Alpha and Omega Semiconductor Limited

Good afternoon, thank you for attending today's Alpha and Omega Semiconductor Fiscal Second Quarter 2026 Earnings Call. My name is Victoria and I'll be your moderator today. All lines will be muted during the presentation portion of the call with opportunity for questions and answers at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Stephen Paleo. Thank you. You may proceed, Stephen.

good afternoon everyone and welcome to alpha and omega semiconductors conference call to discuss fiscal 2026 second quarter financial results i'm stephen paleo investor relations representative for aos with me today are stephen chang our ceo 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 Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yvonne will review the financial results and provide guidance for the March quarter. Finally, we will have a Q&A session. The earnings release was distributed over the wire today, February 5th, 2026, after the market closed. 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. 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 invoke risks and uncertainties that could cause our actual results to differ materially. For the 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'll turn the call over to our CEO, Steven Chang. Steven?

Thank you, Steven. Welcome to Alpha and Omega's fiscal 2026 Q2 earnings call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q2 revenue results slightly higher than the midpoint of our guidance, primarily reflecting seasonality across several end markets, including PCs, wearables, tablets, and gaming. Inventory digestion in AI further impacted by shifts in GPU allocation to prioritize data centers over graphic card markets. strength from our Tier 1 US smartphone customer, and sequential growth in e-mobility, power tools, and home appliances. Overall, total December quarter revenue was $162.3 million, down 6.3% year-over-year and down 11.1% sequentially. Non-GAAP growth margin was 22.2%. Non-GAAP EPS was a loss of $0.16 per share. In addition, We repurchased approximately $13.9 million of ALS shares during the December quarter, representing 728,000 shares as part of our recently announced $30 million share repurchase program approved by the Board. Following these purchases, approximately $16 million remains available. This balanced approach to capital allocation reflects the Board's and management's confidence in our strategy and execution. while maintaining the financial strength needed to invest for long-term growth and deliver shareholder value. Several years ago, we launched a deliberate strategy to transform AOS from a component supplier into a provider of application-specific total solutions. From the start, our focus has been on higher performance markets where system-level differentiation matters. Areas to entry are higher, and we can meaningfully expand BOM content. We believe this strategy is working. We have seen tangible results in AI and graphics in smartphones through a mixed shift towards premium platforms and higher charging currents. And more recently, this momentum has extended into our high performance medium voltage MOSFETs used in applications such as hot swap and intermediate bus converters for AI data centers. Just as important, this focus helps offset competitive pressure at the lower end of the market and reinforces our confidence in the direction we are taking. We have remained disciplined in how we execute the strategy, making targeted long-term investments rather than reacting to short-term noise. As applications continue to evolve towards higher performance and greater system complexity, we believe the right response is to accelerate investment in the technologies, products, and engineering resources required to win. Consequently, we are increasing critical R&D investments. These are not broad-based investments. They are highly focused where we hold clear differentiation, strong customer engagement, and a clear roadmap to higher BOM content and sustainable margins. To support this strategy, we strategically optimize our balance sheet. As part of a planned capital allocation approach, we monetized a portion of our equity interest in the Chongqing joint venture while retaining a meaningful ongoing stake. As previously announced, we sold approximately 20% of our equity interest in the joint venture for an aggregate purchase price of $150 million payable in installments, and we continue to hold an 18.9% equity interest in the joint venture. We received $94 million in the September quarter, followed by an additional $11 million in the December quarter, and subsequent to the quarter end, we received $30 million. There is an additional $15 million remaining that will be received later this calendar year. This financial strength allows us to invest decisively and strategically in technology development, manufacturing capability, and engineering talent as we continue to shift the business towards higher value, higher margin opportunities. We are already realizing the impact of our strategy on revenue. For example, while overall PC unit demand in calendar 2026 is expected to be constrained by tightening memory supply, our total solution strategy is gaining traction, and we are seeing increased BOM content on new platforms such as Intel's Canva Lake. In communications, we are witnessing the fruits of our earlier investment in silicon and packaging technology in smartphone battery protection. Our technology differentiation, coupled with the industry move towards higher charging currents, enabled us to secure increased BOM content and deepen our relationship with top tier customers, factors that are expected to contribute to our growth in 2026. In advanced computing, including AI data centers, server, and graphics, We are encouraged by an expansion in demand across a broader array of AI data center applications and a broader set of customers. We are seeing near-term demand for high-performance medium voltage solutions using applications such as hot swaps and intermediate bus converters for leading ODMs for major hyperscale customers. Advanced computing is becoming a core growing element within the computing segment. The key takeaway is that we are continuing to see the benefits of our structural transformation. We will see tangible results this calendar year, and we expect more meaningful acceleration in 2027 and beyond as new platforms and programs ramp. With that, let me now cover our segment results and provide some guidance by segment for the next quarter. Starting with computing. December quarter revenue was up 5.9% year-over-year and down 17.1% sequentially, and it represented 49.6% of total revenue. The sequential revenue decline was in line with our expectations. Within computing, we saw softness following an unusually strong September quarter that benefited from tariffs-related PC pull-ins, as well as earlier AI and graphics shipments. Seasonality also affected sales of tablets. As we mentioned before, during the September quarter, AI and graphics customers entered a digestion phase that extended into the December quarter, which was further influenced by increasing prioritization of production by our customers towards GPUs for AI data centers over traditional graphics card platforms. Looking ahead to calendar 2026, visibility into the PC market remains limited, driven primarily by uncertainty around memory shortages. While memory availability may impact end PC demand, data center investment continues to provide an important offset. As mentioned before, we are shipping our high performance medium voltage MOSFET products into infrastructure programs, including hotspot power solutions are now moving into the build phase at leading ODMs for major hyperscale customers. We are also expanding our presence in AI platforms through a medium voltage solution supporting 48 volts to 12 volts intermediate bus conversion. Looking ahead to the March quarter, we expect computing segment revenue to decline below single digits sequentially. This reflects softness in the PC market, mostly offset by strength in AI data center applications, as well as growth in graphics cards and tablets. Importantly, we have clear visibility into demand for our new VM voltage MOSFETs across an expanding list of applications and customer base that includes power supply providers, module makers, cloud service providers, and major hyperscalers. Turning to the consumer segment, December quarter revenue was down 14.9% year-over-year and down 18.3% sequentially and represented 11.8% of total revenue. The results were in line with our original expectations for a high teen's sequential decline. While wearables experienced a normal seasonal decline, the overall year-over-year revenue decrease in consumer was primarily driven by gaining, with a smaller impact also from home appliances. In wearables, we continue to see underlying momentum supported by share gains, new customer engagement, higher BOM content, and a broader mix of end applications. In gaming, we remain closely aligned with our key customer as they progress through their next product cycle, where our existing relationship and strength in high performance power solutions positions us to participate in the next generation platform. Solar appliance demand was modestly lower year over year, though new design activity in 2025 supports longer term opportunities, particularly in emerging markets. For the March quarter, we forecast mid-single-digit sequential growth in the consumer segment, primarily driven by a recovery in gaming after a sharp inventory correction in the December quarter. Next, let's discuss the communication segment. December quarter revenue increased 1.1% sequentially and was flat year-over-year, and represented 20.4% of total revenue. The results were supported by strong year-over-year growth from our Tier 1 US smartphone customer, driven by continued expansion of BOM content. While demand from China's smartphone customers remains uneven as we prioritize US customers, we are sustaining high market share in the premium phone segments. We see additional growth coming in calendar 2026 as new models launch with higher charging currents, and our investments in differentiated silicon and packaging technologies for battery protection further enable BOM content expansion. Looking ahead to the March quarter, The communication segment will likely decline mid-single-digit sequentially. This is due to typical seasonality from our Tier 1 US smartphone customer, partially offset by sequential growth from China smartphones. Korea is expected to remain relatively flat. Now let's talk about our last segment, power supply and industrial, which accounted for 16.7% of total revenue and was down 22.5% year-over-year and down 3% sequentially. Overall, the results were below our expectations for mid to high single-digit sequential growth as quick charger demand came in weaker than expected, but were partially offset by a rebound in power tools and e-mobility. Looking ahead to the March quarter, we expect power supply revenue to increase mid single-digit sequentially, driven primarily by quick chargers and DC fans, offset by softer power tools and e-mobility. In closing, we are guiding the March quarter to be down slightly sequentially. We expect the March quarter to mark a near-term low point for revenue and margin, with the business returning to growth beginning in the June quarter and into the peak season, supported by improving mix and a more favorable contribution from higher value applications. Consistent with the strategy we have outlined, we are accelerating targeted investments in performance-driven applications where we have strong positions. clear differentiation, and expanding customer engagement. While calendar 2026 may reflect modest growth as markets work through near-term constraints, our application-specific total solution strategy is yielding results, and we are already seeing positive impact today. As we continue to move higher value programs towards production, we expect these benefits to become increasingly visible through the course of calendar 2026, which we expect to support stronger growth as we move into 2027 and beyond. With that, I will now turn the call over to Yvonne for a discussion of our fiscal second quarter financial results and our outlook for the next quarter. Yvonne?