Good afternoon. Thank you for joining today's Alpha and Omega Semiconductor Fiscal First Quarter 2025 Earnings Call. My name is Jaylen, and I will be your moderator for today. I would now like to pass the call over to your host, Steven Pelayo. Steven, you may proceed.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2025 first quarter financial results. I am Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO; and Yifan Liang, our CFO. This call is being recorded and broadcast live over the Web. A replay will be available for seven 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 segment report. After that, Yifan will review the financial results and provide guidance for the December quarter. Finally, we will have the Q&A session. The earnings release was distributed over the wire today, November 4, 2024, after the market close. The release is also posted 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 the GAAP 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 forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call. Now, I'll turn the call over to our CEO, Stephen Chang. Stephen?

Thank you, Steven. Welcome to Alpha and Omega's fiscal Q1 earnings call. I will start with a general overview of our results and then discuss segment details. We achieved fiscal Q1 revenue and EPS results as predicted. Revenue was $181.9 million, and our non-GAAP gross margin was 25.5%. Our non-GAAP EPS was $0.21. We experienced broad-based demand due to seasonal trends in the September quarter, with sequential growth in all major segments. We observed notable strengths in PC desktops, notebooks, and servers within our Computing segment; gaming and wearables in Consumer; growth from a Tier 1 U.S. smartphone customer in Communications; and AC-DC power supplies and quick chargers in the Power Supply and Industrial segment. We have met our commitments and are progressing steadily in our shift from being a component supplier to a comprehensive solutions provider, capitalizing on our strengths in high-performance silicon packaging and intelligent ICs. Our goal is to gain market share and enhance BOM content with a wider portfolio. For instance, we are utilizing our expertise in graphics cards and launching new Vcore products to tap into opportunities in advanced computing and AI data centers. In the smartphone market, trends such as foldable screens, AI integration, and faster charging present growth prospects. Besides Computing and Communication, we recognize long-term opportunities in solar, e-mobility, gaming, and home appliances, driven by the global necessity for efficient sustainable energy solutions. Now, let's review our segment results and provide some guidance for the upcoming quarter. Starting with Computing, revenue for the September quarter increased by 8.6% year-over-year and 6.6% sequentially, accounting for 42% of total revenue. These results exceeded our initial expectations for mid-single-digit growth. Our strength came from PC desktops, notebooks, and servers, though this was slightly countered by declines in graphics and AI-accelerated cards due to a pause ahead of the next platform transition. We are more confident in our position in advanced computing, with our backlog for both graphics and AI-accelerator cards now expanding as we approach the new platform rollout. We are collaborating closely with add-in card manufacturers in Asia as they ramp up their boards for mass production. With this new platform, we expect BOM content to rise as more power stage ICs, paired with our controller, will be used to power the GPU. These design successes demonstrate the strength of our customer relationships and our comprehensive solutions approach, as we provide both the controller and power stages. Furthermore, we are working with clients on significant data center projects scheduled for 2025 and anticipate sharing more about these developments in our next earnings report. As for the December quarter, the PC market is forecasted to decline due to seasonality, but we expect the Computing segment to experience slight sequential growth, with gains in desktops and strong performance in graphics cards and servers, tempered by seasonal factors in the notebook and tablet markets. Now discussing the Consumer segment, revenue for the September quarter rose by 2% year-over-year and 12.4% sequentially, representing 17.4% of total revenue. These figures met our forecast for low double-digit sequential growth and were mainly driven by gains in gaming, wearables, and TVs, although this was offset by declines in home appliances. This marks the second consecutive quarter of growth in gaming, leading us to believe that the inventory correction is now complete. However, we do not anticipate significant growth until customers transition to the next platform. Wearables had a standout performance this quarter, achieving record levels through market share gains and the launch of new smartwatch and headphone versions. For the December quarter, we project nearly a 30% sequential decline in the Consumer segment due to seasonality in gaming and TVs, impacts from recent product launches in wearables, and ongoing weakness in home appliances. Next, turning to the Communications segment. Revenue for the September quarter increased by 14.2% year-over-year and 29.4% sequentially, comprising 19.5% of total revenue. These results surpassed our expectations for double-digit sequential growth as our Tier 1 U.S. smartphone customer readied for its product launch. Some of their premium models are seeing increased BOM content as they adopt a higher charging current. We also experienced strong sequential growth from China OEMs, countered by sequential declines from Korea. As mentioned in the previous quarter, we are gaining from a shift towards more premium smartphones. Looking ahead, we anticipate a low double-digit sequential decline in the December quarter due to seasonal factors and limited visibility on smartphone sell-through as we approach next year. Lastly, let's discuss the Power Supply and Industrial segment, which accounted for 17.5% of total revenue. Revenue declined by 23.7% year-over-year but increased by 15.6% sequentially. The results were on the low end of our forecast for 15% to 20% sequential growth but were driven by seasonal demand for AC-DC power supplies and quick chargers. Within the industrial segment, solar remains weak, but we are seeing a recovery in quick chargers. We anticipate additional opportunities for quick chargers in 2025, owing to higher BOM content linked to increased charging currents. We are also utilizing our relationships in Taiwan to partner on DC fans for server racks. For the December quarter, we expect the Power Supply and Industrial segment to grow in low single digits sequentially, primarily due to e-mobility and continued growth from quick chargers, although this will be partially offset by seasonal declines in AC-DC power supplies. To summarize, the September quarter results aligned with our expectations, confirming that the inventory corrections we faced over the past year are now complete. Seasonality has returned, and emerging markets like AI and advanced computing are on the rise. We expect a typical seasonal decline in the December quarter, mainly from notebooks, tablets, gaming, wearables, and TVs, but partially mitigated by gains in desktops, graphics cards, servers, e-mobility, and quick chargers. Currently, our visibility into 2025 is limited, and the first calendar quarter of 2025 is typically soft seasonally as well. Nonetheless, we remain optimistic and prepared for growth, supported by advanced technology, a diverse product portfolio that caters to a wide range of end markets, and a top-tier customer base across all business lines. We are committed to executing our technology roadmap and excited about our transformation from a component supplier to a total solutions provider. Our strategic initiatives over the past few years are beginning to yield results, as showcased by our success in integrating both controllers and power stages into PCs, graphics cards, and now expanding into AI applications. This transition is set to accelerate as we explore new opportunities and boost our share of BOM content. In conclusion, power management plays a crucial role in key trends like AI, digitalization, productivity, and electrification, particularly as we strive for a sustainable low-carbon society. We see numerous opportunities in advanced computing and data centers, increasing integration of AI in PCs and smartphones, and higher smartphone charging standards involving multiple batteries and streams. Beyond the Computing and Communications segments, we remain hopeful about the essential power trends in adjacent markets such as solar, motors, e-mobility, gaming, home appliances, and power tools. Now, I will hand the call over to Yifan for a discussion on our fiscal first quarter financial results and our outlook for the next quarter. Yifan?

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the quarter was $181.9 million, up 12.8% sequentially and 0.7% year-over-year. In terms of product mix, DMOS revenue was $122.5 million, up 20% sequentially and 0.8% over last year. Power IC revenue was $52.9 million, up 0.4% from the prior quarter and from a year ago. Assembly service and other revenue was $0.9 million, as compared to $1.4 million last quarter and $0.7 million for the same quarter last year. License and Engineering service revenue was $5.6 million for the quarter versus $5.1 million in the prior quarter and $5.6 million for the same quarter a year ago. Non-GAAP gross margin was 25.5% compared to 26.4% last quarter and 28.8% a year ago. The quarter-over-quarter decrease was mainly impacted by ASP erosion and mix changes. Non-GAAP operating expenses were $38.5 million compared to $39.3 million for the prior quarter and $40.8 million last year. The slight quarter-over-quarter decrease was primarily due to lower professional fees and fluctuation of engineering expenses. Non-GAAP quarterly EPS was $0.21 compared to $0.09 per share last quarter and $0.33 per share a year ago. Moving on to cash flow. Operating cash flow was $11 million, including $8.4 million of repayment of customers' deposits. By comparison, operating cash flow was $7.1 million in the prior quarter and $13.8 million last year. We expect to refund $5.8 million customer deposits in the December quarter. EBITDAS for the quarter was $20.6 million compared to $16 million last quarter and $23.3 million for the same quarter a year ago. Now let me turn to our balance sheet. We completed the September quarter with a cash balance of $176 million, compared to $175.1 million at the end of last quarter. Net trade receivables increased by $12 million sequentially. Day Sales Outstanding were 15 days for the quarter compared to 12 days for the prior quarter. Net inventory decreased by $10.8 million quarter-over-quarter. Average days in inventory were 125 days, compared to 148 days in the last quarter. CapEx for the quarter was $6.7 million, compared to $7.2 million for the prior quarter. We expect CapEx for the December quarter to range from $6 million to $8 million. Now, I would like to discuss December quarter guidance. We expect revenue to be approximately $170 million plus or minus $10 million. GAAP gross margin to be 24%, plus or minus 1%. We anticipate the non-GAAP gross margin to be 25%, plus or minus 1%. GAAP operating expenses to be in the range of $45 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $38.8 million plus or minus $1 million. Interest expense to be approximately equal to interest income, and income tax expense to be in the range of $1 million to $1.2 million. With that, we will open the call for questions. Operator, please start the Q&A session.

Our first question comes from David Williams with Benchmark.

Hi. Good afternoon, gentlemen. Thanks for taking my questions. And, excuse me, I jumped on a little bit late here, so forgive me if you covered some of the call. But just kind of curious how you're seeing, I guess, from the competitive standpoint. Are you seeing anything that's changed there? And it takes maybe your business. Is there any new forces that have come in there to disrupt us?

Your question got a little chopped up. Can you rephrase the last part of the question? I heard the question about competition in general, but can you rephrase it again?

Sure. No problem. Just the competitive landscape and if you've noticed or seen anything, more fully, I guess, in the graphics card side, you thought before about that being a competitive spot. I'm just curious how you're seeing that today.

Sure. Currently, we are experiencing a market correction. Most sectors in our markets began seeing this correction last year in the consumer computing area, while this year it is more evident in the automotive and industrial sectors. Every competitor is feeling the effects of these market cycles, leading to heightened competition as more companies attempt to utilize their manufacturing capabilities. Some are even returning to their previous markets. On the graphics front, a significant aspect involves a major upcoming transition for our key customer. They are undergoing a transformation with a new chipset set to launch at the beginning of the New Year, and we anticipate participating in this, particularly in the graphics and add-in card sections. We expect to see our business pick up sooner with less competitive pressure than in previous platforms, where there were more competitors. Although we predict increased competition in the datacenter segment with several key players entering, there are also substantial opportunities in that space.

Great. Just wanted to ask too on the seasonality. It looks like you're guiding down just a bit more than seasonality. Is it fair to assume that, maybe we're back to a place that we can expect kind of seasonal trends here, or is there still enough volatility out there that you think is too early to call?

I think for the standout markets that we've been in Computing and Consumer, that seasonal pattern has returned. But at the same time, the full recovery, especially for PCs, hasn't come yet. We're still waiting for PC shipments to grow, I guess for the replenishment cycles to come back again. Therefore, at least for the last few years, after the inventory correction of the previous year, right now, we're just waiting for the PC shipments to be able to grow more. That said, we are not standing still, and even in those in the PC markets, we're seeking to gain more BOM content as we sell more of a total solution going into that application. We do think that seasonally, yes, it's going to go through that cycle, where the September quarter is typically the peak because of back-to-school and holiday seasons. And then going into the March quarter is probably more of a trough when it comes to the PC shipments, but that should come back up again going into the following year. We're hoping that, to be able to layer that in especially with our advances in the graphics card and AI-accelerator card side that can help to fill in the gap and layer in on top of what we see as our base business.

Our next question comes from Craig Ellis with the company B. Riley.

Yes. Thanks for taking the questions team and for all the color. I wanted to start with a clarification. Stephen, in your remarks, I think you noted that the expectation in the December quarter for communications would be down around 30%, which seems well above seasonal, for that quarter. I wouldn't be surprised if we saw that on a multi-quarter basis, but single quarter seems high. So, is that a particular OEM program that's weak, or is that something that's spanning different Android programs as well as other customers that you have?

To clarify, I think we didn't say a 30% decline in the December quarter. We said a low double-digit sequential decline in the December quarter. Basically, in this segment, our number one customer in the U.S. market did launch that phone. We have a pretty good share on that phone. The launch is fairly strong. We do expect normally that, for it to drop down some going into the December quarter. So that simply reflects that right now. Right now, I honestly think it's a little bit early to say how strong that reception will be going into this December quarter. Just have to know, were you asking about Communications, or were you asking about Consumer?

I was asking about Communications because I thought that's where you referenced the 30% number. But, if I miss associated those, I apologize.

The 30% decline was specifically for the consumer segment. That's where we mentioned that. And that's a more reflection of the gaming market, the product lifecycle, as well as the TV market has something to do with that as well. Several things that were strong in the September quarter in the Consumer segments such as the wearables, the headsets. Those naturally will tend to drop off once you go into the December quarter once you're passing the holiday season.

Got it. Makes sense. Okay. Moving on to the questions, first on compute and AI. So, I like the tone signaling higher AI confidence than prior, can you provide some details on the specific socket opportunities that the company has won? And it sounds like there are some things that are out there that may be quite material for 2025. Any color on that would be helpful. And to the extent that you can provide color on dollar content with those, Stephen, it would be quite useful.

Sure. For AI, our more near-term opportunity is actually coming from the next-generation graphics cards in combination with the AI-accelerator cards. And with the next platform that's being launched, that customer is using similar solutions for both. And the BOM content indeed is growing. Over there, we're talking about our driver MOS products being sold, actually multiple driver MOS being sold and used to power the GPU. And the new thing about us going into this new platform is that not only are we selling the driver MOS, but we're also pairing that together with the controller as a total solution. In general, I think you've heard us talking more about selling total solutions and this is one evidence of that happening in the market now and we can sell both the controller as well as the power stages. And in this case, in terms of BOM content, it's going to grow from what used to be maybe around $5 to $6 to going to the next platform ranging anywhere from $7 to $15 to possibly even over $20 in content, depending upon the number of the power or the level of the GPU being paired with.

Got it. And Stephen, for the AI application, that would be instances where in a server, there would be a control CPU in front and then anywhere from 4 to 8 GPU cards in back and you'd have content in those GPU cards, is that where you would have content that type of configuration?

So for us, we're specifically addressing initially on the cards themselves, the data cards. So these are both graphics cards, the traditional ones that would go into a PC, but the same ones that can go into also a server as an AI-accelerator card. So that's where the initial content and ramp will be coming from at launch with this customer. We are indeed also working on data center opportunities where we're going for onboard solutions where the content can actually be bigger and that's something that's still earlier in development, but it's something that we'll continue to update on going forward.

Okay, got it. And then moving on to a few other items. You mentioned desktop share gain, can you quantify the degree to which that benefited the business in the back half of this year, or could benefit the business in the back half of this year? And then how does that play out next year for the company?

We are pleased to see our market share recover in the motherboard and related segments. The desktop remains a crucial part of our foundation, and as we approach the December quarter, it is contributing positively to the growth of the Computing segment, even when the PC market typically experiences a seasonal decline. This situation is beneficial, and it’s encouraging to see us performing well against the trends in that market.

Great. And then lastly for me, I think we've all had our eye on competitive pricing this year. How did it play out in the third calendar quarter, your fiscal first quarter? And as you look ahead, what's your expectation for the way pricing can play out? What are maybe positives and what are risks as you look out over the next four quarters?

Sure. During the quarter, we did see increased pricing pressure. I mean, I guess this is a reflection of softer overall market recovery. Competitors impacted by inventory correction and demand slowdown, especially in automotive and industrial. They're shifting more toward consumer-related markets to fill their fabs. So we see increased competition from all players, large or small. Right now, I mean, the ASP erosion for this year is more trending toward high single-digits annual erosion versus typical mid to high single-digits. Here, what we want to do is to accelerate our new product rollout to counter the ASP erosion. So that has been what we have been doing all along the years.

Our next question comes from Jeremy Kwan with the company Stifel.

Thank you. I’d like to follow up on the pricing question. Can you discuss whether competition from China in the low to mid-range has continued to intensify? What steps are you taking to address this? Additionally, could you provide an update on the joint venture regarding your capacity position and any plans they may have communicated about capacity expansion and acquiring new customers? A brief update on this would be appreciated.

Hi, Jeremy. Let me address the first part on the pricing and also on how to compete against competitors in today's market, and then Yifan can address the JV question. What Yifan emphasized is really the key strategy to improving ASPs and margin is that, all-in-all, we are trying to go after a more attractive sockets, higher performance sockets with products that are more differentiated. This is why you've heard us talk about not only the total solutions but driving application-specific solutions that have more differentiation. In China, one of our core markets that we're going after is the smartphone market. Over there, the underlying trend that's powering that is towards, as phone makers are moving towards higher charging currents, especially in the premium phones. Over there, we are selling, again, newer products that have offered better performance, especially to power these higher charging currents. So when there's an application trend that pushes performance more, actually, it creates more separation between us and the competition. So we'll continue to drive and go after these attractive sockets with our solutions and that will help us to combat the competition.

Okay. In terms of joint ventures. Yes, JV is in the process of raising additional funds. In terms of their business, they are positive and signing up more customers. They remain one of our major suppliers, and we still work with them very well. They are supporting our business at this point.

Thank you. Can you provide the utilization rates at Oregon and your capacity? Specifically, with price erosion approaching, does that affect your revenue capacity from the fab? Considering your ongoing upgrades to the fab, could you share the current utilization rate and your expectations for it in the next few quarters?

Okay. Sure. For the quarter, our fabs utilization was around 80%. Overall, I mean, we still have some capacity to go to support our further growth, overall. I mean, yes, as we roll-out more new products, and so, we expect that our fab can provide support there.

Got it. And going to the gross margin line, can you give us more color in terms of the puts and takes into the sequential decline that's expected in the December quarter? How much is volume? How much is pricing? And then, kind of where do you expect the trend to go? Is 25% the bottom here, or how are you looking at it on a longer-term basis?

Okay, sure. September quarter's margin was a quarter-over-quarter drop was mainly because of ASP erosion. I mean, that's pretty much the contributor. So from there, I mean, we expect that, once we grow our business, our utilization can go up and then which can provide support to our gross margin line and then also our newer products can improve our product mix. So that's where we want to grow our gross margin.

There are no more questions registered in the queue. At this time, I'd like to pass the conference back over to our host for closing remarks.

Okay. Great. It's Steven Pelayo. This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking to you again next quarter. Take care.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.