8-K

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):  November 3, 2022

Alpha and Omega Semiconductor Limited

(Exact name of registrant as specified in its charter)

Bermuda	001-34717	77-0553536
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

(Address of principal registered 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 exhibit, 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 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 November 3, 2022, Alpha and Omega Semiconductor Limited (the “Company”) issued a press release regarding its financial results for the fiscal first quarter of 2023 ended September 30, 2022.  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 dated November 3, 2022

    99.2            Script of 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: November 3, 2022

Alpha and Omega Semiconductor Limited
By:	/s/    Yifan Liang
Name:	Yifan Liang
Title:	Chief Financial Officer and Corporate Secretary

EX-99.1

Exhibit 99.1

Alpha and Omega Semiconductor Reports Financial Results for the Fiscal First Quarter of 2023 Ended September 30, 2022

SUNNYVALE, Calif.--(BUSINESS WIRE)--November 3, 2022--Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL) today reported financial results for the fiscal first quarter of 2023 ended September 30, 2022.

The results for the fiscal first quarter of 2023 ended September 30, 2022 were as follows:

GAAP Financial Comparison
Quarterly
(in millions, except percentage and per share data)
(unaudited)
	Three Months Ended
	September 30, 2022			June 30, 2022			September 30, 2021
Revenue	$	208.5		$	194.0		$	187.0
Gross Margin		34.1	%		32.6	%		34.5	%
Operating Income	$	25.5		$	18.1		$	24.9
Net Income Attributable to AOS	$	26.0		$	15.1		$	23.4
Net Income Per Share Attributable to AOS - Diluted	$	0.88		$	0.53		$	0.85

Non-GAAP Financial Comparison
Quarterly
(in millions, except percentage and per share data)
(unaudited)
	Three Months Ended
	September 30, 2022			June 30, 2022			September 30, 2021
Revenue	$	208.5		$	194.0		$	187.0
Non-GAAP Gross Margin		35.4	%		33.8	%		35.3	%
Non-GAAP Operating Income	$	37.1		$	28.9		$	30.8
Non-GAAP Net Income Attributable to AOS	$	35.2		$	27.1		$	29.3
Non-GAAP Net Income Per Share Attributable to AOS - Diluted	$	1.20		$	0.95		$	1.06

The non-GAAP financial measures in the schedule above and under the section “Financial Results for Fiscal Q1 Ended September 30, 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 loss (income) from equity investee for the three months ended September 30, 2022 and June 30, 2022. A detailed reconciliation of GAAP and non-GAAP financial measures is included at the end of this press release.

Financial Results for Fiscal Q1 Ended September 30, 2022

• Revenue was $208.5 million, an increase of 7.5% from the prior quarter and an increase of 11.5% from the same quarter last year.
• GAAP gross margin was 34.1%, up from 32.6% in the prior quarter and down from 34.5% in the same quarter last year.
• Non-GAAP gross margin was 35.4%, up from 33.8% in the prior quarter and up from 35.3% in the same quarter last year.
• GAAP operating expenses were $45.6 million, up from $45.1 million in the prior quarter and up from $39.6 million in the same quarter last year.
• Non-GAAP operating expenses were $36.6 million, a decrease of $0.1 million from last quarter and an increase of $1.5 million from the same quarter last year.
• GAAP operating income was $25.5 million, up from $18.1 million in the prior quarter and up from $24.9 million in the same quarter last year.
• Non-GAAP operating income was $37.1 million as compared to $28.9 million for the prior quarter and $30.8 million for the same quarter last year.
• GAAP net income per diluted share attributable to AOS was $0.88, compared to $0.53 net income per share for the prior quarter, and $0.85 net income per share for the same quarter a year ago.
• Non-GAAP net income per share attributable to AOS was $1.20 compared to $0.95 for the prior quarter and $1.06 for the same quarter a year ago.
• Consolidated cash flow provided by operating activities was $36.7 million, as compared to $25.7 million in the prior quarter.
• The Company closed the quarter with $316.1 million of cash and cash equivalents.

AOS Chairman and Chief Executive Officer Dr. Mike Chang commented, “Our fiscal Q1 results were in-line with our expectations. Revenue grew 11.5% year-over-year to a record high of $208.5 million and non-GAAP EPS was $1.20. Looking forward, we expect to be impacted by an industry inventory correction in PCs and smartphones. While our near-term results will be affected, our PC and smartphone revenue for calendar year 2022, including our December quarter outlook, will actually grow year-over-year notwithstanding a decline of approximately 20% and 6% in global PC and smartphone shipment, respectively, in 2022. We believe this is primarily due to our success with Tier 1 customers, market share gains, higher BOM content, and better premium tier product mix.”

Dr. Chang continued, “The current market environment is not coming to us as a surprise. Over our 22-year history, we have navigated many boom-and-bust cycles. Today, we are better prepared to weather these challenges with our leading technology and a much more diversified product portfolio. For example, our Gaming and Quick Chargers segments have been a great success recently as we secured the leading player in each respective market, and we expect strong demand to continue over the coming quarters.”

Dr. Chang concluded, “While we are not immune to slowdowns in the broader economy, we are resilient and confident that we will be able to navigate the current market cycle with our proven business strategies and strong financial condition. When the market recovers, our goal is to be well on our way towards achieving our one-billion-dollar annual revenue target.”

Business Outlook for Fiscal Q2 Ending December 31, 2022

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 second quarter of fiscal year 2023 are as follows:

• Revenue to be approximately $195 million, plus or minus $3 million.
• GAAP gross margin to be 30.0%, plus or minus 1%. We anticipate non-GAAP gross margin to be 31.0%, plus or minus 1%.
• GAAP operating expenses to be in the range of $43.5 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $34.5 million, plus or minus $1 million.
• Interest expense is expected to be approximately $1.0 million, and
• Tax expense is expected to be in the range of $1.2 million to $1.4 million.

Conference Call and Webcast

AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal first quarter ended September 30, 2022 today, November 3, 2022 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 590723. 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; 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 mitigate economic downturns, and other information under the section entitled “Business Outlook for Fiscal Q2 Ending December 31, 2022”. 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 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; 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, 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 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, and equity method investment loss (income) from equity investee. 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 (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 personal and 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.

Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
	Three Months Ended
	September 30, 2022			June 30, 2022			September 30, 2021
Revenue	$	208,476		$	193,959		$	187,035
Cost of goods sold		137,348			130,737			122,468
Gross profit		71,128			63,222			64,567
Gross margin		34.1	%		32.6	%		34.5	%
Operating expenses:
Research and development		21,389			20,386			17,812
Selling, general and administrative		24,205			24,696			21,806
Total operating expenses		45,594			45,082			39,618
Operating income		25,534			18,140			24,949
Other income (loss), net		(16	)		279			(16	)
Interest expense, net		(608	)		(895	)		(2,176	)
Net income before income taxes		24,910			17,524			22,757
Income tax expense		1,374			940			1,320
Net income before income (loss) from equity method investment		23,536			16,584			21,437
Equity method investment income (loss) from equity investee		2,502			(1,493	)		—
Net income		26,038			15,091			21,437
Net loss attributable to noncontrolling interest		—			—			(1,987	)
Net income attributable to Alpha and Omega Semiconductor Limited	$	26,038		$	15,091		$	23,424
Net income per common share attributable to Alpha and Omega Semiconductor Limited
Basic	$	0.95		$	0.55		$	0.89
Diluted	$	0.88		$	0.53		$	0.85
Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share
Basic		27,391			27,269			26,365
Diluted		29,423			28,466			27,638

Alpha and Omega Semiconductor Limited
Condensed Consolidated Balance Sheets
(in thousands, except par value per share)
(unaudited)
	September 30, 2022			June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	316,119		$	314,352
Restricted cash		278			299
Accounts receivable, net		55,769			65,681
Inventories		164,946			158,040
Other current assets		11,030			11,220
Total current assets		548,142			549,592
Property, plant and equipment, net		339,470			318,666
Operating lease right-of-use assets		24,251			23,674
Intangible assets, net		9,211			10,050
Equity method investment		375,914			378,378
Deferred income tax assets		553			592
Other long-term assets		13,897			17,677
Total assets	$	1,311,438		$	1,298,629
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	80,101		$	87,377
Accrued liabilities		108,350			116,893
Payable related to equity investee, net		19,516			28,989
Income taxes payable		4,687			4,248
Short-term debt		26,738			25,563
Finance lease liabilities		820			802
Operating lease liabilities		4,119			3,850
Total current liabilities		244,331			267,722
Long-term debt		46,953			42,486
Income taxes payable - long-term		2,191			2,158
Deferred income tax liabilities		28,572			28,757
Finance lease liabilities - long-term		3,873			3,932
Operating lease liabilities - long-term		20,748			20,878
Other long-term liabilities		79,301			78,603
Total liabilities		425,969			444,536
Equity:
Preferred shares, par value $0.002 per share:
Authorized: 10,000 shares; issued and outstanding: none at September 30, 2022 and June 30, 2022		—			—
Common shares, par value $0.002 per share:
Authorized: 100,000 shares; issued and outstanding: 34,018 shares and 27,401 shares, respectively at September 30, 2022 and 33,988 shares and 27,371 shares, respectively at June 30, 2022		68			68
Treasury shares at cost: 6,617 shares at September 30, 2022 and 6,617 shares at June 30, 2022		(65,996	)		(66,000	)
Additional paid-in capital		299,196			288,951
Accumulated other comprehensive income		(3,827	)		1,080
Retained earnings		656,028			629,994
Total equity		885,469			854,093
Total liabilities and equity	$	1,311,438		$	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
	September 30, 2022			June 30, 2022			September 30, 2021
GAAP gross profit	$	71,128		$	63,222		$	64,567
Share-based compensation		1,788			1,565			569
Amortization of purchased intangible		812			811			812
Non-GAAP gross profit	$	73,728		$	65,598		$	65,948
Non-GAAP gross margin as a % of revenue		35.4	%		33.8	%		35.3	%
GAAP operating expense	$	45,594		$	45,082		$	39,618
Share-based compensation		8,808			8,305			4,066
Legal costs related to government investigation		142			84			431
Non-GAAP operating expense	$	36,644		$	36,693		$	35,121
GAAP operating income	$	25,534		$	18,140		$	24,949
Share-based compensation		10,596			9,870			4,635
Amortization of purchased intangible		812			811			812
Legal costs related to government investigation		142			84			431
Non-GAAP operating income	$	37,084		$	28,905		$	30,827
Non-GAAP operating margin as a % of revenue		17.8	%		14.9	%		16.5	%
GAAP net income attributable to AOS	$	26,038		$	15,091		$	23,424
Share-based compensation		10,596			9,870			4,635
Amortization of purchased intangible		812			811			812
Equity method investment loss (income) from equity investee		(2,502	)		1,493			—
Legal costs related to government investigation		142			84			431
Income tax effect of non-GAAP adjustments		119			(234	)		1
Non-GAAP net income attributable to AOS	$	35,205		$	27,115		$	29,303
Non-GAAP net margin attributable to AOS as a % of revenue		16.9	%		14.0	%		15.7	%
GAAP net income attributable to AOS	$	26,038		$	15,091		$	23,424
Share-based compensation		10,596			9,870			4,635
Amortization and depreciation		9,352			8,588			13,722
Equity method investment loss (income) from equity investee		(2,502	)		1,493			—
Interest expense, net		608			895			2,176
Income tax expense		1,374			940			1,320
EBITDAS	$	45,466		$	36,877		$	45,277
GAAP diluted net income per share attributable to AOS	$	0.88		$	0.53		$	0.85
Share-based compensation		0.36			0.35			0.16
Amortization of purchased intangible		0.03			0.03			0.03
Equity method investment loss (income) from equity investee		(0.09	)		0.05			—
Legal costs related to government investigation		0.01			0.00			0.02
Income tax effect of non-GAAP adjustments		0.01			(0.01	)		0.00
Non-GAAP diluted net income per share attributable to AOS	$	1.20		$	0.95		$	1.06
Shares used to compute GAAP diluted net income per share		29,423			28,466			27,638
Shares used to compute Non-GAAP diluted net income per share		29,423			28,466			27,638

Contacts

Investor and media inquiries:

The Blueshirt Group
Gary Dvorchak, CFA
In US +1 323 240 5796
In China +86 (138) 1079-1480
gary@blueshirtgroup.com

Yujia Zhai
The Blueshirt Group
Yujia@blueshirtgroup.com
+1 (860) 214-0809

EX-99.2

Exhibit 99.2

 Alpha and Omega Semiconductor Limited

Prepared Remarks for the Investor Conference Call

for the Quarter Ended September 30, 2022

November 3, 2022

Yujia Zhai

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2023 first quarter financial results.  I am Yujia Zhai, Investor Relations representative for AOS.  With me today are Dr. Mike Chang, our CEO, Stephen Chang, our President, and Yifan Liang, our CFO.  This call is being recorded and broadcast live over the Web.  A replay will be available for seven days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows.  Mike will begin with strategic highlights.  Then, Stephen will provide business updates and a detailed segment report.  After that, Yifan will review the financial results and provide guidance for the December quarter.  Finally, we will have the question-and-answer session.

The earnings release was distributed over wire services today, November 3, 2022, after the close of market.  The release is also posted on the company's website.  Our earnings release and this presentation include non-GAAP financial measures.  We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections.  These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially 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.

Now, I will turn the call over to our CEO, Dr. Mike Chang, to provide strategic highlights.  Mike?

Mike Chang (Chief Executive Officer)

Thank you, Yujia. I would like to welcome everyone to today's call. It is good to be speaking with all of you again.

Our fiscal Q1 results were in-line with our expectations. Revenue grew 11.5% year-over-year to a record high of $208.5 million. Non-GAAP gross margin was 35.4% and non-GAAP EPS was $1.20. We are pleased with these results. Looking forward, we expect to be impacted by an industry inventory correction, particularly in PCs and smartphones.

As a result, we anticipate our calendar Q4 2022 results to be somewhat weaker than the historical seasonality that we typically experience during this period. Our data suggests that this process will occur over the next couple quarters before orders begin to normalize and be more in balance with end consumer demand.

While our near-term results will be impacted somewhat, I think it’s important to highlight that our total PC revenue for calendar 2022, including our December quarter outlook, will actually grow slightly year-over-year against a 20% decline in PC units according to Digitimes. Our calendar 2022 Smartphone revenue is also expected to be up 15% year-over-year, despite that the global smartphone shipments is forecasted to decline 6.5% in 2022. This is due to our success in gaining share, increasing BOM content, and deliberately improving our product mix towards more premium tier products. This also demonstrates the strength of our business’s underlying fundamentals and the traction that we have gained in these two important markets. Even though PC and smartphone demand is slowing in the near term, these two markets will continue to be major components of consumer spending for a very long time.

Another example of our solid fundamentals is that our partnerships with Tier 1 customers and our share with them are the highest it’s ever been in our history. We believe this will make us more resilient in recessionary periods since premium tier products are typically less sensitive to slowdowns in the economy. Moreover, these relationships with our Tier 1 customers make us more attractive to prospective customers. Seeing our chip in a Tier 1 flagship device is the best marketing and advertising for AOS, because it provides the strongest testimony of the quality and capabilities of our products and services.  Over the last year, this has been a noticeable trend for us as more new customers approached us proactively and initiated request for product samples and meetings, instead of just our sales people going to them.

Another example is that we have a much more diversified product portfolio that’s serving a broader set of end markets, across consumer, commercial and industrial use cases with different business cycles. For example, one of our biggest growth areas over the past year has been Gaming, where we have leading share with the number 1 gaming console manufacturer. This business for us more than doubled year-over-year and is now a major revenue contributor for AOS and is expected to continue to grow even in a weakening consumer demand environment. We are seeing similar growth trends in multiple other new applications that Stephen will go into more detail in his section.

Finally, our business is a lot more diversified in terms of the geographies that we serve. In the beginning, when we were still small, the majority of our business was in Asia. Today, our customers are much more globally distributed, including Tier 1 customers in Europe and North America.

Diversification and proliferation of total solutions has been our strategy from day one and our execution has been paying off. Today, our business is more balanced with a stronger and more solid foundation.  With that said, while these qualities enhanced our resiliency, we recognize that we are not immune to global slowdowns in demand. To help de-risk some of the topline slowdown, we have already paused hiring of previously planned headcount growth and are taking active steps to reduce discretionary spending.

In closing, the current market environment doesn’t come to us as a surprise. Over our 22-year history, we have navigated many boom-and-bust cycles, surviving and thriving even when we were far smaller than we are now. Today, our market position is stronger than ever, supported by our leading technology, more diversified product portfolio, Tier 1 customer base in all of our business segments, expanding manufacturing capability and supply chain, dedicated and experienced management team and strong balance sheet.

More importantly, the underlying trends for more power that’s providing a tailwind to our business is here to stay.  The electrification of everything is just getting started and our power products sit at the forefront of that trend. We are confident that we can navigate the current economic environment and achieve our one-billion-dollar annual revenue target in the next couple of years, and are actively investing to position ourselves to achieve even more after that.

Thank you. I will now turn the call over to Stephen for an update on our business and a detailed segment report. Stephen?

Stephen Chang (President)

Thank you, Mike, and good afternoon, everyone.

Before I give a detailed overview of our segments, I want to expand on what Mike discussed around our new growth areas.

As Mike already mentioned, Gaming has been a major success story for us and we continue to expect very strong demand over the next year as our number 1 gaming console manufacturer ramps up production. Looking under the hood a bit, over the last year, we built a strong partnership with this customer through our great service and support on shipments during challenging times. Further, our products are significantly more differentiated at the higher-end performance bands, and since gaming consoles are essentially high-end performance PCs, our solutions provide significant competitive advantages against alternative products. Because of these factors, we have won multiple sockets across multiple products, including high performance MOSFETs as well as advanced Power ICs such as DrMOS and smart load switch products.

Another growth area that I want to highlight has been the success of our MOSFETs for Quick Chargers. AOS has a long history of providing high performance medium-voltage MOSFETs to address secondary side rectification in this fast-charging application, particularly as charging power has increased over time.  As a result of our focus on product performance and customer support, we have become a leading supplier in the number 1 U.S smartphone OEM.  Recently, we expanded our BOM footprint at this key customer to now also supplying the HV MOSFET for primary side rectification, thereby effectively tripling our BOM content with this customer application.

All of this have been made possible by our investment in R&D and new product programs that focus on the ability to offer our customers a total solutions portfolio that enables cross-selling and leverage the relationship and success of our existing customers.

I will now cover our segment results and provide some guidance for the next quarter.

Starting with Computing. Revenue was up 13.6% year-over-year, flat sequentially and represented 42.8% of total revenue. The year-over-year growth was driven by strong demand across several different applications but particularly data centers as this area showed significant growth year-over-year with the adoption of our high performance low and medium voltage MOSFETs by leading Cloud providers. In addition, graphics cards, tablets and notebooks continued to show strength.

Looking ahead, in the December quarter, we expect Computing segment revenue to be down over 20% sequentially driven largely by the inventory correction in PCs and to a smaller degree, seasonality. However, our total 2022 PC revenue is actually still expected to be up slightly year-over-year against a 20% annual decline in global PC volumes as a result of share gains and higher device BOM content. I think our investors should keep this in mind when analyzing these results as the fundamentals of our PC business has never been stronger. Data centers and tablets are expected to remain strong next quarter, which helps dampen some of the softness in PCs. AOS offers performance MOSFETs with an elevated Safe Operating Area designed to deliver high reliability for data center infrastructure.

Turning to the Consumer segment, revenue was up 11.0% year-over-year and 23.0% sequentially, and represented 21.7% of total revenue. These results were in-line with our expectations driven by record Gaming volumes which grew 122.7% year-over-year and 70.2% sequentially. Looking ahead, we anticipate our consumer segment to remain strong with low-double-digit growth sequentially driven by continued record Gaming shipments, particularly from the #1 gaming console manufacturer, where we have leading share.

Next, let’s discuss the Communications segment, which was up 21.8% year-over-year and 5.1% sequentially and represented 15.1% of total revenue. This segment delivered strong growth as the September quarter is typically our peak season for smartphone shipments, especially as our #1 U.S smartphone customer normally refreshes their devices during this quarter. Our growth was also driven by share gains at this customer in the premium tier. In fact, we have strong share in high-end models in all three of our markets in U.S., Korea, and China. This is due to our ability to serve the high-end market with our high-performance battery protection products as well as strong partnerships with our customers.

In the December quarter, we expect this segment to decrease high-single-digits as a result of the industry smartphone inventory correction, particularly in China. Our business in the U.S. market is still expected to be strong, with Korea about flat. Offsetting lower smartphone demand somewhat is growth in telecom 5G infrastructure.

Now, let’s talk about our last segment, Power Supply and Industrial, which accounted for 19.6% of total revenue. This segment was up 8% year-over-year and 14.3% sequentially.  The increase was mainly due to share gains in quick chargers at the leading U.S. phone maker and growth in Power tools. For the December quarter, we anticipate this segment to grow high-single-digits sequentially, mostly from continued growth of quick chargers as we expand our designs in multiple devices with the leading U.S. phone maker.

In closing, we are not immune to the overall market and inventory correction. However, we believe our business is a lot more resilient than the old AOS as we have a much more diversified product portfolio servicing multiple end markets and record number of Tier 1 customers and market share. Further, we continue to execute our product and technology roadmaps, enhancing our diversified manufacturing capability and deepening strategic customer relationships, which should result in growth as the market recovers.

With that, I will now turn the call over to Yifan for a discussion of our fiscal first quarter financial results and our outlook for the next quarter.

Yifan Liang (Chief Financial Officer)

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

Revenue for the quarter was $208.5 million, up 7.5% sequentially and up 11.5% year-over-year.  In terms of product mix, both product lines continued to grow.  DMOS revenue was $145.1 million, up 4.5% sequentially and up 11.1% over last year.  Power IC revenue was $61.8 million, up 16.3% from the prior quarter and up 18.0% from a year ago.  Assembly service revenue was $1.6 million, as compared to $2.0 million last quarter and $4.0 million for the same quarter last year.

As Mike mentioned, non-GAAP gross margin was 35.4%, compared to 33.8% in the prior quarter and 35.3% a year ago.  The quarter-over-quarter increase in non-GAAP gross margin was mainly driven by better production absorption at our assembly and test facility in Shanghai.  In the June quarter, our Shanghai factory was partially shut down due to the citywide COVID lock down. Since July, our Shanghai facility has been operating at normal capacity.

Non-GAAP operating expenses were $36.6 million, compared to $36.7 million for the prior quarter and $35.1 million last year.  Holding our non-GAAP operating expenses flat reflects our measures to control discretionary expenses and costs.

As such, non-GAAP quarterly EPS was $1.20 per share, compared to $0.95 last quarter and $1.06 a year ago.

Moving on to cash flow, we continue to generate healthy cash flow.  GAAP operating cash flow was $36.7 million, which included $3.3 million net refund of customer deposits.  By comparison, operating cash flow in the prior quarter was $25.7 million, which included $3.4 million net customer deposits.  Operating cash flow on a stand-alone basis for AOS a year ago was $84.4 million, which included $40.2 million customer deposits.  Consolidated EBITDAS was $45.5 million, compared to $36.9 million last quarter and $45.3 million last year.

Let me turn to our balance sheet.

We completed the September quarter with a cash balance of $316.1 million, compared to $314.4 million at the end of last quarter.  The cash balance a year ago was $231.6 million, excluding $20.9 million at the JV Company.

Net trade receivables were reduced to $55.8 million from $65.7 million at the end of the prior quarter.  The quarter-over-quarter decrease was due to the higher balance in the prior quarter caused by uneven shipments toward the second half of the June quarter as our Shanghai facility was partially shut down due to COVID.  Days Sales Outstanding for the September quarter were 30 days, compared to 26 days last quarter.

Net inventory was up slightly to $164.9 million at quarter-end versus $158.0 million last quarter and $163.4 million last year.  The quarter-over-quarter increase was mainly in raw materials.  Average days in inventory were 106 days, compared to 104 days in the prior quarter.

Finally, Property, Plant and Equipment was $339.5 million, up from $318.7 million last quarter.  The fixed assets balance a year ago was $175.1 million, excluding $266.2 million at the JV Company.  CapEx for the quarter was $40.3 million.  We expect CapEx to drop to a $30 million level in the December quarter.  To update you, our Oregon fab expansion project continued to make progress in equipment installation and qualification, and we anticipate additional capacity to come online in the March quarter of 2023.

Now, I would like to discuss December quarter guidance.

We expect:

● Revenue to be approximately $195 million, plus or minus $3 million.

● GAAP gross margin to be 30.0%, plus or minus 1%.  We anticipate non-GAAP gross margin to be 31.0%, plus or minus 1%.  The quarter-over-quarter decrease mainly reflects the impact of the expected product mix changes and lower factory production absorption due to the current inventory correction. In addition, this guidance also reflects normal seasonality for the December quarter.

● GAAP operating expenses to be in the range of $43.5 million, plus or minus $1 million.  Non-GAAP operating expenses are expected to be in the range of $34.5 million, plus or minus $1 million.

● Interest expense to be approximately $1.0 million, and

● Income tax expense to be in the range of $1.2 million to $1.4 million.

With that, we will now 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.

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 expected financial performance of market segments; the macroeconomic conditions and our ability to mitigate economic downturns; the global capacity constraint; our ability and strategy to develop new products; the Oregon fab expansion project and anticipated timing; projected annual revenue target; fluctuation in customer demand and market segments; our share of Tier 1 customer, our ability to control and maintain manufacturing capacity; the execution of our business plan and strategies; 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 lack of control over the JV Company; 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, 2022 filed by AOS. 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.

XML

Document and Entity Information	Nov. 03, 2022
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 03, 2022
Entity Registrant Name	Alpha and Omega Semiconductor Limited
Entity Incorporation, State or Country Code	D0
Entity File Number	001-34717
Entity Tax Identification Number	77-0553536
Entity Address, Address Line One	Clarendon House
Entity Address, Address Line Two	2 Church Street
Entity Address, City or Town	Hamilton
Entity Address, Country	BM
Entity Address, Postal Zip Code	HM 11
City Area Code	408
Local Phone Number	830-9742
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001387467
Title of 12(b) Security	Common Shares
Trading Symbol	AOSL
Security Exchange Name	NASDAQ