Q1 2021 Alpha and Omega Semiconductor Ltd Earnings Call
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I will now turn the call over to Mister Gary Gabor check Sir the floor is yours.
Good afternoon, everyone and welcome to Alpha and Omega Semiconductors conference call to discuss fiscal 2021 first quarter financial results I'm Garrett word check Investor Relations representative for a O S. With me today or Doctor, Mike Chang R. C E O. He finally on our CFO and Stephen Chair.
We assume no obligation to update the information provided today's call now I will turn the call over to our CEO, Mike to provide an overview of the business Mike.
Thank you Gary welcome everyone to todays call.
We are off to a great start to fiscal year 2021.
Business momentum accelerated in.
A leading designer developer and the global supplier of a broad portfolio of power semiconductors.
Our technical expertise.
Enables us to devote a broader variety of power discrete and power IC technology platforms.
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Which <unk> and help with the in capturing the surgeon of demand <unk> September quarter.
Because of this.
[noise] towards your fab achieve that passed it if it does for a second concept of quarters and we expect to approach is faced one car get run right next year.
The joint venture Fat provides us with flexible capacity management and that your graphic diversification of our supply chain and will support our business growth for many years to come.
I am pleased with all direction and all solid execution, even though I wish it could be a zero faster.
I want to thank our customers visit.
Business partners and the share holders for their support and confidence in the company.
44.7% year over year.
And demand was stronger than expected, which we fulfilled with ramping supply from our JV fab.
The work from home trend drove high demand for P C related products.
Or graphics card business was exceptionally strong driven by demand in the gaming application.
We remain excited about ramping sales of high performance drive a mass and digital power solutions and the launch a key customers graphics card platforms.
Okay modules design for room Air Conditioners add a Japanese customer.
Looking to the December quarter, we anticipate a mid single digit decline in the consumer segment.
Growth and home appliances is likely to be offset by a seasonal decline and T V. Coupled with a production ramp push out of gaming console systems caused by a shortage of other system components.
The year this.
This segment played out largely as expected given the delay in the smartphone peak season.
Looking ahead, our battery protection business is expected to be strong in the December quarter tracking the peak season of our global major smartphone customers.
We expect communications segment revenue to be up double digits sequentially in the December quarter.
Both product mix and higher factory utilization.
$8 million for the same quarter last year.
Ebitdas for the day.
The company was $4.6 million in the September quarter, as compared to $1.1 million for the prior quarter and negative $2.4 million for the same quarter last year.
Now, let's look at the balance sheet.
We completed the September quarter, with cash balance of $154.7 million, including $112.7 million at AOL and $42 million at the JV company.
Yeah.
Capital expenditures were $11.3 million for the quarter, including $7.9 million at a O S and $3.4 million at the T V Company.
With that now I would like to discuss the guidance for the next quarter.
We expect a revenue to be approximately $153 million plus or minus $3 million.
That's gross margin to be 28% plus or minus one person.
We anticipate <unk> gross margin to be 29% plus or minus 1%.
Nope that non got gross margin X clues point $8 million I'm renovation of acquired the I P.
$4 million, so estimated share basic conversation charges and point $4 million, So estimated production and what type of costs relating to the J V company.
Yup operating expenses to be in the range of $32.6 million plus or minus $1 million.
Non-GAAP operating expenses I expect it to be in the range of $28.6 million plus or minus $1 million.
Non-GAAP operating expenses I screwed $2.5 million of estimated sure base compensation charges and $1.5 million. So estimated legal expenses relating to the government investigation.
Income tax expense to be approximately point $8 million to $1.2 million.
Loss attributable to Noncontrolling interest to be approximately $1.4 million.
On the non-GAAP basis, excluding estimated production and bump up costs relating to the J V company.
This item is you expect it to be approximately $1 million.
As part of our normal practice, well not obligated to update this information.
With that we will open that call for questions.
Operator fifth started Q&A session.
Ladies and gentlemen, if you would like to ask a question. Please press Star then the number one on your telephone keypad to withdraw your question press the pound key what path just a moment you can pile the Q&A roster.
Yeah first question comes from the line of David Williams.
Hey, good afternoon. Thanks for taking my question then congrats on on the solid quarter and the Guy.
Thank you. Thank you.
Gotta look out and and kind of thinking about the revenue stream, obviously, it sounds like you're targeting 600 million. This year. So very nice run right. So it feels like most of this is fairly sticky, but can you talk maybe a little bit about.
Where you seem to demand coming from in terms of design wins and new products versus just back filling demand that you previously couldn't just with lack of capacity.
Sure, let me take that and we're definitely excited to see the growth this year and this year I definitely started off.
Unpredictable and uncertain, although we are pleased to see the results in the in the past couple of quarters.
In terms of the the the attraction that we're getting into markets you know the current and growth that we've seen in the past has further a groan, especially in a in the P. C area. We continue to expand our bond content and we talked about we've also a broken into the the graphics card business what day would be at the meeting lots of happened.
This quarter.
And Additionally, our home appliance business also continues to continue to expand and we've we've started with our our GBT business are discreet business and we've expanded with our module business and we're starting to see the results, especially the module business. This the September quarter and going into the December quarter.
Smartphones overall has been a bit of a rocky start dying just like in many of the markets and we saw a push out of the peak season and spurting into the next couple of quarters, but our position. There is still strong on and we you know we have a good placement at the key global a smartphone makers.
And layering on top of that we've also.
Opened on the market for gaming for AOS I'm going onto the one of the gaming consoles launching decided this quarter. So we're pretty happy to see the the growth of our existing applications as well as some of the new growth areas that we just recently expanded into.
Great and then just kind of think about the new digital controller and that just willpower.
Solution, how much did that contribute to the quarter and then as you kind of think about next year. What do you think that contribution or excuse me. This year. What do you think that contribution could be what are the expected kind of ramps are targets for the year.
Sure So our digital power on as as part of our Multiphase initiative and.
We started on the early revenue came in graphics card and going into high end card where are are Sps as being is is already starting to ramp in the September quarter.
This is more of a at a smaller ramp compared to the to the other a graphics card I wrap that we're doing right. Now this is going into a very high end card for that vendor.
So we see some some small business this quarter will ramp a little more going into the December quarter.
And our heart is still set out to go after the core server and telecom market and with that we're still expecting that to be a little further out on more like in in 2000 21.2.
Like a type of time frame for it for that business in the Meanwhile, you know we will continue to.
Expect this graphics card business to gradually increase over time as you know as they roll out their production and hopefully.
Seeing our part also proliferate into more models.
Within within that that graphics card maker.
And one more if you don't mind, but.
Talk to even a little bit about the factory loading and that helping the gross margin a bit but can you maybe give us a little bit of color around what your utilization rate to are looking like particularly in the JV and then maybe where your capacity stands there you talk about getting that run right. In the next year can you maybe maybe qualify that in terms of when you expect.
That and just kind of in terms of gross margin maybe that contribution that you expect to see just from all of these moving pieces that are really moving in the right direction here, if you're kind of combine those together. So just any color you can provide to be helpful.
Okay sure David in terms of gross margin, Yes September quarters.
What was the margin increase the button hungry 50 basis points compared to the two quarter.
It was primarily due to the combination of the product make better product mix and her factory unionization, so product mix and.
Factory utilization I would say half and half and then maybe slightly higher.
Higher on the factory nation side.
Product mix and definitely improved.
<unk> you know.
You can see as a color I see part of the line we grew like 140.
Five and some person call to order you know, 87% a year over a year and then I mean, Paul Ice's product line Theresa I didn't hire parlak margin for us.
In terms of cellphone, so I actually do have a nation.
Our own factories in like in Oregon, five in Shanghai.
Positive.
Factor on the JV company also in that I mean during the September recorder isn't improved and it's a performance and you know you can see from the production ramp up a cost to you.
In the June quarter I remember it was.
$6.6 million also and nowadays this in the September quarter, It's it's $11.3 million also so that well.
Further.
Ramping up in this joint venture 12 inch fab.
Thank you very much certainly appreciate it and look on the corner.
Thank you. Thank you.
Your next question comes from the line of crank alleys from B E. F D R.
Yep, Thanks for taking the question and congratulations on the real strong execution team.
That tends to be some kind of inborn inventory correction once they once our customer sees the reception and then adjuster production.
But right at this moment, it's a little too early to tell.
Okay. That's really helpful. I appreciate it Steven moving on and just looking at the broader supplied landscape. So it seems like there was just very good manufacturing execution between the Oregon Fab and J D fab in the quarter seems like you're getting that again and the outlook, but can you.
<unk> can you confirm if you're able to meet all orders and given some of the things that we've seen with regards to supply constraint. Ethan can you talk about your comfort that there aren't double ordering issues out there that that would be open plating activity versus.
As in demand.
Sure you know I would backlog has been healthy in the study throw the colder which reflected in our guidance for the December quarter, you know right now the overall market supply is.
Right. So at least you know field.
You know I would not rule out and you know some double elders.
Internally, we looked at all backlogs and that you know alders and also we've triangulate and with all with design wings and you know I took each customer. So the we were monitoring you know how much was shipped to each customer you know the overall.
You know.
We think and you know the December quarter guidance and you know is.
The chewable and I mean, it's a it's off.
It's off pretty high base in from the September quarter, So what happy to see December colder continue to to increase not dropping.
[noise], yeah, indeed, nice to see the strength there. The next question, maybe for Mike, perhaps or <unk> or maybe for you eat fine, but but if I look I had a couple of quarters and think about the seasonally stronger period of the year, which typically occurs in the June and September quarter, given given the.
<unk>, except velocity of the business out of calendar 21 here at 153 million, which is very strong. It would seem if you saw something like seasonal growth and the June and September quarter.
Potentially the the revenue profile the business could move well up into the hundred and 65 to 175 million Ranch, which I believe would really be a level, where either a you adapt to increase external supply or accelerate the ramp of face too.
The J V. Fat can you just talk about how you're thinking about moving into a fab phase two versus external supply given that the demand is so strong in your design Windsor performing so well.
Okay at least with my.
<unk> <unk> <unk> <unk>, what is the first and then I will [laughter], okay, Yeah, I'll I'll take it first and that might get in there you can Eddie and you know overall I mean, then next year I mean that as Mike mentioned and you know what.
Targeting you know $600 million a foot the the kind of know your 2021 annual rabbit doing it you know that's all.
So you know in terms of its colder I'm I mean right now the the Covid is kind of Ah altered in a typical seasonality this year.
We'll see I mean, maybe some fluctuations in between the quarters and cause it's hard to tell at this point, but overall I mean.
Steven mentioned, but do have some company specific growth areas and those girls points. So we.
Well I'm pretty excited about next year said opportunities in terms of.
Uhm Supply-side, and yes, and then I mean, the well.
Continuing to rump.
J V five and then and then on the other hand, the yes, we are planning for for the next face and.
Looking at all in business of growth.
Opportunities and so it is an hour.
Agenda right now to kind of say, they're done you know another you're out. So you know, we we will see that I mean, the the overall in the market and business.
Put them in right now the momentum is is.
I'd, rather he'll be strong Mike you went to.
Adding some.
No. Thank you you brought up and you could talk about pretty much about a business idea, okay I'll cost of them.
You remember what I noticed good there, okay and you know the the the macro economy and nobody can predict that so we had to prepare for that talking about surprised side on the C. Q you know I had to be honest with you. Okay. You know.
Why do you look at Claudia, but okay by C. As in there was prepared or the all planned it like a few years ago at that time I'll call. So you don't have the Akea Crystal ball. So <unk> whatever you can and then I'll go ahead, and maybe I'll splurge and what's <unk>, what's your loading right. Okay I'll see it right now it's pretty tight.
Not because of all equipment, we use out mad at because of some.
You know there's somebody <unk>. It there so we called it just in the mind that just Monday up because of that that makes it kind of to respond to the current demand. So that'd be some room to go to to fulfill all all for space in the next year what comes from there we're going to keep on the fifth two which definitely was a follow up there I won't know what does it just ask you a question or not.
Yeah, I think it does make I think one of your points since there's some debottlenecking inefficiency gain she can get to squeeze some extra capacity out of phase one.
You've got some time to do that yeah yeah.
Move I wanted a bit could to note that just opened up the <unk>.
Yeah. Thank you got it guys. Thanks, so much I'll hop back in the queue.
At this time I would like to remind everyone. If you would like to ask a question. Please press star one on your telephone keypads.
Your next question comes from the line of Jeremy Kwan from Stifel Nicholas.
Yes, good afternoon, and and let me add my congratulations on the strong results in outlook and hitting that hundred 50 million <unk>. When you read me that had a plan.
I had a question on the many Steven in terms of the and Marcus I don't think I caught the consumer again and since Eric do you guys have a formal expectations for that that's the end of the business.
Yeah, So I'm trying to yeah. So consumer was very strong for us in the in the Q3 and I'm sorry in the September quarter, and you know do to lighting is tied to the stay at home T V was ups seasonally and the new gaming console the people.
Reduction was you know it was going on as well as the continued on growth and home appliances looking to chew for and we were expecting us a slight drop in the in the outlook, mainly because there's some seasonality is coming back into Plano T V market typically starts to drop in and the December quarter.
And because most of the holiday shipments I've been already done in the September quarter, We do expect to see continued on growth and home appliances. This has been you know again, we're <unk>, we're pretty small part of the overall market and this is an area that we've been growing especially with our I P. M modules I'm going into home appliances, like refrigerators and wash.
[noise] machines.
And we also mentioned in the script and on gaming is expected to see a little bit of a push out because I'm a customer they're having some production supply issues, but we expect that to resume you know and and the following quarter. So overall, we're predicting a slight drop ongoing into the December quarter.
Great. Thank you so it it does sound like the communications segment is is what kind of driving the you know this the better than seasonal outlook for December, especially off the strong September Uhm can you walk us through again, you know what what's let's give me the confidence behind that and is it just the delay in a smartphone ramp.
That's continuing into into.
Number or is there something else going on there that that.
We've seen this business.
Yes, Yeah, you got it by far in the biggest news. There is is the a smartphone side normally will see a big jump up in the in the September quarter, because there's there's a few filmmakers and doing the marches at that time. This year, we've seen some push out some small pushed out of launches even though the they still happened and therefore are.
R R fifth.
December quarter is expected to be at a peak for us and.
To to sell in for battery protection, if that's so and we've so the main if the guidance for acute for the December quarter is a strong Q4 four calendar queue for for communications led because of the battery P. C. M. That's gonna be peeked in that quarter.
Got it thank you and I guess turning to the the J V. So maybe if I can try to get at this another way you know originally the plan was to you know the J D. A favorite one was gonna help you hit 150, and you guys already there now can you give US you know what the new revenue.
Double would suggest to us like that that's J V set at full day's one for for the combined company.
Sure.
Yes, and you know right now.
Coldiretti remedy what you said 150 million level so.
At this point in the J V 12 into five and is not fully ramped up but then run to quite a bit already so.
The the the thing is there a couple of factors here Ottomans here. One is yes in the September quarter JV continue to ramp supported in a portion of our revenue growth.
On the other hand, and you know all of a product mix and the improved doing the last.
Couple of quarters is so nowadays revenue per wafer actually increased.
Some sold and that way you know Hollywood.
Oh, Oregon, five and then and then also foundry foundries actually supported him more revenue.
The loss. So you know that's the the dynamic.
In there so that actually as I said and you know actually I V. With this as a a better outcome for us and so now I'm in some you know.
The JV company can still support and our further world. So in terms of how hyphen.
Support I wouldn't expect an another.
Another.
10 million and ozone and then you know that's the warble from there. So that's the current in the.
Estimate.
Great that that's very helpful. Thank you is there can you give us any indication of you know the timing that you might start you know the face to you and and maybe like with different options. We have in terms of like the you know the magnitude of that I understand you know the shell has been built out already.
So a lot of the Capex is already spent.
Spent so yeah can you get.
What type of plants, you might have in terms of adding incremental capacity 482.
Sure you know.
Right now actually we are planning for the next phase whether or not is another full face or some incremental.
Mm mm expansion you know, we'll see I see Mike just mentioned in the you know the face.
Place, one doesn't clean room and.
Women and you know there are still some rooms too.
Ah just in it you know to resolve some bottleneck here is and so that I can give us a more output.
And also you know the the first one crane room is still.
Oh, not as crowded I saw with Oregon, five Clinton room, So you know the.
<unk> bye.
By incrementally.
Install some you know the equipment and it can also help and lift up some [noise] copay.
Capacity, so an overall, yeah, well do more planning.
We'll see that adjusted.
In terms of the next phase of the JV expansion.
Yes, My <unk> you know he's planning one okay. We are not in a hurry because you know so we report okay. Your next year, we shall see be skippy comfortable so it will take time to do the crime because it was planning make it very crucial if you plan aggressively.
You're gonna wind up lose money, you've you've been not enough there you're gonna be spelled charity. So we do want to spend time after it to read carefully come up with a another I'll pass the calculation wasn't able to do that so.
So this woman was doing the prince plenty of H and there's no firm yet I'm just at the detail yet.
That'd be great.
Great. Thank you Mike It really appreciate that that color Uhm, that's all I had for for now thank you.
Thank you.
Once again I would like to remind everyone in order to ask a question. Please press star one on your telephone keypads at this time again that is star one or any further questions.
And I show no further questions at this time I would now turn the call back to management for any closing remarks.
This concludes our.
Oh, well earnings called today. Thank you for your interest in the wires and we look forward to talking to you again. Thank you.
Thank you.
Thank you.
Browser will be fine.
Ladies and gentlemen, this does conclude today's conference. We thank you for your participation you may know I'll disconnect.
[music].
Yeah.