.
The strategic initiatives such as digital power.
Product line or who will continue to do that and sold and right now what we are at a full speed and to pursue our growth plans.
Okay.
And I guess, if I got to do the math here and I look at the number that are being taken out for wall weigh in and of course for the quarter bars.
Impact.
At about 10 to two and half million dollar to the total from your guidance if I'm looking at that 110 up. It's about 121 21 is it fair to say that you're seeing that demand that same level of demand through the business or is there anything that I'm missing is just thinking about that growth trajectory.
Really nice step.
Yes, I mean, that's in the ballpark number I mean seasonally in the March quarter is in our lowest quarter normally.
We are.
The seeing some.
The good design wins and again, so I didnt variable various customers and so oh in March quarters guidance reflect reflected on despite the the near term headwinds and so that.
Subtracted out yes.
Well.
Right now and that's not where we are.
Okay, and then one more if I can see than maybe you can answer this but if we're thinking about the the allocation and where you're still on allocation amongst your customers can you can you kind of parse it out for us where I guess, there's the greatest demand I know at one point that the PC had been kind of taken out of the.
And and slipping in other higher margin products and are you still doing the same type of strategies or is there anything in terms of the different allocation mix.
Point too.
Sure I can talk about that so last year was the calendar year was a bit of a struggle for us because we were on allocation and as I mentioned before where we are ramping in all these meter customers a in PC in smartphone specialty both of these all usually peak at the same time during the September quarter. So last.
Yeah, we had to be very optimal or a and optimize in our loading and our preparation for that to make sure that we could keep all the key customers happy ending up and matching our priority and and this year. We were actually encouraged because we haven't working on expanding our.
Supply chain and we've been talking about Arts hung Ching 12 inch I just mentioned without that joint venture. This is already a I'm beginning to ramp and we believe that this is going to help us to to provide a lot more flexibility in the way that we support our customers. So yes, you know I believe that we'll still have some.
Allocation issues to deal with but our our we have a lot more option now with punching and in order to address not only the peak demand. That's that's coming you know during the peak season, but also to support all the new business about where we've been working to expand and get into.
Okay. Thanks, so much and best of luck on the quarter in the investigation I'll jump back in the Q.
Thank you. Thank you you.
And our next question comes from the line of Craig Ellis.
[noise] Harlan Lynch on for Craig Thanks for taking my question.
Just wanted to start with the joint venture and kind of the ramp there obviously, the krona viruses and unwelcome headwind, but I think there was last quarter. You had said that there was going to be roughly 7 million in revenues.
In this.
Past quarter, and then looking out to the September quarter, you know, obviously that $150 million run rate, we get to 37 and a half million in revenue per quarter. As we think about the dynamics passed this march quarter, where what end markets are gonna be driving that big leg up at the joint venture.
Is it going to be coming from smartphones. Just curious is how we think about post march quarter getting to that $150 million run rate off of what obviously is a little bit of a lower rate than maybe hoped I'm in the March quarter.
Okay, Oh and Oh.
Address your questions for Paul.
First part of your question.
Stephen King and talk about Oh product mix.
You know well we have been saying is.
We're targeting to run pub, the 12 inch fab and a you know.
Joint venture or to approach to.
ER target run rate quarterly run rate in the September quarter.
Well it doesn't.
[music].
The mean you know it's a linear.
Progression so the from last years.
<unk>.
September quarter to this year's September.
Quarter.
We anticipate didnt around a year 12 month or so you know ramp up time for the new fab, but it is not linear so no right now.
The.
Even given the.
Near term headwinds and <unk> was due.
Remained the Oh.
To target the.
September run rate too.
Got to the run rate so.
I mean, that's our overall goal at this point Oh that the Steven talk but what type of products and we will run over there.
Sure. So regarding the applications that were serving for touching were actually suffers a sure moving several of our technology platforms over there in order to help support the the growth, especially in a PC and smartphones. Those are probably come first we have a lot of high runners are better and we will that were fine.
Turning to move over there in order to help to balance out the loading a wind in our whole supply chain. So we'll be targeting those first but we also are going after other applications as well too. So that is the fab that has several platforms again being and that will be supported from the 12 inch touching joint venture. So again, we have a lot more flexibility.
Do you to support that so not only for existing business to help balance a load, but also to support new business.
Got it and just kind of put a finer point on it that means that we could expect maybe you know in June and September quarter, we could see above seasonal growth or about growth above what we've seen historically just given how much more capacity you guys have to fill demand versus say last year Q.
Years ago, where you were still you know incredibly supply constraints that is that fair.
That's correct and to be fair, Yeah. We will also be on allocation for certain areas, but with launching we have a lot more ability to support that that that peak season.
Got it and then so turning to the digital power side, obviously opex is kind of bounced around between looks like 2.8 3.1 million per quarter. Two questions. There. One is that kind of our we now at a steady 3 million per quarter in operating expense of 12 million.
In a year and then on the second can you touch on just what the demand has look like in terms of breadth of customers you know or where are we in terms of is a one big customer a few big customers, just where are we with that roll out.
Any color there would be great.
Okay I'll comment on on the Opex portion first and then Oh, let Stephen to comment on on the progress.
In terms self and all pacsun related to our digital power team that yes, and right now is running around $3 million also per quarter.
You know this.
<unk> expenses could fluctuate from quarter to quarter, depending on the engineering activities and that I mean, I was thinking probably in the range of ER.
Remitting, two three and half million per quarter that type of Ah Ah range.
Oh less than Steven comment on that on the progress sure. So yeah, we're pretty pleased with the progress so far and digital power or last year was definitely I mean, the a a product development and a ann inc. or early engagement with customers as we kind of reach into the end of last year.
This is Chris stepped up on quite a bit and.
We are getting deeper into customer engagement as a several customers are and where would have a happy with what we see but and we expect you know to start to turn some of these opportunities into design ins into design wins and convert them into revenue soon.
And we will be providing some more guidance on this in the coming in coming quarters, but we are happy with what we see so far.
Got it and then just two more for me a quick ones and then I'll jump back in the queue on inventory dynamics. It was good to kind of see inventory de days of inventory rise a little bit quarter over quarter. Because I know you guys had said before that it was you guys were running a bit lean can you touch on some of the channel.
Tory dynamics, both for you guys and kind of any color about industry broadly I know you had said that Intel CPQ supply remains tight.
But any you know any kind of color what you're seeing.
In terms of inventory de stocking obviously, we just had this long period for where things kind of destock pretty rapidly.
Okay sure.
Well I'll only generally inventory, yes, and the right now is that a low endo flow and target range, which is two to three month, so for us and notice on average in Minnesota what steel.
It's pretty tight inventory level.
In terms of channels and right now.
The overall generally inventory and the overall market conditions thinking right now we need to reassess and you know after Chinese new year, because there's a corner.
Worse than the.
I'll break that I mean, this one could potentially.
You look to cut to the global supply chain or so hopefully.
Right now this viruses.
Situation is very fluid and you know is still evolving so now we need to closely monitored the its impact on the global supply chain and the overall market conditions.
And have just to clarify that how has some of the China Corona virus has that impacted supply demand dynamics within the last two weeks or so how is that kind of change the situation.
Well.
Last couple of weeks.
Hi, it's been Chinese.
New year, so I mean, a lot of the China, Taiwan units, the a lot of patient.
Countries. The then.
Yeah.
Holiday so.
I noticed a hard to.
Say you know this is still pretty.
Dynamic.
The time to.
Cool closely monitor and you body weight because there are some productions and you know from our customer side and whether or not they can resume on there.
Production since in the to the food capacity the how soon they can get to that point and also along though.
Suppliers side, and we also need to evaluate how soon they can start in their productions.
For our own.
Factories in China, you know pretty much all our entire assembly and test and backend <unk> production. So all in China. So then you know we also need to evaluate and was a those workers or come back in the.
I've already the 10th that's nowhere to one isn't supposed to come back but.
Given the current corner, there's a situation you know we also.
Implemented to sell quarantine.
Policy, you know, even though they come back and get them. They may have another 14 taste and myself pointing time, so all those things to kind of still.
Evolving and developing so we.
We need to keep close size and those are.
Situations.
Got it alright, thanks, guys I'll hop back in the Q.
And we have a question from the line of Craig Ellis.
Yeah. Thanks for taking the questions and appreciate all the transparency on the things that are going on in the business I wanted to really.
A follow up on some of the things related to guidance and some of this may have been covered earlier I was on a different call and Karlan was doing a great job following up on some specifics but.
As I look at guidance it looks like there's an $11 million revenue impact for two reasons and I want to understand the much better.
First with respect to the China Corona virus allowance that you're making of six to 7 million how much of that is simply on the supply side and some of the things you just mentioned in Chongqing eat on versus any of the demand side disruption.
That that you may be saying and maybe to put that first question in context, you can tell us how much Chongqing related revenue you had in the December quarter and with the six to 7 million adjustment how much is embedded now in guidance or if all of the Chongqing Fabs revenues are excluded from guidance.
Okay sure.
Right now that 6 million $7 million Oh estimate is primarily we estimate based on the Oh would production situation you know the.
With this extended the Chinese new year holiday [laughter] another seven days.
We lost and and a with a 14 days correlating policies you know weve implemented. So that's the potentially will have some other you addition, no disruptions on loan production, so six and 7 million dollar.
It or something that's a that's reflect in there.
Overall alone.
Backlog and bookings a healthy.
At this point and so the pending on the.
The.
Uh huh.
Customers check and after Chinese new year after they come back as it did.
Probably you expect gradually we'll learn more from our customers.
Uh huh.
At this point so that's a six $7 billion a more in fact can estimate is based on our own production situation.
Okay, that's something that.
This is Stephen so we're one of them inside the end demand side, we haven't seen any major impact yet.
We do see however, we do see the our direct customers you know they also have operations running in China as well too. So you know they're seeing the same due to feeling the same issues and that we are as well. So we do see some impact there, but right now it's also overlapping with our own production delays because of the with.
Labor force and taking a little longer to come back. So you know wherever we are reflecting that in our guidance you know where we are no have confidence that the current demand actually so looking very healthy and on the water works now temporarily through this on the side the challenging time for for China as will be a as we yeah.
Sure.
Okay that the two follow ups our plan Steven It sounds like then you're saying that.
That share loss risk is mitigated given that this is a.
Hey.
A headwind that your customers are accounting, but can you.
Can you speak to any share loss risk that might be out there if you're unable to fill existing demand with product your customers accounted on and then keep on what gives you confidence that the fab will be up and running and and delivering output. So that it could in the calendar second quarter fiscal fourth quarter be able to get back to.
Revenue level that would meet the.
Phase one ramp targets you have for the September quarter. So that's more of an operational question.
So regarding that on demand question and right now we're not anticipating any share loss as a result of out right now and we believe that you know if this does it's mostly ducking right now this or turn to to work.
Certainly if things change of do it can be it could be a different story, but it probably won't be just us that's affected as well so on that and the demand side, that's what we see right now.
Okay and from the estimate and I mean, this an overall I mean.
Right now it doesn't know what we can see I know, we estimate based on the information we have so today.
This corner.
Errors and could.
No potentially it could.
Lost them and you know into a June quarter, Adnan I mean, nobody knows what will give a update and.
Uh huh.
Future if need and.
No I mean this virus and.
Is well based on current information is more like a will fade away.
I have a halter.
Uh huh.
Temperature weather, so that and then that's a wasn't using something.
Comparison, there with a.
Sars like 60 years ago <unk> <unk>. It was an outbreak the in the spring time of the and then well underway in the.
Late spring early summer timeframe. So no you know and that's our current information we have in terms of.
September run rate and yeah. That's you know Oh of course subject to the overall the you know market.
Conditions and Youre right now based on our design wins Lngs pipelines and and then our customers are run pub schedule. We we are you expecting you know PC customers and from customers.
Ramping to the peak season in the September quarter I did the same time, so investment where were we need to capacity.
Are the most so that's well marching.
So where do we we have our longer term wolf clad than that and then it will will press on it.
No. This is Mike can.
Talking about a long term, which it just fuel use a tiny bit too long okay.
This company you have a carrier.
Roadmaps to go P., a bump you didn't daughter company.
So we've been talking about in loss, a year or so and the matter because of this company.
As a determination to Buda the company Buda infrastructure to expand our product technology and the application all cross yeah wider and deeper and also we migrate in opera I forget you can't really you can become more.
More applications to be supply civic.
So.
<unk>.
The strength there could be these there he has a we're facing a short term headwind, but however, these hadn't would be over and then our course was where we're not changing so with this company have full competence to put shifts to pursue that Oh are we gonna go.
That's helpful. Mike appreciate the color and then I wanted to switch gears and just make sure I understood. The why way situation can you. Please.
Identify when do you were notified by the D.O.J. about the inquiry is there any revenue. That's included in the fiscal third quarter guidance associated with Wild way and can you just put a the four to 5 million allowance that you called out in your press release.
As a headwind to the quarter in the context of what you would have shipped to walk away say in the December quarter and the September quarter porous. Thank you guys.
Sure.
Craig.
This.
You will see older first of all the this deal we'll see older applies only to the Oh shipments to walk away you know so and then how sales to other non hallway customers and you expected to continue I didn't grow beyond the March.
Quarter, So and then but.
Given Dod and I mean since this is a pending and confidential matter that we do not plan to make any additional comments beyond the.
Well, we shared with you on this call and are you know press release, so a lesson.
As required by law so <unk>.
Oh any future inquiries about this a case of this instance, and ER will be.
Directed to those.
The statements.
All right well why don't try thanks Theepan.
Alright, thank you.
And we have no further questions then I'll turn the call back over to your speaking.
Sure. This concludes our earnings call today. Thank you for your interest in their Wes and though we look forward to talking with you again next quarter. Thank you.
<unk>.
Thank you.
Thank you and this does conclude today's conference call you may now disconnect your lines.
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