Q1 2024 Alpha and Omega Semiconductor Ltd Earnings Call
Speaker 1: Good afternoon. Thank you for attending today's alpha and omega semi conductor fiscal Q1 2024 earnings call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad.
Good afternoon. Thank you for attending today's Alpha and Omega semiconductor fiscal Q1 2024 earnings call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker 1: I would now like to pass the conference over to our host, use your Zai. Please go ahead.
I would now like to pass the conference over to our host you Joe Tsai. Please go ahead.
Speaker 2: Good afternoon, everyone, and welcome to Alpha N Omega, Summit Conductor's Problem Call to Discuss. This goes to 2024, first quarter financial results. I am a GSI, and my civilization is represented for AOS. So we today are student training, our CEO , and we found out our CFO . This call is being recorded in broadcast live over the web. A replay will be available for seven days, following the call via the link in the Investor Relations section about what's right. Our call is...
Good afternoon, everyone and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2024 first quarter financial results.
GSI simulations breakfast so anyway.
Excuse me.
Our CEO and found out our CFO.
This call is being recorded and broadcast live over the web replay will be available for seven days following the call via the link in the Investor Relations section about website.
Call will proceed as follows today, Steven will begin but business updates, including city right now.
Speaker 2: Steven will begin with business updates, including strategic highlights and the detailed segment report. After that, he found we'll review the financial results and provide guidance to the December quarter. Finally, we'll have the Q&A session.
<unk> segment report after that and followed a review of the financial results.
Our guidance for the December quarter.
I know you will have the Q&A session.
Speaker 2: The earnings release goes to distribute it over the Y-day from November 6, 2023 after the month close. The release goes to a post on the company's website. Our earnings release and this presentation include non- GAAP financial measures. We use non- GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with their gap.
That was distributed over the wire today.
2023 after the market close we released.
Also posted on the company's website.
And this presentation include non-GAAP financial measures. These non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in earnings.
Speaker 2: The reconciliation of these non-gotten measures through the comparable gap manners is included in earnings.
Speaker 2: We remind you that during this conference call, we will make starting for a little bit of statements, including discussions of the bizzalok and financial projections.
We remind you that during this conference call.
We'll make certain forward looking statements, including discussions of business outlook and financial projections.
Speaker 2: Before looking at standards that are based on standards, current expectations involve risks and uncertainties that could cause our actual results with different materials.
Looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially.
Speaker 2: For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent findings with SEC.
For a more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with SEC.
Speaker 2: We're still not obligated to update the information provided today's call.
We assume no obligations to update the information provided in today's call.
Speaker 2: That I will now turn the call over to our CEO , Stephen Chan. Stephen.
I will now turn the call over to our CEO Steven Chang Citibank.
Speaker 3: Thank you, Eugier, and good afternoon, everyone. I will begin today with a high-level overview of our results and then jump into segment details.
Thank you and good afternoon, everyone I will begin today with a high level overview of our results and then jump into the segment details.
Speaker 3: We delivered fiscal Q1 results in line with our guidance. Revenue was $180.6 million. Non-GAP gross margin was 28.8% and non-GAP EPS was 33 cents. These results were driven by strong shipments across notebooks, desktop computing and smartphones for fall device launches and the Q4 holidays.
We delivered fiscal Q1 results in line with our guidance revenue was $186 million.
non-GAAP gross margin was 28, 8% and non-GAAP EPS was <unk> 33.
These results were driven by strong shipments across notebooks desktop computing and smartphones football device launches and the Q4 holiday season.
Speaker 3: I am pleased that our team delivered solid execution amid at macroeconomic headwinds and inventory corrections in some end of March.
I am pleased that our team delivered solid execution.
Macroeconomic headwinds and inventory corrections in some end markets.
Speaker 3: We have been managing our business through various cycles and coping with an ever-changing business environment.
We have been managing our business through various cycles and coping with an ever changing business environment, but our principle remains unchanged.
Speaker 3: But our principle remains unchanged. AOS is committed to building towards long-term growth. We are steadily extending the reach of our business into future and new applications and broadening our product portfolio to address increasing global power trends.
Is committed to building towards long term growth, we are steadily extending the reach of our business into the future and new applications and broadening our product portfolio to address increasing global powertrain.
Speaker 3: As an example, we're leveraging our core technology IP and strength in advanced computing, battery, motor, and power supply and continue to invest in new adjacent markets like data centers for AI, automotive and energy generation.
As an example, we are leveraging our core technology IP and strength in advanced computing battery motor and power supply and continue to invest in new adjacent markets like data centers for AI automotive and energy generation.
Speaker 3: In addition, we are taking products deeper into our existing core markets with more integrated solutions that will drive higher bomb content. By investing in new adjacent markets as well as going deeper into our core markets, we believe we will be well positioned to emerge stronger than ever on the other side of this cycle.
In addition, we are taking products deeper into our existing core markets with more integrated solutions that will drive higher Bom content.
By investing in new adjacent markets as well as going deeper into our core markets. We believe we will be well positioned to emerge stronger than ever on the other side of the cycle.
The rebound in Pcs and smartphones is encouraging following multiple quarters of inventory correction. However.
Speaker 3: The rebound in PCs and smart phones is encouraging following multiple quarters of inventory correction.
Speaker 3: However, we remain cautious about a sustained broader recovery as we are seeing signs of demand constraints in other end markets, which are feeling the effects of the persistent high interest rate environment and geopolitical uncertain.
However, we remain cautious about our sustained broader recovery as we are seeing signs of demand constraints in other end markets, which are feeling the effects of the persistent high interest rate environment and geopolitical uncertainties Mauro.
Speaker 3: Moreover, gaming which has been a significant revenue driver for us is now going through an inventory correction as we indicated math quarter.
Moreover, gaming, which has been a significant revenue driver for US is now going through an inventory correction as we indicated last quarter.
Speaker 3: While we cannot be immune to the macroeconomic headwind, it is important to reiterate that our core fundamentals remain strong. Many of our strategic investments over the past years have better positioned us for sustainable growth. We are excited to have a record number of tier one customer partnerships and growing market share in strategic applications across many of our end markets.
While we cannot be immune to the macroeconomic headwinds. It is important to reiterate that our core fundamentals remained strong many of our strategic investments over the past years have better positioned us for sustainable growth.
We're excited to have a record number of tier one customer partnerships and growing market share in strategic applications across many of our end markets.
Speaker 3: We continue to expect to navigate the current environment better than the broader market up to start.
We continue to expect to navigate the current environment better than the broader market that we serve.
Speaker 3: With that, let me now cover our segment results and provide some guidance by segment for the next quarter.
With that let me now cover our segment results and provide some guidance by segment for the next quarter.
Speaker 3: Starting with computing, September quarter revenue was down 21.2% year over year, but up 35.1% sequentially and represented 38.9% of total revenue.
Starting with computing.
September quarter revenue was down 21, 2% year over year, but up 35, 1% sequentially and represented 38, 9% of total revenue.
Speaker 3: These results were driven by solid recovery and shipments across notebook, tablets, and desktop computing applications.
These results were driven by solid recovery in shipments across notebook tablet and desktop computing applications.
Speaker 3: The recovery has been driven by high-end driver ICs and MOSFETs for powering CPUs.
The recovery has been driven by high end driver Ics and MOSFET for powering Cpus.
Speaker 3: Looking forward into the December quarter, we expect the segment to be down low single digits following a strong September quarter.
Looking forward into the December quarter, we expect this segment to be down low single digits. Following a strong September quarter.
Speaker 3: Turning to the consumer segment, September quarter revenue was down 31.3% year over year, and down 28.9% sequentially, and represented 17.2% of total revenue.
Turning to the consumer segment September quarter revenue was down 31, 3% year over year and down 28, 9% sequentially and represented 17, 2% of total revenue.
Speaker 3: As we indicated last quarter, gaming is going through an inventory correction after an extremely strong club months of shipment into the number one console menu batch.
As we indicated last quarter gaming is going through an inventory correction. After an extremely strong 12 months of shipments into the number one console manufacturer.
Speaker 3: Similar to what we saw in PCs and smartphones earlier this year, given the speed of the current correction, we believe demand will revert back to a new normal in a couple of quarters. Fattering in that the console is now in its midlife part of the platform cycle.
Similar to what we saw in Pcs and smartphones earlier this year given the speed of the current correction, we believe demand will revert back to a new normal in a couple of quarters factoring in that the council is now ended the midlife part of the platform cycle.
Speaker 3: However, we do see opportunities to increase bomb content within the current console platform as part of its refresh next year. Longer term, our relationship with this customer is very strong and we are already engaged in discussions for the next model design.
However, we do see opportunities to increase Bom content within the current console platform.
Part of it's refresh next year.
Longer term our relationship with this customer is very strong and we are already engaged in discussions for the next model design.
Speaker 3: But a December quarter, we anticipate a further mid 20% decline in this.
For the December quarter, we anticipate a further mid 20% decline in this segment.
Speaker 3: Next, let's discuss the communications segment. Revenue in the September quarter was down 1.3% year over year, but of 80.2% sequentially, and represented 17.2% of total revenue.
Next let's discuss the communications segment revenue in the September quarter. It was down one 3% year over year, but up eight 2% sequentially and represented 17, 2% of total revenue.
Speaker 3: These results were driven by strong shipments to the number one US smartphone manufacturer for their phone launch and continue strong demand from Chinese smartphone OEM for their high-end device.
These results were driven by strong shipments to the number one U S smartphone manufacturer for their fall phone launch and continued strong demand from Chinese smartphone OEM for their high end devices looking.
Speaker 3: Looking ahead, we anticipate this segment to remain at current healthy levels given by continued strong shipments to Chinese OEM ahead of their winter and spring the month.
Looking ahead, we anticipate this segment to remain at current healthy levels driven by continued strong shipments to Chinese Oems ahead of their winter and spring the launches.
Speaker 3: Now let's talk about our last segment, Power Supply and Industrial, which accounted for 23.1% of total revenue.
Now, let's talk about our last segment power supply and industrial which accounted for 23, 1% of total revenue.
Speaker 3: September quarter revenue was slightly below our prior expectations. Increasing 2.1% year over year and 0.5% sequentially.
Temperature quarter revenue was slightly below our prior expectations, increasing two 1% year over year and 0.5% sequentially.
Speaker 3: These results were driven by strong shipments for quick chargers for peak season to our tier 1 US smartphone customer, but offset by weakness in power.
These results were driven by strong shipments for quick Chargers for peak season to our tier one smartphone customer, but offset by weakness in power tools.
Speaker 3: For the December quarter, we expect this segment to decline in the low teams sequentially. Mainly due to reduced quick chargers following the peak season and lower solar demand.
For the December quarter, we expect this segment to decline in the low teens sequentially, mainly due to reduced quick Chargers following the peak season and lower solar demand.
Speaker 3: In closing, we delivered a solid fiscal Q1, where closely monitoring market dynamics and macro headwind. However, our fundamentals are strong and we are focused on positioning the company towards growth beyond our $1 billion revenue target on the other side of the cycle, driven by our leading technology, more diversified product portfolio, share one customer base in all our business segments and expanding manufacturing capability and supply chain.
In closing we delivered a solid fiscal Q1, we are closely monitoring market dynamics and macro headwinds. However, our fundamentals are strong and we are focused on positioning the company towards growth beyond our $1 billion revenue target on the other side of the cycle driven by our leading technology.
More diversified product portfolio tier one customer base at all our business segments, and expanding manufacturing capability and supply chain.
Speaker 3: With that, I will now turn the call over to EFON for a discussion of our fiscal first quarter financial results and our outlook for the next quarter.
With that I will now turn the call over to <unk> for a discussion of our fiscal first quarter financial results and our outlook for the next quarter.
Speaker 4: Thank you, Steven. Good afternoon, everyone, and thank you for joining us.
Thank you Steven good afternoon, everyone and thank you for joining us.
Speaker 4: Revenue for the quarter was $180.6 million. Up, 11.8% sequentially and down 13.4% year over year.
Revenue for the quarter was $186 million up 11, 8% sequentially and down 13% year over year.
Speaker 4: In terms of partner links, Demos revenue was $1.1.5 million up 27% sequentially and down 16% over last year.
In terms of product mix demos revenue was $121 $5 million up 27% sequentially.
16% over last year.
Speaker 4: Power IC Remini was $52.7 million down 10.5% from the power quarter and 15.4% from a year ago.
Power IC revenue was $52 $7 million down 10, 5% from the par quarter.
15, 4% from a year ago.
Speaker 4: Assembly service revenue was $0.7 million as compared to $0.6 million last quarter and $1.6 million on the same quarter last year.
Assembly service revenue was $7 million as compared to $6 million last quarter and $1 $6 million for the same quarter last year.
Speaker 4: License and engineering service revenue was $5.6 million for the quarter versus $6.3 million in the park quarter.
License and engineering service revenue was $5 $6 million for the quarter versus $6 $3 million in the part of the quarter.
Speaker 4: Nonggap Gross Margin was 28.8% compared to 28.5% in the power quarter and 35.4% a year.
non-GAAP gross margin was 28, 8% compared to 28, 5% in the prior quarter and 35, 4% a year ago.
Speaker 4: The quarter of a quarter increase in non-gap growth margin was money driven by the mix improvement.
The quarter over quarter increase in non-GAAP gross margin was mainly driven by the mix improvement.
Speaker 4: NGAP operating expenses were $40.8 million compared to $39.1 million for the power quarter and $36.6 million a lot.
non-GAAP operating expenses were $48 million compared to $39 $1 million for the prior quarter and $36 $6 million last year.
Speaker 4: The quota recorder increase was primarily due to higher R&D engineering expenses and professional service.
The quarter over quarter increase was.
<unk> due to higher R&D engineering expenses and professional service fees.
Speaker 4: NGAP Quarter EPS was 33 cents compared to 19 cents last quarter and $20 cents a year ago.
non-GAAP quarterly EPS was 33 cents compared to 19 central last quarter.
<unk> 20, a year ago.
Speaker 4: Moving on to cash flow. Operating cash flow was $13.8 million, including $8.6 million of repayment of customer deposit.
Moving onto cash flow.
Operating cash flow was $13 8 million, including $8 $6 million of repayment over customer deposits.
By comparison.
Speaker 4: Operating cash flows was negative $28.2 million in the prior quarter and positive $36.7 million a year ago.
Operating cash flows was negative $28 $2 million in the prior quarter and a positive $36 $7 million a year ago.
Speaker 4: If it asked for the quarter was 23.3 million dollars, compared to 17.7 million dollars in last quarter, and 45.5 million dollars for the same quarter last year.
Ebitdas for the quarter was $23 $3 million compared to $17 $7 million from last quarter, and a $45 $5 million for the same quarter last year.
Now let me turn.
Turning to our balance sheet.
Speaker 4: We completed September quarter with a cash balance of $193.6 million compared to $195.2 million at the end of last quarter.
Completed September quarter, with a cash balance of $193 $6 million compared to $195 $2 million at the end of last quarter.
Speaker 4: That tree's receivables were $34.4 million compared to $22.4 million at the end of the park.
Net trade receivables were $34 $4 million compared to $22 $4 million at the end of the quarter.
Speaker 4: They sales outstanding were 18 days for the quarter versus 19 days for the parkour.
Days sales outstanding were 18 days for the quarter versus 19 days for the prior quarter.
Speaker 4: The inventory was $187.8 million at the quarter end compared to $183.2 million at the end of the park.
Net inventory was $187 $8 million at quarter end compared to $183 $2 million at the end of the park water.
Speaker 4: Average days in the inventory were 129 days compared to 140 days in the park.
Average days in inventory were 129 days compared to 140 days.
The prior quarter.
Capex for the quarter was $12 $5 million compared to $19 2 million for the prior quarter.
Speaker 4: CapEx for the quarter was $12.5 million compared to $19.2 million for the prior quarter.
Speaker 4: We expect CapEx for the December quarter to range from 10 to 15 million dollars. Now I would like to discuss...
We expect Capex for the December quarter to a range from $10 million to $15 million.
Now I would like to discuss December quarter guidance.
Speaker 4: We expect revenue to be approximately $165 million plus or minus $10 million.
We expect revenue to be approximately $165 million plus or minus $10 million.
Speaker 4: that gross margin to be 27.1% plus or minus 1%.
GAAP gross margin to be 27, 1% plus or minus 1%.
Speaker 4: We anticipate the non-gap gross margin to be 28.5% plus or minus 1%.
We anticipate the non-GAAP gross margin to be 28, 5% plus or minus 1%.
Speaker 4: GAAP operating expenses to be in the range of $48 million plus or minus $1 million.
GAAP operating expenses to be in the range of $48 million plus or minus $1 million.
Speaker 4: Non-cap operating expenses are expected to be in the range of $40.3 million plus or minus $1 million.
non-GAAP operating expenses side and constructed to be in the range of $43 million plus or minus $1 million.
Speaker 4: interest expressed to be approximately $1.1 million and income tax expressed to be in the range of $0.8 million to $1.2 million.
Interest expense to be approximately $1.1 billion in income tax expense to be in the range of $8 million to $1 $2 million.
Speaker 4: With that, we will open the call for questions. Operator, please start Q&A session.
With that we will open the call for questions. Operator, please start the Q&A session.
Thank you we will now begin the Q&A session.
Speaker 1: Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star, followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star, followed by two. Again, the queue for a question, please press star one. We'll pause here briefly as questions are registered.
You'd like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you'd like to remove that question. Please press star followed by two.
Again to queue for a question. Please press star one we'll pause here briefly as questions are registered.
Yeah.
Speaker 1: Our first question is from Jeremy Kwan with Stifel. Your line is now open.
Our first question is from Jeremy Kwan with Stifel. Your line is now open.
Speaker 5: Yes, good afternoon and thank you. Maybe a first question on, you know, the gaming market that you talked about, you know, maybe potentially hitting a new normalized run rate. Can you just help us understand, you know, how big is gaming as a percent of the consumer revenue? You know, what it was at the peak and maybe where you expect that to kind of settle out?
Yes, good afternoon, and thank you.
Your first question on.
The gaming market that you can talk about you know maybe potentially hitting a new normalized run rate I'm keen to help us understand how big is gaming.
As a percent of the consumer revenue you know what it was at the peak and maybe where you expect that to kind of settle out.
Speaker 5: And finally, where you might see this new normalized run rate, where could it go, I guess, as we push the mid to end of this gaming cycle?
And finally, where you may need a new normalized run rate where could it go I guess you know it is.
As we push the mid to end of the gaming.
Getting cycle.
Speaker 3: Sure, Jeremy. Yes, gaming is an important segment for us and, you know, we're excited about this segment in general because there's quite a bit of content going into these systems and it's pretty much like a, you know, specialized PC. So all the solutions we have going into PC also goes into gaming. The console that we sell into generally has a lifetime of up to about seven years. And right now we're in about year four of that seven-year life cycle. And it's about the time, if you look at the previous consoles, that, you know, the annual shouldn't start to drop some. And that correction, you know, was taking in place now. And just like, you know, we saw a correction in some of the other markets that we're in, even gaming has to go through that correction. But right now it's in the middle of that correction. So when we say that it's going to revert back, you know, we believe that it's going to be above the current rate, but below the peak from the few quarters ago. So I would say somewhere in between is probably about right.
Sure Jeremy.
Gaming is an important segment for us and we're excited about the segment and generally because theres quite a bit of content.
Going into these systems.
Pretty much like a specialized on PC. So all of the solutions, we have going into <unk> also goes into gaming.
The console that we sell into generally has a lifetime of up to about seven years and right now we're in about year four of that on a seven year life cycle and it's about the time, if you look at the previous consoles that.
Annual shouldn't start to drop the Sun and.
That correction. It was it was taking in place now and just like we saw correction in some of the other markets that we're in even give me has to go through that correction, but right now it's in the middle of that correction. So when we see that it's going to revert back we believe that it's going to be above the current rate, but below the peak from the.
From a few quarters ago.
So.
I would say somewhere in between.
Probably about right.
Speaker 3: And, you know, we continue to work closely with this particular console maker and, you know, with opportunities also to design in more content. But overall, I think at the peak, to answer your question, it was up to maybe about, you know, almost half of our total consumer segment.
And we continue to work closely with this particular console maker.
With opportunities also to design design in more content and but overall I think the peak could you answer your question. It was up to maybe about almost half of our total consumer segment.
Speaker 3: Right now maybe it's somewhere around 30% or something in that range, 20% to 30% of the consumer business, but that's just during the correction. We do expect it to bounce back up again.
Right now, maybe it's somewhere around 30% or something in that range.
20%, 30% of the consumer business and but that just arent during the correction.
We do expect it to bounce back up again.
Our next question is from David Williams with Benchmark. Your line is now open.
Speaker 1: Our next question is from David Williams with Benchmark. Your line is now open.
Hey, good afternoon. Thanks for taking my question and congrats on navigating this challenging environment.
Speaker 6: Hey, good afternoon. Thanks for taking the question and congrats on navigating this challenging environment.
Thanks, David.
Speaker 6: Yeah, so a couple of quick things. You talked a little bit about the data center and AI opportunity there in your script. And I know this is an area you've been working on for some time, but just, you've talked about having good controllers and power station addresses market. It's wondering if there's anything new there that you can share or just generally how you're seeing your opportunity.
Yeah. So a couple of quick things that you talked a little bit about the data center and AI opportunity there in your script and I know this is an area <unk> been working on for some time, but just.
You've talked about having a good controllers and power stage to address this market just wondering if there's anything new there that you can share or just generally how you're seeing your opportunity in that market.
Speaker 3: It's sourcing it. We're getting some business today. The type of applications in terms of the circuit topologies that AI addresses is very similar to that being used in graphics cards and actually any kind of point of load as such as no for the CPU, but especially for graphics cards, because you're basically powering a, how they parallel processor. And we have good,
It's how we're seeing it we're getting some business today the type of applications in terms of the.
Yes, Sir.
Topology is that AI addresses.
It's very similar to that being using graphics cards.
And actually any kind of point of load is such as you know for the CPU, but especially for graphics card because it because youre basically powering.
Highly parallel processor and we have good solutions from controller to the power station that can address.
Speaker 3: solutions from controller to the power stage that can address high computing applications including artificial intelligence type of hardware. So for us, we do have some small business now. We do see the potential for a lot more going forward, but for us, we're also working on transitioning from addressing client side to moving over to the data center AI side. So that and all those efforts are in process.
Hi, computing applications, including artificial intelligence type of hardware.
So for US we do have some small business now we do see the potential for a lot more.
Going forward, but you know for US. We're also working on transitioning from from addressing client side to moving over to the data center AI side, so that that and all of those efforts are in process.
Speaker 6: Great. Thanks for that help. And then maybe just on the PC side, on the client side, can you talk a little bit about the content increases between Raptor Lake and Meteor Lake, and if you should begin to see those benefits pull in during the December period as we get ready for that next release slated for December ?
Great. Thanks for that help and then maybe just on the PC side on the client side can you talk a little about the content increases between rapidly Meteor Lake and if you should begin to see those benefits pull in during the December period.
Ready for that next release slated for the end of the year.
Speaker 3: Generally, yes, we're starting to see, as Intel is rolling out their platform. Now we are seeing more opportunity for sure for more dollar content. And as you mentioned before, we are in the process of deploying our new control solutions into the marketplace. And it will take some time for our customer base to adopt those. But once adopted, yes, we believe that dollar content, what used to be two, three dollars is coming up to three to four and even on some certain bonds going above five dollars of content. And PC's themselves, you know, they are, we are pleased to see the bump up in the September quarter. And there will be seasonality at play, you know, as the ecosystem goes through another, yes, seasonal pattern. But in general, we are excited about the additional bond content that comes with the new platform.
Generally, yes, we are starting to see.
<unk> is rolling out their platforms.
Seeing more opportunity for sure for a more dollar content.
And as you mentioned before we are in the process of.
Deploying our new controller solutions into the marketplace and that it will take some time to for our customer base two to adopt those.
Once adopted yes, we believe that dollar content what used to be two to $3 is climbing up to three to four and even on some certain bonds going above $5 of content.
Pcs themselves there they are.
Are we at.
We were pleased to see the bump up in the September quarter, and there will be seasonality airplane.
As the ecosystem goes through another.
Uh huh.
I guess the seasonal pattern.
But in general you know we.
We are excited about the additional bond content that comes with these new platforms.
Speaker 6: Great, and then last one here for you, Vaughan, if you could help me just a little bit on the gross margin side. And during the peak part of the cycle, margins had a nice lift from the optimization effort.
Great and then last one here for you Paul If you could help me just a little bit on the gross margin side and during the peak part of the cycle margins had a nice lift from the optimization efforts that you had.
Speaker 6: uh... there and it is is make still the biggest driver of the margin if we're kind of looking back at at last quarter it seems like the discreet were uh... we're lower than the power i see and we're really that the largest percentage of revenues we've seen in some time
There is mix still the biggest driver of the margin. If we're kind of looking back at last quarter. It seemed like the discrete were were lower than the power IC and we're really the largest percentage of revenues we've seen in some time.
Speaker 6: But we saw a slight improvement this quarter and I guess we've had a kind of reversion where your power IC businesses lower but your discreets came up. I'm just trying to understand and maybe square how the power discreet business compares with the power ICs in terms of margin and how we're getting that lift kind of given that the balance is.
But we saw a slight improvement this quarter and I guess, we've had a kind of reversion, where your power IC business is lower but your discrete came out I'm just trying to understand and maybe square how the power discrete business compared to the power Ics in terms of margin and how we're getting that leads to kind of given that the balance.
Sequentially. Thank you.
Sure.
Speaker 7: Sure. Ian, in general, the power I see products carrying at a higher margin for us, but given that, it doesn't mean that we don't have higher margins in the products in the...
In general.
Power IC products carry.
Higher margin for us.
Given that and the other means.
We don't have a higher margins.
Products.
No.
Speaker 7: discrete segment. So, you know, in the September quarter, the product makes improved slightly. And then I mean, a few basis points up. And then, you know, even though...
That's great.
Segment so.
In September.
The September quarter.
Product mix improved slightly and then I mean to.
Two basis points up.
Then.
Even though.
Speaker 7: policy revenue got hurt by the gaming drop, but on the other hand,
Policy revenue got hurt by the gaming drop.
So but on the other hand, we are shifting more to the core in.
Speaker 7: we shipped more to V-Core in those areas, and so generally, which provided some higher margins for us. I mean, overall, I mean, yeah, I mean, mixing is a big...
In those areas so.
January which provided some higher margins for us so.
I mean overall I mean.
I mean, the mix is a big.
Speaker 7: portion of how far was the growth margin improvement.
A portion of our gross margin.
In Portland.
Okay, great great utilization better this quarter, but that was that a tailwind.
Speaker 6: It's new the
Speaker 7: It's in the similar range as a mass holder because for our internal
Yes.
A similar range.
Last quarter because for our internal.
Speaker 7: productions and you know, generally, you know, then our organ fab and you said a pretty good and use that asian level. Our backhand is a little lower. So, you know, on a mix overall, and I mean, then use that asian, you said, roughly same as a box quarter.
Productions.
Generally.
Sure.
Oregon Fab and that you said pretty good utilization level.
Our backend and it is a little bit lower.
So on the mix.
Overall and in it.
Usually nation, you said roughly the same as last quarter.
Thank you.
Yes.
Speaker 1: Our next question is from Craig Ellis with Be Riley Securities. Your line is now open.
Our next question is from Craig Ellis with B Riley Securities. Your line is now open.
Speaker 8: Yeah, thanks for taking the question, guys. Steven, I wanted to go back to a comment in the prepared remarks regarding demand. It sounds like you retain a pretty cautious stance overall and understands the really challenging macro, but what I was hoping you could do is talk a little bit about the environment that you see as you look into the first quarter.
Yes, thanks for taking the question guys.
Stephen I wanted to go back to a comment in the prepared remarks regarding demand it sounds like you retain a pretty.
Cautious stance overall and I understand it's a really challenging macro but what I was hoping you could do is talk a little bit about.
The environment you see.
As you look into the first quarter.
Speaker 8: calendar, fiscal third quarter, qualitatively, where are things looking more encouraging, more challenging, and can you talk about where you're more confident that inventories are now back normal levels versus being in excess outside of maybe gaming, which is going through a pretty visible correction.
<unk> fiscal third quarter.
Qualitatively where are things looking more encouraging were more challenging and can you talk about where you are more confident that inventories are now back to normal levels versus being an excess outside if maybe gaming, which is going through a pretty visible correction.
Sure.
Speaker 3: Seasonality, I think, in terms of, you know, affecting the segments, you know, more impacts the PCs and smartphones a little more. The PC market, as we mentioned, you know, this September quarter was a strong quarter and we saw a resumption of orders for products including ICs and other, you know, higher performance.
Seasonality I think in terms of.
Affecting the segments and no more.
Impacts Pcs and smartphones a little more.
PC market as we mentioned this the September quarter was a strong quarter and we saw a resumption of orders for products, including of Ics and other higher performance sockets that we didn't see in the first half of the year.
Speaker 3: that we didn't see in the first half of the year. And so that's kind of clear signs that the inventory correction is starting to die down. I can't say that we're out of the woods yet, but it's great and very encouraging to see the fresh orders for some of our good products. And going into the, looking two quarters out, as you're suggesting, into the March quarter, yes, we do expect to see some seasonality outplay. Typically that March quarter is in the lowest season for PC youth in any kind of year.
And so that's kind of clear signs that the inventory correction is starting to die down.
Can't say that we're out of the woods, yet, but is great and very encouraging to see that fresh orders for some of our good products and going into the looking two quarters out as they're suggesting into the March quarter, Yes, we do expect to see some seasonality out play typically in our March quarter is the lowest season.
And for Pcs in any kind of year.
And so we do believe that there'll be some correction, but nothing nothing like the <unk>.
The big correction that we saw at the beginning of this calendar year. So we believe that.
<unk> will take a little longer overall to get back to a full recovery, but we are already in a much better state than what it was just a quarter or so, especially two quarters ago, so going forward.
<unk> will go through seasonality, but.
We believe it's getting heading back towards a little more of a normal seasonal pattern.
Speaker 8: And it sounds like you're starting to see some encouraging signs of life in the Android smartphone market within communications and obviously great to see your yearly customer from the US performing well. But can you talk about the potential for next year to see better growth if you get more of a recovery out of the Android market and where do we see that and how big it could be?
Speaker 8: And it sounds like you're starting to see some encouraging signs of life in the end, right? Smart-to-market within communications and obviously great to see your, your lead customer from the US performing well, but can you talk about the potential for next year to see better growth if you get more of a recovery out of the end, right? Mark it and and what will we see that and how big it would be?
And it sounds like Youre, starting to see some encouraging signs of life in the Android smart smartphone market within communications.
Really great to see your European customer from the U S performing well, but can you talk about the potential for next year.
To see better growth, if you get more of a recovery out of the Android market.
Where do we see that and how big that could be.
Speaker 3: Sure, and the great thing about our smartphone business is that we are in multiple and all the big end customers here in the US, in Korea, and in most of the China customer base as well too. And right now, it's launched season on the US side, on the Korea side, they're preparing for a launch for February and even in China, there's still been quite a bit of a decent demand for the high end phones, which we are participating in. So I think it's good to see the diversification at play. Overall, smartphones are still, you know, system shipments are still in the recovery mode, but overall, we do play fairly well in all these high end phones. So that helps to give us some...
Sure and then the great thing about our smartphone business is that we are in multiple.
All the big end.
Customers here in the U S in Korea and in most of the.
China.
<unk> based as well too.
And right now it's.
This launch season on the U S side on the Korea side, they are preparing for a launch for.
For February and even in China, there's been quite a bit of a decent demand for the <unk>. The high end phones, which we are participating in so it's I think it's good to see the diversification at play.
Overall smartphones is still in our system shipments are still in a recovery mode, but overall.
We do play a fairly well.
And all of these high end phones, so that helps to give us some.
Speaker 3: I guess momentum or at least going into the March quarter, you know, again, it's just like PCs that will be some seasonality at play, but at the same time, you know, right now we do see a strong demand Or decent demand I'll say coming from the from the chat the China
Some.
I guess momentum or at least going into the March quarter.
Again, it's just like Pcs, there will be some seasonality at play but at the same time.
Right now we do see.
Strong demand.
Or decent demand I'll say coming from the from this chart.
The China.
Our base.
Speaker 8: That's helpful Stephen. Thank you for my last question for hopping back in the queue. I'll just direct it to if on if on oftentimes in the first quarter we see either lunar new year or I think annual maintenance impacts to
Okay. That's helpful. Stephen Thank you for my last question for hopping back in the queue. I'll. Just directed you find you find oftentimes in the first quarter, we see either lunar new year or I think annual meeting a.
Maintenance impacts to <unk>.
Speaker 8: Fab utilization, therefore, gross margin, as we look ahead to calendar one Q.
Fab utilization and therefore gross margin.
As we look ahead to calendar <unk>.
Speaker 8: Would those historic dynamics be in play or for some reason would things potentially play out differently early next year? Thank you.
Those hits.
Historic dynamics being player for some reason things potentially play out differently early next year. Thank you.
Speaker 7: Sure, Craig. I would expect, yeah, then I mean the March quarter is a typical lunar new year season and then and then and also we also arrange some maintenance around it. So I would expect that this adaptation will be a little bit lower than the September or even lower than the December quarter.
Sure Craig.
Exactly yeah, and then I mean, the March quarter is.
This a typical lunar new year season.
Also we also.
A range of some lumpiness around it so I would expect.
As a nation.
We'll be a little bit lower.
Sure.
The September or even lower than the December quarter.
Speaker 8: That's helpful. And maybe I could sneak in one more that relates to gross margin. TI seemed to indicate that pricing was normalizing. So picking up a little bit, but not getting aggressive. How would you characterize the pricing environment? That's out there right now, guys.
That's helpful and then maybe I could sneak in one more if it relates to gross margin.
Ti seem to indicate that that pricing was normalizing so picking up a little bit, but not getting aggressive how would you characterize the pricing environment.
It's out there right now guys.
Yen this calendar year, I would say that the.
Speaker 7: uh... yen this kind of their year i will say the end of the
Speaker 7: pricing environment return to a historical, normal trends, I would say, and after last couple years, a favorable environment, I would characterize as traditional yet pricing environment.
Pricing environment returned to.
Historical normal trends I would say.
After last couple of years.
Favorable <unk>.
<unk>.
I would characterize as a.
Traditional.
And.
The pricing environment.
Thank you Ethan Thanks Steven.
Alright, thank you.
Speaker 1: We have a follow up question from Jeremy Kwan with Steeple. Your line is now open.
We have a follow up question from Jeremy Kwan with Stifel. Your line is now open.
Speaker 5: Yes, thank you. And maybe a quick follow up to that pricing question. Just wondering a couple of things first, I guess a couple of quarters ago, I think maybe even a year ago now, you mentioned increased local competition from Chinese suppliers on your low-jab-mid-end-agre portfolio. I'm wondering if you give us an update on that and kind of how that has that...
Yes. Thank you.
Maybe a quick follow up to that pricing question I'm just wondering.
A couple of things first I guess.
A couple of quarters ago, I think maybe even a year ago now.
You mentioned increased local competition from Chinese suppliers on their loads.
Oh, Yeah, I'm wondering if you could give us an update on that and kind of how that.
Has that.
Speaker 5: how much of that is impacted pricing. And secondly, how often do you in your customer's speed negotiate pricing? Is there something that is said at the beginning of the year or is it kind of an ongoing basis? Any insight you can offer with the meaningful, helpful thing?
How much of that is impacted pricing.
And secondly.
How often do you and your customers renegotiate pricing is it something that is that at the beginning of the year or is it kind of an ongoing basis.
Braden Conoco with helpful. Thanks.
Speaker 3: Sure, pricing is always ongoing and it's always up to where we are in the balance of supply versus demand and overall global economy. So certain customers will negotiate every quarter. Certain of ones we can negotiate once for the whole year, but it really just depends on how the overall industry is staring.
Sure pricing, there's always ongoing and it's always up to.
Where we are in the balance of supply versus demand and overall.
Global economy, so certain customers will negotiate every quarter certain ones, we can negotiate once for the whole year, but it really just depends on hobby lobby overall.
Okay.
Industry is fairing.
Speaker 3: In terms of a competition, it's really good to see, again, the resumption of some of the high-performance sockets, and that kind of gives us a lot more room in terms of leverage in the face of competition. This is basically less competition for high-performance products.
In terms of competition.
Really good to see again, the resumption of some of the high performance sockets that kind of gives us a lot more room in terms of leverage and in the face of competition.
Basically less competition for higher performance products, so that helps to kind of normalize the situation.
Speaker 3: So that helps to kind of normalize the situation. I would say a competition, local competition is fierce. So when we engage with them, we also have to be aggressive as well, which we are, but they're not also, they're not everywhere. And we will adjust our pricing based on what we need to be competitive.
I would say competition local competition is fierce so when we engage with them. We also have to be aggressive as well and which we are but they're not they're not also not everywhere and we will adjust our pricing based on what we need to be to be competitive.
Speaker 5: Great. And maybe if we could just look at China again, with the JD there, can you tell us what insight you may have in terms of your, I guess how much capacity you have as a JD available to you. Maybe talk about some of your pricing trends that you're seeing from them. Any insight you can offer would be very helpful. And I'm grateful.
Great and maybe if we could.
Look at China again, with the JV. There can you tell us what you think you may have in terms of your.
Sure.
How much capacity you have.
The JV available to you on.
Maybe talk about some of your pricing trends that youre seeing from them.
Any insight you can offer would be very helpful.
And lastly, awesome funding requirement.
Okay sure.
Speaker 7: Okay, sure. Yeah.
<unk>.
Speaker 4: CQ, KV, they have already ramped up in their production a couple of years ago. So right now, in the process of raising additional funds to further expand their capacity. And in the EBITDA level.
CQ JV.
They have already ramped up their production.
A year couple of years ago or so.
Right now.
In the process of raising additional funds to further expand their capacity.
Yes.
On the EBITDA level.
Speaker 7: They already achieved a break even so even though in the sometime recorder we recorded this all portion of it there.
Already achieved breakeven so the.
Even though.
September quarter, we recorded a portion of their June quarter as a loss.
Speaker 7: June quarters of loss, put on a cash side and right now.
On the cash side.
Right now, though so.
Speaker 7: In terms of capacity, we still have the same thing.
In terms of capacity and we still happen.
Speaker 4: capacity than as before so nothing changed there.
Capacity in the us before so.
Nothing changed there.
Speaker 5: Got it. And I guess if we could look at your CAPEX, I know you got it for $10,000,000 for the December quarter. Can you, I think this is most of your...
Got it.
And I guess, if we could look at your Capex I know you guided for $10 million to $15 million for the December quarter.
Can you I think.
Most of your.
Speaker 5: you know, enhance, I guess, to pass Catholics funding that they talked about about a year ago. He just gave us a quick update where we are in that process. You know, how much more do you still have left? And maybe even, you know, what guidance you can offer for it for fiscal 25.
And hence I guess capacity Capex.
Lending that David talked about about a year ago.
Just a quick update where we are in that process how much more do you still have a lot in there.
Then what.
If you can offer for fiscal 'twenty five.
Speaker 7: Okay, sure. I mean, capacity wise, and I mean, right now, I will take a price as, you know, we wind a normal...
Okay sure.
I mean, capex wise in that I mean, right now I wouldn't characterize us.
We were in the normal.
Speaker 4: Capac's spending period, and I mean, normally we would target 6 to 8% of our revenue. Our organ fab's expansion had completed, so right now that the non-hold on the Capac.
Capex spending.
I mean normally we would target 6% to 8% of our revenue.
Our on the.
The Oregon Fab expansion.
So right now that are not.
Whole lot of Capex.
Speaker 9: uh... payment remaining so right now what we don't have a major project and the fourth for any factory expansion at this point
Payment remaining so right now what.
We don't have a major project in the fall.
Factory expansions at this point.
Yeah.
Speaker 5: Great, and this one last question. The licensing revenue is nice to see that come in, pretty steadily here. How much can you give us like a, how much is baked into the guidance for December quarter? And also, if you could help walk us through the impact and gross margin, is there engineering costs associated with the license revenue and how that just kind of flows through the financial team? That would be great. Let me Texas Parsfield test out an overall call, points to purposes that will be given a name and present in just one project run by Dec. 29. OK sure.
Great and just one last question.
The licensing revenue is nice to see that come in pretty steadily here how much of it can you.
Give us like how much is baked into the guidance for the December quarter and also if you could help walk us through the impact on gross margin.
Is there is there engineering costs associated with the license revenue in and how that kind of flows through the financials that would be great.
Okay sure.
<unk>.
Speaker 9: Revenue recognition for the license, and engineering service, this more depends on the actual engineering hours and our team's spend on versus expected the total hours for this 24 month period. So it's, So...
Revenue recognition for that.
Licensing and engineering service.
It's more depends on the actual engineering hours.
Our teams spend though.
Versus.
We expect that the total hours for this 24 month period, so that it's.
Speaker 9: It's inflectuating from quarter to quarter. So it's hard to say right now for the...
Fluctuating from quarter to quarter.
So it's hard to say owner right now the photos.
Speaker 9: December quarter guidance, we estimated similar level of licensing and engineering revenue.
December quarter guidance, we estimate that.
We estimated the similar.
Our level of.
Licensing and engineering.
Revenue.
And the impact to gross margin.
Speaker 9: Oh, sure. Yeah, the margin for the licensing and engineering service, again, it is definitely at a higher margin, than our product margins. We don't break down.
Oh sure yes.
It.
The margin for the licensing and engineering services, yes, it is definitely.
The higher margin.
Our product margins.
Don.
Breakdown.
Yes.
Speaker 9: See if it can product line or product elements here.
The product line or Oh.
Elements here.
Yeah.
Got it thank you.
Speaker 1: We have a follow up question from David Williams with benchmark. Your line is now open.
We have a follow up question from David Williams with benchmark. Your line is now open.
Hey, Thanks for letting me get back in here just curious on the appliance side, Stephen I know you've talked about that being an area of opportunity for you and but it's largely greenfield today, just kind of curious what youre seeing in the appliance market has that improved or worse or anything in particular, there you should be optimistic about.
Speaker 6: Hey, thanks for letting me get back in here. Just a curious on the appliance side. Steven, I know you've talked about that being an area of operation.
Speaker 6: And but it's largely greenfield today. Just kind of curious what you're seeing in the appliance market. Is that improved or worse or anything?
Speaker 3: Right now, still a bit slow because it's tied to the overall housing and real estate market globally and that's slowed down quite a bit in the past year or so. So overall, we're not expecting too much in this shorter term. Overall, in the longer term, this is still a core part of the business, again, in the keeping years where we're selling our IGBTs as well as our modules based on those IGBTs. We can do it. We have a solution that is smaller than the competition, but it does have to contend with overall macro, at least for that sub-segment. So in the shorter term, I don't see too much, too too exciting in the shorter term, but in the longer term, this is a $2 billion plus market and we're describing this service.
Right now, it's still a bit slow because it's tied to the overall housing and real estate market globally and that slowed down quite a bit.
In the past year or so.
So overall, we're not expecting.
Too much in the shorter term.
Overall in the longer term. This is still a core part of our business again. The key thing here is we're selling our <unk> as well as our modules based on those <unk> and we can do it we have a solution that is smaller than the competition.
But it does have to contend with overall macro.
At least for that for that sub segment.
So in the shorter term I don't see too much to two exciting in the shorter term.
Longer term. This is a 2 billion dollar plus market and we're just scratching the surface.
Okay, Alright, great and then just the last one for me here is just the cadence of orders through the quarter was there any change maybe between the beginning in the end of the quarter.
Speaker 6: All right, great. And then just the last one for me here, is just the cadence of borders through the quarter. Was there any change?
Of the order.
Speaker 9: Backlogged, I think, this quarter has been steady. And I mean, some fresh and orders came in, and you know, after a period of time of a human-tree correction. And I mean, by and large and, you know, order.
Backlog and I think this quarter has been steady.
Some fresh orders came in.
After a period of time of inventory correction.
By and large.
Older.
<unk>.
Speaker 9: has been reflected in our December quarter guidance.
Has been reflected in the outlook.
December quarter guidance.
Okay, great. Thanks again for the time.
Thank you thanks.
Speaker 1: We have an additional follow up from Jeremy Kwan with Steeple. Your line is now open.
We have an additional follow up from Jeremy Kwan with Stifel. Your line is now open.
Speaker 5: Thank you, so one last follow up. On the operating cash flow, it included the customer deposit of the payment. So if we exclude this, would it be 22.4 million operating cash flow for the quarter?
Thank you just one last follow up on the operating cash flow. It included the customer deposit with payment.
Would it be $24 million operating cash flow for the quarter.
Correct correct is that right.
Speaker 5: got it. And how much remaining is in your customer deposit at this point?
Got it and how much remaining is in your customer deposits at this point.
Speaker 7: We still have about 75 millionish then customer.
We still have about 75 million ish.
<unk> customer.
Speaker 9: Departus at this point. Yeah, then we would expect the next kind of their year will probably return around 30 million dollars also
The apologize.
At this point.
Yes.
Would you expect the next calendar year, we're probably return or around $30 million also.
Great. Thank you.
Alright, thank you.
Speaker 1: There are no additional questions waiting at this time, so I'll pass the conference back to the management team for any closing remarks.
There are no additional questions waiting at this time, so I'll pass the conference back to the 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.
Speaker 9: This concludes our earnings call today. Thank you for your interest in the AOS and we look forward to talking to you again next quarter. Thank you.
For Ya.
Thank you.
Yeah.
Speaker 1: That concludes today's conference call. Thank you for your participation. You may now disconnect your line.
That concludes today's conference call. Thank you for your participation you may now disconnect your line.
Okay.