Alpha and Omega Semiconductor's CEO Discusses F1Q 2014 Results - Earnings Call Transcript

Nov. 1.13 | About: Alpha and (AOSL)

Alpha and Omega Semiconductor Limited (NASDAQ:AOSL)

F1Q 2014 Earnings Conference Call

October 30, 2013 05:00 PM ET

Executives

So-Yeon Jeong - IR

Mike Chang - CEO and Chairman

Mary Dotz - CFO and Corporate Secretary

Analysts

Operator

Good day, ladies and gentlemen, and welcome to the Alpha and Omega Semiconductor fiscal first quarter earnings call. At this time, participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this call is being recorded.

Now, I would like to introduce your host for today’s conference, So-Yeon Jeong. You may begin.

So-Yeon Jeong

Thank you. Good afternoon, everyone, and welcome to the Alpha and Omega Semiconductor first fiscal quarter of 2014 conference call. This is So-Yeon Jeong, Investor Relations Representative for the company. I am joined by Dr. Mike Chang, the Chairman and Chief Executive Officer and Mary Dotz, the Chief Financial Officer & Corporate Secretary of the company.

This call is being recorded and broadcasted live over the web and can be accessed for seven days following the call via a link in the Investor Relations section of our website at www.aosmd.com.

The earnings release was distributed by Globe Newswire today, October 30, 2013 after the market closed. The release is also posted on the company's website. Our earnings release and desk presentation includes certain non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful formation 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 our earnings release. We would like to remind you that during the course of this conference call, we will make forward-looking statements including discussions of 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 more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today’s call. AOS 2014 fiscal year end is as of June 30, 2014.

Now, let's hear from Mary who will provide an overview of the first fiscal quarter 2014 financial results. Mary?

Mary Dotz

Thanks, So-Yeon. Good afternoon and thank you for joining us today. AOS revenue for the September 2013 quarter was $84.1 million, an increase of approximately 8.9% from the prior quarter and a decrease of about 12.2% from the same quarter last year. Our MOSFET revenue was $65.1 million, up 7.7% sequentially. Power IC revenue was $13.6 million, up 3.7% from the prior quarter. Our service revenue was $5.4 million as compared to $3.6 million for the prior quarter. The increase in our product revenue quarter-over-quarter reflected our new product design wins, seasonal growth in computing and consumer and growth in power supply.

Our GAAP gross margin was 20.4% for the September 2013 quarter, as compared to 17.1% for the prior quarter and 26.7% for the same quarter last year. The sequential improvement in gross margin was primarily due to the higher factory loading and lower manufacturing cost.

GAAP operating expenses were relatively flat at $15.8 million in the September quarter, as compared to $16.1 million for the prior quarter and $15.7 million for the same quarter last year. Income tax expense was $1 million for the quarter, as compared to $1.1 million for the prior quarter reflecting our relatively fixed rate tax structure.

GAAP net income for the quarter was approximately $300,000 or $0.01 per share, as compared to a GAAP net loss of $0.16 per share for the prior quarter. GAAP net income in the September quarter included stock compensation expense of a $196,000 in cost of goods sold, $295,000 in R&D and $718,000 in SG&A. Depreciation and amortization expenses were $7 million for the quarter.

The non-GAAP net income for the September 2013 quarter was $0.06, as compared to an $0.11 net loss for the prior quarter.

Our balance sheet remains strong. We completed the September quarter with cash and cash equivalents of approximately $96 million, as compared to $92.4 million of at June 30 of 2013 quarter end and $95.2 million at September 30 of last year and we paid down $1.4 million of our term debt in the September 2013 quarter.

Net trade receivables were $40.9 million, compared to $38.3 million last quarter and $29.4 million last year. DSO for the quarter was approximately 44 days, compared to 45 days last quarter.

Net inventory was 68.4 million at the quarter end almost flat as compared to last quarter and down from 71.1 million for the prior year. Average days in inventory were 92 days for the quarter compared to 95 days for the prior quarter. The channel inventory was down as of September quarter ended within our target range.

Net property, plant and equipment was about $133 million, a decrease of $5.1 million quarter-over-quarter. Capital expenditures were $1.6 million for the quarter. We anticipate our capital expenditures for calendar 2013 not to exceed $10 million and we spent about $6.6 million for the calendar year to-date.

Cash flow from operations was $6.7 million for the September quarter and we generated about $5 million in free cash flow.

Now, I’d like to turn the call over to our CEO, Dr. Mike Chang, who will provide the business highlights for the quarter. Mike?

Mike Chang

Thank you, Mary. Welcome everyone to AOS earning call today. I am pleased to report our revenue grew by almost 9% quarter-over-quarter for our first quarter of fiscal 2014. Let me give you some recent business highlights and the market segment overview.

During first three quarter of calendar 2013, our design wins were up over 25% compared to the same period last year. This increase is primarily in our new medium voltage and high voltage products that demonstrate the positive progress toward our market diversification.

The computing business represents 45% of revenue in fiscal Q1 and it remains our core business while we continue our diversification effort into other areas. We are currently recovering our market share with our major OEM customer and expect this ongoing effort to remain on a positive territory over the coming quarters.

Additionally we have recently upgraded our vendor position at one of the computing market leaders and have design win and start shipping products to them. Our new position will open the door for further business expansion in the year 2014 and beyond.

We’re also being building tractions with all power IC products, which are starting to ramp in next generation [Hathwell] platform design. We are winning DC-DC regulator, smaller switch and (inaudible) socket in new auto book, OEM PC and the high performance graphic cards.

AOS power IC in this applications provide a small size and high efficiency solution that will leverage our core strength of silicon technology, IC design knowhow and advanced packaging capabilities.

The consumer business was slightly up sequentially represented 21% of revenue. We continue to enjoy a preferred position as a market leader in the TV market and have secured our position for next year’s TV stock with our new [Easy Top] solution that offers high [10 by] efficiency required in the latest energy efficient TVs.

We are also growing our share in other regions, especially in China with our DC-DC power IC and the MOSFET used for LED backlighting. We are gaining traction with gaming and expect to see the major proofs of our design wins next year as we continue to expand our firm footprint in the new consoles.

Industrial and the power supply were up sequentially and represented 15% of our revenue reflecting strength in our high power and high voltage product offerings. This quarter we brought in our secondary board AlphaIGBT portfolio by releasing seven new products suitable for industrial equipments, white goods, and commercial HVAC systems.

We are already starting to see significant design win activities from customers who value our higher robust and efficient IGBT solutions, especially in China, Korea, Japan and Europe. Additionally, our leading voltage products continue to gain customer recognition due to their superior performance in advanced power supply applications.

With our new meeting and high voltage MOSFET, we are providing complete high efficiency solutions for primary and secondary site of power conversions. We are developing new customer doors with our offering that improves their system efficiency and performance and are beginning to emerge as a preferred supplier for some major telecom and power supply customers.

Although the business cycle in this segment is longer than with our base business, I am pleased with the positive customer adoption and initial ramping of our new products in this emerging area.

The communication business reflects 9% of our total revenue in September quarter, exhibiting a strong contribution from mobile devices and the battery packs. We are clearly growing our design wins with the leading smartphone OEM and continue to see growth opportunities in the battery pack for smartphone, which requires longer battery life and smaller footprint solutions than (inaudible) forms.

Important, as you are now seeing through the announcement from some of our customers and peers, they [animated] our mix with uncertainty. Our core guidance reflects the seasonal demand drop, related inventory adjustment and cautious spend giving the unfavorable PC strength in market sectors.

It also takes into account a slowly yet steady recovery at our OEM customers. We are taking cost savings actions to navigate the near-term challenges. I strongly believe our long-term future is bright based on our solid strategy, plan and the customer acceptance of our new products.

I would like to take this opportunity to thank Mary for her valuable counsel and leadership. She played an important role in the development and the execution of our business strategy upon which we will grow and further strengthen our business.

With that, I will turn the call over Mary for the guidance for December quarter. Mary?

Mary Dotz

Thanks, Mike. And now for the guidance for the next quarter. Our revenue is expected to be $77 million, plus or minus $2 million. Our GAAP gross margin is expected to be approximately 18%, plus or minus 1%. GAAP operating expenses are expected to be approximately $15 million, plus or minus $1 million. Tax expense should be about $1 million to $1.3 million. Our share-based compensation should range from $1 million to $1.2 million. And as usual, we are not assuming any obligation to update this information.

And with that, we will open up the floor for questioning. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Okay. I'm not showing any questions at this time. I would now like to turn the call back to management for any further remarks.

Mary Dotz

Thank you. This ends the call today. Thank you very much for your interest in Alpha and Omega Semiconductor. The company looks forward to talking you again about our results next quarter.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!