Q3 2020 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the Alpha and Omega semiconductor reports financial results for the fiscal third quarter of 2020.
At this time, all participants are listen only mode. After the speakers presentation, there will be a question answer session.
Good question during the session you want me to press Star one on your telephone.
Be advised that today's conference is being recorded.
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Okay. How do you have the conference over to your speaker today. So young John. Thank you. Please go ahead.
Good afternoon, everyone and welcome to all final made if any Conductus conference call to these cuts it's called 2023rd quarter financial results I'm still young adult Investor Relations representative for the company.
With me today are Dr., Mike Chang our CEO.
Keep on young our CFO, it's Steven Chin, our executive Vice President.
This call is being recorded and broadcasted live over the web and can be accessed for seven days following the call get a link indeed investor Relations section of our website at Www <unk> eight Oh, it's Andy Dot com.
Mike will begin with a review of business overview for the quarter.
Steven will provide a detailed segment with port.
After that you find we'll continue with a view of financial results for the quarter in guidance for the next quarter.
Then we'll have to question and answer session.
The earnings release West distributing it by basin Flyer today May eight 2020 after the close of the market.
So really it's also posted on the company's website.
Our earnings release and its 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 conference call will make certain forward looking statements, including discussions of 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 more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with the FCC.
We assume no obligations to update information provided in today's call.
Now I'll turn the call over to our CEO, Mike to provide an overview of our business and the impact of coal Pete 19 condemning Mike.
Thank you so don't welcome everyone.
Thank you for <unk>.
Our March quarter earnings call.
Oh got overview, and your remedies Aussie and healthy.
As we navigated the approach said the charges, albeit the coal, but my team and dynamic.
I think it is important to update you on all basins operations.
Oh, we Austin.
Good.
Before we begin the you do do appointed to resort.
We'll take a few minutes.
About the China, just add the risks we agreed.
And Oh actions to mitigate then.
Yes, I said on our last earnings call Oh Oh.
Oh and that will be.
All important and their families.
Yeah, you know didn't put another three bedroom.
By federal.
Okay and original urgency.
We put our you've written for the brand the precautionary majors and establish a Britain garden God morning.
Thank God, all important and good there [noise] remedy.
As part of the old isn't continued Ukraine.
We used that you'd walk them all parties.
Before you know what mandatory.
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Mitigated the impact all weather disruptions, who all break here.
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We all think for all four sold and or <unk>.
Our current that he safe and well.
And all global break is all right.
In addition to save guarding all <unk>.
We are committed to 40 supporting our customers.
Building better these tried arms.
Well, we Cook Oh look for more core Soc in early February.
Oh gardens affects or do you estimate of all lost about China.
Hi, ill turn it off.
Dr. Charles <unk>, what's the severely disrupted uli.
I'd be rugged.
However, we will walk you notice that we.
We met parents, it's hard to your production through all.
The lunar new year Hardy.
You know, which we have right.
Who probably four or five seven.
Where more people return to walk up to do all the.
Oh important.
A ball and the young beard typically goals, who you should get neighboring all products.
Well, our complying with the various governmental orders and managing both logistical challenges.
The only go prep Overwatch nonstop during the quarter.
Oh diversified manufacturing footprint.
I'll quickly responded to shoot the market demand.
It's mark I'll put it back in Lubbock has recovered the 60 because.
Faster than we anticipated.
Today I am pleased to report that the we are watching the level we expected.
Obviously.
<unk> all customers.
So all of them all recovery.
Ben Hartford.
[laughter] [laughter] curry, okay in the.
Kolpin my team Appia sensors.
While authors Oh exports to greater upright check disruption because they saw numerous components to compete.
And how it apart.
Robert restrictions and the vote just a good charges also restrict our ability to support customers.
With them up for.
You're right you body or some kids and did not support.
Without the most gotta kitchen, we are working closely and the creatively to support all customers.
Every week, we can.
We are providing excellent service.
At the mid you can meant by being flexible and nimble, we just production schedules.
Dots, demonstrating Saudi guarantee we all customers.
At this stage.
We are able to walk around the temporary disruptions took chief operating objectives.
While.
Appeared to be young quarter, it's very limited.
Given the uncertainty although the impact.
Corporate the Nike.
We are managing risk.
By optimizing put about mix reached 160, new business opportunities.
The accelerating product tied to market.
Okay. This backdrop.
We reported you might March core.
With Rodman your we think all guidance of Red.
Yeah, Bob will provide details of all March quarter resorts later on the cool.
Let me know.
Touch on some key highlights.
What we have seen in the current involvement.
You bet, we still all boats sometime in the economy.
Near term and that the men for computing and again, it's a very strong.
This is due to the show great shelter in place and the social dependency mended.
Which I'll give me the need for higher computing power for walking from.
<unk>.
Oh, my learning and that's good.
The computer industry has been expanding and this has forming.
Oh and conduct business and the individuals worldwide.
While we have rapid city diversified into all the applications such as more bar and the home apart.
We remember leader in power management.
Especially in the computing.
Area.
Oh unwavering commitment.
In the past years.
Who all computing customers has rewarded us.
Much of welcomed you can you dig these sometime.
It's difficult times like this.
40 customers through.
So I just want to supply up all products.
This is more important than ever.
Also note award.
Oh sure JV is starting to feel its purpose.
It's hard I did you an hour so.
But it's right for sustainable growth goals.
Indeed.
He has played a critical role <unk>, enabling us to meet the surging demand in the computing markets.
Yes, you would expect.
For the environment, we all prudently managing expenses.
We are reducing the amount you said you're spending while also pursuing.
And the critical R&D project in order to express all market reach and Uh Huh.
You had been reluctant to be walking out or and Tim.
With respect to project.
He will provide a more skills.
On the cool.
Finally, I want to hard like that.
Core pieces is generating [laughter] dead the cash flow.
Oh by the <unk>, it's cool.
Bob will provide you with more color on all cash but.
As I look at all performance for our improved.
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And the pulled all Oh amazing group of employees.
They you Liberals are extraordinary performance was strong sense of ownership and the commitment.
Wow, Sandy is safe and healthy working environment.
We look forward to a great your recurring couldn't commodity for our country.
That's true and all economy.
The power semiconductor market.
Yes, with large and growing.
We are determined it and to commit to accomplish our mission.
Happy to expand and it become a top tier suppliers in this market.
No I.
I would tend to pull over who Steven for detailed report.
Steven.
Thank you, Mike and good afternoon.
Let me start with computing it represented 44.2% of our total revenue in the March quarter.
Revenue was down 2.9% sequentially and down 8.8% year over year.
Starting in the second half of March we saw a rise in demand for our computing products, especially for notebook Pcs.
As a result of various see at home orders by governments in response to the coal bid 19th endemic Pcs have become indispensible worldwide as more people are working from home and transitioning to distance learning.
We don't know how this demand picture will play out in the second half of this year, but at the moment to we are optimizing our production mix to satisfy the surge in demand for the next quarter.
Our graphics card business has also been strong with both our high performance driver Mos and MOSFET be course solutions.
Graphics cards have been selling well as demand in both PC and gaming is up.
We expect computing to be strong in the June quarter with mid single digit sequential growth.
Now turning to the consumer segments. It represented 18.7% of total revenue in the March quarter.
Revenue decreased 5.3% sequentially and was down 2.9% year over year.
Our TV business was seasonally down in the March quarter, but we now expect it to grow into June quarter.
We are very excited to share with you that deal Aes has achieved strong design into an upcoming gaming system platform that is expected to launch later this year.
Our content into scheming system has multiple sockets, including driver Mos and Mosfets to power processors as well as type C. Smart those switches and TV a surge protection devices to protect the controlled imports.
Gaming systems feature hydro resolutions and faster graphics, along with plenty of software features while still needing to meet energy efficiency.
Sure and safety requirements.
Well that's one this design because our power solutions offered at the high performance needed to keep the system operating Cooley and efficiently.
Well they ramp up under way, we anticipate double digit growth for the June quarter in the consumer segment.
Next let's discuss the power supply and industrial segment.
It accounted for 17.8% of total revenue down, 24.6% sequentially and down 10.3% year over year.
Kobin 19 market disruptions in China impacted our power supply industrial business during the March quarter.
This was caused primarily by it dropped in Chargers and adapters use for smartphones and Pcs.
However, as China recovers, we expect to see a rebound in production and demand.
The quick charger application has increasingly been migrating to a higher power output from 18 and watch to 24 watch and even up to 65 one.
This performance driven market opportunity comes with higher value content and fewer competitors and is well suited for our medium voltage products.
We expect a return to growth in the June quarter in this segment as the demand for notebook Chargers and smart phone quick Chargers recovers.
Finally, let's move on to the communications segment, which was 18.1% of revenue in the quarter down 8.5% sequentially, but up 41.4% year over year.
The smart phone market was severely impacted by the cold in 19 pandemic and the disruption in production and demand is spreading globally.
Well, we don't have clear visibility on the smartphone market in the near term we are seeing rebound in demand for our telecom business as Fiveg continues to roll out.
We think we can maintain the segment's revenue in the June quarter.
With that I will now turn the call over to you find for additional comments and guidance.
Thank you Stephen good afternoon, everyone and thank you for joining us.
Revenue for the March quarter was $106.9 million down 9.3% from the prior quarter and done two person from the same quarter last year.
In terms of product mix, well spread revenue was $89.9 billion.
11.4% sequentially and the flat year over year.
Power IC revenue was $15.7 million up 7.1 person on the part quarter, an 11% from a year ago.
Assembly service revenue was $1.3 million as compared to $1.7 billion last quarter and $1.5 million for the same quarter last year.
Non-GAAP gross margin for the March quarter was 27.5 million.
27.5.
Sun Baum from 28.3 person for the par quarter.
Up from 27% for the same quarter last year.
Non-GAAP gross margin excluded point $4 million, so share based compensation charge for the March quarter, as compared to $2.4 million pulled apart quarter.
<unk> point $5 million holder par year period.
Non-GAAP gross margin also excluded $6.6 million, so production as ramp up costs relating to the touching 21 for for the March quarter as compared to eight point.
$5 billion quota par quarter at $3.4 million for the same quarter last year.
Non-GAAP operating expenses for the March quarter were $25.9 billion compared to $25.7 billion for the par quarter.
$23.2 million for the same quarter last year.
Non-GAAP operating expenses for the quarter excluded $2.5 million soap share based compensation charge $2.1 billion, so legal costs related to the government investigation.
<unk> point $6 million.
Paramount's charge related to an investment in the privately held startup company.
Let's compare to $2.1 billion soap share based compensation charge for the poor quarter.
The 2.6 million daughters, So shared based compensation charge and 3.6 million daughters. So preproduction expenses related to the joint venture company for the same quarter last year.
Both GAAP and non-GAAP operating expenses included.
$3.1 million, so digital power expenses for the quarter as compared to $3 million pulled apart colder and $2.3 million for the same quarter last year.
Oh with digital power developing but it's also.
Lessing, well and we are close to securing the design win at a graphic card vapor.
Income tax benefit for the quarter was $1 billion compared to <unk>.
<unk> expense of <unk> point $6 million for both fourth quarter and the same quarter last year.
The type spend if it was primarily driven by the tax relief from the Karen.
Non-GAAP bps attributable to a U.S. for the quarter was 11 cents per share as compared to 23 says.
Well, the par quarter and 22 cents for the same quarter last year.
Oh I saw the standalone basis generated.
$29.5 million of operating cash flow in the March quarter, as compared to $12.5 million into par quarter.
$9.5 million in the same quarter last year.
Working capital management contributed $22 million in the quarter.
Cash flow use the you know operations attributable to the JV company was $15.2 million for the March quarter, compared to $3.5 million sort of par a quarter and $17.5 million for the same quarter last year.
Consolidated EBITDA us for the March quarter was $8.8 million compared to $13.9 billion for the park quarter and $11.8 million for the same quarter last year.
EBITDA was attributable to a less for the quarter was $6.5 million as compared to $12.5 billion for depart colder and $13.5 billion for the same quarter last year.
Now, let's look at the father shoot.
We completed the March quarter with cash and cash equivalent so 110 point.
$2 million, including $99.5 million, I, do Wes and $10.7 billion that JV company.
This compares to $107.2 million at the end of last quarter, which included $86.1 billion at U.S. and $21.1 billion at the JV company.
Our cash balance a year ago was $139.1 billion, including $90.9 million ideal Wes.
$48.2 million or the JV company.
The bank borrowing balance at the end of March was $163.6 million, including $34.8 billion said.
Wes and a $118.8 million said the JV company.
During the March quarter, Aeolus, and the joint venture.
Company repaid $2.1 million and $6.6 million, so existing loans respectively.
The JV company.
Obtained.
$15.4 million of working capital loans.
Subsequent to the quarter in.
The JV company also entered into two loan agreements with the local banks or totaled $15 million.
We believe that this would the large lease sufficient to achieve the phase one plan at the JV company.
Net trade receivables were $17.5 million as compared to.
$33.9 million at the end of fourth quarter and $28.4 million for the same quarter last year.
They sales outstanding for the quarter were 22 days compared to 28, they seem to par quarter.
Let inventory was 100 and.
$27.4 million at quarter end up from $117.6 million last quarter, and the up from $107.9 million in the prior year.
I wish they see a inventory was 131 days for the quarter compared to 114 days in the park quarter.
That property plant and equipment to was $412.3 million as compared to $416.1 million car corridor and $391.6 million last year.
Capital expenditures were $16.8 million for the quarter, including $13.1 billion at the end, Wes and $3.7 billion, a the JV company.
We estimate.
The capital expenditure for AOL alone to be in the range over 80% to 9% hold the total revenue for the fiscal year 2020.
Before I move onto the guidance for the next quarter I would like to update you on the progress at that JV company.
During the March quarter, the 12 inch Fab and assembly and test facility performed better than we expected considering the condition. So the kobin 19 outbreak in China.
Given this situation, though the global pen dynamic and resulting economic recession Oh.
Visibility into overall.
Market demand beyond the June quarter isn't very limited.
At this point.
We are unable to determine one weekend ramp up to 12 inch fab, who use space one targeted run rate.
We will continue to monitor your body weight market conditions closely.
And provide further guidance when we gain more visibility.
Well the two quarter, we expect the JV company to increase production volumes sequentially to support our business of growth opportunities.
That's all we're Oregon fab is running at full capacity.
With that no I would like to discuss the guidance for the next quarter.
We expect revenue to be between $117 billion and $121 billion.
GAAP gross margin to be 22%.
Plus or minus 1%.
We are anticipated to non-GAAP gross margin to be 26.5, colson, plus or minus 1%.
No doubt.
Non-GAAP gross margin schools point $4 million, so estimated share based compensation and the $5 million. So estimated production ramp up costs relating to the JV company.
Operating expenses to be in the range of $29 billion, plus or minus $1 billion.
Non-GAAP operating expenses.
Expected to be in the range of $25.7 billion, plus or minus $1 billion.
Both GAAP and non-GAAP operating expenses include $3.2 million to $3.5 million <unk> estimated to be expenses relating to the development of our digital power business.
Non-GAAP operating expenses exclude $1 million to $2 million of estimated professional fees related to the government investigation and $2.3 million. So estimate is share based compensation.
Income tax expense to be approximately <unk> point $3 million $2.5 million.
Loss attributable to non controlling interest to be around $2.7 billion.
On the non-GAAP basis, excluding estimated production ramp up costs relating to the baby company. This item is expected to be approximately <unk> point $1 billion.
As part of our normal practice, we're not assuming any obligations to update this information.
With that we will open the call for questions.
Operator.
We started to when they session.
As a reminder to ask a question he will need to press star one on your telephone withdraw your question press the pound or hash key please standby will be compiled acuity roster.
Your first question comes from David Williams from Loop capital. Please go ahead.
Hey, good even thanks for taking my question and congratulations on the guidance at a very strong revenue.
If I look back over the last couple of quarters or couple of years.
That looks to be a fairly high level of revenue can you kind of talk a little bit about where the greatest level in demand is and maybe what you're confident confidence level is.
The guidance range.
Sure David.
This guidance for the June quarter.
From early reflected and you know a constant demand surge in the computing and the gaming area.
But seeing right now this you know some other areas.
Not to performing to two to the level and that's the last year we've.
We saw a for example into.
Smartphone area, some industrial areas and then those areas since but definitely saw.
For us and a you know with our long term.
Commitment in the computing area.
They sign we we saw a.
Pretty strong surge and in in the month of on March I will say started.
We saw the.
Demand for our products.
So, that's where where we adjusted all and productions.
And this time.
Our joint venture seek to joint venture actually provided us with.
Taxability of production and and I'm much needed capacity.
To support in the this oh southern surgeon.
Computing demand so.
I mean <unk> we are.
Managing this.
A surge in the one.
Going after those business opportunities on the only other hand.
On to be cautious.
About.
That does a lot because it sort of second powerful to either I mean, we don't know whether or not the surgeon.
Yeah and demand there will be.
A short term or can.
We extended the full while so at this point it was very happy and then.
Touching joint venture.
Support us a full full a full and much needed to supply I mean, this Mike and you know but anything.
You want to add.
Well. Thank you you find a and thank you David one question actually you were very thankful. Thank god that to you such a.
Difficult time, now we have to TCPC business surgeon.
And the maybe let me speak a debit about Oh, so the total <unk>. It's a if I mentioned about it and also these crime and the would read it got to benefit from this the joint venture.
As you know all all core piece in them all these technology and body all along so technology will enable us to Korea did you see men and also of course expand penetrating more.
To your customers.
However, this new business wouldn't need a capacity capacity to support.
And the Oregon Fab from Red beginning we knew we know that it's a capacity it will limit and the indeed since last year you start to be full capacity and this a JV or cost coming in right time I'll call. You did I take some time to putting up there and why not we are very thankful that they become into it.
This.
Research and a you'll start to produce a good that could we talk to us and we are very very thankful.
And testing can take four out thanks for the commentary that's very helpful.
If you can think about how much flexibility how much capacity came out of the JV. This quarter can you give us anything that maybe quantify that or maybe as to what level of of revenue was provided by the JV.
Oh sure I've been.
At this point I mean, the because of the funds certainties of about a the overall market demand and the you know one right now it is hard to say about the second half of the year right now so no. We we are unable to.
ER determine when we can run pumps and Ah. This.
Faced one to the target right.
On given Dod and but the you know you can tell from Ireland June quarters, a guidance and the I mean this incremental.
On revenues.
Our own supported by a one or two inches joint venture.
You know over there, we still happen or capacity to support and the thing that you know even higher demand. If you if this a market that oh.
Payoffs in the well you know in the second half of the year on right now just.
So much.
So then decent that you know our visibility.
Beyond the two colder is.
They are limited so that's a war closely monitor the.
Market and then it and then that react and Oh.
Accordingly, so the war well, we'll see.
Okay.
Yeah.
You might have.
<unk> I believe be more [laughter] okay.
Yes, Indeed, we still have some capacity into you just switching gears to fulfil more business. However, I'll first faced a plane greedy.
He is to reach the break even in the catch drilled so we went to compress the but not all but do you not too much. Another work it's enough to support its Newton, Okay. That's a doubling the fact that thank you.
Okay.
So you feel comfortable the tickets at college or demand coming in the June quarter to really be additional capacity and in the the JV.
Yes, yes.
And maybe if you have a askance at the channel inventory health are you seeing any maybe pull in orders or anything that would give you any concern in terms of inventory a over stocking or or just generally the health of the channel.
Okay sure on phone, China inventory right now you know or we are at and into than.
Neither range of our target at less than two to three months and you know a loss the couple of quarters. So we're doesn't low end of the.
Generally human tree this quarter, because so for the better than you expected.
Production recovery, we actually benefited from this production recoveries and you know so still down to weaken server or better.
On the.
On this demand surge so right now the China, Yemen, they did incremental.
Generally inventory is.
Was pretty much as in the computing area, so the notion that which isn't much.
Needed the and inventory both for the full provided to our customers and for this quarter.
Okay and task and just one more if I can hear and I'll get back into queue, but but you've talked a little bit about the the controller and the progress there how how close are you shouldn't Patrick Bobby years in do you think there's an opportunity to accelerate that and maybe a.
Maybe drop that that controller revenue up before that you're in.
Hi, David This Stephen Yes, let me comment on that so actually our digital power has been addressing two markets. One has been advance computing in the second one is on telecom.
And were actually pretty close to getting a design win actually under events computing side I'd aid graphics card on maker and that's it's kind of going into more of a consumer side of that but we're pretty excited about this one we're hoping and expecting just to generate revenue.
Closer to the ended the year once the club project ramps up so at least my Dycom isn't on near term revenue.
Other portions I think we're still in the in the development phase in terms of development now working with the customers. So we're anticipating still let's just take some time to develop the revenue for for the other portion of the business. So we expect in a nutshell, we do expect something business and in the short term on but it'll be kind of small just as a start out with.
With that comes with some more mild growth going into 2021.
Great well, thanks, getting the best of luck on the quarter stay healthy please.
Thank you. Thank you.
Your next question comes from Tories hundred from Stifel.
Yes. Thank you question on gross margin. So I do recognize the Oregon Fab is full but I was expecting a little bit more follow through from the 10 to 15 million high revenue. The June quarter Somebody's D is the lower gross margin just a pure functional on the revenue mix.
<unk>. This you don't the higher.
Revenue guidance for the June quarter, and the margin you know we did not increase much and then over there a couple of things one is you.
You know the we think the in some ASP erosion and you know we would expect it does.
Are.
Economic recession timed and you know this you know some other areas than you know we would expect some price erosion. Another thing is some you know this incremental revenue up.
As for pretty much supported by all the joint venture so joint venture by providing pro forma.
The production run public cost and actually you know you can go the the margin benefit will be reflected the into.
Production ramp up costs.
Reduction so the you know into the March quarter, we perform a out the six point some minimed $605 million also.
The June quarter, what are you expecting the above the $5 million.
Production ramp up costs than the from the joint venture so.
I will be that Oh Gee at all of it.
That's very helpful and you mentioned $60 million alone could you elaborate a little bit on the on the terms about alone and as far as their usage of that money.
Is that going to go down to pay down some of the JV debt or is it going to be spent more on.
Capex as you continue to ramp up phase one of and eventually phase two.
This $50 million loans that Oh for Capex and for working capital So.
Terms on pretty much similar to our two of their previous along so it seemed to five years in a range and that and similar.
Interested at a rate and then a little bit dong actually better rates have done before.
This is.
This will be you for.
Remaining and payment for the Capex and for the phase one and for the some working capital.
For the company.
Great and do you have a capex number for the JV for for this year.
Capex and the you mean food this fiscal year and I'll be in June.
Quarter, I would think that did a little bit higher than a this march quarters.
Three or $480 a capex payment nothing is it just depends on the.
Ah tightening up the payment so that does a thorough some.
Remaining payments is done.
They need to me that's right off the.
After the equipment and the good you started and then a try rather than on a full period of time and then there and then everything checked out and then that done and you know they wouldn't make the last payment the full dose equipment.
That's very helpful. Thank you.
Thank you.
As a reminder to ask a question press star one on your telephone keypad.
Your next question comes from Craig Ellis from B. Riley FBR.
Yeah. Thanks for taking the question team and congratulations on doing such a good shop in the March quarter, navigating a real volatile environment.
Wanted to start just a with a couple of clarifications the first one.
With respect to the but prior target for the JV ramp we had been looking for a revenue ramped at 37 and a half million in the September quarter, and I understand we've got a much different environment, but what I wanted to take into is is the the reason that the company's uncomfortable sticking with that.
And just because the design wins aren't there to get to the 37 and a half million where the design wins are there, but maybe the unit volumes on those wins is no different than you thought or is it that those two things are fine and maybe you're just concerned about a parts from other suppliers.
That would go in kids that are related to these assignments that you have maybe it's other things, but I'm just trying to understand what the specific factors are and where are you are our overall relative to their design wins that are needed to get to a 37 million run rate for that facility.
Okay sure quite good Oh. This is primarily because of the overall market demand and I mean at this point and as the sole volatile no. Nothing I mean is kind of a generally in the March quarter.
We saw in this market the shift <unk>, you know like a roller coaster <unk> and then and then <unk> with the.
Mobile market demand the down so dramatically and then and then later on over the quarter and you know we saw the surge in demand for computing than it I mean, all those things and then and then also this.
You know a lot of.
So to that piece of related to this and the you know pandemic and you know we don't know.
How long that will allow us them, then I'm a dose the recessions in the <unk> on for sure why you.
Recession, right now, but the done how long and how severe we don't know in and then and then a even after this reopening of no cities and.
You can't have made in it I mean on how people aren't going to be hey, when react and you know that also another things will be seen or whether or not and others and second wave.
<unk> 19 went down the road and in the wintertime own them you know one this is.
Vaccine.
And then I mean, a lot of an unknown.
Going to.
To a impact on the overall global demand for all products the so.
At this point and then I mean, I just unable to.
Or give you a dozen guidance you know when we can run pub to the targeted run rate.
He is one that will will work closely monitor isn't and then that will.
We will provide further.
Guidance into when we say I'm more visibility.
Okay, I'm going back to a clarification on gross margin Terry Tory flesh out fiscal fourth quarter from the third quarter is about a 150 basis points better than I expected me right.
So.
What.
Allowed the company to perform so well and then obviously, we could reduce estimates intra quarter, just given a choppy environment, but were there any incremental positive it's in a quarter that a good allows you to offset some of what was likely incremental our cogs costs in a cup environment.
Sure in the March quarter, Yes, I would gross margin came.
Came in.
Higher.
You know done our guidance it was primarily because of the our production recovery was better than we'd expected them and I mean, we expect it didnt.
A more.
Declined in the you know into the production.
So I got to give credit to our employees and then I mean, you, especially in China <unk> you know they they they are.
The they fall off the through this.
Locked on CNN, and and Oh, gosh shortage open labor pool fooled pretty much most of the time February and March Hustle, and then you know with a limited.
The workforce and over there and then and then they they produced at the a much higher.
Hi, or an important for US you know who overtime through.
Through a commitment and.
You know it really does stood at the ownership and over there you know given to situations and not only the shortage of labor, but also that you know due to the disruption though from the logistic.
You know some a lot of.
Shortage on some materials and the or even clean room masks and then having this oh.
Full while and then you know.
They were down to the pretty low level and then I mean, the these days the oh through it so.
I'm not that contributed to our overall gross margin and then I mean performed better than than we expected photos of cash.
Got it and then moving consumer [laughter] through the sure I guess my can you could go [laughter] Yeah, Let me add a few we're about to do the 20 ingevity off while the full cut out yet that they're facing these a recession and the I'm not in the corporate care the 19th the impact.
I wouldn't I think we shouldn't be more conservative, but I like to point out the problem with the loading.
The 20, <unk> progressive the accordingly and improving.
So no. We don't you really look I know, we cannot to come in anything what kind of anything but at least the one this woman I'm very very much a priest and performance.
Thank you Okay got it thanks, thanks for that Mike I'm moving on to consumers gaming ramps. So it looks like gaming's accounting for about half of the sequential growth if I've got the bottoms up modeling right in the June quarter. So twofold question. When you you know and once we exit the June quarter, where we'd be with respect.
To that ramp is fair further growth coming in September or what you really realize all the benefits of the gaming design win.
In the June quarter, and then maybe going back and connecting in wet God. Tories question. Since this is a have a sequential growth and given the decline in gross margins would it be fair to assume that this design win it's a high volume design wins coming in below corporate average.
Yes, Stephen let me comment on the gaming things, we're pretty excited to that you'd be able to share. This because you know we're winning on multiple sockets and just gaming system and on as gaming systems go I'm definitely they are preparing for a pre production at this point the systems not how the release yet it's going to release on in this.
Second happened this year, hopefully you know, there's no delays or anything, but we don't see anything as of yet on the we do expect on our business with this to continue to grow but definitely depends on the customers on a ramp up rate I think whenever these things launched is usually a bit push especially the trying to do.
Do for Christmas and then after that to see how how on the substances and then they push further.
But we believe that this would be a pretty good.
Growth area for us. So we're excited by people that were also cautious, especially given the sun Qunar buyers time huh.
In tandem architecture.
Do you have any sense for what your shares but that takatoshi.
The share I mean, our share in there or was that would drive yeah are you still sourcing to the sockets that you're in or what do you think Cameron majority Amador majority show.
I think it depends on which socket is some it's something we have a better sure others. We don't want we had the good thing is we actually have a quite a few a number of sockets inside so it depends which one you're you're talking about but none of them our sole sourced on they they always want multiple sources for these for these systems.
Okay, Great for you guys and then just connecting to at the end market. So I see fancy footwork to realize the strength in Pcs. The question has to be looking ahead in Pcs get back to some of the high is that we had seen last year, a with the strength that you're seeing near term team and then.
I can only you know we went into this you're thinking that that comps was gonna be the sequential or the year on year growth driver, we were allocating capacity towards comps.
Certainly gotten unit headwinds, but she'd like to the back half of the calendar year.
And the design win final, but you have do you feel like from staple revenues in June you have the opportunity to really grow that business in the back half or would be really look to calendar 21, before we were able to see significant growth our current revenue levels.
Yeah, Let me answer that one too so on regarding Pcs definitely we're very excited about the under growth in Pcs normally interest in a in a regular year Q1. It typically is a down season, so I'm actually to where we're asking and only dropping your guess is just because a few percentage points in the first quarter is a is a pretty big on you.
Duals type of thing for us. So we do expect kind of computing to continue to be strong and we know we.
All along we voice stuck to PC, either as one of our core areas of business and we'll continue to do that and we continue to also grow their into into higher higher content, you know with <unk> power I season drive them off. So we do can expect to continue and to maintain and grow our foothold and PC.
Of course this is all pending the overall market, we don't know how long.
This current surge is going to last for on but we believe our position at least in into whats. There is a is good.
Regarding communications on what remains to be seen is how lumpy. The peak smartphone seasons is going to be a in the in this coming September quarter in December quarter.
And you know we know that in at least in the March quarter. Overall, a phone shipments were actually you know were actually down quite quite quite sharply, but actually you know our battery production business was also down but actually wasn't as down as compared to the overall overall market and we wish we're still in some pretty.
Good I'm positions at a global phone makers.
Horse or no dependent upon their own shipments to see how on below there will be doing in this upcoming peak season. So yes. There's I think there is possibility for growth, but there's also a lot of dynamics that went out we have to account for as well. So where are we we hesitate to is just put up for a number into the second half, but yes, but yes potential.
Yeah, we could be growing in a going into the into second half even further.
And just to.
Further clarify that Passpoint Steven.
Can you see the.
Air interface, a bit design wins that you have for example is it fits both you whether you are designed into a five cheer up for GE tone in the back half the year, because obviously the units dynamics, you're gonna be dramatically different on how fiveg phones are likely to be up to two and a half action the first half fourg phones.
Well be nowhere near that is good so in any visibility on whether you're in order to your project.
We don't necessarily always know, which model where design ins on until at the things get finally released but no we feel pretty confident about where we're out physician to wise at Liza each of the the phone makers that we've been in so designing wise I think we're in a good position on in terms of you know Oh.
What the actual volumes would be of course that we don't we don't know what that what that's what's going to happen there until it happens.
Right now we aren't we are preparing you know preparing for a ramp but we don't know how strong of a rapid would be.
Okay, great. Thanks trumpet, how good luck team.
Thanks, Thank you.
There are no further questions at this time I will turn the call back over to the presenters.
This concludes our earnings call today. Thank you for your interest in U.S. and we look forward to talking to you again next quarter. Thank you.
Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participation you may now disconnect.
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