Q2 2025 Alpha and Omega Semiconductor Ltd Earnings Call
Thank you Stephen welcome to Alpha and Omega fiscal Q2 earnings call I will begin with a high level overview of our results and then jump into segment details.
We delivered fiscal Q2 revenue and EPS results in line with our guidance revenue was $173 $2 million non-GAAP gross margin was 24, 2% non-GAAP EPS was <unk> <unk>.
While we saw seasonal sequential declines in fiscal Q2 from each of our major segments, the communications and industrial segments outperformed our initial forecast and we saw sequential growth in graphics cards quick Chargers, PUC desktops and power tools.
These increases were offset by seasonal declines in gaming notebooks tablets and wearables.
With the December quarter now complete we can reflect on our performance in calendar 2024, where AOS revenue increased four 1% year over year.
While this modest overall growth might not seem overwhelming the recovery in our segment suggest the inventory correction is clearly behind US further a closer examination by segment validate AOS a strategic shift from a component supplier to a total solutions provider. This transition is enabling us.
To tap into new opportunities, gaining market share and increase Bom content, most notably our computing and communication segments. Each grew more than 25% in calendar 2024, driven by market share gains and Bom content growth and motherboards AI graphics cards and tablets and smart.
Phones are battery PC product line contributed the largest incremental dollar growth to the company in calendar year 2024, we now believe Eos as the industry leader in smartphone battery PCM.
We also saw strong growth in Wearables and E mobility in calendar 2024, further proving our ability to build on existing customer relationships, while broadening into new and adjacent markets.
The primary headwinds to calendar 'twenty for growth were mostly concentrated in gaming and quick Chargers, yet both markets have now digested excess inventories and return to growth in the past few quarters.
As we look ahead, we are delivering on our commitments and advancing our transformation from a component supplier to a total solutions provider.
Our strategic focus is to go deeper by leveraging strength in high performance silicon packaging and intelligent Ics.
Our goal is to leverage premier customer relationships to expand market share and increase bom content with a broader portfolio.
With that let me now cover our segment results and provide some guidance by segment for the next quarter.
Starting with computing December quarter revenue was up 6% year over year, but down slightly negative <unk>, 5% sequentially and represented 43, 9% of total revenue.
These results were better than typical seasonality, but slightly worse than our original expectation for slight sequential growth we.
We saw relative strength from PC desktops, and graphics cards offset by the seasonal decline in notebooks and tablets servers in AI and celebrated cars were also softer as the industry prepares for the next platform transition.
We continue to see a good opportunity in advanced computing and we are encouraged by the progress we have made thus far within AI for large data centers. We are a contender in the middle stages of the design in phase and we see potential for these products to contribute to revenue in the middle of the calendar year.
On graphic cards. The next generation platform is ramping up to mass production.
With this new platform, we expect bond content to increase as more power stage Ics paired with our controller are being used to power the GPU.
Looking forward into the March quarter, the computing segment will likely decline due to seasonality. However in the PC market is expected to be flat as tariff uncertainty is leading to demand pull ins with PC makers.
Turning to the consumer segment December revenue was down three 9% year over year and down 28, 8% sequentially and represented 13% of total revenue. The results were in line with our forecasts driven by seasonality in gaming and home appliances as well as a pullback in wearables following a record level achieved.
In the third calendar quarter.
As a reminder, we don't expect gaming to return to meaningful growth until the customer transitions to the next platform.
For the March quarter, we forecast a low single digit sequential decline in the consumer segment, driven by continued seasonality in gaming Tvs and softness in home appliances.
Next let's discuss the communications segment.
Revenue in the December quarter was up 14, 5% year over year, but down six 4% sequentially and represented 19, 2% of total revenue users.
These results were above our initial expectations for a double digit sequential decline as broad based demand from our tier one U S smartphone customer and China Oems moderated only slightly while Korea saw an increase in preparation for product launches in the first calendar quarter.
We believe the better than expected results are due to a combination of market share gains and mix shift to higher end phones in China, and generally higher charges for its driving increased bom content.
Looking ahead, we anticipate a low teens sequential decline in the March quarter for the communications segment, mostly due to seasonality.
Now, let's talk about our last segment power supply and industrial which accounted for 22% of total revenue and was flat year over year and up nine 6% sequentially.
Those results were ahead of our forecast for low single digit sequential growth driven by seasonal strength in quick Chargers as well as an increase in power tools.
Demand also held relatively steady quarter over quarter, and AC DC power supplies and E mobility.
As we've stated before we see additional opportunities in 2025 for quick Chargers due to increased Bom content driven by higher charge occurrence.
Further we are leveraging relationships in Taiwan to partner on DC fans for server racks.
For the March quarter, and we expect a low teens sequential decline for the power supply and industrial segment, primarily driven by seasonal decline and quick Chargers. This decline will be partially offset by some sequential growth in E mobility and AC DC power supplies.
In closing December quarter revenue was slightly ahead of our expectations. While gross margin was a bit softer the continued year over year revenue growth confirms the inventory corrections, we experienced over the past year, our complete seasoned.
<unk> has returned in new markets like AI and advanced computing are emerging.
As we look ahead to 2025 visibility remains limited in the first quarter is typically affected by seasonal softness the subdued market environment will likely pressure pricing and wind down of licensing and engineering revenue with further impact gross margin, we expect both revenue and margin to recover beyond the March.
Quarter with incremental growth likely from smartphones graphics cards.
Hi.
AOS is well positioned for growth supported by our advanced technology, a broad product range and our premier customer base across our various industries.
Strategic initiatives over the past few years are yielding results with successful design integration of controllers and power stages into Pcs graphics cars and AI applications. We are poised to accelerate this expansion, capturing new opportunities and increasing our bond content.
Power management remains at the core of major industry trends, including AI digitalization connectivity and electrification critical to achieving our low carbon sustainable future. We anticipate continued growth driven by advanced computing and data centers.
Integration in Pcs and smartphones.
And higher charging current in smartphones.
Speaker Change: Beyond computing and communications, we see many opportunities in the solar motors and E mobility gaming home appliances and power tools with that I will now turn the call over to <unk> for a discussion of our fiscal second quarter financial results and our outlook for the next quarter.
Yvonne.
Yvonne: Thank you Steven good afternoon, everyone and thank you for joining us.
Yvonne: Revenue for the quarter was $173 2 million down four 8% sequentially and up four 8% year over year.
Yvonne: In terms of product mix.
Yvonne: <unk> revenue was $113 million down seven.
Yvonne: Seven 8% sequentially and up three 8% over last year.
Yvonne: Our IC revenue was $53 7 million up one point.
Yvonne: 5% from the prior quarter and six 8% from a year ago.
Yvonne: Assembly service and other revenue was $1 1 million as compared to $9 million last quarter.
Yvonne: $7 million for the same quarter last year.
Yvonne: License and engineering service revenue was $5 4 million for the quarter versus $5 $6 million in the prior quarter and $5 5 million for the same quarter a year ago.
Yvonne: The license and under nearing service revenue will end in the mid February after the 24 month contract expires.
Yvonne: non-GAAP gross margin was 24, 2% compared to 25, 5% last quarter and 28% a year ago.
Yvonne: And quarter over quarter decrease was mainly impacted by ASP erosion in the mix changes.
Yvonne: non-GAAP operating expenses were $39 million compared to $38 $5 million from the prior quarter.
Yvonne: $37 9 million last year.
Yvonne: The slight quarter over quarter increase was primarily due to higher R&D expenses.
Yvonne: non-GAAP quarterly EPS was <unk> <unk> compared to <unk> 21 per share last quarter, and <unk> 24 per share a year ago.
Yvonne: Moving onto cash flow operating cash flow was $14 $1 million, including $5 million repayment of customer deposits.
Yvonne: By comparison operating cash flow was $11 million in the prior quarter and negative $23 5 million last year.
Yvonne: We expect to refund at $11 1 million customer deposits in the March quarter.
Yvonne: EBITDA for the quarter was $16 8 million compared to 20.
Yvonne: $6 million from last quarter, and $20 7 million for the same quarter a year ago.
Yvonne: Now, let me turn to balance sheet.
Yvonne: We completed December quarter, with a cash balance of $182 6 million compared to $176 million at the end of last quarter.
Yvonne: Net trade receivables decreased by $4 $7 million sequentially.
Yvonne: Sales outstanding were 12 days for the quarter compared to 15 days for the prior quarter.
Yvonne: Net inventory decreased by $1 $2 million quarter over quarter.
Yvonne: Average days in inventory remained at 125 days for the quarter.
Yvonne: Capex for the quarter was seven 4 million.
Yvonne: <unk> to $6 7 million for the prior quarter and we expect Capex for the March quarter to range from $7 million to $9 million.
Yvonne: Now I would like to discuss our March quarter guidance.
Yvonne: We expect revenue to be approximately $158 million plus or minus $10 million.
Yvonne: GAAP gross margin to be 21, 5% plus or minus 1%.
Yvonne: We anticipate non-GAAP gross margin to be 22, 5% plus or minus 1%.
Yvonne: The expected quarter over quarter decline is largely due to the decrease in license and engineering service revenue and to a lesser extent the anticipated increased manufacturing costs during the lunar new year period.
Yvonne: GAAP operating expenses to be $46, 5 million plus or minus $1 million.
Yvonne: non-GAAP operating expenses are expected to be 39, $5 million plus or minus $1 million.
Yvonne: Interest expense to be approximately equal to interest income and income tax expense to be in the range of $1 1 billion to $1 3 million.
Yvonne: With that we'll now open the call for questions. Operator, please start the Q&A session.
Yvonne: At this time, if you would like to ask a question at this time followed by one on your telephone keypad.
Yvonne: Any reason that you would like to remove that question. It is star followed by two again to ask a question. It is star one.
Yvonne: As a reminder, if you use the speakerphone. Please pick up your handset before asking your question I'll pause briefly here's question as relates to.
Yvonne: Okay.
Speaker Change: Our first question comes from Craig Ellis with company B Riley Securities. Greg. Your line is now open.
Speaker Change: Yes, thanks for taking the question guys and congratulations on the <unk> of year on year growth in calendar 'twenty four I wanted to go back to the prepared comments on.
Speaker Change: Performance versus expectations in fiscal <unk>.
Speaker Change: AIA celebrated market.
Speaker Change: Commented that revenues were a little bit below what you had expected.
Speaker Change: Can you provide more detail was the issue either in AOS held product tissue or share into a platform or was it just the pace at which the platform is ramping up.
Speaker Change: No it's simply the transition from our customers on old program moving into the New program, we're continuing to be working working with them in their ramp up.
Speaker Change: This is their transition pace. So just remember that we have been shipping into especially the accelerated cards throughout this.
Speaker Change: The past 2020 for calendar 'twenty 'twenty, four and now that they've launched.
Speaker Change: The products are transitioning to the new platform. So we expect a bit of a transition and the new model that we are starting to ship already and that's going to continue to grow throughout.
Speaker Change: This current calendar year.
And then a follow up to that Stephen and thanks for that color.
Speaker Change: There had been reports in the mid December timeframe around some thermal issues associated with AOS <unk> product can you speak to whether that was the case.
Speaker Change: To the extent that it was weather.
Speaker Change: Those issues as reported accurately or potentially inaccurately have been resolved.
Speaker Change: Yes, so we're actually not going to comment we've never offered any comments regarding the article that was put out about us.
Speaker Change: Our general practice isn't too to go into details about our designs at our customers on our respect for our customers, but we did say in our prepared remarks, and what's actually going on is that we've continued to be one of the main contenders in this upcoming design for data centers. So we're pretty excited about that.
Speaker Change: We are giving guidance that we expect.
Speaker Change: This program to award program to launch in the Middle of the year and this is something that we are excited and looking forward to.
Speaker Change: And then if I could and it's along the same thing because that's where all the investor questions are I think there are generally speaking.
Speaker Change: Multiple opportunities for the company one would be more.
Speaker Change: Card centric and somewhat similar to along shipment history, you've had with the customer one would be more on server system Board can you talk about the extent to which.
Speaker Change: Each of those.
Speaker Change: And the magnitude would contribute to growth and how should we think about the growth potential from this platform how material can it be as we think about revenues ramping mid tier. Thank you Steven.
Speaker Change: Sure. Thanks, Greg, It's certainly our opportunity in AI falls into two categories. The first is continuing what we've been doing already which is getting our products shipping our products into both graphics cards as well as accelerated cards and.
Speaker Change: With our.
Speaker Change: Target end customer it's pretty much.
Speaker Change: Similar solution, that's being used there for both graphics as well as AI acceleration in these daughter cards.
Speaker Change: A portion of them as I mentioned is undergoing a transition and they are our customer is ramping up we are ramping with them and we do expect to see content increase also because I believe these cars are more powerful they can do a lot more and they also but they also require more power, which is a good fit for our solutions.
Speaker Change: We are shipping on one big change from the last generation to this generation is that we're also now shipping the multiphase controller in addition to.
Speaker Change: Our power stage and so that's helping us to provide the total solution to the customer for this application. So that's the first category of business and as I mentioned, we are continuing to ramp with them as they are as they bring up production.
Speaker Change: <unk> fully.
Speaker Change: And going on throughout this quarter and then throughout the next few a few a few quarters.
Speaker Change: The second category.
Speaker Change: Projects that we are targeting.
Speaker Change: Is the AI data center portion of it and this is where our solutions are being used on board to power Gpus.
Speaker Change: And on <unk>.
Speaker Change: These go into their server solutions and this is something that we are very excited to take part into be able to.
Speaker Change: Design into.
Speaker Change: Right now still in the middle of that design phase and we're closely working with that customer in.
Speaker Change: In bringing our boards and working with them.
Speaker Change: And I'm not going to go into details about the design, but we did in <unk>.
Speaker Change: Already indicate that this is something targeting that.
Speaker Change: Targeting mid year four for lunch.
Speaker Change: That's very helpful. Thank you Steven.
Speaker Change: Okay, well, thank you David Williams.
The company Benchmark company David Your line is now open.
Speaker Change: Hey, good afternoon, gentlemen, it's good to talk with you and.
Speaker Change: Thanks for letting me ask a question here.
Speaker Change: If I gave David Steven first.
Speaker Change: Not to.
Speaker Change: To beat the proverbial dead horse here, but as we kind of think about that the AI opportunity for you and you've talked about being in the middle of this design.
Speaker Change: Design phase here, how do you think obviously.
Speaker Change: Your March launch.
Speaker Change: But what do you think youll have a better indication on your content that you have and if you've won that slot and what you've won.
Speaker Change: Thank you would kind of get that indication and when should we begin to really think about those revenues coming in and given that it's kind of a new area for you. It seems like that should be a fairly sizable step up in the revenue.
Speaker Change: Is that fair.
Speaker Change: Yes, we certainly think the potential for our.
Speaker Change: Business in data center to be.
Speaker Change: A much bigger than that of the graphics portion simply because of the usage goes up much more as you can imagine in these data centers.
Speaker Change: The power levels are significantly bigger so it simply requires more power stages to power each of these but these gpus.
Speaker Change: I want to quantify that at the moment, but.
Speaker Change: Basically it is something that is.
Speaker Change: Multiples bigger you can say in terms of the total.
Speaker Change: Tam that we can go after.
Speaker Change: We know that we're not the only one players going after this so the share is still is still to be determined that final design everything is still to be finalize as well too.
Speaker Change: So we're working closely with the customer again at this point, we can say that we're targeting for a mid year.
Speaker Change: Lunch.
Speaker Change: Okay, well congratulations on the progress there and that's an area you've been really working to get into so.
Speaker Change: Fantastic and then.
Speaker Change: If you kind of think about the gross margin profile, we knew it would come down here a bit I think actually performed a little bit better than we anticipated, but how do you think about the margin profile as we get into next year and as you kind of get this ramp coming back and it seems like some higher margin products potentially in the volumes should we be begin to see that utilization snapback.
Speaker Change: And where do you think margins can.
Speaker Change: Continually go over the next 12 to 18 months.
Speaker Change: Sure.
Speaker Change: Generally yes.
Speaker Change: Thanks.
Speaker Change: 18 months.
Speaker Change: I would expect that yes, there is product mix is probably will improve.
Speaker Change: Sure.
Speaker Change: From this march quarter low point.
Speaker Change: Margin.
Speaker Change: I would expect that probably in the.
Speaker Change: In the <unk>.
Speaker Change: June quarter, we can expect.
Speaker Change: Gross margin on a non-GAAP basis get back to the December quarter level.
Speaker Change: March quarter was Monday.
Speaker Change: Some.
Speaker Change: Product.
Speaker Change: And also the.
Speaker Change: The.
Speaker Change: The decrease in revenue.
Speaker Change: License and under nearing service revenues.
Speaker Change: Along with.
Speaker Change: Lunar new year period.
Speaker Change: It's not going to sell on the.
Speaker Change: Margin side.
Speaker Change: I mean.
Speaker Change: Do you expect that yes, we can.
Speaker Change: Cover from there.
Speaker Change: Okay, Great and then maybe just last one for me I guess, Steve as you look across the landscape and you see the inventory digestion complete.
Speaker Change: Got the tariff issues that are kind of settling in and you pointed to some of that being pulled in this quarter is there a way for you to for US maybe to think about the magnitude of pull ins you saw and then what maybe are you hearing thus far from your customers just given your base in China. How are you hearing from them or what are you hearing and how are you positioned for the tariff stays moving forward. Thank you.
Speaker Change: Yeah.
Speaker Change: I think it's it's not a.
Speaker Change: A huge amount, but I think it.
Speaker Change: It makes it that right now we're getting regarding computing just to be slightly down whereas in like a normal year over year, we will have more of a pronounced effect there.
Speaker Change: Think there's still a lot of uncertainty about how that's going to play out.
Speaker Change: In terms of the with the New administration is doing and what the impacts will be on.
Speaker Change: On trade you can say, but.
Speaker Change: Right now I think thats because of the anticipation of tariffs that we saw some we saw a little bit of pull ins coming because of that.
Speaker Change: Great. Thanks, so much.
Speaker Change: Our next question comes from Jeremy Kwan with a company Stifel. Jamie Your line is now open.
Speaker Change: Yes. Thank you just wanted to circle back on the gross margin question.
Speaker Change: You mentioned I think it's being impacted by ASP erosion and mix changes can you quantify that.
Speaker Change: Do recall I think you talked about pricing declined in the high single digits kind of being above maybe typical kind of <unk>.
Speaker Change: Level set us where things are now and how you see it shaping up over the next.
Speaker Change: 12 months.
Speaker Change: Okay sure, yes, I mean for the whole year.
Speaker Change: Erosion was in the range of mid to high single digit range.
Speaker Change: Are the same.
Speaker Change: Product basis so.
Speaker Change: Going forward for this calendar year 2025.
Continue to expect.
Speaker Change: Mid to single digit mid single digit type of ASP erosion.
Speaker Change: What we do here.
Speaker Change: We we will accelerate our new product rollout to two concerted ASP.
Speaker Change: Erosion so.
Speaker Change: With some good opportunities design opportunities here.
Speaker Change: We expect beyond March quarter that our gross margin bounce.
Bounce back and recover.
Speaker Change: Great and can you remind us again, what your current utilization levels or both.
Speaker Change: Internally and also maybe potentially at your foundry partners, including the JV and how do you kind of expect that to look as we look ahead.
Speaker Change: The rest of the year.
Speaker Change: Okay short for our internal utilization right now.
Speaker Change: 80% or so so.
Speaker Change: So foundry in JV.
Speaker Change: Yes.
Speaker Change: On their own.
Speaker Change: Yes.
Speaker Change: They can.
Speaker Change: Provide me to our.
Speaker Change: Patients on us.
Speaker Change: Purchase.
Speaker Change: Got it and maybe one last question on the gross margin side.
Speaker Change: With <unk>.
Speaker Change: Margins are expected to bottom in the 25% level.
Speaker Change: Bouncing back to just in the quarter levels in June how do you see.
Speaker Change: Your long term targets.
Speaker Change: And what kind of revenue levels do you get to kind of.
Speaker Change: Maybe get back to that 30% gross margin.
Speaker Change: <unk> experienced in the past.
Speaker Change: Yes.
Speaker Change: Midterm target model is.
Speaker Change: Revenue.
Speaker Change: Sure.
Speaker Change: Just $1 billion.
Speaker Change: At that time, we expect.
Speaker Change: non-GAAP gross margin to be around 30 above 30% range. So.
Speaker Change: Our midterm.
Speaker Change: Target.
Speaker Change: And that contemplates.
Speaker Change: Price erosion in the mid single digits.
Speaker Change: Yeah.
Speaker Change: Yes, yes.
Speaker Change: Got it.
Speaker Change: I guess turning to the.
And markets Steve.
Speaker Change: Stephen you mentioned on the consumer side that Theres, a transition going on in terms of the gaming.
Speaker Change: Can you kind of walk us through that.
Speaker Change: Dynamics of that when do you see EBIT.
Speaker Change: Transition.
Speaker Change: And reflecting that.
Speaker Change: The nexgen.
Speaker Change: Contributing more meaningfully in.
Speaker Change: And how long is that expected to be a headwind before it turns into more of a tailwind.
Speaker Change: Sure. So in the gaming platform cycles tend to last somewhere around 6% to seven to eight years, it really depends on how.
Speaker Change: Customers cadence right now we are around year five of the launch.
Speaker Change: It is expected that but.
Speaker Change: Their production volumes is going to is.
Speaker Change: Starting to tail off so for now we arent expecting this to be a huge part of the consumer portion.
Our sights are set on.
Speaker Change: Ready for the next platform, which is still kind of early early stages for so in the meantime, we're putting our attention into other areas are growing, especially AI on smartphones is also something that we continue to grow and as well too so.
So we will ship to addressing the other markets and of course, and we're gonna be preparing ourselves for the next major gaming of the platform launch.
Speaker Change: Got it and then I guess, maybe kind of.
Speaker Change: Going off of that.
Speaker Change: As you look ahead to.
Speaker Change: This year, which end markets are you most excited about in terms of growth contributors and if we could get a little bit more insight.
Speaker Change: And then computing can you give us the split rough split between graphics cards, Pcs and AI accelerator cards. Thank you.
Speaker Change: Yeah.
Speaker Change: Sure Yeah, we're certainly excited about AI and Thats certainly going to help to.
To strengthen our overall computing segments.
Speaker Change: In the past, we thought that the segment will start to too.
Speaker Change: To reduce in terms of the proportion of our revenue, but because of our efforts into AI data Center and graphics. This is something I think this is actually.
Speaker Change: We're going to continue to grow this is actually a natural evolution of us focusing on Puc's first and then moving to graphics and now moving to AI and that's Perez.
Speaker Change: Pairs well with our solutions that we're offering from discrete to Ics for the power stages and now suddenly that the selling the total solutions for that.
Speaker Change: Right now.
Speaker Change: <unk> is really just starting so it's a small portion of.
Speaker Change: Our computing business, our core PC business is still the mainstream and we still expect that to.
Speaker Change: To be steady and we're still waiting for that recovery ultimate recovery to happen for the PC market.
Speaker Change: But.
Speaker Change: Over time actually we do see we expect to see acceleration in growth for our <unk> and graphics business I don't want to size. It at this point, but this is definitely going to be the probably the biggest growth area for us in this calendar year.
Speaker Change: Great. Thank you I'll hand, it back over.
Sure Hey, I'm sorry go ahead the other the other area that just to finish your question I wasn't only on AI.
Speaker Change: We also see that smartphones will be an area that we will continue to be strong for us.
Speaker Change: We are continuing to be a market share leader in.
Speaker Change: All of the three core markets that we're in when it comes to battery protection.
Speaker Change: And for these customers, especially the leading brand we are.
Speaker Change: We continue to expand our footprint into the other products too. So that will also be continued to be a growth area and a focus for us and we still see other sub segments also emerging.
Speaker Change: Can help us to grow as well, we're still excited about E mobility.
Speaker Change: That's a newer area when it comes to E bikes and scooters.
Speaker Change: And we'll.
Speaker Change: We'll continue to invest in other motor applications as well.
Speaker Change: Great. Thank you very much.
Speaker Change: Thanks, Jeremy Our next question comes from Craig Ellis with the company would be wildly Securities. Craig. Your line is now open.
Speaker Change: Okay.
Craig Ellis: Yes, thanks for taking the follow up questions and in fact, Mike.
Speaker Change: My first question is right, where I think Jeremy and Stephen you ended the conversation there and it was really framing up the things you're most confident in and deriving calendar 'twenty five euro setting aside anything that's unit growth related weather smart.
Speaker Change: Phones, Pcs whenever but either accruing from content gain share gainer, just Sam expansion and into a new application.
Speaker Change: Steven I think what I heard you say is that AI would be the biggest after that you've still got a lot of headroom with smartphone content and then there are other areas like E mobility.
Speaker Change: Is that the right prioritization and this or anything else that would go on that list.
Speaker Change: Yes, I would put those in.
Speaker Change: That's about right, but for sure the AI the top one we talked a little quite a bit about the potential there.
Speaker Change: Smartphones is exciting again, because we are seeing charging currents increase there is generally a demand for fast charging and we see a filmmaker's advertising that.
Speaker Change: And this is something that's.
Speaker Change: Directly tied to the usage of our products.
Speaker Change: In those battery packs so.
Speaker Change: So with the new charging currency going up.
Speaker Change: The performance requirements for our solutions also go up.
Speaker Change: And thereby the Bom content is expected to increase.
Speaker Change: Each forthcoming generation and this is something that I think will continue to be rolled in going forward across various models.
Speaker Change: At our customers.
Speaker Change: Thank you that's very helpful. And then the follow up is a little bit further on intermediate to longer term gross margin. So clearly.
Speaker Change: There's been a lot of competitive pricing pressure in the market.
Speaker Change: Volume levels that are the slow and it's it's had a negative impact on gross margins and here we are back down in the low twenties as the company looks at things that can do to move back to that mid 20 ish range.
Speaker Change: And then to the 30% range are there things other than the new product release cadence in higher value higher ASP products like we've seen new PR multiple times in the last couple of months.
Speaker Change: Get you back there how do we think about things that you're doing differently amidst recent pricing pressure to reaccelerate margins. Thank you.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: You new products and higher margin products and the rollout yes definitely.
Speaker Change: This is a major backer to improve gross margin.
Speaker Change: On top of that yes.
Speaker Change: As we continue to grow our business.
Speaker Change: We expect our utilization.
Speaker Change: Two to go up so.
Speaker Change: Internally, we also focus on cost reduction so.
Speaker Change: All of those.
Speaker Change: Aspects of that.
Speaker Change: We.
Speaker Change: Expect to.
Speaker Change: Grow our.
Speaker Change: Gross margin.
Speaker Change: Got it and and <unk> would you expect a fairly steady climb back I know that Tim part trying to put a prediction on in demand, but maybe.
Speaker Change: Maybe the different way to ask it is are there any discontinuities coming either and new products and pricing and gross margin or cost reduction that would give us a particular step up as well.
Speaker Change: We look out over 25 and 26.
Speaker Change: I mean that.
Speaker Change: A lot of them.
Speaker Change: It's hard to say there are a lot of factors.
Speaker Change: Intertwined.
Speaker Change: Intertwine there.
Speaker Change: But what.
Speaker Change: What I expect is.
Speaker Change: In the.
Speaker Change: June quarter.
Speaker Change: We can expect that our non-GAAP margin get back to the December.
Speaker Change: non-GAAP margin available.
Speaker Change: Got it okay, well that'll be a nice step forward, okay. Thanks, very much Tim.
Speaker Change: Okay. Thank you. Thank you.
Jeremy Kwan: Our next question comes from Jeremy Kwan with company Stifel. Jamie Your line is now open.
Speaker Change: Thank you just a quick clarification follow up Andy.
Speaker Change: The customer deposits I think in the past few broken out short term versus long term.
Speaker Change: And your total deposits I believe that's $42 3 million last quarter with.
Speaker Change: With the 5 million down 37, but can you break that out between short term and long term deposits.
Speaker Change: How you see that shaping up.
Speaker Change: And one <unk>.
Speaker Change: Follow up to that would be.
Speaker Change: Are there any.
License payments that you might need to make in terms of building carbide agreement or is that pretty much.
Speaker Change: Locked in at this point.
Speaker Change: Okay sure I terms of that sorry.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: In terms of the customer.
Speaker Change: Part of this.
Speaker Change: Yes, there there are 30 some million dollars pilots right now.
Speaker Change: This sheet.
Speaker Change: And in calendar 2025, we expect to retire about $25 million ish or so.
Speaker Change: Most of that $30 million already.
Speaker Change: Classifieds to short term within the next 12 months.
Speaker Change: After that.
Speaker Change: The year 2026.
Speaker Change: Sure.
Speaker Change: There will be several million dollars.
Speaker Change: Over there.
Speaker Change: So that will be down by <unk> 26.
Speaker Change: So what else.
Speaker Change: The.
Speaker Change: Oh there was.
Speaker Change: I think in the past you had a silicon carbide supply agreement is there any kind of come in that's anticipated for that.
Speaker Change: No.
Speaker Change: Let's say that yes.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Alright, thank you.
Speaker Change: At this time there are no more questions registered in queue again, if you would like to ask a question just a follow up one.
Charles: There are no more questions in queue I'd like to pass the conference back over to Charles <unk> for closing remarks.
Steve: Okay. Great. This is Steve <unk> and this concludes our earnings call today and thank you for your interest in AOS.
Charles: Look forward to talking to you again next quarter take care.
Speaker Change: That will conclude today's call. Thank you for your participation and enjoy the rest of your day.