Q4 2022 Alpha and Omega Semiconductor Ltd Earnings Call
Descriptions 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 now I'll turn the call over to our CEO , Dr. Mike Chang to provide strategic highlights Mike.
Thank you Gary.
I'd like to welcome everyone to todays call.
It's good to be speaking with all of you again.
Our fiscal Q4 was another strong quarter, despite the challenge posed.
By the Covid Lockdown in Shanghai.
Again, we outperformed our guidance mid point.
Revenue was $194 million.
9% year over year.
non-GAAP gross margin was that as three 8%.
And the non-GAAP EPS was.
95%.
I'm very proud of our people's ability and determination.
Each quarter.
Right the uncertainty and challenges.
As you May remember.
Early April .
Shanghai packaging and testing facilities was forced to shut them down.
Due to the citywide Covid lockdown.
Our ability to assemble and ship products was severely limited for most of April .
Why is the lockdown ease.
And we were cleared to restart operations.
End of April .
It took time for somebody you know is to return to full utilization.
It always a good time for logistics support and supply chain to ramp up to full functional capacity.
Our Shanghai facilities.
Most of that back to normal and are currently operating at full capacity.
Taking careful steps to reduce the risk of new corporate infections.
In compliance with local.
Time lines.
I am most proud of and grateful.
For a great collaboration and unwavering dedication that our people, especially our Shanghai team demonstrated.
During these challenging times.
Our employees worked.
One key.
Politically pressing on.
Our mission and values, which is to help our customers succeed.
I want to say thank you.
To all employees once again.
For their selfless devotion loyalty and support.
Looking to the rest of 2022.
We are seeing inventory corrections happening.
In certain consumer and the market.
While we are not immune to current global market conditions.
As of today, our demand and backlog are still higher than our overall capacity.
We are in up cycle or down cycle, we always focus.
On the basics.
And the strengthening the foundation to speed up future growth.
I founded at AOS September two solid just as the Internet bubble crash and the last two recessions.
This happened to be the best timing for startup.
Our two years of history.
The AOS team has navigated and many semiconductor cycles surviving and destroyed.
Even when we were.
We're far smarter than we are now.
Today.
We are stronger than ever.
In terms of our leading technology more diversified product portfolio.
Tier one customer facing all our business segments.
Spending manufacturing capability, and our supply chain strong balance sheets, and dedicated and experienced management team.
We are confident that we can navigate the current economic environment.
More importantly, we are confident that near to cyclical fluctuations we're not overshadow.
Substantial long term opportunities for our business.
The electrification of everything is just getting started and I'll pause.
Out of the forefront of that trend.
I believe our strategic position within our sector.
Got it.
And our customers the list and market share with tier one customers is the highest didn't have ever been.
We are confident we can keep our $1 billion and your revenue target.
Next.
Quarter of years.
And are actively investing to position ourselves to achieve even more stuff.
Thank you.
I will now turn the call over to Steven for an update.
Our business and a detailed segment report Steven.
Thank you, Mike and good afternoon, everyone I will start with an update on our business and then provide color on our segment results.
As a reminder, in the June quarter demand for our products was higher than our total capacity.
The modest slowdown in our growth was caused by the very limited operations at our Shanghai packaging and assembly facilities due to the government post Covid lockdowns in the month of April .
However, we still delivered solid results, which highlights our strong execution and the benefits of our diversified manufacturing capacity.
I mean September quarter as Mike mentioned, we are seeing some softness in consumer end markets due to inventory corrections.
However, as of now our backlog remains higher than our capacity so our customers remain on allocation.
Moreover, we believe a few aspects of our business and make us more resilient in this type of environment, which we are highly probable.
First since we own the majority of our own manufacturing, we are able to quickly shifts wafers capacity to other parts of the business where demand remains strong and therefore are at lower risk of costly inventory buildups that later and May result in write offs or selling at discounted prices.
Second another trend that is worth mentioning is that most of our tier one customers have remained resilient thus far.
This benefits us as our share at our tier one customers is at the highest level ever in our history.
Third AOS has been upgrading our products to address higher performance sockets with differentiated solutions.
These are the types of products that remain on allocation now.
For the coming September quarter, with our Shanghai facility back in full operation, we expect high single digit sequential growth.
September quarter revenue to be at $210 million at the midpoint.
Now, let me drill down into each of our business segments, unless otherwise noted the following figures refer to the June quarter of 2022.
Starting with computing.
Revenue was up 15, 6% year over year down <unk>, 5% sequentially and represented 46% in total revenue.
The year over year growth was driven by continued strong demand in notebooks, particularly from OEM customers that have a higher concentration of their businesses, serving commercial a laptop applications.
In addition high N P CS and gaming desktops were also strong.
Sequential decline was mainly due to the shutdown of our facilities in Shanghai.
Looking ahead in the September quarter, we expect computing to be flat to slightly down sequentially as our customers rebalance their inventories for a weaker end markets.
Our total revenue won't be affected however, as we are able to quickly shift to wafer capacity to other parts of the business.
Turning to the consumer segment revenue declined one 7% year over year, and 15, 9% sequentially and represented 19% of total revenue.
Nearly all of the revenue decline was attributable to the Shanghai locked down as the largest end market applications. In this segment such as home appliances and gaming are sourced fully from our Shanghai factory.
Looking ahead, we expect the consumers had been to recover double digits sequentially, a strong demand in gaming and catch up shipments we are expecting a record gaming volumes, particularly from the number one gaming console manufacturer, where we have leading share.
Home appliances are also expected to recover sequentially on catch up shipments, but in general is softer as overall demand has weakened driven by inflation induced slowdowns in real estate and consumer spending.
Next let's discuss the communications segment, which was up 32% year over year, and two 9% sequentially and represented 15% of total revenue.
This segment delivered strong year over year growth due to share gains at major Chinese smartphone Oems, particularly in their premium tier models, which are still in shortage.
These share gains more than offset an overall softening of the smartphone market in the quarter.
Due to our ability to serve the high end market with our high performance battery protection products as well as strong partnerships with our customers.
In the September quarter, we expect mid single digit revenue growth as we prepare for our launch from one of our major smartphone Oems.
<unk> maintains high share in high end models in all three of our markets in U S Korea and China.
Now, let's talk about our last segment power supply and industrial which accounted for 18% of total revenue.
This segment was down one 1% year over year and four 8% sequentially.
Decline was mainly due to our intentional decision to de prioritize shipping quick charges parts into our distributors with a slowing smartphone market, we want to manage channel inventory levels shipments for solar applications and power tools remained steady.
For the September quarter, we anticipate this segment to grow low double digits sequentially, mostly from share gains and quick Chargers at a major phone maker and growth in power tools.
In closing we are aware of the growing uncertainty in the macro economic environment. However, we still expect to grow.
Focus on our long term plan, we continue to execute our product and technology roadmaps enhancing our diversified manufacturing stability and deepening strategic customer relationships, which should result in share gains and Sam expansion.
Our $210 million September revenue guidance puts us well over an $800 million annual revenue run rate.
We remain confident in our target of $1 billion of annual revenue in 2024.
With that I will now turn the call over to <unk> for a discussion of our fiscal fourth quarter financial results and our outlook for the next quarter.
Sure.
Thank you Steven good afternoon, everyone and thank you for joining us.
Revenue for the quarter was $194 million.
Up nine 4% a year over year.
Four 6% sequentially.
Given the COVID-19 restrictions in Shanghai, where the tree.
He used to that we achieved a better than our guidance midpoint.
Please recall that the March quarter was a record setting quarter.
And the way you expect another record quarter in September .
In terms of product mix demos revenue was $138 9 million.
Up nine 2% year over year and down one 2% sequentially.
Power IC revenue was $53 $1 million.
Up <unk>.
2014, 2% pharma, a year ago and down 12% from the prior quarter.
Assembly service revenue was $2 million.
As compared to $2 2 million last quarter and $3 $6 million for the same quarter last year.
non-GAAP gross margin was 33, 8% compared to 34, 9% a year ago and 36, 7% in the prior quarter.
Again.
The decrease in non-GAAP gross margin was primarily impacted by the production shutdown at our Shanghai Assembly and test facilities in April .
non-GAAP operating expenses were $36 7 million.
Compared to $34 million for the prior quarter and $32 8 million last year.
The quarter over quarter increase in non-GAAP operating expenses was largely due to higher R&D engineering expenses and the addition of headcount.
We continue to invest in R&D to fuel our future growth.
In sum.
non-GAAP quarterly EPS was <unk> 95 per share compared to $1 34.
The last quarter, and 95 cents a year ago.
On a fiscal year basis.
Revenue for the year 2022 was $777 $6 million.
Up 18, 4% a year over year.
non-GAAP gross margin was 35, 6% representing a year over year improvement of 370 basis points.
non-GAAP operating expenses were $139 3 million up 12, 5% from last year.
non-GAAP EPS for the year was $4 56.
As compared to last year's $2 and 93%.
The increase of 56%.
Moving on to cash flow.
GAAP operating cash flow was $25 7 million.
Which included $3 4 million of net customer deposits.
By comparison.
Operating cash flow in the prior quarter was $61 8 million.
Which included $6 $4 million of net customer deposits.
Operating cash flow on Laos stand alone versus a year ago was.
$32 6 billion.
Which included $10 million of customer deposits.
Consolidated Ebitdas was $36 9 million compared.
Compared to $48 $4 million from last quarter and $49 million a year ago.
For the fiscal year cash flow from operations was 203 4 million.
As compared to $114 3 million for the prior year.
Consolidated Ebitdas was $177 2 million as compared to $136 $4 million a year ago.
Let's move onto the balance sheet.
We completed the June quarter, with a cash balance of $314 $4 million.
Compared to $323 $1 million at the end of the March quarter, the cash balance a year ago was $164 9 million.
Excluding $37 $5 million either JV company.
Bank borrowing balance at the end of June was $63 million compared.
Compared to $65 $2 million a quarter ago.
Net trade receivables were.
Were $65 7 million at the end of the June quarter as compared to $39 2 million at the end of the prior quarter and $35 8 million for the same quarter last year.
The quarter over quarter increase was due to the uneven shipman.
Shipments.
For the second half of the quarter as a result of the shutdown of our Shanghai Assembly and test facilities in April .
Days sales outstanding for the June quarter were 26 days compared to 28 days in the prior quarter.
Net inventory was $158 million at quarter end.
Up from $143 5 million last quarter and up from 100.
$54 $3 million in the prior year.
The quarter over quarter increase was primarily due to increase the wafer inventory as a result of lower wafer consumption at our Shanghai Assembly and test facilities because of the Covid shutdown.
Average days in inventory were 104 days compared to 94 days in the prior quarter.
Finally proper.
Property plant and equipment was $318.7 million.
Up from $200.
$45 8 million last quarter.
The fixed asset balance a year ago was $174 5 million.
Excluding $262 $5 million at the JV company.
An update on our Oregon Fab expansion project.
The clean room expansion has been completed.
A good portion of that equipment was installed.
However.
Our equipment installation contractors have experienced a shortage of scale of the labor and certain materials.
Therefore, we expect the product to be delayed by a quarter.
We currently anticipate <unk>.
Additional capacity to come online in the March quarter of 2023.
Now I would like to discuss September quarter guidance.
We expect.
Revenue to be approximately $210 million, plus or minus a $3 million.
GAAP gross margin to be 33, 8% plus or minus 1%.
We anticipate non-GAAP gross margin to be 35% plus or minus 1%.
non-GAAP gross margin guidance excludes <unk>.
8 million amortization of acquired IP, and $1 8 million of estimated share based compensation charges.
GAAP operating expenses to be in the range of $45 $7 million, plus or minus $1 million.
non-GAAP operating expenses are expected to be in the range of $36 $5 million plus or minus $1 billion.
non-GAAP operating expenses exclude $9 million of estimated share based compensation charges and $2 million of estimated legal expenses relating to the government investigation.
Interest expense to be approximately $1 $2 million.
Income tax expense to be in the range of $1 $2 million to $1 4 million.
With that we'll now open the call for questions. Operator, please start the Q&A session.
Thank you as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to remove that question. Please press star followed by two.
Again to ask a question press star one.
Youre using a speakerphone, please remember to pick up your handset before asking your question.
Well pause here briefly ask questions of registered.
Our first question is with David Williams around benchmark.
David Your line is open.
Thanks, so much for taking the question and congratulations on the execution and the resiliency of the business. Obviously, some some great success here and it's great to see so congratulations there.
Thank you Steven.
Maybe the backdrop it seems to have deteriorated more than I think we had expected.
The prior quarter and particularly in areas that you have a lot of exposure.
Excuse me you talked about this in prior remarks, a little bit but maybe.
If you could give us some color around the flexibility to pivot. If there was anything unusual maybe given the assembly and test issues and maybe speak to the Fungibility of your portfolio overall.
Sure for US, Yes, we are starting to see some softness in some of the end markets that we address.
Any of our end markets at the very end are consumer facing and we're seeing some pressure just due to the current macroeconomic backdrop. However, when you look into each of the businesses and that we're in that we're in.
As the story is not necessarily the case across the board in that we address multiple sockets within many of our applications.
And depending on the socket the higher performance applications.
Performance on sockets are generally bearing better and then at the lower end, we talked about in computing that we are more.
Addressing the commercial applications as opposed to consumer and in general the drop has been more on the lower to mid end models, especially in the consumer side, whereas the higher end models and the commercial Pcs have had generally been generally been doing better. Additionally, when you look into the Bom content of some of these.
Patients higher power performance sockets in general are still under allocation. It is still a hand to mouth, whereas the lower end, we're starting to see some more pressure from local competition.
That theme you can see that we can also see that in other segments as well too as a whole AOS still remains on allocation or backlog is stronger.
Dan.
Our capacity right now so for us.
Currently we are basically shifting our supply to support their areas.
There are more profitable to have a stronger demand.
So we do have the ability because we have a lot of the supply chain under our own control.
Able to shift those resources around to address the stronger parts of portions of the market.
Great. Thanks, so much for the color there certainly helpful.
And then maybe even on the gross margin side I know you had expected.
To recover most of the margin loss from the shutdown in Shanghai, but it looks like you gained about 120 basis points was this largely maybe a component of just the mix of lower power IC or higher power IC and <unk>.
Excuse me lower discrete and higher power Ics and then how do you think that trends over the next several quarters can we get back that the margin maybe that we were previously or just anything around the levers that you have available to pull there would be helpful.
Sure.
September quarters.
Mid point of the non-GAAP gross margin guidance.
Is.
About 120 basis points as you said higher than the.
June quarter's actual.
Yeah.
This guidance reflects the current view of.
Uh huh.
Demand dynamics.
As expected product mix and then.
Also our factory productions.
Including input cost increases.
<unk> factors.
We have been factored in.
<unk> of course is a range.
35% plus.
<unk>, 1%.
In.
In terms of.
Future quarters, and then I mean at this point.
It's hard to say.
We only guide one quarter at a time.
Market demand in the ore dynamics and a lot of factors that could change.
For the.
December quarter end.
Ward.
I would expect on the property.
We can.
Maintain.
Ron.
September quarter.
Guidance in a range at least.
Okay. Thanks, so much and then maybe just one last one for me if I can if you kind of think about your outlook and just given the macro challenges. What do you think the risks are to the outlook how much is maybe.
Is booked into the outlook in terms of that demand and then maybe how much of the guidance is already booked.
And just kind of where do you think there could be potential risks from end market perspective.
Thank you for the September guidance.
Yes.
Oh, Okay, Yeah, that's the September guidance.
I will say that the most of the risk.
Production side.
Backlog is pretty much there in place and the production side of it yes.
The China Covid.
The risk is still there.
Even though the Shanghai city.
<unk> already.
Restrictions about.
You'll never know.
There are policy toward zero tolerance.
Tolerance in Covid.
Bill.
Sure.
Not lifted it yet and so then I mean.
I think in supply chain.
Disruptions always.
His risk out there.
Great. Thanks, so much.
Craig Ellis from B Riley.
Your line is open.
Hey, guys, so nice work getting alright.
Alright, I back up and running.
Hum shrunk guide for the fiscal first quarter a.
A couple of things that stood out.
At least for me and our guide is the strength, we're seeing in gaming console. So I'm wondering if that's in part due to incremental content gain and if so how much and the other thing that stood out was.
Industrial and power there's some.
Quick charger share gain with the large smartphone OEM and I'm wondering if you can help us understand how material that is because it seems you might have a couple of tail winds that at least on our end we might have been.
Under appreciating as we head into the back half of the year.
Sure Greg This is Steven so two questions.
Good question.
So addressing the first question about gaming gaming consoles in general.
Definitely a strong a portion of the business.
And historically this customer.
Their consoles have been.
More immune to changes in the economy, and and we know that from the past year and a half that <unk> been under <unk> and they've had ever since launch they couldn't produce fast enough.
Our resolving some of that now so our growth in the September quarter, partly is coming from their own growth.
In the second half as well as share gain on bond content increase I don't think is playing a big factor right now, but it's definitely and we are all internally as a company AOS is shifting more support.
Two to this particular customer so I would say both the engine shipments and growth as well as share gain is what's contributing to the big step.
In the gaming console business for AOS.
Regarding our quick Chargers and this is more more so on the.
On the high end quick Chargers and and.
Charter market, we actually addressed to two sets of customers. One is in China for the lower to mid end in that area, we actually because of the decline and softness in the China smartphone market.
We chose to to back office support for that area.
For the China region, but for the Big OEM, and that's making more higher and quick Chargers for their higher end phones.
This is an area that we've been and we've been in been choosing to support more. It's also it's a higher performance socket, it's better business for us and our customers coming to us for more support so.
In general you kind of see the theme as we see the market dynamics that the higher end applications are generally faring better and AOS is shifting our resources to support those applications.
Got it and then moving on to a supply side issue and I'm not sure. If this is best directed to you or.
At <unk>.
Can you provide a little bit more color on what the specific issues are with the contractors that are working on.
Pam.
The fab clean room completion, and then given how we are to ramp any update on expectations for the pace and magnitude of revenue ramp out of that out of that facility.
Sure I mean.
This this one.
We have to.
Thanks to the booming.
The fab constructions.
And then I mean right now there's a lot of fab constructions going on people are competing for skilled.
<unk> certified labors, and then I mean, those are fab equipment and of their own.
Large and complicated and then.
You'll need in certain.
Certified.
People to handle it and then to install so right now our.
Contractors.
I've been experiencing some of the labor shortage in some materials.
Materials and I'd like to send the most of all.
All very spur.
Specialize the tube.
Four.
Yep.
Operations, So I mean in those areas.
We are seeing some.
Shortages, so that's why that.
Our current estimate is that probably.
Delay for fourth quarter. So previously we estimated in the December quarter, we can.
Got it.
But now it is more likely in the March quarter range. So then.
March quarter, and then it will.
Sure.
I actually ramp up so I would say it'd probably take a quarter or two will probably fully ramp up.
The anticipated expansion capacity.
Got it got it and then.
A follow up question it goes back to one of the themes from.
From the prior questioner and it's related to just the environment that we're seeing out there, where there's more more and more visible signs of consumer weakness, but obviously the company peripheral ever they can pull but the question is this given given what youre seeing with.
With growing signs of inventory correction across the end markets that you serve and and given the seasonal dynamics of the business with consumer and enterprise builds typically stronger in calendar, two and three Q and recurrent <unk> Steve.
Steven can you give us some help on how we should think about some of the Gibson takes as we look out to fiscal <unk> not looking for guidance, but just.
Do you have any new programs like the two we just talked about that we'd be picking up in fiscal <unk> or.
Anything that would be a particular headwind anything that's coming off of a particularly strong ramp in.
In fiscal <unk>. Thank you.
Sure for us when we look outward to the December quarter, and seasonally typically is the strength of it depends on the strength of the peak season of the previous quarter. The September quarter, So where we are looking at.
Carefully at the adoption of the new smartphone from one of the major Oems that's one.
That's one of the major customers that'll be half in supporting not only for their they're on their smartphone, but also there are other applications like the tablet and quick Chargers.
And we're also looking carefully at what's happening in the PC market in terms of how.
How long the inventory correction will take place.
Of course, we're still gravitating towards the higher end of that area AOS is focusing on supporting more of during this time as you know as they're going through inventory inventory correction of the other.
Low to mid end products, so for us I think.
That's what we're carefully watching now we're not we're not giving specific guidance for December quarter.
But at the same time that we are making careful use of our allocation right now.
Yes.
Lastly on the December quarter.
There was I think a significant gaming card launch that.
I think a lot of us thought would.
Calendar <unk> fiscal <unk> and it looks like.
Due to the inventory correction, that's going to happen.
And.
Calendar <unk> fiscal <unk>. So it seems like that would be one thing if it occurred at that time frame that would be a sequential benefit to the business or has a lot of the product for that product cycle already been produced and shipped to that customer.
We are still shipping and producing for that particular customer they're dealing with their own challenges right now.
Balancing the inventory of existing <unk>.
Graphics cards from the current platform. So that we do expect that that transition is going to be delayed.
AOS is containers to ship into that application, but at the same time. We're also taking some of that that products supply support to support other stronger.
Applications, such as the gaming consoles.
Got it thanks, guys I'll hop back in the queue.
Our next question is with Jeremy Kwan from Stifel.
Jeremie Your line is open.
Yes.
Good afternoon, and let me add my congrats to the strong execution during the quarter.
Steven you mentioned that your backlog is still higher than overall capacity would you mind, giving us a little bit more color.
In terms of the makeup of the backlog and the quality of it.
Is it canceled will.
Are there different dynamics going on between demos backlog versus power IC.
I think for us.
Flex.
The changing that backlog now, yes, we see some inventory correction going on but as I mentioned before it is different depending on which products are involved.
Higher end products higher performance products are still hand to mouth and backlog just high on those but for the lower to mid end and this is where we're seeing more.
Competition coming from other <unk>.
Suppliers, including our local suppliers that are starting to get more access.
Two foundries in this in this market that landscape.
So overall.
We are seeing.
Some backlog adjustments actually we welcome that because it's a good time to clean up the backlog. So that is a better clearer picture of what were the true demand is.
And so part of this is initiated by the customer, but it's part of this is also initiatives aided by us in order to have a clean look at what to build.
Great. That's very helpful and maybe if I can just press a little bit more on the color in terms of.
The tenure of that.
Backlog like how much of it is.
Still 12 months out.
Have you seen a shift in maybe order customers, placing orders that far out and how much of it is for the <unk>.
Three months.
Right now our total backlog, we still have about six months backlog and generally we have the next quarter cover plus some more.
So our backlog still goes through the December quarter, and some of the trickles into the following quarter after that.
But our focus is always still on the near term.
Quarter first.
Great. Thank you.
And I guess can you give us insight into how order linearity.
Looking.
<unk> I know last quarter there was.
Probably a lot of catch up in the month of June .
Which probably drove the.
To help drive Dsos up but can you talk about how things are trending this quarter so far.
Do you mean order linearity or our delivery.
Sorry.
Okay.
Yes sales linearity.
Okay. So our building and is the main thing about for the June quarter was we were affected by the lock up right. So once we were able to get back to full production in June was a much heavier month for us and.
Our operations team did an excellent job to bring things back online and.
To get our products out the door. So last quarter was an abnormal quarter, usually we see the shipments spread more evenly.
Through the third quarter, but because of the lockdown recovery.
It was more back heavy.
We do expect the September quarter to be more linear and back to a normal shipping patterns.
And also if you wouldn't mind, adding some color on the order linearity too.
And that then.
Pretty stable as well.
It's well.
We mentioned before and on the backlog itself is going through inventory correction. So we're seeing some areas where the arguing the inventory correction that means yes, canceling some all delinquent backlog, but also a pausing on some of the new orders for the lower to mid end products that are into that or sorry.
Going to build up some inventory, but the areas where it's high performance.
Our supply is still a hand to mouth to the customer.
Those orders are still coming in study.
Great.
<unk>.
Another question, if I could on the <unk>.
Could you give any color on the pricing on ESP I know.
Some of your peers have talked about 8% year over year price increases and even a 2% sequential and that's something that we're seeing as well and maybe if there's a differentiation. It seemed like you said the higher end and the lower end and where you see that trending next quarter.
But I mean, the overall pricing environment and I think in this kind of steadied at this point and then I mean, yes.
I mean.
We selectively pass onto <unk>.
Input cost increases to certain.
Customers.
Overall, I mean, it's kind of.
Steady at this point.
Great and one last question before I.
Get back in the queue, but.
Last quarter, you mentioned capex of $43 4 million.
We're expecting something similar for this quarter can you give us that number for this quarter and.
How you see things trending, especially in light of.
Different delays in installation thank you.
Sure.
June quarter's Capex spending was 34 35 minute others each.
That range, so compared to the quarter before it was a 40 million.
<unk>.
For the September quarter, we'd still expect a similar level 30 $40 million range. So that's.
Primarily for that.
Our Oregon Fab expansion, and then plus some backend.
<unk>.
Expansion as well.
Great. Thank you very much.
Thank you. Thank you.
Sure.
Our next question is with David Duley from Steelhead Securities.
David Your line is open.
Thanks for taking my questions a couple a couple of clarifications.
You mentioned that your June quarter was backend weighted I saw receivables were up at least 25 $26 million I'm assuming since this next quarter is going to be linear that youre going to kind of.
Have a very strong cash flow from operations quarter as you unwind the receivables and perhaps the inventory could you just comment on.
How much you think cash flow might be from from lowering the working capital needs.
Sure Yes.
The June quarter, yes, our operating cash flow.
Impacted by this receivable balance.
Yes.
June quarter.
First half of the quarter our production cut.
Suspended.
Shanghai facilities. So now it is the backup too.
Normal.
Productions at our Shanghai factories at this point.
Yes in the September quarter, I would've expected.
Our receivable balance.
<unk> come down.
A little bit and then to <unk>.
How much.
To come.
Come down.
It will depends.
Also keep in mind in our total.
Our revenue guidance also increased compared to last quarters $194 million.
Both factors.
The other I would say that yes, we'll see.
Should be able to see some.
Accounts.
Receivable balance.
Drop.
In terms of the inventory inventory is the one.
The inventory increase in the June quarter was primarily due to the wafer inventory increase because in our Shanghai factory shutdowns. So.
Shanghai Assembly and test.
Facilities consumed less inventory wafer inventory, so I wanted to.
It will depends on the backend capacity.
Certain wafers.
The Bakken capacities.
It's also full cylinder.
It will gradually.
Pete digested.
So it's kind of a dynamic consultant for the inventory I would say roughly flattish to slightly down.
Okay and then you mentioned you have this delay in the brain.
Bringing on this new capacity in the Oregon fab by a quarter, but you also mentioned a lot of the equipment is already installed so I am just assuming because you can't finish everything that you can delay the hitting the depreciation button.
All of that equipment, that's installed until the March or the June quarter.
Alright.
The production and then the.
Yeah.
Wafer productions depends on a lot of.
Equipment is sold.
Though you have certain equipment and install it.
We won't be able to.
The.
Formulated.
The additional capacity is sold and that will have to wait until all of the equipment online.
Okay, and so I am assuming the depreciation clock then starts like roughly at the end of the March quarter.
Yes.
When they started production.
Okay, and then I noticed the power IC business was down sequentially I think more than the overall revenue could you just comment on perhaps why and then.
This business be expected can you just talk about the growth prospects in the back half of the calendar year here.
Given that its a higher margin and higher value added slot.
Okay sure I can comment on that.
The June June quarter's power IC revenue.
Decrease in yes, and then I mean that was largely because of the Shanghai factory shutdown.
Our power IC products.
Uh huh.
We use.
Advanced packaging packaging technologies proprietary technologies.
<unk> technologies is still in the dose.
Products tend to be.
<unk> produced a more at our Shanghai facilities, So big.
Because of the factory shutdown in April and partially in May So that was limited.
Power IC revenue growth yes.
We wouldn't expect that your September quarter power IC revenue to <unk>.
Deposit again.
Should it grow faster than the overall revenue.
And then bigger picture yes.
As you've seen the growth of our power IC business Dallas tied to onto the gaming consoles are tied to the PC and also a bit to graphics too.
I think graphics might slow down a little bit, but regards to the PC and gaming I think this is still a key areas where our power IC.
As has store strength.
Okay final question from me is I think in your prepared remarks someone mentioned.
Tier one market share is the highest.
Ben could you just frame that for US do you have is 20% of your revenue coming from tier one accounts are.
Don't need an exact number but what does that mean.
I'd say overall in terms of the majority of our business is tied to the tier one accounts and these days.
That's been a major change from I think over the last probably three or four years that.
We've really been going after the market leaders in every application that we're in whether it's in the PC market, whether it's in the home appliance or the gaming market or the graphics cards.
We've been focusing our attention and designing and products as well as our.
Allocating our supply to these tier one customers. So it's a reflection of that effort and we see it in the.
And the revenue and also in our market share.
Alright, thank you.
Thanks.
Our next question is with Craig Ellis from B Riley Craig Your line is open.
Yes, thanks for taking the question I wanted to come back and follow up on that point in time customer deposit. So the increase in the quarter was moderate at $3 million.
For $10 million in the last two quarters, but I have been a little bit surprised that you.
You've taken customer deposits in two and now 10% above the expected capital cost of the aggression expansion that.
They continue to come in so.
One can you talk about what's been driving the increase right in and is it possible that as we look into the back half of the year that we would have.
We would have continued.
Customer deposit intake and if so to what extent thanks team.
Oh sure.
Yes.
June quarter, we had.
Three or $4 million and net customer.
Deposits.
Going forward I would not expect a whole lot of deposits that we can take in.
Those deposits.
Our year Mark of width.
Our.
Delivery support and to our customers so right.
Brian .
A lot of the.
Oregon Fab expansion.
<unk> already pretty much allocated to whoever put down.
Deposits and so I would not.
Got you excited going.
Forward.
We take a whole lot of.
Deposits.
Southern customers strategic customers.
They still want to secure their supply and yes, we want to.
Foster those and deepening our <unk>.
Partnership with those tier one customers say, yes, we.
We still selectively take some deposits.
Yes.
And if I can you provide some color on.
Where are those still sort of coming in from I think the last time I ask a question of that nature was more of the PC customer base, but can you provide any color on how many different customers have placed deposits and if it remains more PC centric or if it's broadened out into some of the other.
Application areas.
Those deposits.
Came in from pretty much all all of the segments.
The customers in the different.
Industries.
And smartphone.
The power supply.
Home appliances and then.
From a variety of health and the customer.
Base.
Yeah.
Got it.
Thanks, and good luck team.
Alright. Thank you. Thank you.
Our final question will be with Jeremy Kwan from Stifel.
Jeremy Your line is open.
Yes.
A quick follow up or two on.
First the.
The delay in the capacity expansion.
March is that.
Would that impact your ability to.
Actually grow.
Are you guys pretty maxed out at this point or are there other levers you can keep pulling some kind of.
I guess.
Manage our way through these delays.
Follow up to that is there are there, what's giving you the confidence that these.
Issues will be resolved.
No.
And in that time line that you guys have outlined.
Sure.
The second one first so overall.
We are working very closely to resolve those challenges of the labor as well as the specialized equipment that we need we have great relationships with the local labor force and they are very cooperative to helping us to resolve not to resolve and try to close the gap.
So.
And just keep in mind in terms of the Tula project. This is like the last leg, which we're getting through the.
The major equipment is already in it already installed now we're trying to get all these accompanying equipment also towards up and installed as well too.
So we have we have confidence in that.
With our team and our partnerships with the.
The local local vendors that they can help us to get this done for.
For US, yes, it will impact our expansion.
We were hoping to get some of that benefit at the end of this calendar year.
But it's not going to stop our our overall direction, we still plan to grow next year, even when the market changes, even we do expect the supply even if it's just one quarter late is still there's still going to start to help us in the first half of next year.
And at the same time, we talked about our well we know it will.
Talked about our demand growth will be at the time of our supply strategy.
Three pronged strategy first as an internal but also depending on.
An external around both with our JV partner and also with external foundries and we believe that with next over and over the course of the next year, we will start to see more benefit coming from external foundries also too. So I think that will help us to grow in addition to when our eight inch fab expansion comes online.
And just a quick clarification on the external foundry this for.
For your power IC, mainly or and you're speaking about.
Lots of them.
It's for both but it's mainly for the demos side.
I see okay.
And one last question.
You mentioned, you're seeing some more local competition in the low to mid <unk> range.
The range of your products can.
Can you help us.
Understand.
Would you classify as low to mid <unk>.
What are kind of the distinguishing features is it just pricing or are there other things that.
And maybe some applications that youre seeing in targeted first.
It's really tied to more low lower to lower performance sockets, where it's easier for competitors to copy.
And the products that we make power densities that big deal right and if you can make a make the deliver the same power in a smaller form factor than you have an advantage right.
In some cases, where space may not be an issue than some of our competitors can come in with the inferior process, usually bigger die and and compete with lower margin.
With us so this happens much more in the low end of the market and the more I would say a standardized type of type of products and for us.
<unk> has been focused on differentiating ourselves more and more with our products. Both for the high end discrete in MOSFET, but also especially for our power IC. So the more the trend generally is towards more integration both of our customers as well and that's reflected in our product portfolio. So the more that we differentiate the more that we can.
Defend or.
Sure.
Yes avoidance challenges from the local competitors.
Great. Thank you very much.
Thank you.
Our Q&A session. So I'll pass the call back to management team for any closing remarks.
This concludes our earnings call today. Thank you for your interest in AOS and we look forward to talking to you again next quarter. Thank you.
Thank you all right.
Uh huh.
Today's call. Thank you for your participation you may now disconnect your lines.
Okay.