Financial Results for Fiscal Q1 Ended September 30, 2019
- Revenue was $117.8 million, an increase of 5.3% quarter-over-quarter and an increase of 2.4% from the same quarter last year. The quarter-over-quarter increase was primarily due to the increased sales in mobile applications.
- GAAP gross margin was 22.9%. Non-GAAP gross margin was 28.3%, an increase of 90 basis points quarter-over-quarter and a decrease of 140 basis points year-over-year. The quarter-over-quarter increase on a non-GAAP basis was primarily due to the improvement of operation efficiency and product mix, partially offset by the price erosion.
- GAAP operating expenses were $27.6 million. Non-GAAP operating expenses were $25.6 million, an increase of $3.0 million quarter-over-quarter and an increase of $1.1 million from the same quarter last year. The quarter-over-quarter increase on a non-GAAP basis was primarily due to the increased research and development engineering expenses and the merit increase of compensation started in the new fiscal year.
- GAAP operating loss was $0.6 million. Non-GAAP operating income was $7.7 million as compared to $8.0 million for the prior quarter and $9.7 million for the same quarter last year.
- GAAP earnings per share attributable to AOS was $0.04. Non-GAAP earnings per share attributable to AOS was $0.26 compared to $0.35 for the prior quarter and $0.36 for the same quarter a year ago.
- Consolidated cash flow used in operating activities was $2.7 million, compared to cash flow provided by operating activities of $8.3 million last quarter. Operating cash flow used by AOS alone was $4.2 million, compared to $15.2 million cash flow generated in the prior quarter. The AOS operating cash flow was significantly impacted by a one-day delay of $9.2 million receivable payment from one of our major distributors due to the bank shut down on September 30, 2019 because of Typhoon Mitag in Taiwan, and $5.9 million intercompany receivable impact from the Chongqing Joint Venture (the "JV Company").
- The Company closed the quarter with $103.1 million of cash and cash equivalents, including $15.1 million cash balance at the JV Company.
“The strength of our September quarter, especially with record revenue that marked the fifteenth consecutive quarter of year-over-year increase, underscores the successful deployment of our growth strategy in the Mobile business. Our expertise in high performance MOSFET technology coupled with our advanced packaging capabilities have enabled us to grow our Battery Protection and Quick Charger businesses at multiple global brand smartphone OEM customers,” remarked Dr. Mike Chang, Chairman and CEO of AOS.
“To support the growing demand for our products, we are progressively ramping up the production of the 12-inch fab at the joint venture,” continued Dr. Chang, “We are confident that the 12-inch fab can reach the Phase 1 target run rate by the September quarter of next year as planned. Our diversified products are well-positioned with strategic players in many key market segments, and we are committed to better serving those customers through increasingly comprehensive total power solutions and a highly reliable supply chain.”
Business Outlook for Fiscal Q2 Ending December 31, 2019
The following statements are based on management's current expectations. These statements are forward-looking, and actual results may differ materially. AOS undertakes no obligation to update these statements.
- Revenue is expected to be between $117 million and $121 million.
- GAAP gross margin is expected to be approximately 22.3% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 27.3% plus or minus 1%. Note that non-GAAP gross margin excludes $0.4 million of estimated share-based compensation and $5.8 million of estimated production ramp-up costs relating to the JV Company.
- GAAP operating expenses is expected to be in the range of $27.4 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $25.4 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $3.1 million to $3.3 million of estimated expenses relating to the development of our digital power controller business. Non-GAAP operating expenses exclude an estimated share-based compensation charge of approximately $2.0 million.
- Tax expense is expected to be approximately $0.5 million to $0.7 million.
- Loss attributable to noncontrolling interest is expected to be around $3.6 million. On a non-GAAP basis, excluding estimated production ramp-up costs relating to the JV Company, this item is expected to be approximately $0.9 million.
Conference Call and Webcast
AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal first quarter of 2020 ended September 30, 2019 today, November 4, 2019 at 2:00 p.m. PT / 5:00 p.m. ET. To participate in the live call, analysts and investors should dial 866-393-4306 (or 734-385-2616 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 management's prepared remarks 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, anticipated annual revenue target, our ability and strategy to develop new products including digital power controller products, the ability to expand our sales and market share, increase our capacity and achieve sustained growth and profitability, the expected ramp-up schedule of the 12 inch fab at the JV Company, the development of digital power business, partnership with global brands, the relationship with key customers, business pipeline from design wins, the grown in mobile business, our ability to provide power solutions and reliable supply chains, and other information under the section entitled “Business Outlook for Fiscal Q2 Ending December 31, 2019”. 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, our ability to successfully operate our joint venture in China; our ability to develop and succeed in the digital power business; difficulties and challenges in executing our diversification strategy into different market segments; new tariffs on goods from China; ordering pattern from distributors and seasonality; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of PC markets; 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; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed on August 23, 2019. 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 and production ramp up costs for all periods presented, as well pre-production expenses related to the JV Company for the quarter ended June 30, 2019 and September 30, 2018. 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 JV Company 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.
