Alpha and Omega Semiconductor Limited

Good afternoon. Thank you for attending today's Alpha and Omega Semiconductor Cisco Q2 2023 Earnings Call. My name is Tamiya, and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to your host, Yuji Ozai, with Investor Relations. Please proceed.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductors conference call to discuss fiscal 2023 second quarter financial results. I am GSI, investor relations representative for AOS. With me today are Dr. Mike Chang, our CEO, Stephen Chang, our president, and Fang 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 March quarter. Finally, we will have the Q&A session. The earnings release is distributed over the wire today, every 6, 2023, after the market closed. The release is also posted on the company's website. Our earnings released in 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. The 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 form of 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 detailed description of these risks and uncertainties, please refer to our recent and subsequent findings of 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. Mike?

Thank you, Ujie. Happy New Year, everyone. and welcome to today's call. It is good to speak with all of you again. Before I go over our results, I'd like to begin today by saying that I am proud to be speaking to you for the last time as the Chief Executive Officer of AOS. 22 years ago, I founded this company with a vision and a dream. While this vision never ends, Today, we are one of the most successful and well-recognized fast-growing power semiconductor companies in the world. I am proud of all that we have accomplished together. It is with great confidence and pleasure that I now turn the chief executive position to Stephen, who has already demonstrated his leadership skills and business acumen since his appointment as AOS president two years ago, leading AOS to achieve record revenues and profitability. I want to thank each and every one of the AOS team for your dedication and hard work. It has been an honor to walk alongside you and see this company grow and thrive. Thank you all for the memories and opportunities. We are in the midst of an incredible journey, and I'm grateful for every moment that has led us to this point today. I will continue to be deeply involved in AOS as Executive Chairman and plan on focusing more on strategic matters such as the key relationships with critical partners and customers of AOS. and the technology development essential to ensure sustained and long-term growth. Now, moving on to the results, our Q2 results were below our expectations. Revenue was $108.8 million. Non-GAAP growth margin was 29.5%, and the non-GAAP EPS was 67 cents. Last quarter, we indicated that we expect an industry-wide inventory correction to impact us over the coming quarters, particularly in PC and smartphones. However, the magnitude of this inventory correction for certain customers was larger than we expected. Inventory levels across many of the consumer markets that we serve remain high, are working to bring supply chain inventory level back into balance as quickly as possible. As a result, we forecast March quarter revenue to be approximately $130 million, plus or minus $5 million. We expect to recover a good portion of the sequential decline in the June quarter, and even more so in the second half of the year. especially with the reopening of China. As we stated last quarter, our business is not immune to macro challenges and the industrial cycles. We have been through many of these cycles over the past 22 years and do not make decisions based on just a couple of quarters of data. Every cycle since the beginning of our industry has eventually ended and give way to a new leg of growth. And this one is no exception. We are confident that given our strong fundamentals, we are in the best position we have ever been to continue our growth momentum once this downturn is past us. Looking back on the year, Currently, 2022 was one of the most successful years in our history, despite the many challenges. We set records across almost every metric. Revenue was a record $794 million, up 9% year over year. And the non-GAAP earnings per share was a record $4.16, up 5% year over year. Further, we closed the year. with record tier 1 customers and market share across most product segments. In our two largest product segments, PC and smartphones, we grew significantly faster than the market. This was due to our success in gaining market share, increasing bump content, and deliberately improving our product mix toward more premium tier products. Gaming was an outstanding success for us in 2022. We won leading share with the number one gaming console manufacturer. And this business for us more than doubled year over year. And it's now a major revenue contributor for AOS. And it's expected to continue to grow even in a weakening consumer demand environment. are just a few examples out of many achievements that demonstrate our fundamental strengths and the competitiveness of our products and the traction that we have gained. Stephen will provide more details during his section of the call. But our business has never been stronger, which is why I'm confident that Our outlook is largely due to macroeconomic factors rather than anything specific to fundamentals. As channel inventories are consumed and the broader economy recovers, we expect to see a rebound in revenue. In closing, 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, and we are in the best position we have ever been to continue to win in this market. We exit 2022 with a strong balance sheet, which enables us to navigate the current economic environment while keeping our eyes on achieving our $1 billion annual revenue target. in the next couple of years. Thank you. I will now turn the call over to our future CEO, Steven, for an update on our business and a detailed segment report.

Steven. Thank you, Mike, and good afternoon, everyone. Overall, I'm very pleased with the performance we achieved this past calendar year, and we delivered it while navigating a very challenging business environment with disruptions from China's zero COVID restrictions, global supply chain constraints, and significant inflationary headwinds. Despite all of this, we achieved record revenues across all of our segments. Our calendar year 2022 computing segment revenue increased 5.9% year over year to $332.6 million. Consumer grew 13.4% to $173.6 million, Communications increased 23.9% to $125.7 million, and our power supply and industrial increased 7.8% to $155.5 million. These results were made possible by our record Tier 1 customer partnerships and market share, as well as a much more diversified total solutions product portfolio that's serving a broader set of end markets across consumer, commercial, and industrial use cases. While our near-term outlook and general market sentiment indicate a significantly weaker demand environment and inventory correction for 2023, we believe there are a couple of factors that make us uniquely positioned to benefit on the other side. One, a good portion of the slowdown that we are experiencing is driven by our Tier 1 customers where we have leading share. However, our sockets and BOM content in their devices remain unchanged and our relationship with these customers are the best it has ever been. These customers are the leading device makers in their categories in the world, and demand for the devices over time has only grown. This is why we are confident that the slowdown we are experiencing will be behind us as demand for these premium products are starting to come back once inventories are more normalized. Two, to strategically navigate the current environments, Our focus will be on stabilizing spending where we can, while continuing R&D investments to drive market leadership and have leading products once the market returns. In addition, we are accelerating our development in new growth areas such as data center, infrastructure, industrial, and automotive applications. For example, we recently expanded our silicon carbide portfolio to include 650 volts and 750 volts silicon carbide MOSFETs for onboard car charging, traction, converters, and infrastructure applications. Our industrial renewable energy and automotive customers will now have a broader portfolio available to select the right solution that supports their wide range of product power levels at an even higher performance and efficiency level. Let me now cover our segment results and provide some guidance by segment for the next quarter, starting with computing. December quarter revenue was down 27.3% year over year, and 28.4% sequentially, and represented 33.8% of total revenue. Looking back on the year for our PC business more closely, our PC shipments grew in the first three quarters of the year, but demand dropped off rapidly in December quarter as our customers aggressively reduced inventories. Even with a significant drop, our full-year PC revenue was up 3% compared to a 20% decline in PC units according to DigiTimes. This was due to our success in gaining share, increasing bond content, and deliberately improving our product mix towards more premium tier products. Based on our conversations with customers and latest demand forecasts, we expect some of our customers' inventories will be depleted in the March quarter, and they anticipate resuming orders for the June quarter, which will help to recover some of the significant March quarter decline ahead of peak season. In December quarter, there were some notable areas of strength in our computing segment, 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 and tablets continue to be strong. Looking ahead in the March quarter, we expect total computing segment revenue to be down about 30% sequentially as we actively work with our customers to right-size their inventory. Turning to the consumer segment, December quarter revenue once again set records, increasing 21.3% year-over-year and 4.2% sequentially, and represented 25% of total revenue. These results were in line with our expectations, driven by record gaining volumes, which grew 222% year-over-year and 19.5% sequentially. Looking ahead, we anticipate our consumer segment to decrease mid-single digits sequentially driven by a seasonal slowdown in gaming shipments after a very strong December quarter. Now let's discuss the communications segment, which also set record quarterly revenue as it increased 38% year-over-year and 12.4% sequentially and represented 18.7% of total revenue. These results were significantly higher than our expectations due to stronger-than-anticipated shipments to the number one U.S. smartphone customer as well as to China. For the full year 2022, smartphone revenue grew 24% year-over-year, despite an estimated 11.6% decline in global smartphone shipments as estimated by DigiTimes. Our growth was driven by share gains in the premium tier smartphone models. 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 March quarter, we expect this segment to face steep correction, about 45% sequential decline as we help our customers normalize their inventory levels after two quarters of record shipments that didn't fully sell through to end customers as a result of lower discretionary spending due to inflationary headwinds and China's zero COVID restrictions. Internally, we expect our smartphone business to start to recover in the June quarter in preparation for the September quarter peak season. China's reopening is also a welcome development that should improve consumption. Now let's talk about our last segment, power supply and industrial, which accounted for 21.8% of total revenue. This segment also set records with revenue up 9.3% year over year and up slightly sequentially. The increase was due to share gains in quick charges at the leading U.S. phone maker and growth in PC power supplies and gaming adapters. For the March quarter, we anticipate this segment to decline around 30% sequentially due to the inventory corrections. In closing, while we are experiencing a temporary slowdown, inventory corrections and market cycles are ultimately healthy for our industry. Calendar 2022 was a record-breaking year for us with record revenues, earnings, and leading market share with a record number of Tier 1 customers. We enter 2023 with many strengths, a growing product offering, cutting-edge R&D, and promising technology roadmaps, diverse manufacturing capabilities, and strong relationships with strategic customers. As a newly appointed CEO, I am focused on leading AOS forward and am confident in our ability to continue growing at a faster rate than the overall market. We will maintain and execute our successful strategies while also investing in new growth areas such as data centers, automotive, infrastructure, and industrial. With that, I will now turn the call over to Ethan for a discussion of our fiscal second quarter financial results and our outlook for the next quarter.

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the quarter was $188.8 million, down 9.5% sequentially, and down 2.4% year over year. In terms of product mix, DMOS revenue was $137.6 million, down 4.8% sequentially, and up 2.3% over last year. PowerIC revenue was $50 million, down 19.8% from the prior quarter and down 10.1% from a year ago. Assembly service revenue was $1.2 million as compared to $1.6 million last quarter and $3.3 million for the same quarter last year. Non-GAAP growth margin was 29.5% compared to 35.4% in the prior quarter and 36.7% a year ago. The quarter-over-quarter decrease in non-GAAP growth margin was mainly driven by less favorable product mix and an increase in inventory reserve, reflecting the ongoing industry-wide inventory correction. Non-GAAP operating expenses were $32.8 million compared to $36.6 million for the prior quarter and $33.5 million last year. The quarter-over-quarter decrease was primarily due to lower variable compensation accrues this quarter. As such, non-GAAP quarterly EPS was 67 cents per share. compared to $1.20 last quarter and a year ago. Moving on to cash flow. GAAP operating cash flow was $0.3 million, which included $12.2 million repayments of customer deposits. By comparison, operating cash flow in the prior quarter was $36.7 million, which included $3.3 million net repayments of customer deposits. Orbiting cash flow a year ago was $50.8 million, which included $11.2 million net customer deposits. We expect to refund around $30 million customer deposits in calendar year 2023. Consolidated EBITDAs was $31.8 million compared to $45.5 million last quarter and $46.7 million last year. Let me turn to our balance sheet. We completed the December quarter with a cash balance of $287.8 million compared to $316.1 million at the end of last quarter. The cash balance a year ago was $269.3 million. Net trade receivables were reduced to $53.2 million compared to $55.8 million at the end of the prior quarter. Days sales outstanding for both the December quarter and last quarter were 30 days. Net inventory was $163.8 million at the quarter end, slightly down sequentially from $164.9 million last quarter and up from $129.1 million last year. Average days in inventory were 109 days compared to 106 days in the prior quarter. Finally, property, plant, and equipment was $351 million up from $339.5 million last quarter. The fixed assets balance a year ago was $196.7 million. CapEx for the quarter was $28 million. We expect CapEx to drop to $20 million to $25 million level in the March quarter. Our Oregon Fab expansion is expected to start to ramp in March 2023. Now I would like to discuss March quarter guidance. We expect revenue to be approximately $130 million plus or minus $5 million. Our guidance factors in the ongoing industry-wide inventory correction and seasonality for the March quarter. Gap gross margin to be 22.5% plus or minus 1%. We anticipate the non-GAAP growth margin to be 24.5% 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. 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 to be approximately $1.2 million, and income tax expense to be in the range of $1.3 million to $1.5 million. With that, we will open the call for questions. Operator, please start the Q&A session.

Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a quick reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from David Williams with Benchmark. You may proceed.

Hey, good evening, and thanks for taking the question. I guess first off, Stephen, congrats on the transition. It's great to hear and looking forward to hearing more from you there. Secondly, I guess maybe if you could talk about the confidence that you have in the recovery for the revenues in June and I know you gave some color there and talked about a few things, but it sounds like you're expecting a much larger kind of rebound in June. And I guess I'm just curious as to what's giving you that type of confidence.

Sure. For us, we do think that there's a good chance that March quarter is a bottom and that we are seeing some signs of recovery for June. This is why we give guidance for that. But largely, it will also depend on the overall macro environment. But in general, in a normal seasonal year, we are tracking towards peak shipments in the September quarter for some of our end markets. We're still, from a market share position, still positioned for that. Even in PC, the portion that's seeing the more severe inventory correction, But what we find is that different customers have different levels of inventory, and some of them are already starting to place replenishment orders for the June quarter. So this kind of indicates some stabilization, even for the PC market. That's kind of the bigger impact. So, of course, we are closely working with our end customers, not only in PC, but in other markets to right-size their inventory levels.

Okay, that's very helpful. Thank you for that. And then how much of the revenue guidance do you think, and thinking about that rebound in June, is related to maybe a recovery in China versus just more broad-based demand recovery?

That can help, certainly. Opening of China will not only affect the spending and consumer spending within China, but also impacts a lot of our global customers who also have a good portion of business being purchased by China consumers. So that can help too. And so, yes.

Okay, all right, fantastic. And then even one for you maybe on the gross margin side, just kind of curious if you could give us an idea of the volume versus mix impact there. And then where do you think this kind of stabilizes? I felt that the margins would be maintained a little bit higher, even in a more negative environment. But maybe just discussing the puts and takes there and what are the biggest headwinds that you think you're facing today and how those maybe recover through the year.

Sure. In the December quarter, I mean, margin got impacted primarily by the inventory correction. And I mean, there's... Big portion of it was because of the product mix. And to a smaller portion was because of inventory reserve increase, which is also tied to the inventory correction in the March quarter especially. For the March quarter, yeah, we are on seeing some you know product mix and and factory utilization because because of the top line and decline so we we are also scaling back in our production so then I mean both product mix and then and utilization basically contributed to the March quarter's margin changes.

Thanks so much. I certainly appreciate it and best of luck on the quarter. Thank you.

Thank you.

Thank you. The next question comes from Craig Ellis with DRally Securities. You may proceed.

Yeah, thanks for taking the question. And just to start, Mike Chang, congratulations on all you accomplished while CEO. You built a great company. And Stephen, we'll look forward to staying in touch with you on these calls and other events. Stephen, I wanted to go back to an earlier question and just maybe frame it a different way. If you looked at your different end markets and as you look out to the fiscal fourth quarter, calendar second quarter and if you were to rank them by confidence in which could rebound most materially from potential lows here in the March quarter, how would that ranking look and any color around that would be helpful?

Sure. I'll also point to computing as the greatest potential to grow in that quarter. Again, we're not giving specific guidance, but That is the segment that we saw the most inventory correction, and the level that that's at now is definitely in the inventory correction territory. And we believe that, as I mentioned, that there are some signs of that already starting to recover for that fiscal fourth quarter. So I think that that segment itself has more room to recover. But the other segments also have opportunity growth, too. We're still working towards you know, the peak seasons for smartphones. And, you know, the fourth fiscal quarter will be usually the ramping time to prepare for that. And then, you know, the power supply also tends to follow after, you know, follow along with the computing segment. A good portion of the business are the PD adapters and power supplies for computing. We also note in our earnings release that we believe that gaming within consumer is seasonally low, so there's expected to be recovery starting from the fiscal fourth quarter as well.

Okay, so that was compute, comms ahead of product cycles, the PC part of industrial power, and then the gaming part of consumer. Did I get that right, Stephen? Yes, yes. Yep. Okay, great. All right, so moving on to a related question. Ifon, if we see a recovery in revenues maybe back towards but not quite to levels that we saw in the fiscal second quarter, can gross margins move commensurately or will there be kind of a delay just given the way things could float through inventory. How quickly can a change in revenues translate into a change in gross margin?

You mean for the fiscal fourth quarter, right?

Yeah, for fiscal fourth quarter. Thank you.

All right. Yeah, I mean, we would expect some recovery in the gross margin line once we have top line um recover and recovers um so then i mean but the the relationship right now is hard to say i would say that i mean depending on the uh product mix and and uh utility also you know which tied to the inventory both our own inventory and and the channel inventory so by and large i would expect to get some recovery for uh for the close margin line.

Got it. And how is pricing holding up out there? I imagine relatively good at your tier ones because those are longer term agreements. But are you seeing competitors now that foundry capacity availability is loosening up? Are you seeing some of your competitors get more aggressive with pricing? How should we think about the ASP dynamic over the course of this calendar year versus what you saw last year?

Yeah, I mean, the last couple years, yeah, it was, you know, pricing-wise, it was favorable pricing environment. I mean, now we are in inventory correction mode, so we would expect some ASP erosions in the back. I would expect, yeah, for the calendar year 2023, price erosion that probably didn't back to normal or even worse than the historical trend.

Okay, and is normal a few percentage points or how should we think about normal levels since it's been two or three years since we have that?

Yeah, I mean, before back to the years before two to three years. And I mean, you know, traditionally we'll be in the high single digit per year basis, but only for those same products. And then, I mean, if you sell your same products, you know, year over year, yes, we would expect some erosion there, price erosion there. You know, the name of the game is, you know, we rolled out an new products and then, you know, we reset the ASP and then by providing, you know, more efficiency or more functionality, I mean, that's the R&D new products are for.

Absolutely, yeah. I think you have a history of getting about 100 new products out a year, which does exactly that, resets the price point, so totally get that dynamic Lastly, at least in my model, operating expense came in quite favorable versus what I expected. Is that mostly tactical belt tightening or are you doing anything structurally to reduce OpEx even as you push ahead with various product programs including the things you talked about in automotive?

OpEx for the December quarter, it was largely because of the variable compensation or COOPs, because then, you know, the performance order was not up there. So then, you know, we reduced the overall calendar year 2022 variable.

Got it. Thanks so much, Yifan. Thanks, Stephan. All right. Thank you.

Thank you. The next question comes from Jeremy Kwan with Stiefel. Your line is open.

Yes, good afternoon. And let me also add my congratulations to both Stephen and Mike in your new or changing roles. Stephen, I guess the first question I have is in terms of the linearity in the quarter, as well as thus far into the March quarter, you know, it sounds like quarters took kind of a pretty meaningful pause. sometimes, especially in the last month or two, can you give us a sense of, you know, or just more color into how things shaped out as you moved throughout the end of last year and into this year? And also, any update in terms of returns business that you've done, what it was in prior quarters and where it might be the next few quarters? Thank you.

Sure, let me address the first part, maybe Yvonne can address the second part. But essentially, you know, we did see a further slowdown in the macro picture since the last time we talked on the earnings release. And this is coming mainly from, you know, PC and smartphones, both kind of consumer type of products and tied to the overall inflation and reduced kind of personal spending. is this adjustment was seen throughout the supply chain, between Sardisti through the OEM, ODM. There was a more significant adjustment to the changing demand. So the last few years were quite strong in demand in this overall industry. So it will take some time for some of our customers to unwind from that. again, right-size their inventories. So that's mainly affecting those particular areas in the end markets. I want to reiterate again that our products and our position at our customers are still strong. We are happy to have forged stronger relationships with Tier 1 customers, and this is very important, especially during this time, to protect our share and as well as, very importantly, getting us positioned for when the market rebounds or for their next versions of products. So, yes, we have to deal with the overall industry slowdown, but our positions at our customers are still better than they were in previous years.

Yeah, and then, Jeremy, regarding your question on current business, yeah, I mean, this current business right now is pretty dynamic. I mean, depending on the backlog and market situations. We are pretty nimble and dynamic, so we catch whatever we can. On the other hand, we do have production cycles. If we happen to have inventory on hand yet we can serve, but the thing is we cannot grab all the current business as we want.

Thank you. That's very helpful. Maybe you found a bit more clarification. Maybe another way to ask the terms question would be to ask how much of the outlook is currently in backlog and And also, you know, as we talked, as you mentioned a little bit about, you know, seeing a potential rebound in the June quarter, you know, what your lead times are like, you know, are customers placing orders, you know, much further beyond that? And finally, on this topic, you know, can you give us any clarity into, you know, how cancellations have changed or looked relative to the past couple quarters? Thank you.

Sure. And then, I mean, the backlog, yeah, in the December quarter, we did experience more backlog adjustment than, you know, than a normal quarter. And, you know, push out and conservation and, you know, replacement. And then, I mean, a lot of the product mix changes and, I mean, shuffling there. You know, overall backlog level decreased reflecting, you know, industry-wide inventory correction and then I mean that's the thing you know so I mean overall then yeah then for the March quarter you know our backlog already has been reflected you know guidance you know for the June quarter you know as Steven just commented on, you know, we saw some sign of recovery and, you know, some customers started placing some orders for the June quarter already.

So we'll see. Got it. Okay. And maybe if I could turn to, you know, touch back on the utilization. Can you give us where the utilization currently is now and where it was, you know, last quarter? Sure. and also what kind of flexibility you have in terms of switching capacity between your internal capacity and your JV partnership. Are there contracts or obligations that you may have to fill on the supply side there, or can you bring more internal if needed? Thank you.

Sure. Utilization-wise, We have our own fab in Oregon, and our priority is to utilize our internal fab first. That's where we develop most of our new products. So naturally, right now, the Oregon fab is still running at a pretty high level of utilization. portion we expect to come online for the expansion. In the month of March, we expect to start to ramp up Oregon Fab. So for the expansion portion, actually in the end, And we actually, we have demand to fulfill. So, I mean, that's, right now, it's kind of pretty dynamic. I mean, the product mix changing quite a bit. For the back end, again, we do have some lower utilization. I mean, we also use, you know, joint venture third-party foundries and subcontractors. We'll do as much as we can, load our own factory first, but sometimes it's pretty hard to switch between a quarter or two. So this is kind of pretty dynamic right now.

Got it. Thank you. That's helpful. And I guess just turning to the balance sheet, can you give us how much customer deposits you have remaining? I think from what I've understood, you have about $98 million in the September quarter. You repaid about $3 million of that in the prior quarter and $12 million of that this past December quarter. So do I have that right, that there's about $80 million left in customer deposits?

Yeah, yes, it is in that level.

Okay. And I guess how do you expect those deposits to be worked through? Was the repayment this time around, is it, you know, as you fulfill some of the capacity arrangements, or are they saying they don't need as much capacity and kind of taking some of the deposit back? Can you just give us clarity in terms of the dynamic there?

Oh, yeah. Typically, those deposit a year mark with a certain level of purchase. So, as I mentioned in the script, we expect about $30 million in repayment in calendar year 2023. Got it.

Okay. And on the internal inventories, Um, do you have a, I know the DOI was a little bit up this quarter, next quarter, you know, inventory dollars are flat. Uh, these are the inventory to kind of get to the one, you know, maybe a little one fifties. Do you have, um, kind of a target that you want to keep inventories at and where you're comfortable holding things?

Well, right now it is in the world, um, adjust them, you know, according to the market. situation and I mean we expect a June quarter rebound to some level and then you know the peak season normally in the second half of the year yet and then we do need to balance out capacity can support in second half of the year so then we'll see that I mean largely probably that maintain in that level, current level.

Does it largely maintain the dollar amount in the current level?

Yeah, dollar.

Okay. Great. That's all I had. Thank you.

Thank you. Thanks.

Thank you. There are no questions at this time, so if you would like to ask a question, it is star one on your telephone keypad.

This is Mike Chen. I do want to thank each one of you for your support and be with me through all these years thick and thin. I really appreciate that. Recession, that is not a good thing. Unfortunately, this life is part of life and your common goals and I'm sure it will end soon. The important thing which is I believe or we believe is technology. That's long term. In the last three years, AOS has taken advantage of the available cash. We drastically beefed up our R&D in both capability as well as dynamic. We have a lot of good things or exciting things there and waiting to really shine. So we are very, very confident for tomorrow. And I really thank you at the end for your support and wish you all the best. God bless. This concludes the conference call. Thank you for your participation. You may now disconnect your line.