Q2 2021 Alpha and Omega Semiconductor Ltd Earnings Call
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Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Alpha and Omega semiconductor and fiscal second quarter 'twenty 'twenty, one and earnings call and this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask the question do any of the session you will need the press star one.
And your telephone.
Acquirer of any further assistance. Please press star zero and please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Mr. Gary The Barczak. Thank you. Please go ahead Sir.
Good afternoon, everyone and welcome to Allison Omega Semiconductor's conference call to discuss fiscal 'twenty and 'twenty, one second quarter financial results and Gary The board of Jack The Investor Relations representative of trading with us.
With me today are Dr. Mike Chang, our CFO you find the young our CFO and Stephen Chang, our president and <unk>.
All of us being recorded and broadcast live over the web and a replay will be available for seven days following the call via the link and the Investor Relations section of our website.
Our call will proceed as follows Mike will begin with strategic highlights then Steven will provide business updates and the detailed segment reported after that you find will review the financial results and provide guidance for the March quarter.
Finally, we will have the question and answer session.
The earnings release was distributed over one for services today February for 2021 after the close of market. The releases also posted on the company's website.
The earnings release and this presentation includes certain non-GAAP financial measures, we use non-GAAP measures because we believe they provide useful information about our operating performance and it should be considered by investors in conjunction with the GAAP measures that we provide a reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.
We remind you that during this conference call, we will make certain forward looking statements, including discussions of the business outlook and financial projections. These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations.
For more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with the SEC, we assume no obligation to update the information provided in today's call and now I will turn the call over to our CEO, Mike to provide strategic highlights Mike.
Thanks, Gary I would like to welcome everyone to today's call.
I'm excited to be speaking with all of you again today and.
And the to report and accident quarter and finished the calendar year 2000, and pointing and.
December quarter, we saw solid shipment of course, most of our product categories, leading to resort ahead of expectation.
We grew revenue by 35% year over year to $159 million.
We at cheap high utilization at our manufacturing facilities.
The continued it took the disparate with our expanding.
All of this led to record and non-GAAP gross margin of $31 four per cent and the non-GAAP EPS of 65.
You probably will go into more detail on our financial performance data.
I'm really pleased by our team's execution.
The operational control and efficiency that.
We have implemented are positively impacting our bottom line for.
For investors, who may be new to our story.
All of mission is to become a leading designer developer and the global supplier of a broad portfolio of power semiconductors.
Michigan drives all of strategic focus and the work we do.
Compute and it has been a core market for the.
We have successfully diversified our business.
By expanding into other market second line.
The including consumer.
Communications, how supply and the industrial.
Our strong engineering team and the technical expertise enable us to the BOP it broader variety of power discrete and the power IC technology platform.
This positions us to expand our product offering and the deliver complete power solution for more targeted applications.
On the manufacturing from would continue to ramp our capacity at our JV fab and coaching.
This provides us for capacity management.
And that York rapidly diversify our supply chain, which is critical to supporting all of growth for years to come.
And I will update you on the progress of the JV back in the few moments and.
I'm proud of what our team has the company.
And the the ground work, we are laying for long term and the sustainable success.
Obviously, we faced tremendous Chinese and kind of the year 2020, the including the global COVID-19 pandemic.
Traded company and.
And the political and social unrest in different parts of the world.
Despite these challenges we made significant progress toward achieving our target of 600 million dollar annual revenue for calendar year 2021.
Good day by developing the healthy pipeline of new products new.
New design wins and the new customers.
Now I will turn the call over to Steven for an update on our business and a detailed of the Turkmen report.
As you know, we recently promoted Steven <unk> President and he.
Will not be responsible for all day to day operations of eight O N.
And my role will gradually transition to a higher level of leadership role.
<unk> seen the companies, but the options.
Stephen has done and I was getting jobs at a O as over the years and I am 40, competent and his ability to lead a O S and the next phase of rapid growth David the floor is yours.
Thank you, Mike and good afternoon, everyone.
I will start with an update on our business and then provide detailed the segment highlights for the December quarter.
Our business momentum has accelerated over the past several quarters due to our advanced product portfolio marketing strategy and growing production capacity and.
As we said previously our strategy is now to create advanced total solution products in close partnership with our customers.
These products leverage our expertise and power and move beyond commodity parts into multi socket optimized solutions that make our customer products more reliable and efficient.
For example, our recent design wins in the gaming system, and and a new PC graphics card platform as well as our high growth and home appliance applications and battery protection solutions demonstrate how we have deepened the strategic partnerships with tier one global OEM customers.
We expect to accelerate growth by winning new customer engagements with an expanding pipeline of new products and increasing bom content.
Of course, our large global customers would not partner with us if we could not deliver our solutions at scale. As you know we have been ramping production at the JV fab and for machine.
Supply from the JV fab has enabled us to win new large scale customers, while also regaining market share and others that we were struggling to supply and.
We have crossed several milestone and the JV fab with E on and will elaborate on shortly.
In addition to the traction we are gaining from the successful execution of our strategy. We're also blessed with strong industry tailwind industry wide supply is tight as demand remains strong across the various market segments, including computing consumer and communications we.
We are on allocation as well and are optimizing our operations product mix and capacity allocation.
And your product lines.
We are closely working with our strategic customers to meet their procurement needs our customers appreciate our commitment to enabling the growth and executing on our mission.
Now let me provide a detailed review of each of the business segments.
Let's start with computing.
Revenue was up 32, 9% year over year, representing 47 per cent of our total revenue.
Revenue was down two 3% sequential the acura and unusually strong September quarter.
<unk> cars were strong while demand for PC related products declined seasonally as we passed the peak build for the western holidays.
This momentum in computing is the direct results of our strategy of partnering with our customers to create total power solutions, which increases our content.
Looking ahead, we expect overall computing revenue to return to sequential growth and the March quarter.
We expect solid demand at our ODM customers attributable to ongoing work from home and remote learning trends. This.
This will be partially offset by a slight decline and graphics card shipments due to the Chinese new year holiday.
While we were on allocation, we expect to have sufficient capacity to resume sequential growth.
Moving on the consumer segment was up 67, 3% year over year, representing 22, 3% of total revenue and the December quarter.
Like computing consumer revenue also decreased sequentially by three 4%, which was expected when comparing to the strong September quarter.
Home appliances drove growth in the segment as a key strategic customer in Korea ordered high volumes of intelligent power modules.
In contrast, our new gaming console customer reduced its build plan in response to shortages of other system components.
This enabled us to beat the rest of some production to support other customers and products.
And is anticipated to resume growth in the March quarter.
We are excited about this gain and customer as it shows the strength of our strategic supplier approach.
And the console, we have multiple sockets covering several of the price, including power Ics and MOSFET.
Great example of how we can drive growth through greater percentage of bonds.
We expect this segment to decrease double digits, primarily due to the seasonal decline of TV business and a decline in home appliance business due to a day Lee and supply.
These declines will be partially offset by meaningful growth and gaming.
Next let's move to the communications segment, which was 17% of total revenue in the quarter.
Up to 32, 5% sequentially and up 27, 9% year over year.
This segment played out as expected driven by the strong demand for battery protection during the peak build season for one of our global smartphone customers.
We also grew revenue from China based smartphone customers in the December quarter.
As we passed the peak build we expect a sequential decline in the March quarter.
However, our long term outlook is solid as we have broadened our battery protection design wins and multiple customers globally, and we are supporting the overall growth for much hung Ching JV fab.
Finally, let's discuss the power supply and industrial segment, which accounted for 18, 2% of total revenue.
The segment was up 15, 4% sequentially and up 14, 3% year over year the <unk>.
All of the growth was due to two factors.
First for charters were exceptionally strong due to demand for travel adapters used for tablets as well as the shift in China from 60 volt to 100 volts.
And surely we doubled shipments of 100 volt products.
Meanwhile, we regained our market position and both cost effective flexible and quick charger solutions and.
And at a power tool customer the rig.
Huberty was due to our ability to supply those customers from the JV of time looking ahead, we see continued strength into the March quarter and expect this segment to be up single digits and quick charger remains strong and E. C. D. C continues to grow.
Overall I am excited by the momentum we are seeing in our business. We have a strong pipeline of design wins with our major customers our strategy to focus on more differentiated product solutions that have higher value and margin is paying off and our operational discipline is adding leverage to our model.
I am very encouraged by our execution and the progress we are making towards a stronger future for AOS.
With that I will now turn the call over to <unk> for a discussion of our fiscal second quarter of financial results and our outlook.
Thank you Steven good afternoon, everyone and thank you for joining us before I dive into the financials I want to highlight some key milestones and the JV company, which Steven alluded to a few minutes ago.
We started the construction of the JV company for years ago, as we anticipated additional capacity requirement based on our longer term growth plan at that time.
The 12 inch fab capacities production in July 2019, and Assembly and test facility started a bit earlier.
And the JV Companys production ramp in the past year has played a significant growth in our race and the business growth.
And the December quarter of 2020, the JV company achieved a positive EBITDA for the third consecutive quarter.
We are very encouraged by the progress the JV company has made in this production and Brian.
Beginning in the December quarter, we no longer report the production and ramp up of cost as of.
Non-GAAP items.
We expect the JV company to generate another sequential volume growth and the March quarter and our.
Approach the phase one targeted run rate in the September quarter.
Beyond the phase one.
The JV company will provide us with flexible capacity management and geographic diversification of our supply chain.
As part of our next phase of the growth plan, well planning the phase II expansion and the wall for more details in the quarters ahead.
Now, let's turn to financial results.
Revenue for the December quarter was $158 $8 million up 4.8 percentage from the prior quarter and.
Up 34, 8% and from the same quarter last year.
In terms of product mix day.
Most of the revenue was $118 $5 million.
Up three 6% from the prior quarter and up 19, 3% year over year.
Power IC revenue was 37 $4 million up eight five percentage from the prior quarter and.
And up 100 and.
22, 2% of from a year ago.
The Assembly service revenue was $12 $9 million as compared to $2 $7 million and last quarter and $1 $7 million for the same quarter last year.
Non-GAAP gross margin for the December quarter was 31, 4% up from 29% of in the prior quarter and the up from 28, 3% and the same quarter last year.
The quarter over quarter increase in non-GAAP gross margin was mainly driven by the higher utilization and the operational efficiency as well as favorable product mix.
Non-GAAP gross margin excluded <unk> $8 million of amortization of purchased IP for both December and September of quarters.
In addition, non-GAAP gross margin excluded point of $4 million of share based compensation charges for the December quarter and for the prior quarter as well as for the same quarter last year, respectively.
Non-GAAP operating expenses for the December quarter were $31 $5 million.
<unk> to $28 $6 million for the part of colder and $25 $7 million for the same quarter last year.
The quarter over quarter increase primarily reflected higher variable compensation and of course based on the better than expected results for calendar year 2020.
Non-GAAP operating expenses for the quarter excluded $2 $8 million of share based compensation charges and <unk> $8 million. So.
Legal expenses related to the government the investigation of.
This compares to $2 $5 million of share based compensation charges and $1 $1 million. So for legal expenses related to the investigation for the part of quarter as well as $2 $1 billion of share based compensation charges for the same quarter last year.
Income tax expense for the quarter was <unk> 7 million compared to $1 million for the part of quarter and $6 million for the same quarter last year.
Non-GAAP EPS attributable to AOS for the quarter was 65 cents per share as compared to 55 cents for the prior quarter and 23 for the same quarter last year.
AOS continued to generate positive operating cash flow.
On the stand alone basis generated $35 $7 million of operating cash flow in the December quarter.
Compared to $12 $7 million and the prior quarter and.
The $12 $5 million and the same quarter last year.
And the December quarter, we received the $10 million customer deposit for securing supply.
The JV company generated positive operating cash flow of $4 million in the December quarter, compared to $2 $9 million and $3 $5 million of cash flow used the by the JV company and the prior quarter and the same quarter last year, respectively.
Consolidated Ebitdas for the December quarter was $31 6 million compared to $27 $6 million for the part of colder and $13 $9 million for the same quarter last year.
The ebitdas attributable to AOS for the quarter was $25 $3 million as compared to $22 $2 million for the part of colder and $12 $5 million for the same quarter last year.
EBITDA for the JV company was $6 million and the December quarter as compared to a full point of $6 million for the part of quarter and negative $2 $2 million for the same quarter last year.
Now, let's look at the balance sheet.
We completed the day.
Number of quarter with cash balance of $181 million, including $142 $3 million out of the AOS and $38 $7 million at the JV company.
This compares to 154 plenty of $7 million at the end of last quarter, which included $100 and $12 $7 million out of the AOS and and $42 million out of the JV company.
Our cash balance of year ago was 107 $2 million, including $86 $2 million at AOS and $21 million at the JV company.
The bank borrowing balance at the end of December was $175 $2 million, including $28 5 million at AOS and the $146 $7 million at the JV company.
During the quarter, the JV company borrowed $7 $7 million of working capital loan.
AOS and the JV company repaid $2 $1 billion of $9 $6 million of existing loans respectively.
Net trade receivables were $24 9 million at the end of the December quarter.
Per $226 $3 million at the end of the prior quarter and.
And $33 9 million for the same quarter last year.
Day sales outstanding for the December quarter was 21 days compared to 18 days in the prior quarter.
Net inventory was $144 $3 million out of quarter end up from $137 $7 million of last quarter and up.
And from $117 $6 million in the prior of year.
Average days and inventory of where 115 days for the quarter compared to 113 days in the prior quarter.
Net property plant and equipment and it was $438 million up from 400 and.
$21 $6 million of last quarter and up from $416 $1 million last year.
Capital expenditures were $13 $4 million for the quarter, including $6 9 million at AOS and $6 $5 million of the JV company.
With that now I would like to discuss the guidance for the March quarter.
We expect revenue to be approximately $157 million plus or minus $3 million.
GAAP gross margin to be $28, 7% plus or minus 1%.
We anticipate the non-GAAP gross margin to be 29, 5% plus or minus 1%.
Non-GAAP gross margin excludes point $8 million amortization of acquired IP and point of $5 million of estimate of share based compensation charges.
GAAP operating expenses to be and the range of $33 $8 million plus or minus $1 million.
Non-GAAP operating expenses are expected to be and the range of $29 $5 million plus or minus $1 million.
Non-GAAP operating expenses exclude $3 $3 million of estimated of share based compensation charges and $1 million of estimated legal expenses relating to the government investigation.
Income tax expense to be approximately $7 million for $1 million.
Loss attributable to non controlling interest to be approximately $2 million.
As part of all of normal practice, we're not obligated to update this information.
With that and we will open the call for questions.
Operator, please start the Q&A session.
As a reminder to ask a question you will need to press star one on your telephone.
Question press the pound key please standby while the compile the Q&A last day.
We have our first question from the line of Craig Ellis from B Riley Securities. Your line is now open.
Thanks for taking the question and congratulations on the strong calendar 'twenty 'twenty and the start to 'twenty one.
I wanted to start with the higher level question, and maybe also Regulus, Steven Oh, Yeah sure Mike.
Yeah business has come a long way and it's been and incredible journey, but the 300 millimeter fab and nice to see that doing so well here with the 6 million EBITA.
My My first question is just around the nature of order visibility that the company has of president and.
We've heard some from some companies that the.
The third visibility extends well into the second half.
For some of it's already extending all the way through calendar 'twenty one.
Steven maybe you can just comment on order visibility you have across the.
The main end markets, whereas the comparatively longer.
And and where might disability be a little bit shorter.
Sure and again you know the I think this year is the continuation of last year and tens of non seasonal patterns and we're seeing now.
But overall I don't know what the backlog is strong and even can probably comment on debt on the afterwards.
But the overall.
We're still in the very tight market overall and.
We do see you know just kind of going to the centers and the key segments in the computing still remains to be fairly strong and.
We are still exiting what is traditionally the peak season.
And our normal season.
And but it's still and we still expect it to be relatively strong and going into and.
And then the March quarter of this year.
Overall and in general and it's still a fairly tight market. So demand is pretty strong and costs most of our segments.
And I wouldn't necessarily say that we have visibility all at the end of the year I think we we still think that we're and unusual times. So there could be corrections.
And that will happen sort of certain segments. Overall, you know and we are on and allocation state right now so.
We're trying to best serve our customers of all you know also of course protecting iron and revenue.
Yeah and I.
Of course Stevens Commerce, and then I mean, the backlog and Aspen.
Healthy and stable.
Stable.
For the quarter so on the.
Right now and then I mean, I wouldn't I wouldn't say, we can see far enough toward the second half of the year This calendar year.
So there are a lot of and diner.
Dynamics and the risks.
And all there so and the which is a want to be.
A little bit and cautious.
Steven can you elaborate further on the allocation statement that was made in the prepared remarks and and your answer to that last question.
How broad based start day, and and can you provide any any color on when they started to emerge and and just you know what.
And they stand here as we start February.
Sure I think allocated in terms of overall tightness and the market that probably started towards the second half of last year of last calendar year.
As soon as you know yeah, I think our you know our third quarter, we had and produce strong quarter, but it really wasn't just us it was that the industry wide width that we and we're seeing a general shortages here and there whether it's and you know.
And some raw materials of the tons being stretched out.
And we're pretty good at our operations, but what we're not immune to that so and there's something that's high priority for us too.
And make sure we have the secure supply chain for it just like any other any other company and the space.
You know so you know we see it also in the marketplace as well too in terms of the demand across segments coming in pretty strong and even mentioned, which just talk about the backlog is very high and I think part of that is in the inflection to the overall industry of shortness and addition to the the demand that we're seeing because of you know because of Covid.
Because of other segments that are.
The strong mill.
And and if demand is strong and if there are allocations why wouldn't the of.
The JV fab phase two start to ramp up earlier to alleviate that demand.
And can you just talk about where our products are being source that are related to some of the tightness and and why there wouldn't be a pull in on the phase two ramp if there is tightness.
Yeah, I'll speak generally person.
For the and CQ CQ isn't ramping actually pretty well.
Specially compared to the beginning of the last calendar year towards the end.
And we're very very fortunate and happy to see the CQ is is ramping and ready to support us with the growth.
So we will be depending on the just and this JV and more and going forward and.
If I want to provide some more color on.
The expansion.
Sure we have been.
Continuously and ramping the JV company.
I've been over there.
As you can see the started from last calendar years are true.
And quarter September of colder and at the summer quarters continue to ramp and then the with do we expect in the March quarter will continue to run.
But it takes time for a brand new fab to ramp so the.
At this point and what do we expect the weak.
And we can.
Ramp up and placed one targeted run rate and by the September quarter of this year.
That sounds good and then last question for me before I jump back in the queue.
We've heard from a number of companies and it's quite the reported that their spend and increase and various types of input costs and that is true.
Triggering some.
More tactical pricing moves for.
All types of semiconductor suppliers.
What's the status of that type of activity at AOS shell and how should we think about whether either of you would be doing that or be the extent that you are not if there's an opportunity to gain either intermediate or long term share gain from customers that are raising prices.
Sure and certainly we are seeing the cost of raw materials, increasing and general and.
And whether it's from.
Actual physical raw materials, or the or the services, and we see and and lead times and and it's all of it.
It is affecting the.
And the cost and the reflection of the overall market supply chain and being tight.
And we will be adjusting and we actually are already adjusting some of the pricing to reflect the cost increases, but I do want to make a note that this is not of time for us to we're not gonna be gouging of customers where because.
Because we arent and we are.
And focusing on the long term relationships, especially the several of these and many of these tier one customers and that.
And that we had really establishing ourselves and to be in a close partner with them.
So we arent being ex.
Intentional and selective about how the implement and at the cost increases.
Got it thanks, everybody good luck.
Thank you.
We have our next question from the line of David Williams from Loop Capital. Your line is now open.
Hey, Thank you I appreciate you let me ask the question and first of all Steven Congratulations it's great.
And to see moving through there and then also congrats on the fantastic results and you guys are really good.
You're really building on your success and its nice to watch and the seat the growth. So congratulations there.
David I appreciate it.
I wanted to maybe if we could kind of talk a little bit about the the incremental capacity.
The capacity that you may have and the JV, obviously, you're still ramping and you're not quite there yet, but do you think that there is an opportunity and you kind of maybe alluded to this and the passage of might be able to squeeze a little more capacity out of that facility.
The actual run rate is and then maybe if you could just remind us what your your full ramp is.
And if that's changed at all in terms of the revenue ramp.
Okay sure David.
Yes.
We have been.
Ramping up and JV.
The fab and.
And over there.
I mean this will.
We will continue to run right Nowadays and we still have some room to go.
That's the good thing for us actually so we'll continue to fill up of the.
The fab.
In terms of the March quarter, and March quarter, right, now, we guided and hundreds of $57 million and plus or minus $3 million and then I mean this.
Reflecting the.
The.
And some production lower productions and then.
During the quarter because of a couple of factors of wireless and the lunar.
The new year, and then that I mean.
And where would they expect the of some are lower.
Output at all the factories another thing is although.
Although we will have a one week shutdown at all and Oregon fab and for that.
Full of.
Scheduled and.
And you mentioned this and so facility and and you mentioned this and.
On the once a year sold and the none that would also.
The lower some production and put it there so the overall and then I mean.
Well the C C.
And the.
Continued ramp for the.
JV company.
Okay, great. Thanks for the context there.
And.
And then and then.
And maybe a little bit on your customer kind of how they are posturing themselves are you seeing your orders.
And maybe longer lead times are you seeing customers maybe place orders today that are for the third and the fourth quarter and then this was absolutely the earlier, but in terms of the visibility do you think thats improving overall in terms.
A lot of volatility still and the market. The demand has been very strong I guess I'm trying to get a sense on how comfortable you are the demand level can remain and remain at these elevated levels and then what happens as we get into the second half do you predict or can you foresee at the time that maybe the COVID-19 tailwind subside and we start seeing a little bit of pullback there and just how do you think about that.
And posture for that scenario.
Okay, and let me let me.
And take it first and I mean, the the.
Backlog and right now, yes, and it is and the strong.
And then.
We are monitoring it very closely.
So the the March quarter, and the some quarters and the already filled up and I.
I would not.
Ruling out of the some double ordering.
And those situations. So we we are monitoring.
The older patterns, and then triangulate and with all of these on Wayne side of the customers and so so that we don't need to ship and the.
And kind of a whole lot of to certain customers, but then the cost other customers lined them. So the lesson and we are doing on all of a daily basis right now.
So overall and then I mean.
Things that could the.
And then I mean I would not the.
Comment on the.
The second half of the year.
Yeah and in general and just two.
For some more color and you know right now because of the strong backlog and and demand from our customers now and we're doing quite a bit of scrubbing.
Sort out what the critical the business to support the strategic business, whether it's our of key customers that we're trying to grow our key products and that we're trying to grow.
So there's a good chance for us to.
Choose and be selective about what we want to support but at the same time and now we.
And that this is you know and.
And we don't have long long term visibility.
So we have two so we're carefully watching to see you're not type of training for certain markets or or or.
One way or the other for it is upside of that coming back that we wanted to take advantage of.
Okay, Great and then one more if you don't mind on the on the gross margin side.
Was up nicely and the quarter North of 30, and and so it's good to see how do you think that trends as we go forward can we keep these types of same types of incremental I guess margin of rates or do you see this moving down significantly and then maybe if you could just touch on what the the impact was on other utilization of the mix was the mix more.
Product specific or was it more of and maybe the IC versus some of your discrete debt.
Maybe help with the margin.
Okay sure.
We are very encouraged by the.
Historical high of and non-GAAP gross margin of 31, four per Sunday and the December quarter.
All of it to the demonstrated we can achieve all of 30% gross margin target for the calendar year 'twenty 'twenty one.
I mean, that's the.
The.
The summer quarters performance.
Gave us.
More confidence and that we can achieve.
Term target and I mean.
The.
I would do you expect in the yeah, the way well on track to.
Oh and.
Achieved it and 30% the gross margin goal for the on kind of another year of 'twenty 'twenty, one I mean the <unk>.
March quarter.
We guided the 29, 5% of plus or minus 1% and then debt.
Primarily reflected in the some.
The lower production.
I'll put it.
On the for the reason and stuff I, just talked about and you know.
The lunar new year and.
One we can shut down at all and Oregon Fab full and you mentioned this.
No.
Of course, and then I mean this.
Why give guidance in the you know.
I would like to.
Finish and at the high end of our guidance and so.
Well.
And what I'm pretty confident at this point and its we can achieve.
Achieve all of the near term and the margin target.
Okay.
Great. Thanks, so much and the best of luck to you on the quarter.
Okay. Thank you.
Next and Jeremy Kwan from Stifel Nicolaus. Your line is now open.
Yes, good afternoon, and let me add my congratulations on the very strong results and and also thank you and on your expanded leadership role.
And I appreciate it.
Yeah.
In terms of the can you give us a little bit more color I just want of pressing a little bit more on the at the allocation situation is this both.
Are you also putting customers on allocation and our suppliers of placing the <unk> allocation Omega for things like substrates of raw materials and can you just give us a little bit more insight into where the the shortages are.
Sure and it's happening on both ends and and again, it's not just us and it's industry wide.
And right now I think of.
And I have capacity as well as smell.
And from the foundries as well as back and as well as all of the raw materials.
And generally across the board and that we're seeing shortages and the overall market.
And that also means and our downstream to our customers and know where.
At the same time, the the demand and that also has shot up quite a bit as well too of beef I mentioned on the backlog and is.
Is it quite high right now.
And much higher than our capacity so as a result and that they are on the allegation and because of us too.
So there is restriction that both of them.
Yes.
Good thing is and in Germany the.
You know we have the majority of the money factoring in the <unk>.
<unk> in the house and so that's.
The better part of and done and been.
The Fabulous company.
Yeah, and this situation and it's certainly a competitive advantage for you guys.
Can you and can you give us a little more insight also into the pricing trends that youre seeing from your suppliers I know you touched on and some of the pricing.
Debt for free.
And your customers, you're still you're not necessarily passing that along but can you give us you know.
And some of the magnitude of of this effect and if that impacts things further down the line.
Most of the pricing increase and on the supply side and the kind of a very the.
Virus and the.
Quite a bit and some of and did not increase and the some interest some some of them.
And a bit high and then having.
This oh all over the map, so and for US and the you know when we focus on the long term relationship with all the customers. So all of the adjustment and that is true.
Two of them.
Offset or mitigate the cost increase.
At this point.
Got it.
And.
Maybe if I can switch gears, a little bit too the.
The $10 million customer.
Deposit that you got is this included in the $35 7 million and operating cash flow and on the S side.
Yes.
Okay, Yes is the.
And part of the 35 million of dollars of operating cash flow because it and that we recorded in the.
The other liability long term liability account.
Got it okay.
And then turning to.
The common side of the business.
You mentioned, China smartphones.
Months of a big.
Part of that.
And nice growth that you've seen can you give us a sense of how big that is how what proportion of revenues of the comms business is from these.
The Chinese smartphone wins.
Let's see.
It's not as big as the the big global customers that we know.
Hi, Sir.
But the the story behind this is that these aren't these are actually not new customers that leave the.
And of course, if there are not new customers and they've been customers of before but because of allocation and you can say.
Chose to prioritize the global business before that.
And but because now the hour of capacity has expanded some and especially because of the queue of the treaty side, we've been able to go back to these are these customers and actually grow our business again, so the size wise I would say, they're not net together and the not as big as the global customer, but there just isn't.
Isn't enough for us for us dimension and we believe that this is part of our growth going for it to really be a leader.
Globally in the space.
Great. Thank you.
And then I guess speaking of the J D.
And you'll see that hit operating cash flow breakeven.
The notice that the Capex also increased a little bit meaningfully.
As you know the lap of the phase one and spending or is this kind of maybe a little bit of preparation for when you plan to do and the phase two and until you announced the plans for phase two what can we expect in terms of the capex going forward for the JV.
The short I mean.
And the Capex spending kind of in the fluctuations from time to time.
Depending on the the payment term and you know.
When we purchased and the some when you put down downpayment and and some of the tail end and after qualification and the Tri run when you pay the last portion of the.
The payment so the right.
Right now we are in the process of planning the phase two expansion.
The we will have.
Some flexibilities from there and then.
As I just mentioned.
I mentioned before the car.
Current face one clean room.
We still have some space there so we couldn't squeeze in some equipment to solve some bottleneck areas. So that we can lift up.
The total output so right now we.
We will provide more details and the quarter so head.
Maybe just a little bit more clarification can you give us of a sense of how much the <unk>.
J D painful and it's being utilized because and I know youre trying and in the past was that the JV will help you reach that thinking of the million dollar run rate and you know this quarter and next quarter, you're you're ahead of that.
So, whereas the worth of excess coming from is it are you able to squeeze more out of the Oregon Fab and.
And how much room is left for the on the JV side.
Okay sure and the overall the increase even though.
And.
Production is in the.
Kind of partially from.
Come from the Oregon Fab and the waiting.
The increase the hull and.
And the product mix and the some newer products and provide and.
Higher revenue per wafer.
And also and some power IC products and.
You saw we grew quite a bit.
For a year the.
And I see products and.
A portion of it.
Related to the I C.
The drivers in the.
Our wafer so wait the purchase from third party foundries and not from our Oregon Fab.
So for the <unk>.
JV fab and.
Yeah. There are still some of the rooms to go I would say at this point and the we ramped up to.
And I would say two third of it or 70 of Sunday of it. So we still have what about the.
See sort of a cent a room to go.
Great. Thank you very much for the clarification.
Alright, thank you.
Once again, if you wish to ask a question. Please press star one on your telephone and wait for the name to be announced.
We have Craig Alice again from <unk> Securities. Your line is now open.
Yeah. Thanks for taking the follow up questions I just wanted to follow up on a few points that we talked about at different times and the past team.
And the past the company has mentioned that.
And there could be potential for design wins with follow on.
Gaming system products.
And I'm wondering if there's any update to the potential for such.
Yeah of the intangibles. So there is still and not the timing of when the decisions being made yet so I don't think that would be until probably the middle of the year and the calendar year.
But yeah, that's all of it and that's always the something that we are.
Preparing ourselves for and.
And we hope to build the gains and sockets or are these gained more share and existing sockets, but right now and there's not much in the news and it's not the timing it for that.
And then on the gaming card side I think the companies mentioned.
The good participation at the high end of the of.
And of the gaming card line.
The opportunity for for following that up with with content and mid range cards, which I think are rolling out through the first quarter.
Sure I think that that's ongoing right now and some of that was really happening at the end of the last quarter and so.
So yeah, we do plan to participate and.
As part of the rollout of all of our customers.
And yes, so right now again Memphis card rollout for over a period of two years and before the next platform is released and between that time.
And yes, they are coming out with more additional models and based upon those chipsets.
And how would you characterize the content differential for AOS between the mid range and the high and cards Steven.
Still good amount of drive and losses being used on it.
And the high and to be quite of bit.
And remember, we're not really putting the actual sort of dollars, but I would say maybe two.
And after two thirds of the Bom content of a high and card.
And we'll be in the mid and card.
And that that range could you kind of white.
Yeah, good for you and.
Then lastly, guys just given the the real strong December and the strong.
Above seasonal March guide great to see those.
Really the question is you know with the fab phase two sounding like it's not starting up and and physical three or four Q does that mean that we're we're looking at a pretty steady stable revenue profile as we go through the calendar year or.
Would we be able to see fat pays to ramp up so that there would be more meaningful sequential growth coming through as we get into the back half.
We may have some of them incremental.
The expansion and that I mean I had to.
JV company and you know.
The right now and I said mentioned and.
The phase one and clean room still has some space there so on that we.
We will will place and some.
The equipment there to solve some bottleneck areas, so that and we can get some incremental output and the overall, yeah and in terms of.
And the Baker your expansion that yet and we need to get the.
And the clean room and expand.
So that the that.
And that will take some time.
Got it thanks, good luck to everybody.
Alright, thank you.
We have a follow up from Jeremy Kwan from Stifel. Nicholas Your line is now open.
Yes. Thank you are the two quick questions here. The first is the.
Can you give us some of it.
Picture of maybe of your channel inventories you know what the situation is there with your distributors and.
And related to that and what kind of the lead times that your your debt.
You're quoting to then alright, and Clinton according to your customers and.
What kind of of the magnitude.
And how that compares to last quarter and.
And then and a quick question on the JV and it looks like Youre willing over some of the debt there.
Can you give us any update on and sort of in terms of like yeah. If the.
The capital plans.
Whether the new financing if needed and.
And where things stand in terms of the J D.
Okay sure in terms of the our channel inventory right now channel inventory is.
The load and Lo and of our target.
We target and the two to three month channel inventory right now the is below the low end of the.
Target.
Right now and we don't see much the channel stuffing.
At this point.
In terms of the Jv's and second the face and yes, we are in the process of do email with plenty of work.
No.
We have some options on the.
The table and you know well could risk moneys from bank and the from the the market and then.
Your body weight and all of the options on there. So we will disclose more I will say in the quarter sort of head.
And what about the lead times.
And what that Youre seeing from your suppliers and maturing and often seen and customers.
How how the what's the change then.
Lead time, right now and it's in the you know from all the supply side of the yes, and the time he is getting longer and then.
The reflecting the tightness of of the overall market.
How and lead time to our customers and that I mean, right now it is and well on the location and then I mean, if we cannot supply the will will will tell and the customers and so and then having the.
Lead time generally yeah, the longer than the normal time.
Hey.
Thank you very much.
Alright, thank you.
Yeah.
Again, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
There are no further questions at this time I will turn the call back over to the presenters.
And the remarks.
This concludes our earnings calls for today. Thank you for your interest in AOS and the way I look forward to talking to you again next quarter. Thank you.
Thank you and then got Brexit at all.
Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect have a great day.
Yeah.
Okay.
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