Q4 2025 Alpha and Omega Semiconductor Ltd Earnings Call

Good afternoon and thank you for attending the Alpha and Omega. Omega, semiconductor, fiscal Q4 2025 earnings call. My name is Jason, and I'll be the moderator today.

All lines of be muted during the presentation portion of the with an opportunity for questions and answers at the end.

Now, like about the conference over here, this is Steven paleo

Good afternoon everyone and welcome to Alpha and Omega semiconductors conference. Call to discuss fiscal 2025 fourth quarter.

I am Steen Pho. Best of relations representative for AOS with me, today are Stephen Chang, our CEO. And he found me on our CFO, this call is being recorded and broadcast live over the web. A replay will be available for 7 days. Following the call via the link in the investor relations section of our website. Our call will proceed as follows today. Stephen will begin business updates including strategic highlights and a detailed segments report after that, efan will review the financial results and provide guidance from September quarter. Finally, we will have a Q&A session the earnings release was distributed over the wire today, August 6th, 2025 after the market closed. The release is also posted on the company's website, our earnings release in this presentation in

Include non-gaap Financial measures to use non-gaap measures because we believe they provide useful information about our operating performance. That should be considered by investors in conjunction with The Gap measures a Reconciliation of these non-gaap measures to comparable. Gaap measures is included in the earnings release. We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business Outlook, and financial projections. These 4 looking statements are based on Management's, current expectations, and involve risks, and uncertainties that could cause our actual results to differ materially for more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with the SEC. We've seen no obligation to update the information provided in today's call. Now, I'll turn the call over to our CEO. Stephen Chang Steen.

Q4 Revenue results at the high end of our guidance. Is it better than expected demand in Computing? Mostly driven by tariff related, customer Poland, for PCs and strong sequential growth in Ai and Graphics chips.

Our consumers them and also saw strong sequential growth related to wearables and gaming overall total dream quarter Revenue was 176.5 Million non-gaap growth. Margin was 24.4% non-gaap EPS was 2 cents.

Total revenue increased 9.4% year-over-year and 7.2% sequentially as previously. Noted licensing Revenue wound down in the March quarter excluding licensing and other Revenue are product. Revenue was up 13.7% year-over-year and 9% sequentially.

Our IC Revenue, increased 25.8% sequentially and 30.2% year-over-year through a record quarterly high and now represents nearly 40% of total product Revenue.

The Richer mix of power. I see benefits growth, margins and comes from Graphics, AI gaming, and PC markets on July 14th, we announced an equity transfer agreement, with a strategic investor to sell approximately 20.3% of outstanding Equity interests of AOSS. Joint venture in China, for an aggregate cash consideration of 150 million.

The sale is expected to provide AOS with significant additional Capital to continue investing in technology equipment and acquisition of assets complimentary to our business operations to support key growth areas.

In summary, uncertainties regarding macroeconomy and geopolitics continued.

Nonetheless, we are delivering on our commitments and advancing our transformation from a component supplier to a total solution provider.

Our goal is to leverage, Premier customer, relationships to expand, market, share and increase Bond content with a broader portfolio.

With that. Let Me Now cover our segment results and provide some guidance by segments for the next quarter starting with Computing. June quarter Revenue was up 29.7% year-over-year and up 17.9% sequentially and represented the majority or 52.6% of total revenue.

These results were solidly ahead of our original expectation, for Mid single digit, sequential growth and more than 15% year-over-year,

As mentioned earlier, the upside was fueled by tariff related Poland's from our PC customers and robust sequential and year-over-year growth in Power Solutions for AI and graphics with applications.

Revenue from Ai and Graphics reached a record high. In the June quarter driven by strong initial shipments for a new AI program. However, we can expect a digestion period in the September quarter as that initial demand is absorbed.

Meanwhile designing activities for additional AI programs remains active and ongoing.

In summary we expect the competing segment to grow low. Single digit sequentially and mid teens year-over-year in this September quarter.

Sequential growth will be driven by PCS with graphics and AI demand remaining relatively strong. So, down from June's record levels.

Tablet, demand is expected to decline. Overall visibility remains limited given the uncertain macro economic backdrop and evolving, trade policies.

According to the consumer segment student quarter Revenue was down 5.8% year-over-year and up 23.9% sequentially and represented 15.1% of total revenue.

The results were in line with our forecast. Counts driven by strong promotional activity in gaming as well as sequential growth from home. Appliances, wearables were also better than expected.

Well, this is humble quarter. We forecast a mid single digit sequential decline in the consumer segment driven by a gaming and Home Appliances but offset by continued growth in wearables.

Next, let's discuss the communication segment Revenue in the June quarter was down, 1.7% year-over-year down 5.2% sequentially and represented 15.2% of total revenue.

The June quarter results were below our guidance for flat sequential growth as a follow-up from smartphones in China, more than offset growth from Korea. And our Tier 1 US smartphone customer

Smartphone battery, PCM Revenue continues to outpace the overall Market due to a combination of market, share gains, a mix shift to higher-end phones and generally higher charging currents, in driving increased bomb, content.

Prepare for their next phone launch.

Demand from China, smartphone is also expected to grow sequentially. While Korea sustains the high-level achieved in the June quarter.

Now let's talk about our last segment, Power Supply and Industrial, which accounted for 16.8% of total revenue. This segment was up 7.3% year-over-year, but down 9.8% sequentially.

The results were below our flat to slightly down sequential forecast. Primarily due to weaker than expected, demand from power tools and e-mobility.

ACDC power supplies and quick chargers for smartphones. Did increase sequentially but it was not enough to offset the weakness, elsewhere as stated before. We are now seeing increases in quick charges due to increased bomb. Content driven by higher charging cuts for the September quarter. We expect Revenue to grow mid single-digit sequentially for the power supply and Industrial segments primarily driven by a slight pickup in e-mobility offset by lower ACDC, power supplies.

In closing, we are pleased to report that June quarter results landed at the high end of our guidance, fueled by strong demand across AI and graphics, aiming at wearables and tariff-related PC in Poland.

These results highlight the strengths of our diversified portfolio and our ability to execute amid dynamic market conditions.

Looking ahead to the September quarter. We expect further growth driven by PC's smartphones and wearables as we continue to be excited by expanding opportunities in Ai and graphics.

The geopolitical and macroeconomic environment remains fluid. As we actively monitor, evolving trade, policies capture, Poland, related opportunities, and collaborate with customers to minimize disruptions.

Our business fundamentals, remain strong anchored by differentiated technology, a broadening product portfolio, and deep relationships with leading Global customers. We Believe calendar 2025 will be a year of growth supported by expanding and Market exposure, shared games and Rising bomb content.

While near-term uncertainties persists, we remain focused on execution, Innovation, and delivering, sustainable value for our stakeholders.

With that, I will now turn the call over to eson for a discussion of our fiscal fourth quarter Financial results and our outlook for the next quarter. Be fun.

Thank you, Stephen. Good afternoon, everyone. And thank you for joining us.

Revenue for the June quarter was 176.5 Million up, 7.2% sequentially, and up 9.4% year-over-year.

In terms of product mix, the most Revenue was 107.3 million up, 4%, sequentially and 5.1% over last year power. I see Revenue was 68.7 Million up 25.8% from the park quarter and 30.2% from a year ago.

Assembly service. And other Revenue was 0.5 million as compared to 0.4 Million last quarter, and 1.4 million for the same quarter last year.

We did not have any license and Engineering Services. Revenue this quarter,

As did related to the contract, was completed in May, February.

This compares to 2.8 million in the prior quarter and 5.1 million in the same quarter last year.

Gross margin was 24.4% compared to 22.5% last quarter and 26.4% a year ago.

The quarter quarter increased was primarily impacted by the mix Improvement.

Non-gaap operating expenses were 40.9 million compared to 39.7% last year. The quarter quarter increased was primarily due to higher R&D engineering expenses

Non Gap quarterly EPS was 2 cents compared to negative 10 cents per share last quarter and 9 cents per share a year ago.

Moving on to cash flow.

Operating cash flow was negative 2.8 million, including 2.7 million dollars of repayment of customer deposits by comparison, operating cash flow was 7.4 million in the power quarter and 7.1 million dollars last year.

We expect to refund 5 million dollars of customers deposits in the September quarter.

.5 million.

Compared to 15.2 million, the last quarter, and 16 million dollars for the same quarter a year ago.

Now, let me turn to our balance sheet. We competed in June quarter with a cash balance of 153.1 million compared to 169.4 million at the end of last quarter,

Nitrate receivables increased by 6.3 million sequentially.

Day sales outstanding work. 15 days for the quarter compared to 11 days for the power quarter.

90 inventory increased by 1.6 million quarter of a quarter. Average days in inventory, were 126 days for the quarter compared to 129 days for the power quarter.

Capex for the quarter was 14.3, million compared to 8.1 million for the park quarter.

We expect capex for the September quarter to range from 11 million to 13 million. A few words about our drawing Venture in Chongqing. China, on July 14th, we signed an equity transfer agreement to sell 20.3% of the outstanding shares of CQ TV for 150 million dollars in cash.

And we expect this deal to be completed in the next few months. This transaction, demonstrated our commitment to the ongoing value creation for our shareholders with this sale.

Our ownership in CQ JV will reduce to 18.9% from 39.2%. DQ JV will remain as an important wafer and packaging supplier for AOS. After this transaction, the new investor plans to inject significant amount of capital into CQ JV to further expand its capacity.

Based on evaluation of this sale. We recorded an impairment charge of 76.8 million in the June quarter on the US, gaap basis. This impairment charge partially reversed the 358.7 million net gain that we recorded Back to December 2021. After we sold 3.2% Equity interest, in DQ JV for 26.3 million cash.

With that. Now, I would like to discuss, September quarter guidance.

We expect Revenue to be approximately 183 million plus, or minus 10 million, that gross margin to be 23.8% plus or minus 1%.

We anticipate the non gaap, gross margin to be 24.4% plus or minus 1%.

Gap property expenses to be 47.5 million plus or minus 1 million non Gap, operating expenses, expected to be 41 million plus or minus 1 million dollars.

Interest income to be 0.5 million higher than interest expense and income tax expense, to be in the range of 1 million dollars to 1.3 million with that. We will now open the call for questions, operator, please start at Q&A session.

If you would like to ask a question, please press star followed by 1 on your telephone.

for any reason. You'd like to remove that question. Please. Press star. Followed by 2 again. To ask a question. It is star 1.

Our first question is from David Williams with bench, rail line is open.

David Williams. Your line is open.

Our next question is from Jeremy Kwan with stifel now, I just now open.

Related to the Tariff Pullins more generally or is that related to the you know strong initial shipment um of the new AI program and any you know colleagues can provide in terms of the AI contribution this quarter. And and how you see that going forward over the next couple of quarters would be very helpful.

Hi, Jeremy. So, certainly, we're excited about our Ai and Graphics. Um, business. Uh, this is something that's been, you know, we've been building upon and expanding in, in our Advanced Computing area. And, um, and in terms of the digestion portion and this is, is a reflection of, um, some of the, when the AI programs that we, uh, started shipping into, uh, in the last quarter. Um, the we we ship into and for certain program and we, we expect to take a little bit longer for that initial, uh, shipment to be digested, uh, by the same time. You know, we're also and we commented in the call on that, you know, we are excited that that our, our additional programs that we continue to be designed into, uh, that will help with that with that digestion. And at the same time, we already are seeing fresh, um, orders as well. Um, forecast and back law coming in for some of those new programs. Um, so, you know, again, you know, we we are going after multiple, uh, types of projects here when it comes to Ai, and

This is in addition to what we're doing on the graphic side. Uh, on the graphic side that actually, you know, we, you know, we report also that, you know, we that is also fairly strong and I would say better than our original expectations with good share, and at the add in, uh, card makers, uh, for the graphics cards. So we're excited about both of our AI as well as graphics and business.

Great. And that's very helpful. And can you help us quantify this maybe in qualitative terms? Like, how much um, your total AI is is as a part of the continuing segment or maybe how much it drove uh, growth in the current quarter and and maybe how you see that um shaping out over the next, you know, maybe call it 12 to 18 months.

Yeah, we tend to look at both graphics and AI together when it comes to, um, because they're this products are pretty are pretty similar but when it comes to both the controller, as well as the uh, the driver Moss that we're selling as a total solution. So those 2 together is somewhere on the neighborhood and maybe around 25% of computing these days.

Great. That's very helpful. Um, and maybe if I can ask a question on, um, the uh, gross margin, I

I understand that, you know, the Richer mix kind of helps with um the Richer mix of the power, I C help with gross margins. This quarter. Um it's it's

Kind of um, maybe flat next quarter, you know, revenues are a little bit higher. Um, can we infer from that that maybe the power IC mixed, you know, shift down a little bit here. Um, can you just help us understand kind of the Dynamics, uh, near-term and, and how you see this, um, looking out. Again 12 to the 18 months. Um, especially as you know, some of these newer, um, richer, higher value products, uh, continue to ramp, thank you.

sure, turn me um yes in the room quarter, you know, I

Would gross margin, improved it, uh, quarter over quarter, uh, pretty nicely. So, it was back up to the December 2024 quarter level. Um, so the primarily because of this, uh, Better Mix, um, keep in mind and, you know, in the June quarter, uh, we did not have any license and Engineering service Revenue. Uh,

Compared to the March quarter because, uh, that contract 24 month, contract and expired. Uh, you made February. Um, so, um, this, uh, uh, in terms of September quarter guidance, uh, uh, flat compared to the room quarter on

Martin.

Basically reflected, um, similar.

Um, mix, uh, product mix and similar production level. And then I mean that's uh, uh Revenue. Yes, that was a little bit higher compared to the June quarter. Uh, so we still have

An Revenue, uh, the inventory and also other inventory. Uh, we purchased from, uh, third-party foundries and, and, and subcontractors, to support. So so overall.

uh, we see at this point that we see uh, uh flattish, uh,

September quarter.

And and Beyond the September quarter. How how should we think about gross margins? Um, especially you know, do we can are you expecting the mix to continue increasing? Um or to be more increasingly favorable, um just any kind of color you can provide on, that would be helpful.

Uh, sure that. I mean we don't give a longer term guidance. And then I mean we only guide on 1 quarter at a time. So but overall yeah that I mean, as our Revenue continue to grow and I would expect yeah when in the growth area

I would expect.

Uh, uh, we can, we expect to see, uh, better part of mix?

Got it. And and 1 last question if I could um just

Thinking about, you know, the uh, the sale or the transfer of um, you know, portion of your whole JB Holdings that 150 million dollars. Um,

You know, can you?

Maybe rank order your priorities in terms of, you know, how you how we you're thinking about capex um Opex, maybe some m&a. Um you know, is there any thought as to you know, shareholder returns. Um yeah, does any kind of uh indication about? You know how you think about that? Um cash inflow.

Uh, sure. Uh, first of all, I mean this uh, 150 million dollars, cash deal. Uh, we expect to be completed in the next few, uh, months then, I mean probably by the end of this calendar year. Um, and then, um, you know, the, the first payment and we can expect it probably in, in the September quarter and, and then rest of the money, uh, expected to come in, uh, in the

December quarter um in terms of uh uh use of cash. And then I mean the we we we definitely will invest in, you know uh business growth. And you know we do see quite a bit, the growth opportunities and uh

Ahead of us. So, um, yes. And it will invest in, you know, technology in uh, how how, how, uh, uh, Thailand and then and then, uh, expanding our capacity and then I mean, yeah, m&a is also, uh, on the on the, uh, on the plan and, you know, but that 1 is dependent on the opportunity in the US, the, um, that. Um, yeah. And then I'm sure our board will evaluate and in terms of, uh, uh, return, uh, Capital to to, uh,

Investors and so, uh, you know, that's all on the on the slide.

Great, thank you very much.

Right. Thank you.

Our next question is David Williams with Benchmark. Your line is now open.

Hey, I think my questions and I apologize for the the first issue there. Um, look I I kind of following up on the last question on the, the JV. Um, if you kind of think about your, your balance sheet, now, it feels like, uh, and you talked about some of your utilization and third-party foundries and and that's provided some nice flexibility in the past. But I wonder how you think about adding or bringing in additional capacity uh internal to help you drive the margin profile. Um as you as you kind of scale, the business is that the place you want to be, or would you prefer to have this kind of even split between third party and internal uh, and and the JV

Sure. And that, I mean that this, uh, definitely, I mean there's 150 million dollars to uh, transaction. Definitely will bring in, uh, you know, more Capital to us and then and, and also increases some flexibility uh, in terms of uh uh, where we want to uh, set up a supply. Um, yeah, we we'll continue to evaluate, you know, both and

Internal, uh, production and uh, uh, purchasing from a third party boundaries, it depends on our needs. Sure, I mean after this transaction, I mean, our balance sheet is definitely got to strengthen the, um, you know, we we, we would have quite a bit. Uh, um, uh,

Liquidity and and uh, also I mean we created quite a bit value. Uh uh for our investor that. I mean that's uh, if you look at this uh

Uh, and then in the past, and we recorded 300 some million dollars on our balance sheet in this, uh, uh, Equity investment. Um, you know, the

Throughout the years, including this deal, we already realized about 176 million dollars or so, uh, cash. And and then, uh,

We we still own uh 18.9% uh even after this um transaction. So um I mean I would say then yeah this uh deal is definitely created and tackled heck of uh

buying for for our investors.

Yeah, no, no doubt. If I'm in recently, correct. You were 30 to 35 million dollars total, including equipment and some cash. Is that right?

Uh, we invested 35 million cash in the plus that, uh, some used assembly equipments.

Yeah. Yeah that's uh that is a heck of a return. So congrats on that. Um good. Thanks for the color and and I guess maybe uh as you think about your, your internal capacity and and care of us and the shipping, I just kind of giving how much of your your customer base ends up in in Asia. How do you think the tariffs are impacting your

Your local manufacturing capacity, uh is that is it a bigger challenge for you than maybe being outside of the country and moving outside largely and uh, just maybe what your exposure do you think to the tariffs on that side of of the house?

uh,

So far, I mean, the direct and impact from tariffs and this and on us and it's not that significant the sensor. We don't ship a whole lot of uh, products uh, to the US. So, um, you know, from that front and yeah 1, um,

Right now. What? Okay, but then this geopolitical and uh, trade and uh, tension that, you know, the the the dude plays some uh, an uncertainty is the here. Um, so what? What, what,

Um, adjust our supply chain, you know, along with our customers. And so basically, you know, we want to support our customers. So, wherever our customers at uh, uh, are located. And we, we want to

Support them.

Great. And and maybe Stephen how do you or, or maybe if you think about how your customers have been reacting? Are you do you, do you sense that there's more cautiousness out there in terms of the demand side and and kind of where things lead or do? You feel like people are generally feeling better about the second half in from the underlying demand side.

I think that the answer is different depending on which Market you're looking at, um, in terms of the, the uh, the Tariff impact.

We see that from the demand side more prominently and in the Computing side, when it comes to notebooks and desktops, um, over there and we are, you know, we're we're we are still dealing with how with, how to support, uh, the Poland efforts, um, and and with uh, with uh, demand being pulled in, um, by our customers, in advance of any kind of policy change when it comes to tariffs. Uh, so as of right now, um, um, our customers are still wanting to, to produce as much as they can and get things into get things, you know, produced and onto a boat, uh, before the tariffs change. Uh, so that's more more prominently so in in the PC market, um, we don't really see the Tariff impact on other areas. Others are more other impacts. Of course anything with AI is is definitely still a very hot on Graphics. Still continues to be uh strong as well too. Since then um that the cards graphics cards just launched at the beginning of this year. Uh the AI programs are just starting up also so those are and those are still you know, fresh um new projects. Um

Smartphones. So we're heading into, uh, the peak season, uh, with um, the US and the Korea, smartphone maker also going into a peak production. Uh, so those are, um, seasonal effects and, uh, that we're seeing now,

Great. Thanks so much for the help. Certainly appreciated them, best of luck on the quarter.

Thank you, David.

It looks like there are no more questions. So I'll pass the call back over to the management team for closing remarks.

great before we conclude, I'd like to highlight

Vector, it hardware and networking conference on August 26th and the Jeffrey semiconductor. It hardware and Communications technology conference on August 27th. Both of those are in Chicago, Illinois, as well as the Benchmark, 2025 Tech media and Telecom conference on September 3rd and PD Securities. Technology, growth cap Summit on September 4th both of those are in New York City. If you wish to request a meeting, please contact the institutional sales representative at each sponsoring Bank, this concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking to you again, next quarter.

Thank you. Thank you.

That concludes the conference. Thank you for your patience. Enjoy the rest of your day.