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Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Second Quarter of 2023 Ended December 31, 2022

Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL) today reported financial results for the fiscal second quarter of 2023 ended December 31, 2022.

The results for the fiscal second quarter of 2023 ended December 31, 2022 were as follows:

GAAP Financial Comparison

Quarterly

(in millions, except percentage and per share data)

(unaudited)

 

 

Three Months Ended

 

 

December 31,

2022

 

September 30,

2022

 

December 31,

2021

Revenue

$

188.8

 

$

208.5

 

$

193.3

 

Gross Margin

 

28.1

%

 

34.1

%

 

35.4

%

Operating Income

$

8.8

 

$

25.5

 

$

27.7

 

Net Income Attributable to AOS

$

6.3

 

$

26.0

 

$

383.0

 

Net Income Per Share Attributable to AOS - Diluted

$

0.21

 

$

0.88

 

$

13.54

 

Non-GAAP Financial Comparison

Quarterly

(in millions, except percentage and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31,

2022

 

September 30,

2022

 

December 31,

2021

Revenue

$

188.8

 

$

208.5

 

$

193.3

 

Non-GAAP Gross Margin

 

29.5

%

 

35.4

%

 

36.7

%

Non-GAAP Operating Income

$

22.8

 

$

37.1

 

$

37.4

 

Non-GAAP Net Income Attributable to AOS

$

20.0

 

$

35.2

 

$

34.0

 

Non-GAAP Net Income Per Share Attributable to AOS - Diluted

$

0.67

 

$

1.20

 

$

1.20

 

The non-GAAP financial measures in the schedule above and under the section “Financial Results for Fiscal Q2 Ended December 31, 2022” below exclude the effect of share-based compensation expenses, amortization of purchased intangible, legal costs related to government investigation, income tax effect of non-GAAP adjustments in each of the periods presented, and equity method investment income from equity investee for the three months ended December 31, 2022 and September 30, 2022, and gain on deconsolidation and changes of the equity interest in the JV Company for the three months ended December 31, 2021. A detailed reconciliation of GAAP and non-GAAP financial measures is included at the end of this press release.

Financial Results for Fiscal Q2 Ended December 31, 2022

  • Revenue was $188.8 million, a decrease of 9.5% from the prior quarter and a decrease of 2.4% from the same quarter last year.
  • GAAP gross margin was 28.1%, down from 34.1% in the prior quarter and down from 35.4% in the same quarter last year.
  • Non-GAAP gross margin was 29.5%, down from 35.4% in the prior quarter and down from 36.7% in the same quarter last year.
  • GAAP operating expenses were $44.3 million, down from $45.6 million in the prior quarter and up from $40.6 million in the same quarter last year.
  • Non-GAAP operating expenses were $32.8 million, down from $36.6 million from last quarter and down from $33.5 million in the same quarter last year.
  • GAAP operating income was $8.8 million, down from $25.5 million in the prior quarter and down from $27.7 million in the same quarter last year.
  • Non-GAAP operating income was $22.8 million as compared to $37.1 million for the prior quarter and $37.4 million for the same quarter last year.
  • GAAP net income per diluted share attributable to AOS was $0.21, compared to $0.88 net income per share for the prior quarter, and $13.54 net income per share for the same quarter a year ago.
  • Non-GAAP net income per share attributable to AOS was $0.67 compared to $1.20 for the prior quarter and $1.20 for the same quarter a year ago.
  • Consolidated cash flow provided by operating activities was $0.3 million, as compared to $36.7 million in the prior quarter.
  • The Company closed the quarter with $287.8 million of cash and cash equivalents.

AOS Chairman and Chief Executive Officer Dr. Mike Chang commented, “While our business was negatively impacted by the industry-wide inventory correction and reduction of customer demand, we are proactively implementing measures to ensure that we emerge from this downturn stronger and more successful than ever. Even as we project a decline in our March quarter revenue, we expect to recover a good portion of the sequential decline in the June quarter, with further recovery in the 2nd half of calendar year 2023, especially with the re-opening of China.”

Dr. Chang continued, “While this temporary slowdown is disappointing, the fundamentals of our business are the strongest that they have ever been, which will enable us to meet this challenge. In 2022, we set records across almost every metric. Our annual revenue was a record $794 million and non-GAAP earnings per share was a record $4.16. These successes were driven by many critical achievements, including a significant increase in record Tier 1 customers and market share across most of our product segments.”

“AOS has been in business for over two decades and inventory corrections and market cycles are a natural and healthy part of our industry. Demand for more and better power management is being driven by what we call the ‘electrification of everything’. We believe this tailwind is here to stay despite this temporary headwind, and we are in an excellent position to continue to win and thrive in this market. We enter 2023 with many strengths: growing product offerings, promising technology roadmaps, diverse and expanding manufacturing capabilities, strong relationships with strategic customers and a robust balance sheet, which will enable us to navigate the current economic environment while keeping our eyes on achieving our one-billion-dollar annual revenue target in the next couple of years.”

Business Outlook for Fiscal Q3 Ending March 31, 2023

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 third quarter of fiscal year 2023 are as follows:

  • Revenue to be approximately $130 million, plus or minus $5 million.
  • GAAP gross margin to be 22.5%, plus or minus 1%. We anticipate non-GAAP gross margin to be 24.5%, plus or minus 1%.
  • GAAP operating expenses to be in the range of $45.5 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $35.5 million, plus or minus $1 million.
  • Interest expense is expected to be approximately $1.2 million, and
  • Tax expense is expected to be in the range of $1.3 million to $1.5 million.

Conference Call and Webcast

AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal second quarter ended December 31, 2022 today, February 6, 2023 at 2:00 p.m. PT / 5:00 p.m. ET. To listen to the live conference call, please dial +1 (844) 200-6205 or +1 (929) 526-1599 if dialing from outside the United States and Canada. The access code is 529922. 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. The webcast replay will be available for seven days after the live call on the same website. 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, market trends in the semiconductor industry; our ability to navigate economic downturns and expected recovery timeline; anticipated earnings power and non-GAAP EPS on an annual basis, our growth opportunities and new markets, our annual revenue target, projected amount of revenue, gross margin, operating income, income tax expenses, net income, and share-based compensation expenses, non-GAAP gross margin, non-GAAP operating expenses, tax expenses, our objectives to achieve revenue target, our ability to continue to win and acquire market share and other information under the section entitled “Business Outlook for Fiscal Q3 Ending March 31, 2023”. 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 and government policies on our business operations in China; our lack of control over the joint venture in China; difficulties and challenges in executing our diversification strategy into different market segments; 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, 2022 filed by AOS with the SEC and other periodic reports we filed with the SEC. 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 expenses, operating income, net loss attributable to AOS, net income, diluted earnings per share ("EPS") and EBITDAS. These supplemental measures exclude, among other items, share-based compensation expenses, legal and profession fees related to government investigation, amortization of purchased intangible, income tax effect of non-GAAP adjustments, equity method investment income from equity investee, and gain on deconsolidation and changes of the equity interest in the JV Company. We also disclose certain non-GAAP financial measures in our guidance for the next quarter, including non-GAAP gross margin and operating expenses. We believe that these historical and forecast non-GAAP financial measures 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 such non-GAAP financial measures 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 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, graphic cards, flat panel TVs, home appliances, smart phones, battery packs, quick chargers, home appliances, 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 condensed 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

 

Six Months Ended

 

 

December 31,

2022

 

September 30,

2022

 

December 31,

2021

 

December 31,

2022

 

December 31,

2021

 

 

 

 

 

 

Revenue

$

188,760

 

$

208,476

 

$

193,319

 

$

397,236

 

$

380,354

 

Cost of goods sold

 

135,719

 

 

137,348

 

 

124,954

 

 

273,067

 

 

247,422

 

Gross profit

 

53,041

 

 

71,128

 

 

68,365

 

 

124,169

 

 

132,932

 

Gross margin

 

28.1

%

 

34.1

%

 

35.4

%

 

31.3

%

 

34.9

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

21,468

 

 

21,389

 

 

16,516

 

 

42,857

 

 

34,328

 

Selling, general and administrative

 

22,788

 

 

24,205

 

 

24,132

 

 

46,993

 

 

45,938

 

Total operating expenses

 

44,256

 

 

45,594

 

 

40,648

 

 

89,850

 

 

80,266

 

Operating income

 

8,785

 

 

25,534

 

 

27,717

 

 

34,319

 

 

52,666

 

 

 

 

 

 

 

Other income (loss), net

 

(903

)

 

(16

)

 

473

 

 

(919

)

 

457

 

Interest expense, net

 

(397

)

 

(608

)

 

(541

)

 

(1,005

)

 

(2,717

)

Gain on deconsolidation of the JV Company

 

 

 

 

 

399,093

 

 

 

 

399,093

 

Loss on changes of equity interest in the JV Company, net

 

 

 

 

 

(7,641

)

 

 

 

(7,641

)

Net income before income taxes

 

7,485

 

 

24,910

 

 

419,101

 

 

32,395

 

 

441,858

 

 

 

 

 

 

 

Income tax expense

 

1,659

 

 

1,374

 

 

34,096

 

 

3,033

 

 

35,416

 

Net income before income from equity method investment

 

5,826

 

 

23,536

 

 

385,005

 

 

29,362

 

 

406,442

 

Equity method investment income from equity investee

 

511

 

 

2,502

 

 

 

 

3,013

 

 

 

Net income

 

6,337

 

 

26,038

 

 

385,005

 

 

32,375

 

 

406,442

 

Net loss attributable to noncontrolling interest

 

 

 

 

 

2,007

 

 

 

 

20

 

Net income attributable to Alpha and Omega Semiconductor Limited

$

6,337

 

$

26,038

 

$

382,998

 

$

32,375

 

$

406,422

 

 

 

 

 

 

 

Net income per common share attributable to Alpha and Omega Semiconductor Limited

 

 

 

 

 

Basic

$

0.23

 

$

0.95

 

$

14.40

 

$

1.18

 

$

15.35

 

Diluted

$

0.21

 

$

0.88

 

$

13.54

 

$

1.10

 

$

14.53

 

 

 

 

 

 

 

Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share

 

 

 

 

 

Basic

 

27,511

 

 

27,391

 

 

26,593

 

 

27,451

 

 

26,479

 

Diluted

 

29,576

 

 

29,423

 

 

28,287

 

 

29,499

 

 

27,963

 

 

 

 

 

 

 

Alpha and Omega Semiconductor Limited

Condensed Consolidated Balance Sheets

(in thousands, except par value per share)

(unaudited)

 

 

December 31, 2022

 

June 30, 2022

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

$

287,805

 

$

314,352

 

Restricted cash

 

288

 

 

299

 

Accounts receivable, net

 

53,223

 

 

65,681

 

Inventories

 

163,823

 

 

158,040

 

Other current assets

 

12,004

 

 

11,220

 

Total current assets

 

517,143

 

 

549,592

 

Property, plant and equipment, net

 

350,950

 

 

318,666

 

Operating lease right-of-use assets

 

23,474

 

 

23,674

 

Intangible assets, net

 

8,389

 

 

10,050

 

Equity method investment

 

365,115

 

 

378,378

 

Deferred income tax assets

 

566

 

 

592

 

Other long-term assets

 

20,008

 

 

17,677

 

Total assets

$

1,285,645

 

$

1,298,629

 

LIABILITIES AND EQUITY

 

 

Current liabilities:

 

 

Accounts payable

$

65,799

 

$

87,377

 

Accrued liabilities

 

98,107

 

 

116,893

 

Payable related to equity investee, net

 

21,570

 

 

28,989

 

Income taxes payable

 

5,620

 

 

4,248

 

Short-term debt

 

25,045

 

 

25,563

 

Finance lease liabilities

 

835

 

 

802

 

Operating lease liabilities

 

4,553

 

 

3,850

 

Total current liabilities

 

221,529

 

 

267,722

 

Long-term debt

 

44,101

 

 

42,486

 

Income taxes payable - long-term

 

2,227

 

 

2,158

 

Deferred income tax liabilities

 

27,136

 

 

28,757

 

Finance lease liabilities - long-term

 

3,658

 

 

3,932

 

Operating lease liabilities - long-term

 

19,713

 

 

20,878

 

Other long-term liabilities

 

67,607

 

 

78,603

 

Total liabilities

 

385,971

 

 

444,536

 

Equity:

 

 

Preferred shares, par value $0.002 per share:

 

 

Authorized: 10,000 shares; issued and outstanding: none at December 31, 2022 and June 30, 2022

 

 

 

 

Common shares, par value $0.002 per share:

 

 

Authorized: 100,000 shares; issued and outstanding: 34,181 shares and 27,565 shares, respectively at December 31, 2022 and 33,988 shares and 27,371 shares, respectively at June 30, 2022

 

68

 

 

68

 

Treasury shares at cost: 6,616 shares at December 31, 2022 and 6,617 shares at June 30, 2022

 

(65,990

)

 

(66,000

)

Additional paid-in capital

 

316,141

 

 

288,951

 

Accumulated other comprehensive income (loss)

 

(12,904

)

 

1,080

 

Retained earnings

 

662,359

 

 

629,994

 

Total equity

 

899,674

 

 

854,093

 

Total liabilities and equity

$

1,285,645

 

$

1,298,629

 

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

 

Six Months Ended

 

 

December 31,

2022

 

September 30,

2022

 

December 31,

2021

 

December 31,

2022

 

December 31,

2021

 

 

 

 

 

 

GAAP gross profit

$

53,041

 

$

71,128

 

$

68,365

 

$

124,169

 

$

132,932

 

Share-based compensation

 

1,748

 

 

1,788

 

 

1,709

 

 

3,536

 

 

2,278

 

Amortization of purchased intangible

 

811

 

 

812

 

 

811

 

 

1,623

 

 

1,623

 

Non-GAAP gross profit

$

55,600

 

$

73,728

 

$

70,885

 

$

129,328

 

$

136,833

 

Non-GAAP gross margin as a % of revenue

 

29.5

%

 

35.4

%

 

36.7

%

 

32.6

%

 

36.0

%

 

 

 

 

 

 

GAAP operating expense

$

44,256

 

$

45,594

 

$

40,648

 

$

89,850

 

$

80,266

 

Share-based compensation

 

11,343

 

 

8,808

 

 

6,838

 

 

20,151

 

 

10,904

 

Legal costs related to government investigation

 

110

 

 

142

 

 

293

 

 

252

 

 

724

 

Non-GAAP operating expense

$

32,803

 

$

36,644

 

$

33,517

 

$

69,447

 

$

68,638

 

 

 

 

 

 

 

GAAP operating income

$

8,785

 

$

25,534

 

$

27,717

 

$

34,319

 

$

52,666

 

Share-based compensation

 

13,091

 

 

10,596

 

 

8,547

 

 

23,687

 

 

13,182

 

Amortization of purchased intangible

 

811

 

 

812

 

 

811

 

 

1,623

 

 

1,623

 

Legal costs related to government investigation

 

110

 

 

142

 

 

293

 

 

252

 

 

724

 

Non-GAAP operating income

$

22,797

 

$

37,084

 

$

37,368

 

$

59,881

 

$

68,195

 

Non-GAAP operating margin as a % of revenue

 

12.1

%

 

17.8

%

 

19.3

%

 

15.1

%

 

17.9

%

 

 

 

 

 

 

GAAP net income attributable to AOS

$

6,337

 

$

26,038

 

$

382,998

 

$

32,375

 

$

406,422

 

Share-based compensation

 

13,091

 

 

10,596

 

 

8,547

 

 

23,687

 

 

13,182

 

Amortization of purchased intangible

 

811

 

 

812

 

 

811

 

 

1,623

 

 

1,623

 

Gain on deconsolidation and changes of the equity interest in the JV Company

 

 

 

 

 

(391,452

)

 

 

 

(391,452

)

Equity method investment income from equity investee

 

(511

)

 

(2,502

)

 

 

 

(3,013

)

 

 

Legal costs related to government investigation

 

110

 

 

142

 

 

293

 

 

252

 

 

724

 

Income tax effect of non-GAAP adjustments

 

122

 

 

119

 

 

32,800

 

 

241

 

 

32,801

 

Non-GAAP net income attributable to AOS

$

19,960

 

$

35,205

 

$

33,997

 

$

55,165

 

$

63,300

 

Non-GAAP net margin attributable to AOS as a % of revenue

 

10.6

%

 

16.9

%

 

17.6

%

 

13.9

%

 

16.6

%

 

 

 

 

 

 

GAAP net income attributable to AOS

$

6,337

 

$

26,038

 

$

382,998

 

$

32,375

 

$

406,422

 

Share-based compensation

 

13,091

 

 

10,596

 

 

8,547

 

 

23,687

 

 

13,182

 

Amortization and depreciation

 

10,804

 

 

9,352

 

 

11,938

 

 

20,156

 

 

25,660

 

Gain on deconsolidation and changes of the equity interest in the JV Company

 

 

 

 

 

(391,452

)

 

 

 

(391,452

)

Equity method investment income from equity investee

 

(511

)

 

(2,502

)

 

 

 

(3,013

)

 

 

Interest expense, net

 

397

 

 

608

 

 

541

 

 

1,005

 

 

2,717

 

Income tax expense

 

1,659

 

 

1,374

 

 

34,096

 

 

3,033

 

 

35,416

 

EBITDAS

$

31,777

 

$

45,466

 

$

46,668

 

$

77,243

 

$

91,945

 

 

 

 

 

 

 

GAAP diluted net income per share attributable to AOS

$

0.21

 

$

0.88

 

$

13.54

 

$

1.10

 

$

14.53

 

Share-based compensation

 

0.44

 

 

0.36

 

 

0.30

 

 

0.80

 

 

0.47

 

Amortization of purchased intangible

 

0.03

 

 

0.03

 

 

0.03

 

 

0.05

 

 

0.06

 

Gain on deconsolidation and changes of the equity interest in the JV Company

 

 

 

 

 

(13.84

)

 

 

 

(14.00

)

Equity method investment income from equity investee

 

(0.02

)

 

(0.09

)

 

 

 

(0.10

)

 

 

Legal costs related to government investigation

 

0.00

 

 

0.01

 

 

0.01

 

 

0.01

 

 

0.03

 

Income tax effect of non-GAAP adjustments

 

0.01

 

 

0.01

 

 

1.16

 

 

0.01

 

 

1.17

 

Non-GAAP diluted net income per share attributable to AOS

$

0.67

 

$

1.20

 

$

1.20

 

$

1.87

 

$

2.26

 

 

 

 

 

 

 

Shares used to compute GAAP diluted net income per share

 

29,576

 

 

29,423

 

 

28,287

 

 

29,499

 

 

27,963

 

Shares used to compute Non-GAAP diluted net income per share

 

29,576

 

 

29,423

 

 

28,287

 

 

29,499

 

 

27,963

 

 

 

 

 

 

 

 

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