8-K
ALPHA & OMEGA SEMICONDUCTOR Ltd (AOSL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2020
Alpha and Omega Semiconductor Limited
(Exact name of registrant as specified in its charter)
| Bermuda | 001-34717 | 77-0553536 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
(Address of principal executive offices)
(408) 830-9742
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Shares | AOSL | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The information in Item 2.02 of this Current Report, including the accompanying exhibits, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18. The information in Item 2.02 of this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language contained in such filing.
On May 5, 2020, Alpha and Omega Semiconductor Limited (the “Company”) issued a press release regarding its financial results for the fiscal third quarter of 2020 ended March 31, 2020. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release<br> dated May 5, 2020 |
|---|---|
| 99.2 | Script of<br> Prepared Remarks for Earnings Call |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 5, 2020
| Alpha and Omega Semiconductor Limited | |
|---|---|
| By: | /s/ Yifan Liang |
| Name: | Yifan Liang |
| Title: | Chief Financial Officer and Corporate Secretary |
Exhibit 99.1
Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Third Quarter of 2020 Ended March 31, 2020
SUNNYVALE, Calif.--(BUSINESS WIRE)--May 5, 2020--Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL) today reported financial results for the fiscal third quarter of 2020 ended March 31, 2020.
The results for the fiscal third quarter of 2020 ended March 31, 2020 were as follows:
| GAAP Financial Comparison | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Quarterly | |||||||||
| (in millions, except percentage and per share data) | |||||||||
| (unaudited) | |||||||||
| Three Months Ended | |||||||||
| March 31, <br><br> 2020 | December 31, <br><br> 2019 | March 31, <br><br> 2019 | |||||||
| Revenue | $ | 106.9 | $ | 117.9 | $ | 109.1 | |||
| Gross Margin | 21.0 | % | 20.7 | % | 23.5 | % | |||
| Operating Loss | $ | (8.6 | ) | $ | (3.4 | ) | $ | (3.7 | ) |
| Net Loss Attributable to AOS | $ | (6.5 | ) | $ | (1.0 | ) | $ | (1.6 | ) |
| Net Loss Per Share Attributable to AOS - Diluted | $ | (0.26 | ) | $ | (0.04 | ) | $ | (0.06 | ) |
| Non-GAAP Financial Comparison | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarterly | |||||||||
| (in millions, except percentage and per share data) | |||||||||
| (unaudited) | |||||||||
| Three Months Ended | |||||||||
| March 31, <br><br> 2020 | December <br><br> 31,2019 | March 31, <br><br> 2019 | |||||||
| Revenue | $ | 106.9 | $ | 117.9 | $ | 109.1 | |||
| Non-GAAP Gross Margin | 27.5 | % | 28.3 | % | 27.0 | % | |||
| Non-GAAP Operating Income | $ | 3.5 | $ | 7.6 | $ | 6.3 | |||
| Non-GAAP Net Income Attributable to AOS | $ | 2.9 | $ | 5.8 | $ | 5.5 | |||
| Non-GAAP Net Income Per Share Attributable to AOS - Diluted | $ | 0.11 | $ | 0.23 | $ | 0.22 |
The non-GAAP financial measures in the schedule above and under the section “Financial Results for Fiscal Q3 Ended March 31, 2020” below exclude the effect of share-based compensation expenses and production ramp up costs in each of the periods presented, and pre-production costs relating to Chongqing Joint Venture ("JV Company") for the three and nine months ended March 31, 2019, as well as legal costs related to government investigation and impairment of privately-held investment for the three and nine months ended March 31, 2020. A detailed reconciliation of GAAP and non-GAAP financial measures is included at the end of this press release.
Financial Results for Fiscal Q3 Ended March 31, 2020
- Revenue was $106.9 million, a decrease of 9.3% from the prior quarter and a decrease of 2.0% from the same quarter last year.
- GAAP gross margin was 21.0%, up from 20.7% in the prior quarter and down from 23.5% year-over-year.
- Non-GAAP gross margin was 27.5%, down from 28.3% in the prior quarter and up from 27.0% from the same quarter last year.
- GAAP operating expenses were $31.1 million, up from $27.8 million in the prior quarter and up from $29.4 from the same quarter last year.
- Non-GAAP operating expenses were $25.8 million, an increase of $0.1 million from last quarter and an increase of $2.7 million from the same quarter last year.
- GAAP operating loss was $8.6 million, up from $3.4 million loss in the prior quarter and $3.7 million loss from the same quarter last year.
- Non-GAAP operating income was $3.5 million as compared to $7.6 million for the prior quarter and $6.3 million for the same quarter last year.
- GAAP net loss per share attributable to AOS was $0.26, compared to $0.04 for the prior quarter and $0.06 for the same quarter a year ago.
- Non-GAAP earnings per share attributable to AOS was $0.11 compared to $0.23 for the prior quarter and $0.22 for the same quarter a year ago.
- Consolidated cash flow provided by operating activities was $14.3 million, compared to $8.9 million in prior quarter. Operating cash flow provided by AOS alone (excluding the JV Company) was $29.5 million, compared to $12.5 million in the prior quarter.
- The Company closed the quarter with $110.2 million of cash and cash equivalents, including $10.7 million cash balance at the JV Company.
“Despite unprecedented challenges resulting from the COVID-19 pandemic, we finished the March quarter in line with expectations, with revenue in our guidance range. As we navigate through this difficult time, our top priority is the health and well-being of our employees and their families. We are thankful that all 4,000 of our employees are safe and well, our global operations are running, and our manufacturing facilities are operating at expected levels. I am both humbled by and proud of our amazing group of employees, who delivered extraordinary performance with a strong sense of ownership and commitment, while sustaining a safe and healthy work environment,” stated Dr. Mike Chang, Chairman and CEO of AOS.
Dr. Chang continued, “Even with the overall downturn in the economy, near-term end demand for Computing and Gaming is strong. Our JV Company is starting to fulfill its purpose, as highlighted in our strategic plan for sustainable growth. It has played a critical role in enabling us to capture the surge in Computing demand. In difficult times like these, supporting our customers through uninterrupted supply of products is more important than ever. The power semiconductor market is large and growing, and we are determined and committed to accomplish our mission to expand rapidly and become a top-tier supplier to this market.”
Business Outlook for Fiscal Q4 Ending June 30, 2020
The following statements are based on management's current expectations. These statements are forward-looking, and actual results may differ materially. AOS undertakes no obligation to update these statements.
Our expectations for the fourth quarter of fiscal year 2020 are as follows:
- Revenue is expected to be between $117 million and $121 million.
- GAAP gross margin is expected to be approximately 22.0% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 26.5% plus or minus 1%. Note that non-GAAP gross margin excludes $0.4 million of estimated share-based compensation and $5.0 million of estimated production ramp-up costs relating to the JV Company.
- GAAP operating expenses are expected to be in the range of $29.0 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $25.7 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $3.2 million to $3.5 million of estimated expenses relating to the development of our digital power controller business. Non-GAAP operating expenses exclude $1.0 million to $2.0 million of estimated professional fees related to the government investigation and $2.3 million of estimated share-based compensation charge.
- Income tax expense is expected to be approximately $0.3 million to $0.5 million.
- Loss attributable to noncontrolling interest is expected to be around $2.7 million. On a non-GAAP basis, excluding estimated production ramp-up costs relating to the JV Company, this item is expected to be approximately $0.1 million.
Conference Call and Webcast
AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal third quarter of 2020 ended March 31, 2020 today, May 5, 2020 at 2:00 p.m. PT / 5:00 p.m. ET. To participate in the live call, analysts and investors should dial 866-393-4306 (or 734-385-2616 if dialing from outside the United States and Canada). The conference ID number is 2759996. In addition, a copy of the script of management's prepared remarks and a live webcast of the call will also be available in the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com/.
Forward-Looking Statements
This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management's judgment, beliefs, current trends, and anticipated product performance. These forward-looking statements include, without limitation, statements relating to expected growth rate, our product portfolios, projected amount of revenue, gross margin, operating income (loss), income tax expenses, net income (loss), noncontrolling interest, and share-based compensation expenses, non-GAAP gross margin, non-GAAP operating expenses, tax expenses, and non-GAAP loss attributable to noncontrolling interest, expected increase of demand in PC and gaming markets, our responses to the COVID-19 pandemic, the ability to expand our sales and market share, increase our capacity and achieve sustained growth and profitability, our ability to support global OEM and ODM customers, the expected ramp-up schedule of the 12-inch fab at the JV Company and target run rate, our ability to provide power solutions and reliable supply chains, and other information under the section entitled “Business Outlook for Fiscal Q4 Ending June 30, 2020”. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, the impact of COVID-19 pandemic on our business, our ability to successfully operate our joint venture in China; our ability to develop and succeed in the digital power business; difficulties and challenges in executing our diversification strategy into different market segments; new tariffs on goods from China; ordering pattern from distributors and seasonality; changes in regulatory environment and government investigation; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of PC markets; the actual product performance in volume production; the quality and reliability of our product, our ability to achieve design wins; the general business and economic conditions; the state of semiconductor industry and seasonality of our markets; our ability to maintain factory utilization at a desirable level; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed on August 23, 2019. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and AOS undertakes no duty to update such information, except as required under applicable law.
Use of Non-GAAP Financial Measures
To supplement our unaudited consolidated financial statements presented on a basis consistent with U.S. GAAP, we disclose certain non-GAAP financial measures for our historical performance, including non-GAAP gross profit, gross margin, operating income (loss), net loss attributable to noncontrolling interest, net income (loss) and diluted earnings per share ("EPS"). These supplemental measures exclude share-based compensation expenses, production ramp up costs and re-production expenses related to the JV Company, as well as legal costs related to government investigation and impairment of privately-held investment. We also disclose certain non-GAAP financial measures in our guidance for the next quarter, including non-GAAP gross margin, operating expenses and loss attributable to noncontrolling interest. These forecast supplemental measures exclude estimated pre-production expenses and production ramp-up costs relating to our JV Company, estimated share-based compensation expenses and legal costs related to investigation case. We believe that these historical and forecast non-GAAP financial measures can provide useful information to both management and investors by excluding certain items and expenses that are not indicative of our core operating results or do not reflect our normal business operations. In addition, our management uses non-GAAP measures to compare our performance relative to forecasts and to benchmark our performance externally against competitors. Our use of non-GAAP financial measures has certain limitations in that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP net income (loss) or non-GAAP operating expenses, do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. In addition, we included amount of income tax effect of non-GAAP adjustments in the non-GAAP net income of reconciliation table for all periods presented as the management believes that such non-GAAP presentation provides useful information to investors, even though the amounts are not significant. We seek to compensate for the limitation of our non-GAAP presentation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP measures both in the text in this press release and in the tables attached hereto. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.
About Alpha and Omega Semiconductor
Alpha and Omega Semiconductor Limited, or AOS, is a designer, developer and global supplier of a broad range of power semiconductors, including a wide portfolio of Power MOSFET, IGBT, IPM, TVS, HVIC, GaN/SiC, Power IC and Digital Power products. AOS has developed extensive intellectual property and technical knowledge that encompasses the latest advancements in the power semiconductor industry, which enables us to introduce innovative products to address the increasingly complex power requirements of advanced electronics. AOS differentiates itself by integrating its Discrete and IC semiconductor process technology, product design, and advanced packaging know-how to develop high performance power management solutions. AOS’ portfolio of products targets high-volume applications, including portable computers, flat-panel TVs, LED lighting, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers, and telecommunications equipment. For more information, please visit www.aosmd.com.
The following unaudited consolidated financial statements are prepared in accordance with U.S. GAAP.
| Alpha and Omega Semiconductor Limited | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (in thousands, except percentages and per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | March 31, 2020 | March 31, 2019 | |||||||||||
| Revenue | $ | 106,852 | $ | 117,860 | $ | 109,067 | $ | 342,514 | $ | 339,064 | |||||
| Cost of goods sold | 84,393 | 93,454 | 83,438 | 268,717 | 251,322 | ||||||||||
| Gross profit | 22,459 | 24,406 | 25,629 | 73,797 | 87,742 | ||||||||||
| Gross margin | 21.0 | % | 20.7 | % | 23.5 | % | 21.5 | % | 25.9 | % | |||||
| Operating expenses: | |||||||||||||||
| Research and development | 13,569 | 12,147 | 11,417 | 38,084 | 35,401 | ||||||||||
| Selling, general and administrative | 16,909 | 15,629 | 17,947 | 47,723 | 58,403 | ||||||||||
| Impairment of privately-held investment | 600 | — | — | 600 | — | ||||||||||
| Total operating expenses | 31,078 | 27,776 | 29,364 | 86,407 | 93,804 | ||||||||||
| Operating loss | (8,619 | ) | (3,370 | ) | (3,735 | ) | (12,610 | ) | (6,062 | ) | |||||
| Interest expense and other income (loss), net | (2,282 | ) | (635 | ) | (1,595 | ) | (3,744 | ) | (4,455 | ) | |||||
| Loss before income taxes | (10,901 | ) | (4,005 | ) | (5,330 | ) | (16,354 | ) | (10,517 | ) | |||||
| Income tax expense (benefit) | (1,015 | ) | 568 | 625 | (37 | ) | 1,886 | ||||||||
| Net loss including noncontrolling interest | (9,886 | ) | (4,573 | ) | (5,955 | ) | (16,317 | ) | (12,403 | ) | |||||
| Net loss attributable to noncontrolling interest | (3,391 | ) | (3,568 | ) | (4,400 | ) | (9,826 | ) | (11,719 | ) | |||||
| Net loss attributable to Alpha and Omega Semiconductor Limited | $ | (6,495 | ) | $ | (1,005 | ) | $ | (1,555 | ) | $ | (6,491 | ) | $ | (684 | ) |
| Net loss per common share attributable to Alpha and Omega Semiconductor Limited | |||||||||||||||
| Basic | $ | (0.26 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.26 | ) | $ | (0.03 | ) |
| Diluted | $ | (0.26 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.26 | ) | $ | (0.03 | ) |
| Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net loss per share | |||||||||||||||
| Basic | 24,894 | 24,701 | 24,084 | 24,711 | 23,938 | ||||||||||
| Diluted | 24,894 | 24,701 | 24,084 | 24,711 | 23,938 |
| Alpha and Omega Semiconductor Limited | |||||
|---|---|---|---|---|---|
| Condensed Consolidated Balance Sheets | |||||
| (in thousands, except par value per share) | |||||
| (unaudited) | |||||
| June 30, 2019 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 110,223 | $ | 121,893 | ||
| Restricted cash | 364 | ||||
| Accounts receivable, net | 24,296 | ||||
| Inventories | 111,643 | ||||
| Other current assets | 37,102 | ||||
| Total current assets | 295,298 | ||||
| Property, plant and equipment, net | 409,737 | ||||
| Operating lease right-of-use assets, net | — | ||||
| Intangible assets, net | 16,882 | ||||
| Deferred income tax assets | 4,822 | ||||
| Restricted cash - long-term | 2,038 | ||||
| Other long-term assets | 10,617 | ||||
| Total assets | 767,295 | $ | 739,394 | ||
| LIABILITIES AND EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 87,973 | $ | 94,384 | ||
| Accrued liabilities | 44,075 | ||||
| Income taxes payable | 1,541 | ||||
| Short-term debt | 26,609 | ||||
| Finance lease liabilities | 11,355 | ||||
| Operating lease liabilities | — | ||||
| Total current liabilities | 177,964 | ||||
| Long-term debt | 59,380 | ||||
| Income taxes payable - long-term | 993 | ||||
| Deferred income tax liabilities | 466 | ||||
| Finance lease liabilities - long-term | 43,381 | ||||
| Operating lease liabilities - long-term | — | ||||
| Other long-term liabilities | 13,921 | ||||
| Total liabilities | 296,105 | ||||
| Equity: | |||||
| Preferred shares, par value 0.002 per share: | |||||
| Authorized: 10,000 shares; issued and outstanding: none at March 31, 2020 and June 30, 2019 | — | ||||
| Common shares, par value 0.002 per share: | |||||
| Authorized: 100,000 shares; issued and outstanding: 31,715 shares and 25,076 shares, respectively at March 31, 2020 and 31,163 shares and 24,517 shares, respectively at June 30, 2019 | 62 | ||||
| Treasury shares at cost, 6,639 shares at March 31, 2020 and 6,646 shares at June 30, 2019 | ) | (66,240 | ) | ||
| Additional paid-in capital | 234,410 | ||||
| Accumulated other comprehensive loss | ) | (2,693 | ) | ||
| Retained earnings | 125,485 | ||||
| Total Alpha and Omega Semiconductor Limited shareholder's equity | 291,024 | ||||
| Noncontrolling interest | 152,265 | ||||
| Total equity | 443,289 | ||||
| Total liabilities and equity | 767,295 | $ | 739,394 |
All values are in US Dollars.
| Supplemental disclosures of financial information: | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||||||||||||||||
| As of March 31, 2020 | As of June 30, 2019 | ||||||||||||||||||||||||
| AOS | CQJV | Consolidated | AOS | CQJV | Consolidated | ||||||||||||||||||||
| Cash and cash equivalents | $ | 99,523 | $ | 10,700 | $ | 110,223 | $ | 100,733 | $ | 21,160 | $ | 121,893 | |||||||||||||
| Bank borrowings liabilities | $ | 34,793 | $ | 118,790 | * | $ | 153,583 | $ | 41,048 | $ | 99,865 | * | $ | 140,913 | |||||||||||
| Inventory | $ | 95,237 | $ | 32,158 | $ | 127,395 | $ | 93,852 | $ | 17,791 | $ | 111,643 | |||||||||||||
| Property, plant and equipment, net | $ | 159,517 | $ | 252,801 | $ | 412,318 | $ | 148,497 | $ | 261,240 | $ | 409,737 | |||||||||||||
| Total assets | $ | 378,422 | $ | 388,873 | $ | 767,295 | $ | 375,004 | $ | 364,390 | $ | 739,394 | |||||||||||||
| Total equity | $ | 336,512 | $ | 93,217 | $ | 429,729 | $ | 325,240 | $ | 118,049 | $ | 443,289 | |||||||||||||
| * AOS is not a guarantor of CQJV's (Chongqing Joint Venture) debts. | |||||||||||||||||||||||||
| Three Months Ended March 31, 2020 | Three Months Ended December 31, <br><br> 2019 | Three Months Ended March 31, 2019 | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| AOS | CQJV | Consolidated | AOS | CQJV | Consolidated | AOS | CQJV | Consolidated | |||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 29,545 | $ | (15,233 | ) | $ | 14,312 | $ | 12,470 | $ | (3,532 | ) | $ | 8,938 | $ | 9,540 | $ | (17,465 | ) | $ | (7,925 | ) | |||
| Purchase of property and equipment, net of government grant | $ | 13,063 | $ | 3,720 | $ | 16,783 | $ | 12,062 | $ | 3,307 | $ | 15,369 | $ | 8,184 | $ | 15,786 | $ | 23,970 | |||||||
| EBITDAS | $ | 6,487 | $ | (1,095 | ) | ** | $ | 8,783 | $ | 12,538 | $ | (2,214 | ) | ** | $ | 13,892 | $ | 13,535 | $ | (6,093 | ) | ** | $ | 11,842 | |
| ** CQJV EBITDAS includes amounts attributable to noncontrolling interest. |
| Alpha and Omega Semiconductor Limited | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except percentages and per share data) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | March 31, 2020 | March 31, 2019 | |||||||||||
| GAAP gross profit | $ | 22,459 | $ | 24,406 | $ | 25,629 | $ | 73,797 | $ | 87,742 | |||||
| Share-based compensation | 357 | 404 | 494 | 1,197 | 1,532 | ||||||||||
| Production ramp up costs related to joint venture | 6,552 | 8,486 | 3,350 | 21,029 | 7,983 | ||||||||||
| Non-GAAP gross profit | $ | 29,368 | $ | 33,296 | $ | 29,473 | $ | 96,023 | $ | 97,257 | |||||
| Non-GAAP gross margin as a % of revenue | 27.5 | % | 28.3 | % | 27.0 | % | 28.0 | % | 28.7 | % | |||||
| GAAP operating loss | $ | (8,619 | ) | $ | (3,370 | ) | $ | (3,735 | ) | $ | (12,610 | ) | $ | (6,062 | ) |
| Share-based compensation | 2,876 | 2,487 | 3,112 | 7,732 | 10,659 | ||||||||||
| Pre-production expenses related to joint venture | — | — | 3,584 | — | 11,945 | ||||||||||
| Production ramp up costs related to joint venture | 6,552 | 8,486 | 3,350 | 21,029 | 7,983 | ||||||||||
| Legal costs related to government investigation | 2,133 | — | — | 2,133 | — | ||||||||||
| Impairment of privately-held investment | 600 | — | — | 600 | — | ||||||||||
| Non-GAAP operating income | $ | 3,542 | $ | 7,603 | $ | 6,311 | $ | 18,884 | $ | 24,525 | |||||
| Non-GAAP operating margin as a % of revenue | 3.3 | % | 6.5 | % | 5.8 | % | 5.5 | % | 7.2 | % | |||||
| GAAP net loss attributable to AOS | $ | (6,495 | ) | $ | (1,005 | ) | $ | (1,555 | ) | $ | (6,491 | ) | $ | (684 | ) |
| Share-based compensation | 2,876 | 2,487 | 3,112 | 7,732 | 10,659 | ||||||||||
| Pre-production expenses related to joint venture | — | — | 2,215 | — | 7,335 | ||||||||||
| Production ramp up costs related to joint venture | 3,764 | 4,294 | 1,705 | 11,156 | 4,199 | ||||||||||
| Legal costs related to government investigation | 2,133 | — | — | 2,133 | — | ||||||||||
| Impairment of privately-held investment | 600 | — | — | 600 | — | ||||||||||
| Income tax effect of non-GAAP adjustments | 0 | (2 | ) | (17 | ) | (7 | ) | (30 | ) | ||||||
| Non-GAAP net income attributable to AOS | $ | 2,878 | $ | 5,774 | $ | 5,460 | $ | 15,123 | $ | 21,479 | |||||
| Non-GAAP net margin attributable to AOS as a % of revenue | 2.7 | % | 4.9 | % | 5.0 | % | 4.4 | % | 6.3 | % | |||||
| GAAP net loss attributable to AOS | $ | (6,495 | ) | $ | (1,005 | ) | $ | (1,555 | ) | $ | (6,491 | ) | $ | (684 | ) |
| Share-based compensation | 2,876 | 2,487 | 3,112 | 7,732 | 10,659 | ||||||||||
| Amortization and depreciation | 11,784 | 10,850 | 8,010 | 33,538 | 24,159 | ||||||||||
| Interest expense, net | 1,633 | 992 | 1,650 | 2,405 | 4,738 | ||||||||||
| Income tax expense (income) | (1,015 | ) | 568 | 625 | (37 | ) | 1,886 | ||||||||
| EBITDAS | $ | 8,783 | $ | 13,892 | $ | 11,842 | $ | 37,147 | $ | 40,758 | |||||
| GAAP diluted net loss per share attributable to AOS | $ | (0.26 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.26 | ) | $ | (0.03 | ) |
| Share-based compensation | 0.11 | 0.10 | 0.12 | 0.30 | 0.43 | ||||||||||
| Pre-production expenses related to joint venture | — | — | 0.09 | — | 0.30 | ||||||||||
| Production ramp up costs related to joint venture | 0.15 | 0.17 | 0.07 | 0.44 | 0.17 | ||||||||||
| Legal costs related to government investigation | 0.09 | — | — | 0.09 | — | ||||||||||
| Impairment of privately-held investment | 0.02 | — | — | 0.02 | — | ||||||||||
| Income tax effect of non-GAAP adjustments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||
| Non-GAAP diluted net income per share attributable to AOS | $ | 0.11 | $ | 0.23 | $ | 0.22 | $ | 0.59 | $ | 0.87 | |||||
| Shares used to compute GAAP diluted net income per share | 24,894 | 24,701 | 24,084 | 24,711 | 23,938 | ||||||||||
| Shares used to compute Non-GAAP diluted net income per share | 25,889 | 25,594 | 24,769 | 25,538 | 24,598 |
Contacts
Alpha and Omega Semiconductor Limited
Investor Relations
So-Yeon Jeong
408-789-3172
investors@aosmd.com
Exhibit 99.2
Alpha and Omega Semiconductor Limited
Prepared Remarks for the Investor Conference Call
for the Quarter Ended March 31, 2020
May 5, 2020
So-Yeon Jeong (Moderator)
Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2020 third quarter financial results. I am So-Yeon Jeong, Investor Relations representative for the company. With me today are Dr. Mike Chang, our CEO, Yifan Liang, our CFO, and Stephen Chang, our executive vice president. This call is being recorded and broadcasted live over the Web and can be accessed for seven days following the call via the link in the Investor Relations section of our website at www.aosmd.com.
Mike will begin with a review of business overview for the quarter. Then, Stephen will provide a detailed segment report. After that, Yifan will continue witha review of financial results for the quarter and guidance for the next quarter. Then, we will have the question-and-answer session.
The earnings release was distributed by business wire today, May 5, 2020, after the close of market. The release is also posted on the company's website. Our earnings release and this presentation include certain 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 that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.
We remind you that during the course of 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 from such expectations. 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.
Page 1
Now, I’ll turn the call over to our CEO, Mike, to provide an overview of our business and the impact of COVID-19 pandemic.
Mike Chang (Chief Executive Officer)
Thank you, So-Yeon. Welcome, everyone, and thank you for joining us for our March quarter earnings call. I hope that all of you and your families are safe and healthy.
As we navigate the unprecedented challenges of this COVID-19 pandemic, we think it is important to update you on our business operations and how we are staying resilient. Before we begin the usual review of quarterly results, I will take a few minutes to talk about the challenges and risks we face and our actions to mitigate them.
As I said on our last earnings call, our top priorityis the health and well-being of our employees and their families. In addition to the mandatory measures enacted by federal, state and regional agencies, we proactively implemented precautionary measures and established operating guidelinesto safeguard our employees and their families. As part of our business continuity plan, we instituted a “work-from-home” policy before it was mandatory. This helped us mitigatethe impact of sudden disruptions to our operations,and ensured that our employees had full access to the connectivity infrastructure required to work remotely. We are thankful that all 4,000 of our employees are currently safe and well, and our global operations are running.
In addition to safeguarding our employees, we are committed to fully supporting our customers during these trying times. When we discussed our outlook for the March quarter back in early February, our guidance factored in an estimate of our lost production in China. As it turned out, production in China was severely disrupted during February. However, we were fortunate that we maintained partial production throughout the Lunar New Year holiday, during which we ran 24x7. When more staff returned to work after the holiday, our employees went above and beyond their typical roles to ensure delivery of our products while complying withvarious governmental orders and managing logistical challenges. The Oregon fab also ran non-stop during the quarter. Our diversified manufacturing footprint helped us quickly respond to shifting market demand. Since March, our total production level has recovered significantly-- faster than we anticipated. Today I am pleased to report that we are running at levels we expected.
Page 2
Obviously COVID-19 negatively impacted our customers. Some of them are recovering more slowly than others. A few customers have factories located in the COVID-19 epicenters, while others are exposed to greater supply chain disruptions because they source numerous components to complete an entire kit of parts. Travel restrictions and logistical challenges also restricted our ability to support customers with demo boards, evaluation kits and design-in support. With utmost dedication, we are working closely and creatively to support our customers in every way we can. We are providing excellent service and meeting demand by being flexible and nimble with production schedules, thus demonstrating solidarity with our customers. At this stage, we are able to work around temporary disruptions to achieve our operating objectives. While visibility beyond the June quarter is very limited given the uncertainty of the impact of COVID-19, we are managing risks by optimizing product mix, vigilantly seeking new business opportunities and accelerating product time-to-market.
Against this backdrop, we reported an in-line March quarter with revenuewithin our guidance range. Yifan will provide details of our March quarter results later on the call.
Let me now touch on some key business highlights and what we are seeing in the current environment.
Even with the overall downturn in the economy, near-term end-demand for Computing and Gamingis very strong. This is due to the shelter-in-place and social distancing mandates, which are driving the need for higher computing power for work-from-home activities, online learning and gaming. The computing industry has been expanding and transforming to support and connect businesses and individuals worldwide. While we have rapidly diversified into other applications such as mobile and home appliance, we remain a leader in power management, especially in the computing area. Our unwavering commitment in the past years to our computing customers has rewarded us with much-welcomed business during this downturn. In difficult times like these, supporting customers through the uninterrupted supply of our products is more important than ever. Also noteworthy is that our Chongqing JV is starting to fulfill its purpose, as highlighted in our strategic plan for sustainable growth. Indeed, it has played a critical role in enabling us to meet the surging demand in the Computing market.
Page 3
As you would expect, given the environment, we are prudently managing expenses. We are reducing non-essential spending, while also pursuing strategic and critical R&D projects in order to expand our market reach and TAM. Stephen is diligently working with our R&D team on these special projects, and he will provide more details later on the call.
Finally, I want to highlight that ourcore business is generating consistent and sustained cash flow. Our balance sheet is strong! Yifan will provide you with more color on our cash position.
As I look at our performance in the quarter, I am both humbled by and proud of our amazing group of employees. They delivered extraordinary performance with a strong sense of ownership and commitment, while sustaining a safe and healthy work environment. We look forward to a gradual return to normality for our country, our industry and our economy. The power semiconductor market is large and growing, and we are determined and committed to accomplish ourmission to rapidly expand andbecome a top-tier supplier in this market.
Now, I will turn the call over to Stephen for a detailed segment report.
Stephen Chang (Executive Vice President)
Thank you, Mike, and good afternoon!
Let me start with Computing. It represented 44.2% of our total revenue in the March quarter. Revenue was down 2.9% sequentially and down 8.8% year-over-year. Starting inthe second half of March, we saw a rise in demand for our Computing products, especially for Notebook PCs. As a result of various stay-at-home orders by governments in response to the COVID-19 pandemic, PCs have become indispensable worldwide as more people are working from home and transitioning to distance learning. We don’t know how this demand picture will play out in the second half of this year, but at the moment we are optimizing our production mix to satisfy this surge in demand for the next quarter. Our Graphics card business has also been strong with both our high performance DrMOS and MOSFET Vcore solutions. Graphics cards have been selling well as demand in both PC and gaming is up. We expect Computing to be strong in the June quarter, with mid-single-digit sequential growth.
Page 4
Now turning to the Consumer segment, it represented 18.7% of total revenue in the March quarter. Revenue decreased 5.3% sequentially and was down 2.9% year-over-year. Our TV business was seasonally down in the March quarter but we now expect it to grow in the June quarter. We are very excited to share with you that AOS has achieved a strong design into an upcoming gaming system platform that is expected to launch later this year. Our content in this gaming system has multiple sockets, including DrMOS and MOSFETs to power processors as well as Type C smart load switches and TVS surge protection devices to protect the controller ports. Gaming systems feature higher resolutions and faster graphics along with plenty of software features, while still needing to meet energy efficiency, temperature, and safety requirements. AOS won this design because our power solutions offer the high performance needed to keep the system operating coollyand efficiently. Withthe ramp-up underway, we anticipate double-digit growth for the June quarter in the Consumer segment.
Next, let’s discuss the Power Supply and Industrial Segment. It accounted for 17.8% of total revenue, down 24.6% sequentially and down 10.3% year-over-year. COVID-19 market disruptions in China impacted our Power Supply/Industrial business during the March quarter. This was caused primarily by a drop in chargers and adapters used for smartphones and PCs. However, as China recovers, we expect to see a rebound in production and demand. The quick charger application has increasingly been migrating to higher power output-- from 18W to 24W and even up to 65W. This performance-driven market opportunity comes with higher value content and fewer competitors, and is well-suited for our medium voltage products. We expect a return to growth in the June quarter in this segment as the demand for notebooks chargers and smartphone quick chargers recovers.
Finally, let’s move on to the Communications segment, which was 18.1% of revenue in the quarter, down 8.5% sequentially but up 41.4% year-over-year. The smartphone market was severely impacted by the COVID-19 pandemic, and the disruption in production and demand is spreading globally. While we don’t have clear visibility on the smartphone market in the near-term, we are seeing rebound in demand for our telecom business as 5G continues to roll out. We think we can maintain this segment’s revenue in the June quarter.
With that, I will now turn the call over to Yifan for additional comments and guidance.
Page 5
Yifan Liang (Chief Financial Officer)
Thank you, Stephen. Good afternoon everyone and thank you for joining us.
Revenue for the March quarter was $106.9 million, down 9.3% from the prior quarter and down 2.0% from the same quarter last year.
In terms of product mix, MOSFET revenue was $89.9 million, down 11.4% sequentially and flat year-over-year. Power IC revenue was $15.7 million, up 7.1% from the prior quarter and down 11.0% from a year ago. Assembly service revenue was $1.3 million as compared to $1.7 million last quarter and $1.5 million for the same quarter last year.
Non-GAAP gross margin for the March quarter was 27.5%, down from 28.3% for the prior quarter and up from 27.0% for the same period last year. Non-GAAP gross margin excluded $0.4 million of share-based compensation charge for the March quarter, as compared to $0.4 million for the prior quarter and $0.5 million for the prior-year period. Non-GAAP gross margin also excluded $6.6 million of production ramp-up costs related to the Chongqing Joint Venture (“JV Company”) for the March quarter, as compared to $8.5 million for the prior quarter and $3.4 million for the same quarter last year.
Non-GAAP operating expenses for the March quarter were $25.8 million, compared to $25.7 million for the prior quarter and $23.2 million for the same quarter last year. Non-GAAP operating expenses for the quarter excluded $2.5 million of share-based compensation charge, $2.1 million of legal costs related to the government investigation and $0.6 million impairment charge related to an investment in a privately held start-up company, as compared to $2.1 million of share-based compensation charge for the prior quarter, and $2.6 million of share-based compensation charge and $3.6 million of pre-production expenses related to the JV Company for the same quarter last year. Both GAAP and Non-GAAP operating expenses included $3.1 million of digital power team expenses for the quarter, as compared to $3.0 million for the prior quarter and $2.3 million for the same quarter last year. Our digital power development is also progressing well, and we are close to securing a design win at a graphics card maker.
Income tax benefit for the quarter was $1.0 million compared to tax expense of $0.6 million for both prior quarter and the same quarter last year. The tax benefit was primarily driven by the tax relief from the CARES Act.
Page 6
Non-GAAP EPS attributable to AOS for the quarter was 11 cents per share as compared to 23 cents for the prior quarter and 22 cents for the same quarter last year.
AOS on the stand-alone basis generated $29.5 million of operating cash flow in the March quarter, as compared to $12.5 million in prior quarter and $9.5 million in the same quarter last year. Working capital management contributed $22.0 million in the quarter. Cash flow used in operations attributable to the JV Company was $15.2 million for the March quarter, compared to $3.5 million for the prior quarter and $17.5 million for the same quarter last year.
Consolidated EBITDAS for the March quarter was $8.8 million, compared to $13.9 million for the prior quarter and $11.8 million for the same quarter last year. EBITDAS attributable to AOS for the quarter was $6.5 million as compared to $12.5 million for the prior quarter and $13.5 million for the same quarter last year.
Now let’s look at the balance sheet.
We completed the March quarter with cash and cash equivalents of $110.2 million, including $99.5 million at AOS and $10.7 million at the JV Company. This compares to $107.2 million at the end of last quarter, which included $86.1 million at AOS and $21.1 million at the JV Company. Our cash balance a year ago was $139.1 million, including $90.9 million at AOS and $48.2 million at the JV Company.
The bank borrowing balance at the end of March was $153.6 million, including $34.8 million at AOS and $118.8 million at the JV Company. During the March quarter, AOS and the JV Company repaid $2.1 million and $6.6 million of the existing loans, respectively. The JV Company obtained $15.4 million working capital loans. Subsequent to the quarter-end, the JV Company also entered into two loan agreements with local banks for a total of $50 million. We believe that this would be largely sufficient to achieve the Phase 1 plan at the JV Company.
Net trade receivables were $17.5 million, as compared to $33.9 million at the end of prior quarter and $28.4 million for the same quarter last year. Day Sales Outstanding for the quarter were 22 days, compared to 28 days in the prior quarter.
Net inventory was $127.4 million at the quarter-end, up from $117.6 million last quarter and up from $107.9 million in the prior year. Average days in inventory was 131 days for the quarter, compared to 114 days in the prior quarter.
Page 7
Net Property, Plant and Equipment was $412.3 million, as compared to $416.1 million prior quarter and $391.6 million last year. Capital expenditures were $16.8 million for the quarter, including $13.1 million at AOS and $3.7 million at the JV Company. We estimate that the capital expenditure for AOS alone to be in the range of 8% to 9% of the total revenue for the fiscal year 2020.
Before I move onto the guidance for the next quarter, I would like to update you on the progressat the JV Company. During the March quarter, the 12” fab and assembly and test facility performed better than we expected, considering the conditions of the COVID-19 outbreak in China. Given this situation of the global pandemic and resulting economic recession, our visibility into overall market demand beyond the June quarter is very limited. At this point, we are unable to determine when we can ramp up the 12” fab to its Phase 1 target run rate. We will continue to monitor and evaluate market conditions closely and provide further guidance when we gain more visibility. For the June quarter, we expect the JV Company to increase production volumes sequentially to support our business growth opportunities as our Oregon fab is running at full capacity.
With that, now I would like to discussthe guidance for the next quarter.
We expect:
| - | revenue to be between $117 million and $121 million. |
|---|---|
| - | GAAP gross margin to be 22.0%, plus or minus 1%. We anticipate non-GAAP gross margin to be 26.5%, plus or minus 1%. Note that non-GAAP gross margin excludes $0.4 million of estimated share-based compensation and<br> $5.0 million of estimated production ramp-up costs relating to the JV Company. |
| --- | --- |
| - | GAAP operating expenses to be in the range of $29.0 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $25.7 million plus or minus $1 million. Both GAAP and non-GAAP<br> operating expenses include $3.2 million to $3.5 million of estimated expenses relating to the development of our digital power business. Non-GAAP operating expenses exclude $1.0 million to $2.0 million of estimated professional fees<br> related to the government investigation and $2.3 million of estimated share-based compensation. |
| --- | --- |
| - | income tax expense to be approximately $0.3 million to $0.5 million. |
| --- | --- |
| - | loss attributable to non-controlling interests to be around $2.7 million. On a non-GAAP basis, excluding estimated production ramp-up costs relating to the JV company, this item is expected to be approximately<br> $0.1 million. |
| --- | --- |
Page 8
As part of our normal practice, we are not assuming any obligation to update this information.
With that, we will open the call for questions. Operator, please start the Q&A session.
Closing:
This concludes our earnings call today. Thank you for your interest in AOS and we look forward to talking to you again next quarter.
Page 9
Special Notes Regarding Forward Looking Statements
This script contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management's judgment, beliefs, current trends, and anticipated product performance. These forward looking statements include, without limitation, statements relating to projected amount of revenues, gross margin, operating expenses, operating income, tax expenses, net income, noncontrolling interest and share-based compensation expenses, production ramp up costs and annual revenue and growth objectives; statements regarding market segments and impact of COVID-19 pandemic on market demand; expectation with respect to ramp up activities and Phase 1 target run rate at theChongqing Joint Venture and timeline for production and operation;; our ability and strategy to develop new products,; projected mid-term annual revenue target; our ability to obtain debt financing and working capital loans; expectation with respect to our digital power business; seasonality fluctuation in customer demand and market segments;; the execution of our business plan; international trade tension and geopolitical environment; and other information regarding the future development of our business. Forward looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, the impact of COVID-19 pandemic on our business operation; our ability to successfully operate our joint venture in China; our ability to develop and succeed in the digital power business; difficulties and challenges in executing our diversification strategy into different market segments; new tariffs on goods from China; ordering pattern and seasonality; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of the PC industry and our ability to respond to such decline; the actual product performance in volume production, the quality and reliability of our product, our ability to achieve design wins, the general business and economic conditions, the state of semiconductor industry and seasonality of our markets, our ability to maintain factory utilization at a desirable level; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed by AOS on August 23, 2019. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and AOS undertakes no duty to update such information, except as required under applicable law.
Page 10