Market Overview

Alpha and Omega Semiconductor Reports Financial Results for Fiscal Fourth Quarter and Fiscal Year Ended June 30, 2018

Share:

Alpha and Omega Semiconductor Limited ("AOS") (NASDAQ:AOSL), today
reported financial results for the fiscal fourth quarter and the fiscal
year ended June 30, 2018.

The results for the fiscal fourth quarter of 2018 ended June 30, 2018
were as follows:

 
GAAP Financial Comparison
Quarterly
(in millions except percentage and per share data)
(unaudited)
  Three Months Ended
June 30, 2018   March 31, 2018   June 30, 2017
Revenue $ 109.9 $ 102.9 $ 98.0
Gross Margin 26.6 % 26.4 % 25.6 %
Operating Income (loss) $ (0.1 ) $ 0.7 $ 3.6
Net Income attributable to AOS $ 1.0 $ 1.7 $ 4.1
Net Income Per Share attributable to AOS - Diluted $ 0.04 $ 0.07 $ 0.17
 
 
Non-GAAP Financial Comparison
Quarterly
(in millions except percentage and per share data)
(unaudited)
  Three Months Ended
June 30, 2018   March 31, 2018   June 30, 2017
Revenue $ 109.9 $ 102.9 $ 98.0
Non-GAAP Gross Margin 27.0 % 26.8 % 26.0 %
Non-GAAP Operating Income $ 7.8 $ 5.9 $ 5.6
Non-GAAP Net Income attributable to AOS $ 7.6 $ 5.7 $ 6.2
Non-GAAP Net Income Per Share attributable to AOS - Diluted $ 0.31 $ 0.23 $ 0.25
 

The non-GAAP financial measures in the schedule above exclude the
effect of share-based compensation expenses in each of the periods
presented, and pre-production costs relating to the Chongqing joint
venture for the quarter ended June 30, 2018 and March 31, 2018. A
detailed reconciliation of GAAP and non-GAAP financial measures is
included at the end of this press release.

The results for the fiscal year ended June 30, 2018 were as follows:

 
GAAP Financial Comparison
Annually
(in millions except percentage and per share data)
(unaudited)
  Year Ended June 30,
2018   2017
Revenue $ 421,553 $ 383,337
Gross Margin 26.6 % 24.0 %
Operating Income $ 8,420 $ 13,144
Net Income attributable to AOS $ 14,263 $ 13,829
Net Income Per Share attributable to AOS - Diluted $ 0.57 $ 0.56
 
 
Non-GAAP Financial Comparison
Annually
(in millions except percentage and per share data)
(unaudited)
  Year Ended June 30,
2018   2017
Revenue $ 421,553 $ 383,337
Non-GAAP Gross Margin 26.9 % 24.2 %
Non-GAAP Operating Income $ 27,592 $ 19,778
Non-GAAP Net Income attributable to AOS $ 28,243 $ 20,463
Non-GAAP Net Income Per Share attributable to AOS - Diluted $ 1.14 $ 0.83
 

The non-GAAP financial measures in the schedule above exclude the
effect of share-based compensation expenses in each of the periods
presented, as well as pre-production expenses relating to the Chongqing
joint venture and income tax benefit from tax reform for fiscal year
ended June 30, 2018.
A detailed reconciliation of GAAP and
non-GAAP financial measures is included at the end of this press release.

"AOS delivered another quarter of outstanding execution, breaking
revenue records both on a quarterly and annual basis. The solid June
quarter brought a strong finish to our fiscal year 2018: we achieved an
annual revenue growth of 10%, a non-GAAP gross margin expansion of 270
basis points, and non-GAAP earnings per share increase of 37%, as
compared to a year ago. During fiscal year 2018, we dedicated our
efforts to enhance demand creation and expand capacity. I am pleased to
announce that the critical investments and heavy lifting of our internal
capacity expansion are now largely behind us," stated Dr. Mike Chang,
chairman and CEO of the company. "As we entered fiscal year 2019 with
stronger and more diverse product portfolio, increased capacity and
enhanced customer partnerships, we are optimistic that our investments
in the past year will enable us to capitalize on the next phase of
accelerated growth. We remain keenly focused on executing our longer
term strategies."

Business Outlook for Fiscal Q1 Ending September 30, 2018

The following forward-looking statements are based on management's
current expectations and actual results may differ materially. AOS
undertakes no obligation to update these statements.

  • Revenue is expected to be between $113 million and $117 million.
  • Gross margin is expected to be approximately 26.5% plus or minus 1%.
    Non-GAAP gross margin is expected to be approximately 28.5% plus or
    minus 1%. Non-GAAP gross margin excludes $0.6 million of estimated
    share-based compensation charge and $1.7 million of estimated
    production ramp-up costs relating to the Chongqing joint venture.
  • Operating expenses are expected to be in the range of $32.0 million
    plus or minus $1 million. Non-GAAP operating expenses are expected to
    be in the range of $24.2 million plus or minus $1 million. Both GAAP
    and non-GAAP operating expenses include $2.1 million to $2.3 million
    of estimated expenses relating to the development of our digital power
    team. Non-GAAP operating expenses exclude an estimated share-based
    compensation charge of approximately $2.8 million and estimated
    pre-production expenses relating to the Chongqing joint venture of
    $5.0 million.
  • Tax expense is expected to be approximately $0.6 million to $0.8
    million.
  • Loss attributable to noncontrolling interest is expected to be around
    $4.2 million. On a non-GAAP basis, excluding estimated pre-production
    expenses and production ramp-up costs relating to the Chongqing joint
    venture of approximately $3.5 million, this item is expected to be
    approximately $0.7 million.

Conference Call and Webcast

AOS plans to conduct an investor teleconference and live webcast to
discuss the financial results for the fiscal fourth quarter and the
fiscal year ended June 30, 2018 today, August 8, 2018 at 2:00 p.m. PT /
5:00 p.m. ET. To participate in the live call, analysts and investors
should dial 877-312-8797 (or 253-237-1194 if outside the U.S.). To
access the live webcast and the subsequent replay of the conference
call, which will be available for seven days after the live call, go to
the "Events & Presentations" section of the company's investor relations
website, http://investor.aosmd.com.
In addition, a copy of the script of prepared remarks by CEO and CFO at
the investor teleconference and webcast is available prior to the call
at the Company's investor relations website.

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, our ability and strategy
to develop new products, including digital power controller products,
the ability to expand our sales, increase our capacity and achieve
sustained growth and profitability, the pre-production and production
phases of our Chongqing joint venture, the relationship with key
customers, and other information under the section entitled "Business
Outlook for Fiscal Q1 Ending September 30, 2018". 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, difficulties
and challenges in executing our diversification strategy into different
market segments; ordering pattern from distributors and seasonality; our
ability to introduce or develop new and enhanced products that achieve
market acceptance, 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, our ability to
successfully operate our joint venture in China, and other risks as
described in our SEC filings, including our Annual Report on Form 10-K
for the fiscal year ended June 30, 2018 to be 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.

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 for all periods presented,
pre-production expenses related to Chongqing joint venture for the
quarter of March 31, 2018 and June 30, 2018, and income tax benefit from
tax reform for the quarter of December 31, 2017 in this press release.
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 Chongqing joint venture and
estimated share-based compensation expenses. 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, such as the joint venture
pre-production expenses. 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. 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, Power IC products and
Digital Power. 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's 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 Fiscal Year Ended
June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017
 
Revenue $ 109,897 $ 102,902 $ 98,007 $ 421,553 $ 383,337
Cost of goods sold 80,714   75,769   72,921   309,625   291,516  
Gross profit 29,183 27,133 25,086 111,928 91,821
Gross margin 26.6 % 26.4 % 25.6 % 26.6 % 24.0 %
 
Operating expenses:
Research and development 9,951 9,966 7,907 37,344 29,835
Selling, general and administrative 19,307   16,486   13,618   66,164   48,842  
Total operating expenses 29,258   26,452   21,525   103,508   78,677  
Operating income (loss) (75 ) 681 3,561 8,420 13,144
 
Interest income and other income (loss), net (1,589 ) (234 ) 52 (1,943 ) (141 )
Interest expense (685 ) (105 ) (19 ) (821 ) (91 )
Income (loss) before income taxes (2,349 ) 342 3,594 5,656 12,912
 
Income tax expense 676   830   807   708   3,652  
Net income (loss) including noncontrolling interest (3,025 ) (488 ) 2,787 4,948 9,260
Net loss attributable to noncontrolling interest (4,046 ) (2,139 ) (1,332 ) (9,315 ) (4,569 )
Net income attributable to Alpha and Omega Semiconductor Limited $ 1,021   $ 1,651   $ 4,119   $ 14,263   $ 13,829  
 
Net income per common share attributable to Alpha and Omega
Semiconductor Limited
Basic $ 0.04 $ 0.07 $ 0.17 $ 0.60 $ 0.59
Diluted $ 0.04 $ 0.07 $ 0.17 $ 0.57 $ 0.56
 
Weighted average number of common share attributable to Alpha and
Omega Semiconductor Limited used to compute net income per share:
Basic 23,864 23,795 23,917 23,901 23,526
Diluted 24,628 24,755 24,960 24,844 24,826
 

 
Alpha and Omega Semiconductor Limited
Condensed Consolidated Balance Sheets
(in thousands, except par value per share)
(unaudited)
  June 30, 2018   June 30, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 131,535 $ 115,708
Restricted cash 189 221
Accounts receivable, net 33,755 28,410
Inventories 90,182 76,254
Other current assets 29,551   4,883  
Total current assets 285,212 225,476
Property, plant and equipment, net 331,656 148,191
Intangible assets, net 16,591 282
Deferred income tax assets - long-term 4,892 4,594
Other long-term assets 28,698   19,865  

Total assets

$ 667,049   $ 398,408  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 92,661 $ 63,134
Accrued liabilities 49,841 28,386
Income taxes payable 2,211 1,748
Short-term debt 3,811
Deferred margin 1,665 814
Capital leases 4,491   828  

Total current liabilities

154,680 94,910
Long-term debt 26,786
Income taxes payable - long-term 924 922
Deferred income tax liabilities 713 2,659
Capital leases - long-term 56,791 866
Other long-term liabilities 993   502  
Total liabilities 240,887   99,859  
Equity:
Preferred shares, par value $0.002 per share:
Authorized: 10,000 shares; Issued and outstanding: none at June 30,
2018 and 2017
Common shares, par value $0.002 per share:
Authorized: 100,000 shares; issued and outstanding: 30,400 shares
and 23,860 shares at June 30, 2018 and 29,600 shares and 23,992
shares at June 30, 2017
61 59
Treasury shares at cost; 6,540 shares at June 30, 2018 and 5,608
shares at June 30, 2017
(64,790 ) (49,836 )
Additional paid-in capital 220,244 206,332
Accumulated other comprehensive income 440 306
Retained earnings 122,639   113,909  

Total Alpha and Omega Semiconductor Limited shareholders' equity

278,594 270,770
Noncontrolling interest 147,568   27,779  
Total equity 426,162   298,549  
Total liabilities and equity $ 667,049   $ 398,408  
 

 
Supplemental disclosures of financial information:
(in thousands)
           
As of June 30, 2018 As of June 30, 2017
AOS CQJV Consolidated AOS CQJV Consolidated
Cash and cash equivalents $ 88,269 $ 43,266 $ 131,535 $ 109,584 $ 6,124 $ 115,708
Bank borrowings liabilities $ 30,876 $ 60,416 $ 91,292 $ $ $
Property, plant and equipment, net $ 141,575 $ 190,081 $ 331,656 $ 102,068 $ 46,123 $ 148,191
Total assets $ 384,380 $ 282,669 $ 667,049 $ 333,163 $ 65,245 $ 398,408
Total equity $ 293,609 $ 132,553 $ 426,162 $ 276,204 $ 22,345 $ 298,549
 
 
  Three Months Ended June 30, 2018   Three Months Ended March 31, 2018   Three Months Ended June 30, 2017
AOS   CQJV   Consolidated AOS   CQJV   Consolidated AOS   CQJV   Consolidated
Net cash provided by (used in) operating activities $ 8,722 $ (19,499 ) $ (10,777 ) $ 704 $ (8,301 ) $ (7,597 ) $ 14,485 $ (937 ) $ 13,548
Purchase of property and equipment $ 13,805 $ 41,271 $ 55,076 $ 12,393 $ 45,512 $ 57,905 $ 14,636 $ 195 $ 14,831
 
   
Year Ended June 30, 2018 Year Ended June 30, 2017
AOS   CQJV   Consolidated AOS   CQJV   Consolidated
Net cash provided by (used in) operating activities $ 36,885 $ (33,405 ) $ 3,480 $ 44,783 $ (2,135 ) $ 42,648
Purchase of property and equipment $ 49,390 $ 128,359 $ 177,749 $ 30,799 $ 24,789 $ 55,588
 

 
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 Fiscal Year Ended
June 30, March 31, June 30, June 30, June 30,
2018 2018 2017 2018 2017
 
GAAP gross profit $ 29,183 $ 27,133 $ 25,086 $ 111,928 $ 91,821
Share-based compensation 461   449   420   1,641   1,041  
Non-GAAP gross profit $ 29,644   $ 27,582   $ 25,506   $ 113,569   $ 92,862  
Non-GAAP gross margin 27.0 % 26.8 % 26.0 % 26.9 % 24.2 %
 
GAAP operating income (loss) $ (75 ) $ 681 $ 3,561 $ 8,420 $ 13,144
Share-based compensation 2,935 2,460 2,049 11,412 6,634
Pre-production expenses related to joint venture 4,988   2,772     7,760    
Non-GAAP operating income $ 7,848   $ 5,913   $ 5,610   $ 27,592   $ 19,778  
Non-GAAP operating margin 7.1 % 5.7 % 5.7 % 6.5 % 5.2 %
 
GAAP net income attributable to AOS $ 1,021 $ 1,651 $ 4,119 $ 14,263 $ 13,829
Share-based compensation 2,935 2,460 2,049 11,412 6,634
Income tax benefit from tax reform (2,690 )
Pre-production expenses related to joint venture 3,643   1,615     5,258    
Non-GAAP net income attributable to AOS $ 7,599   $ 5,726   $ 6,168   $ 28,243   $ 20,463  
Non-GAAP net margin attributable to AOS 6.9 % 5.6 % 6.3 % 6.7 % 5.3 %
 
GAAP net income attributable to AOS $ 1,021 $ 1,651 $ 4,119 $ 14,263 $ 13,829
Share-based compensation 2,935 2,460 2,049 11,412 6,634
Amortization and depreciation 7,601 7,431 7,040 29,419 27,188
Interest expense (income), net 582 (34 ) (18 ) 333 (140 )
Income tax expense 676   830   807   708   3,652  
EBITDAS $ 12,815   $ 12,338   $ 13,997   $ 56,135   $ 51,163  
 
 
GAAP diluted net income per share attributable to AOS $ 0.04 $ 0.07 $ 0.17 $ 0.57 $ 0.56
Share-based compensation 0.12 0.10 0.08 0.46 0.27
Income tax benefit from tax reform (0.10 )
Pre-production expenses related to joint venture 0.15   0.06     0.21    
Non-GAAP diluted net income per share attributable to AOS $ 0.31   $ 0.23   $ 0.25   $ 1.14   $ 0.83  
 
 
Shares used to compute diluted per share 24,628 24,755 24,960 24,844 24,826
 

View Comments and Join the Discussion!