Operator
Good afternoon and thank you for attending the Alpha and Omega Semiconductor Fiscal Q4 2025 earnings call. My name is Jason and I'll be the moderator today. All lines have been muted during the presentation portion of the call with an opportunity for questions and answers at the end. Now I'd like to pass the conference over to the host Stephen Palao.
Good afternoon everyone and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2025's fourth quarter. I am Stephen Faleo, investor relations representative for AOS. With me today are Stephen Chang, our CEO, and Yifan Leong, 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 september quarter finally we will have a q a session the earnings release was distributed over the wire today august 6 2025 after the market closed the release is also posted on the company's website our earnings release in this presentation include non-gap financial measures we use non-gap 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-gap measures to comparable gap 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 more detailed description of these risks and uncertainties please refer to our recent and subsequent findings 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.
Stephen? Thank you, Stephen. Welcome to Alpha and Omega's Fiscal Q4 earnings call. I will begin with a high-level overview of our results and then jump into segment details. We delivered Fiscal Q4 revenue results at the high end of our guidance due to better-than-expected demand in computing, mostly driven by tariff-related customer pull-ins for PCs and strong sequential growth in AI and graphics chips. Our consumer sentiment also saw strong sequential growth related to wearables and gaming. Overall, total June 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, our product revenue was up 13.7% year-over-year and 9% sequentially. PowerIC revenue increased 25.8% sequentially and 30.2% year-over-year to a record quarterly high and now represents nearly 40% of total product revenue. The richer mix of PowerIC benefits gross 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 interest of AOS's joint venture in Songqing, 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 complementary to our business operations to support key growth areas. In summary, uncertainties regarding macroeconomy and geopolitics continue. Nonetheless, we are delivering on our commitments and advancing our transformation from a component supplier to a total solutions 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 segment 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 tear-related pull-ins from our PC customers and robust sequential and year-over-year growth in power solutions for AI and graphics 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 computing segment to grow low single digits sequentially and mid-teens year-over-year in the 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 turning to the consumer segment student quarter revenue was down 5.8 percent year over year and up 23.9 percent sequentially and represented 15.1 percent of total revenue the results were in line with our forecast driven by strong promotional activity in gaming as well as sequential growth from home appliances. Wearables were also better than expected. For the September quarter, we forecast mid-single-digit sequential decline in the consumer segment driven by 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 fall-off from smartphones in China more than offset growth from Korea and our Tier 1 U.S. smartphone customers. Smartphone battery PCM revenue continues to outpace the overall market due to a combination of market share gains, a mid-shift to higher-end phones, and generally higher charging currents, driving increased bond content. Looking ahead to the September quarter, we anticipate more than 10% sequential growth for the communication segment primarily driven by our Tier 1 U.S. smartphone customer as they prepare for their next phone launch. Demand from China's 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 and was up 7.3% year over year and down 9.8% sequentially. The results were below our flags to slightly down sequential forecasts, 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 chargers due to increased bomb content driven by higher charging terms. For the September quarter, we expect revenue to grow mid-single digits sequentially for the power supply and industrial segment, primarily driven by a slight pickup in e-mobility offset by lower ACDC power supply. 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, gaming, wearables, and tariff-related PC pull-ins. These results highlight the strength 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 PCs, smartphones, and wearables as we continue to be excited by the expanding opportunities in AI and graphics. The geopolitical and macroeconomic environment remains fluid as we actively monitor evolving trade policies, capture pull-in 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 end market exposure, share gains, and rising bond content. While near-term uncertainties persist, we remain focused on execution, innovation, and delivering sustainable value for our stakeholders. With that, I will now turn the call over to Yifan for a discussion of our fiscal fourth 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 June quarter was $176.5 million, up 7.2% sequentially, and up 9.4% year-over-year. In terms of product mix, DEMOS revenue was $107.3 million, up 0.4% sequentially, and 5.1% over last year. Power IC revenue was $68.7 million, up 25.8% from the prior 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 licensed and engineering services revenue this quarter as the related contract was completed in mid-February. This compares to $2.8 million in the prior quarter and $5.1 million in the same quarter last year. Non-GAAP gross margin was 24.4 percent compared to 22.5 percent last quarter and 26.4 percent a year ago. The quarter-over-quarter increase was primarily impacted by the mixed improvement. Non-GAAP operating expenses were $40.9 million compared to $39.7 million for the prior quarter and $39.3 million last year. The quarter-over-quarter Quarter increase was primarily due to higher R&D engineering expenses. Non-GAAP quarterly EPS was $0.02 compared to negative $0.10 per share last quarter and $0.09 per share a year ago.
Operating cash flow was negative $2.8 million, including $2.7 million of repayment of customer deposits. By comparison, operating cash flow was $7.4 million in the prior quarter and $7.1 million last year. We expect to refund $5 million of customer deposits in the September quarter. EBITDA's excluding impairment of equity investment for the quarter was $10.5 million compared to $15.2 million last quarter and $16 million for the same quarter a year ago. Now let me turn to our balance sheet. We completed June quarter with a cash balance of $153.1 million compared to $169.4 million at the end of last quarter. Net trade receivables increased by $6.3 million sequentially. Day sales outstanding were 15 days for the quarter compared to 11 days for the prior quarter. Net inventory increased by $1.6 million quarter over quarter. Average days in inventory were 126 days for the quarter compared to 129 days for the prior quarter. CapEx for the quarter was $14.3 million compared to $8.1 million for the prior quarter. We expect paybacks for the September quarter to range from $11 million to $13 million. A few words about our joint venture in Chongqing, China. On July 14th, we signed an equity transfer agreement to sell 20.3% of the outstanding shares of CQJV for $150 million 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 CQJV will reduce to 18.9% from 39.2%. CQJV 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 CQKV to further expand its capacity. Based on the valuation of this sale, we recorded an impairment charge of $76.8 million in the June quarter on the U.S. 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 CQJV 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. Gap growth margin to be 23.8% plus or minus 1%. We anticipate the non-gap growth margin to be 24.4% plus or minus 1%. Gap operating expenses to be $47.5 million plus or minus $1 million. dollars non-gap operating expenses expected to be 41 million dollars plus or minus 1 million dollars interest income to be 0.5 million dollars higher than interest expense and income tax expense to be in the range of 1 million dollars to 1.3 million dollars with that we'll now open the call for questions operator please start this q a session if if you would like to ask a question please press star followed by one on your telephone key to that for any reason you'd
Operator
like to remove that question please press star followed by two again to ask a question it is star our first question is from david williams with bench your line is open david williams your line is open our next question is from jeremy kwan with steve your line is now open yes uh good afternoon
Aaron. Maybe if you could provide a little bit more color on the computing segment. Looks like, you know, that was very nice to see. It was quite strong, especially on the AI and graphics. Can you help us understand the digestion that you mentioned? Is that related to the tariff pull-ins more generally, or is that related to the, you know, strong initial shipment of the new AI program? And any, you know, color you can provide in terms of the AI contribution this quarter 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 business. This is something that's been, you know, we've been building upon and expanding in our advanced computing area. And in terms of the digestion portion, and this is a reflection of one of the AI programs that we started shipping into uh in the last quarter um that we we ship into it for a certain program and we expect to take a little bit longer for that initial shipment to be digested but at the same time you know we're also and we commented in the column that you know we are excited that there are there are additional programs that we continue to be designed into that will help with that with that digestion and at the same time we already are seeing fresh orders as well forecast and backlog coming in for some of those new programs so again you know we are going after more projects here when it comes to AI and this is in addition to what we're doing on the graphic side on the graphic side actually you know we were 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 card makers for the graphics cards so we started both of our ai as well as graphics 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 continued segment or maybe how much it drove
growth in the current quarter and and maybe how you see that um shaping out over the next maybe call it 12 to 18 months.
Yeah, we tend to look at both graphics and AI together when it comes to, because they're at this process are pretty similar when it comes to both the controller as well as the driver mouse that we're selling as a total solution. So those two together is somewhere on the neighborhood maybe around 25% of computing these days.
Great, that's very helpful. And maybe if I can ask a question on the gross margin i i understand that you know the richer mix kind of helps with um the richer mix of the power ic helps 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 you infer from that that maybe the power ic mix you know shifts down a little bit here um can you just help us understand kind of the dynamics uh near term and how you see this looking out, again, 12 to the 18 months, especially as, you know, some of these newer, richer, higher-value products continue to ramp. Thank you.
Sure, Chairman. Yes, in the June quarter, you know, our gross margin improved quarter over quarter pretty nicely. So it was back up to the December 2024 quarter level. So, primarily because of the better mix, keep in mind that, you know, in the June quarter, we did not have any license and engineering service revenue compared to March quarter because that contract, 24-month contract, expired in mid-February. So, this in terms of September quarter guidance flat compared to the June quarter on a basically reflected similar mix, product mix and similar production level. And then, I mean, that's the revenue, yes, was a little bit higher compared to the June quarter. So, we still have revenue, inventory, and also other inventory we purchased from third-party foundries and subcontractors to support. So, overall, we see, at this point, we see a flattish close margin in the September quarter.
And beyond the September quarter, how should we think about gross margins, especially, you know, are you expecting the mix to continue increasing or to be more increasingly favorable? Just any kind of color you can provide on that would be helpful.
Sure. I mean, we don't give a longer-term guidance. I mean, we only guide one quarter at a time. But overall, yeah, I mean, as our revenue continue to grow, then I would expect that, yeah, in the growth area, I would expect we can – we expect to see a better product Got it.
And one last question, if I could, just thinking about, you know, the sale or the transfer of, you know, portion of your JV holdings, that $150 million, you know, can you maybe rank order your priorities in terms of, you know, how you're thinking about CapEx, OpEx, maybe some M&A, you know, there any thought as to you know shareholder returns um yeah just 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 150 million dollars cash deal uh we expect to be completed in the next few months then i mean
probably by the end of this calendar year and then you know the first payment and we can expect it probably in in the September quarter and then rest of the money you expected to come in in the December quarter in terms of use of cash and then I mean we definitely will invest in you know business growth and you know we do see quite a bit growth opportunities and ahead of us so yes and we'll invest in you know technology in our talents and then and expanding our capacity, then, I mean, yeah, M&A is also on the plan, but that one is dependent on the opportunity that, yeah, and then I'm sure our board will evaluate and return capital to us all.
Operator
Our next question is from David Williams with Benchmark.
Your line is now open. Hey, thank you, Mike, and then I apologize for the first issue there. Look, kind of following up on the last question on the JV, if you kind of think about your balance sheet now, it feels like, and you talked about some of your utilization and third-party foundries, and that's provided some nice flexibility in the past. But I wonder how you think about adding or bringing in additional capacity internal to help you drive the margin profile as you kind of scale the business. Is that a place you want to be, or would you prefer to have this kind of even split between third party and internal and the JV?
Sure. I mean, this $150 million transaction definitely will bring in more capital to us. and also increases some flexibility in terms of where we want to set up our supply. Yeah, we'll continue to evaluate, you know, both internal production and purchasing from third-party boundaries. It depends on our needs, sure. I mean, after this transaction, I mean, our balance sheet definitely got strengthened. You know, we would have quite a bit liquidity, and also, I mean, we created quite a bit of value for our investors. I mean, if you look at this deal, in the past, we recorded $300 million on our balance sheet in this equity investment. Throughout the years, including this deal, we already realized about $176 million dollars also cash, and then we still own 18.9 percent even after this transaction. So, I mean, I would say that, yeah, this deal definitely created a heck of value for our investors.
Yeah, no doubt. If my memory is certainly correct, you were $30 to $35 million total, including equipment and some cash. Is that right? we invested 35 million dollars cash in the class that some used assembly equipment 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 as you think about your your internal capacity and and tariffs and the shipping just kind of given how much of your customer base ends up in Asia, how do you think the tariffs are impacting your local manufacturing capacity? Is it a bigger challenge for you than maybe being outside of the country and moving outside largely? And just maybe what's your exposure do you think to the tariffs on that side of the house?
So far, I mean, the direct impact from tariffs and on us it's not that significant since we don't ship a whole lot of products to the U.S. So, you know, from that front, yeah, right now, well, okay, but this geopolitical and then trade the tension and you do play some uncertainties here. So we'll 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 are located, we want to support them.
And maybe, Stephen, how do you – or maybe if you think about how your customers have been reacting, do you sense that there's more cautiousness out there in terms of the demand side and kind of where things lead, or do you feel like people are generally feeling better about the second half from the underlying demand side?
I think that answer is different depending on which market you're looking at. In terms of the tariff impact, we see that from the demand side more prominently and in the computing side when it comes to notebooks and desktops over there and we are you know we are still dealing with how to support the pull-in efforts and with demand being pulled in by our customers in advance of any kind of policy change when it comes to tariffs so as of right now and our customers are still wanting to to produce as much as they can and get things into get things they produce and onto a boat before the tariffs change so that's more more prominently so in in the pc market we don't really see the chair of impact in other areas as others are more other impacts of course anything with ai is is definitely still very hot and graphics still continues to be strong as well too since you know that the cards graphics cards just launched at the beginning of this year the ai programs are just starting up also so those are and those are still fresh, new projects. Smartphones, we're heading into the peak season with the US and the Korea smartphone maker also going into peak production. So those are seasonal effects that we're seeing now.
Thanks so much for your help, certainly appreciate it, and best of luck on the quarter.
Operator
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 a few upcoming investor events. The management team will be participating in the 6th Annual Needham Virtual Semiconductor and Semicap One-on-One Conference on August 21st, the 2025 Evercore Semiconductor IT, Hardware, and Networking Conference on August 26th, and the Jefferies 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.
Operator
That concludes the conference. Thank you for your participation. Enjoy the rest of your day.
