Alpha and Omega Semiconductor Limited

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2023 first quarter financial results. I am GSI, investor relations representative for ALS. 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 today. 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 Q&A session. The earnings release was distributed over the wire today, November 3, 2022, after the market closed. The release is also posted on the company's website. earnings release and this presentation will include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information for 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 the 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 findings with the SEC. We assume no obligations to update information provided in today's call. Now, I will turn the call over to our CEO, Dr. Mike Chang, to provide strategic highlights. Mike? Thank you, Yujian.

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 the non-GAAP EPS was $1.20. We are pleased with this result. Looking forward, we expect to be impacted by 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 of quarters before orders begin to normalize and there will be more imbalance within consumer demand. While our near-term results will impact some points, I think it is important to highlight that our total PCE revenue for Canada 2022, including our December quarter outlook, will actually grow slightly year over year against a 20% decline in PCE units. according to Digitime. Our current 2022 smartphone revenue is also expected to be up 15% year-over-year, despite that the global smartphone shipment is forecast to decline 6.5% in 2022. This is due to our success in gaining share, increasing bomb content, and deliberately improving our product mix towards more premium-tier products. This also demonstrates the strength of our business underlying fundamentals and the traction 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 the major components of consumer spending for a very long time. Another example of our solid fundamentals is that our partnerships with tier one 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 expensive, to slow down in the economy. Moreover, these relationships with our Tier 1 customers make us more attractive to prospective customers. Seeing our chips 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 few years, this has been a noticeable trend for us as more new customers approach us proactively and initiate requests for product samples and meetings, instead of just our salespeople going to them. Another example is that we have a much more diverse product portfolio. that is serving a broader set of end markets across consumer, commercial, and industrial use cases with different business cycles. For example, one of our big growth areas over the past years has been gaming, where we have leading share with the number one 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 trend in multiple other new applications that Steven will go into more detail in his section. Finally, our business is a lot more diversified in terms of 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 one customers in europe and north america diversification and the proliferation of total solutions has been our strategy from day one and our execution has been paying Today, our business is more balanced with a stronger and more solid foundation. We just say, while these qualities enhance our resilience, we recognize that we are not immune to global slowdowns in demand. To help de-risk some of the top-line slowing slowdowns, we have already paused hiring of previously planned telecom growth and are taking active steps to reduce discretionary spending. In closing, the current market environment does not come to us as a surprise. Over our 22 years 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 diverse product portfolio, tier one customer base in all of our business segments, expanding manufacturing capability and supply chain, dedicated and experienced management team, and a strong balance sheet. More importantly, the underlying trend 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 projects sit at the forefront of that trend. We are confident that we can navigate the current economic environment and achieve our $1 billion annual revenue target in the next couple of years. and are actively investing to position ourselves to achieve even more of that. Thank you. I will now turn the call over to Stephen for an update on our business and the detailed segment report.

Thank you, Mike, and good afternoon, everyone. Before I give a detailed overview of our segment, 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 one 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 driver MOS 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 one US smartphone OEM. Recently, we expanded our BOM footprint at this key customer to now also supplying the high voltage MOSFET for primary side rectification, thereby effectively tripling our BOM content with this customer application. All of this has 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 the 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 this consumer segment, revenue was up 11% year-over-year and 23% 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 number one 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 number one 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 the 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 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 ALS as we have a much more diversified product portfolio servicing multiple end markets and a 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.