Good morning and -- good afternoon and thank you for attending today's Alpha and Omega Semiconductor Conference Call. My name is Austin, and I will be your moderator for today. . I would now like to pass conference over to our host Gary Dvorchak, Investor Relations representative of Alpha and Omega Semiconductor. Gary, you may proceed..

Mike will begin with strategic highlights. Then, Stephen will provide business updates in a detailed segment report. After that, Yifan will review the financial results and provide guidance for the September quarter. Finally, we'll have a question-and-answer session.

The earnings release was distributed over wire services today, August 10, 2022, after the close of the market. The release is also posted on the company's website. Our earnings release and this presentation include certain 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 that we provide. 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’ll 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 filings with the SEC.

We assume no obligation to update the 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, Gary. I would like to welcome everyone to today's call. It is good to be speaking with all of you again. Our fiscal Q4 was another strong quarter despite the challenge posed by the COVID lockdown in Shanghai. Once again, we outperformed our guidance report. Revenue was $194 million growing 9% year-over-year.

Non-GAAP gross margin was 33.8% and a non-GAAP EPS was $0.95. I'm very proud of our people's ability and determination they executed this quarter despite the uncertainty and challenges. As you may remember, in early April, our Shanghai packaging and the testing facilities was forced to shut down due to a single wide COVID lockdown.

Our ability to assemble and ship products was severely limit from those of April. Whilst the lockdown ease and we were created to restart operations at the end of April. It took time for our assembly lines to return to full utilization. It also took time for logistic support and supply chain to ramp up to full functional capacity.

Our Shanghai facilities are mostly back to normal and are currently operating at a full capacity. We are taking careful steps to reduce the risk of new COVID instructions in compliance with local guidelines.

I am most proud of and grateful for the great collaboration and unwavering dedication that our people especially our Shanghai team demonstrated during this challenging times. All employees worked as one team relentlessly pressing on our mission and the values which is to help our customers succeed.

I want to say thank you to all employees once again for their selfless devotion, loyalty and support. Look into the rest of 2022, we are seeing inventory corrections happened in certain consumer in the market. While we are not immune to current global market conditions, as of today, our demand and backlog are still higher than our overall capacity.

Whether we are in up cycle or down cycle, we always focus on the basics and strengthening the foundation to speed up future growth. I found it AOS in September 2000. Just as the internet bubble crashed and the lead to recession, this happened to be the best timing for a startup.

Over our 22 years of history, the AOS team has navigated and many semiconductor cycles, surviving and destroyed. Even when we were far smarter than we are now. Today, we are stronger than ever.

In terms of our leading technology, more diversified product portfolio, Tier 1 customer base in all our business segments, extending manufacturing capability and a supply chain, strong balance sheet and dedicated and experienced management team. We are confident that we can navigate the current economic environment.

More importantly, we are competent than near-term cyclical fluctuations were not overshadow substantial long-term opportunities for our business. The electrification of everything is just getting started. And our power product sit at the forefront of that trend. I believe our strategic position within our sector is resilience.

And our customer service and market share Tier 1 customers is the highest it has ever been. We are confident we can keep our $1 billion annual revenue target in the next quarter of years. And are actively investing to position ourselves to achieve even more update. Thank you.

I will now turn the call over to Stephen for an update on our business and detailed a segment report.

Stephen?.

Thank you, Mike, and good afternoon, everyone. I will start with an update on our business and then provide color on our segment results. As a reminder, in the June quarter demand for our products was higher than our total capacity.

The modest slowdown in our growth was caused by the very limited operations at our Shanghai packaging and assembly facilities due to the government post-COVID locked down in the month of April. However, we still delivered solid results, which highlights our strong execution and the benefits of our diversified manufacturing capacity.

In September quarter, as Mike mentioned, we are seeing some softness in consumer end markets due to inventory corrections. However, as of now, our backlog remains higher than our capacity, so our customers remain on allocation.

Moreover, we believe a few aspects of our business make us more resilient in this type of environment, which we are highly proud of.

First, since we own the majority of our own manufacturing, we are able to quickly shift wafers capacity to other parts of the business where demand remains strong and therefore are at lower risk of costly inventory buildups that leader may result in write offs or selling at discounted prices.

Second, another trend that is worth mentioning is that most of our Tier 1 customers have remained resilient thus far. This benefits us as our share at our Tier 1 customers is at the highest level ever in our history. Third, AOS has been upgrading our products to address higher performance sockets with differentiated solutions.

These are the types of products that remain on allocation now. For the coming September quarter with our Shanghai facility back in full operation, we expect high single digit sequential growth. We expect September quarter revenue to be at $210 million at the midpoint. Now, let me drill down into each of our business segments.

Unless otherwise noted, the following figures refer to the June quarter of 2022. Starting with computing, revenue was up 15.6% year-over-year, down 0.5% sequentially and represented 46% in total revenue.

The year-over-year growth was driven by the continued strong demand in notebooks, particularly from OEM customers that have a higher concentration of their businesses serving commercial laptop applications. In addition, high-end PCs and gaming desktops were also strong. Sequential decline was mainly due to the shutdown of our facilities in Shanghai.

Looking ahead in the September quarter, we expect computing to be flat to slightly down sequentially as our customers rebalance their inventories for a weaker end market. Our total revenue won't be effective, however, as we are able to quickly shift wafer capacity to other parts of the business. Turning to the consumer segment.

Revenue declined 1.7% year-over-year and 15.9% sequentially, and represented 90% of total revenue. Nearly all of the revenue decline was attributable to the Shanghai lockdown as the largest end market applications in this segment, such as home appliances and gaming are sourced fully from our Shanghai factory.

Looking ahead, we expect the consumer segment to recover double digits sequentially, strong demand in gaming and catch-up shipments. We are expecting record gaming volumes, particularly from the number one gaming console manufacturer, where we have leading share.

Home appliances are also expected to recover sequentially on catch-up shipments, but in general is softer as overall demand has weakened, driven by inflation and do slowdowns in real estate and consumer spending. Next, let's discuss the communication segment, which was up 32% year-over-year and 2.9% sequentially and represented 15% of total revenue.

This segment delivered strong year-over-year growth due to share gains at major Chinese smartphone OEMs particularly in their premium tier models, which are still in shortage. These share gains more than offset and overall softening of the smartphone market in the quarter.

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 September quarter, we expect mid-single-digit revenue growth as we prepare for our launch from one of our major smartphone OEMs.

A with maintains high share and high end models in all 3 of our markets in U.S., Korea and China. Now let's talk about our last segment, power supply and industrial which accounted for 18% of total revenue. This segment was down 1.1% year-over-year and 4.8% sequentially.

The decline was mainly due to our intentional decision to deprioritize shipping quick chargers parts into our distributors. With a slowing smartphone market, we want to manage channel inventory levels, shipments for solar applications and power tools remained steady.

For the September quarter, we anticipate this segment to grow low double digit sequentially, mostly from share gains in quick chargers at a major phone maker and growth in power tools. In closing, we are aware of the growing uncertainty in the macroeconomic environment. However, we still expect to grow as we focus on our long-term plan.

We continue to execute our product and technology roadmaps, enhancing our diversified manufacturing stability, and deepening strategic customer relationships, which should result in share gains and expansion. Our $210 million September revenue guidance puts us well over an $800 million annual revenue run rate.

We remain confident in our target of $1 billion of annual revenue in 2024. With that, I will now turn the call over to Yifan for a discussion of our fiscal fourth quarter financial results and our outlook for the next quarter.

Yifan?.

Thank you, Stephen. Good afternoon, everyone. And thank you for joining us. Revenue for the quarter was $194 million, up 9.4% year-over-year and down 4.6% sequentially. Given the COVID restrictions in Shanghai, we're pleased that we achieved a better than our guidance midpoint.

Please recall that the March quarter was a record setting quarter and we expect another record quarter in September. In terms of product mix, DMOS revenue was $138.9 million, up 9.2% year-over-year and down 1.2% sequentially. Power IC revenue was $53.1 million up 14.2% from year ago and down 12% from the prior quarter.

Assembly service revenue was $2 million as compared to $2.2 million last quarter and $3.6 million for the same quarter last year. Non-GAAP gross margin was 33.8%, compared to 34.9% a year ago, and 36.7% in the prior quarter.

Again, the decrease in non-GAAP gross margin was primarily impacted by the production shutdown at our Shanghai assembly and test facilities in April. Non-GAAP operating expenses were $36.7 million, compared to $34 million for the prior quarter and $32.8 million last year.

The quarter-over-quarter increase in non-GAAP operating expenses was largely due to higher R&D engineering expenses, and the addition of headcount. We continue to invest in R&D to fuel our future growth. In some non-GAAP quarterly EPS was $0.95 per share, compared to $1.34 for the last quarter and $0.95 a year ago.

On a fiscal year basis, revenue for the year 2022 was $777.6 million, up 18.4% a year-over-year. Non-GAAP gross margin was 35.6% representing a year-over-year improvement of 370 basis points. Non-GAAP operating expenses were $139.3 million, up 12.5% from last year.

Non-GAAP EPS for the year was $4.56 as compared to last year is $2.93, an increase of 56%. Moving on to cash flow. GAAP operating cash flow was $25.7 million, which included $3.4 million of net customer deposits. By comparison, operating cash flow in the prior quarter was $61.8 million, which included $6.4 million of net customer deposits.

Operating cash flow on a standalone basis a year ago was $32.6 billion which included $10 million of customer deposits. Consolidated EBITDAS was $36.9 million compared to $48.4 million last quarter and $40.9 million a year ago. For the fiscal year, cash flow from operations was $203.4 million as compared to $114.3 million for the prior year.

Consolidated EBITDAS was $177.2 million as compared to $136.4 million a year ago. Let's move on to the balance sheet. We completed the June quarter with a cash balance of $314.4 million, compared to $323.1 million at the end of the March quarter. The cash balance a year ago was $164.9 million, excluding $37.5 million at the JV Company.

The bank borrowing balance at the end of June was $63 million, compared to $65.2 million a quarter ago. Net trade receivables were $65.7 million at the end of the June quarter as compared to $39.2 million at the end of the prior quarter and $35.8 million for the same quarter last year.

The quarter-over-quarter increase was due to the annual shipments toward the second half of the quarter as a result of the shutdown of our Shanghai assembly and test facilities in April. Day sales outstanding for the June quarter were 26 days, compared to 28 days in the prior quarter.

Net inventory was $158 million at quarter end up from $143.5 million last quarter and up from $154.3 million in the prior year. Quarter-over-quarter increase was primarily due to increase the wafer inventory as a result of lower wafer consumption at our Shanghai assembly and test facilities because of the COVID shutdown.

Average days in inventory were 104 days compared to 94 days in the prior quarter. Finally, property, plant and equipment was $318.7 million up from $245.8 million last quarter. The fixed assets balance a year ago was $174.5 million, excluding $262.5 million at the JV Company.

An update on our Oregon fab expansion project, the clean room expansion has been completed and a good portion of the equipment was installed. However, our equipment installation contractors have experienced a shortage of scale the labor and certain materials. Therefore, we expect the product to be delayed by a quarter.

And we currently anticipate additional capacity to come online in the March quarter of 2023. Now, I would like to discuss the September quarter guidance. We expect revenue to be approximately $210 million plus or minus $3 million. GAAP gross margin to be 33.8% plus or minus 1%. We anticipated non-GAAP gross margin to be 35% plus or minus 1%.

Non-GAAP gross margin guidance excludes $0.8 million amortization of acquired IP and $1.8 million of estimated share-based compensation charges. GAAP operating expenses to be in the range of $45.7 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $36.5 million plus or minus $1 million.

Non-GAAP operating expenses exclude $9 million of estimated share-based compensation charges and $0.2 million of estimated legal expenses relating to the governmental investigation. Interest expense to be approximately $1.2 million and income tax expense to be in the range of $1.2 million to $1.4 million.

With that, we'll now open the call for questions. Operator, please start a Q&A session..

Our first question is with David Williams from Benchmark..

Congratulations on the execution and the resiliency of the business. Obviously, some great success here, and it's great to see. So, congratulations there. On the -- maybe the backdrop, it seems to have deteriorated more than I think we had expected since the prior quarter and particularly in areas that you have a lot of exposure.

Stephen, you talked about this in the prepared remarks a little bit, but maybe if you could give us some color around the flexibility to pivot, if there was anything unusual maybe given the assembly and test issues and maybe speak to the fungibility of your portfolio overall?.

Sure. For us, yes, we're starting to see some softness in some of the end markets that we address. And many of our end markets at the very end, are consumer-facing and we're seeing some pressure just due to the current and macroeconomic backdrop.

However, when you look into each of the businesses that we're in, the story is not necessarily the case across the board in that we address multiple sockets within many of our applications. And depending on the socket, the higher performance applications and higher performance on sockets are generally faring better than the lower end.

We talked about in computing that we are more addressing the commercial applications as opposed to consumer. And in general, the drop has been more in the lower to mid-end models, especially in the consumer side, whereas the higher-end models and the commercial PCs have generally been doing better.

Additionally, when you look into the BOM content of some of these applications, higher power performance sockets in general, are still under allocation. It is still a hand-to-mouth whereas the lower end, we're starting to see some more pressure from local competition. So that theme, we can also see that in other segments as well, too.

As a whole, AOS still remains on allocation. Our backlog is stronger than our capacity right now. So, for us, internally, we are basically shifting our supply to support the areas that are more profitable, that have a stronger demand.

So, we do have the ability because we have a lot of the supply chain under our own control to be able to shift those resources around to address the stronger portions of the market..

Great. Certainly helpful. And then maybe even on the gross margin side, I know you had expected most -- to recover most of the margin loss, I guess, from the shutdown in Shanghai. But it looks like you gained about 120 basis points.

Was this largely maybe a component of just the mix of lower Power IC or higher Power IC and lower discrete and higher Power ICs. And then how do you think that trends over the next several quarters? Can we get back to the margin maybe that we were previously? Or just anything around the levers that you have available to pull there would be helpful..

Sure. Our September quarter's midpoint of the non-GAAP gross margin guidance, yes, is about 120 basis points, as you said, and higher than the June quarters actually. This guidance reflected the current view of demand dynamics, the expected product mix and also our factory productions, including the input cost increases.

I mean, all those factors, I mean, we have been factored in. So of course, I mean it's a range. I mean, 35% plus or minus 1%. And I mean in terms of future quarters, and I mean at this point, it's hard to say. I mean, we only guide one quarter at that time.

And then I mean the market demand and the old dynamics and a lot of factors could change for the December quarter and onward. So, I would expect that probably we can maintain around the September quarter guidance range at least..

Okay. And then maybe just one last one for me, if I can.

If you kind of think about your outlook and just given the macro challenges, what do you think the risks are to the outlook? How much is maybe is booked into the outlook in terms of that demand? And then maybe how much of the guidance is already booked? And just kind of where you think there could be potential risk from an end market perspective..

I mean for the September guidance?.

Yes..

Okay. Yes, for the September guidance, I mean, I would say that most of the risk is on the production side and our backlog is pretty much there in place and the production side, yes, the China COVID risk is still there. And then I mean, even though Shanghai city has already released restrictions, but you'll never know.

I mean their policy towards zero tolerance on COVID is still there. I mean not lifted yet. So, the I mean, I think supply chain disruptions always is a risk there..

Our next question is with Craig Ellis from B. Riley..

So nice work getting back up and running and a strong guide for the fiscal first quarter. A couple of things that stood out at least for me in a guide is the strength we're seeing in gaming consoles.

So, I wondering if that's in part due to incremental content gain, and if so, how much? And the other thing that stood out was that industrial and power supply, there?s some quick charger share gain with the large smartphone OEM.

And I'm wondering if you can help us understand how material that is because it seems you might have a couple of tailwinds that at least on our end, we might have been under appreciating as we head into the back half of the year..

Sure. Greg, this is Stephen. So, addressing the first question about gaming. Gaming consoles in general is definitely a strong portion of the business. And historically, this customer, their consoles have been more immune to changes in the economy.

And we know that from the past 1.5 years that they've been under producing and they've had -- ever since launched, they couldn't produce fast enough. They are resolving some of that now. So, our growth in the September quarter partly is coming from their own growth in the second half as well as share gain.

BOM content increase, I don't think is playing a big factor right now, but it's definitely -- and we are internally as a company, AOS is shifting more support to this particular customer. So, I would say both the end shipment growth as well as share gain is what's contributing to the big step in the gaming console business for AOS.

Regarding our quick chargers, this is more so on the on the high-end quick chargers. And in the quick charger market, we actually addressed two sets of customers; one is in China for the lower to mid-end.

And that area, we actually -- because of the decline in softness in the China smartphone market, we chose to back off support for that area in -- for the China region.

But for the big OEM, and that's making more higher-end quick chargers for their higher-end phones, this is an area that we've been choosing to support more is also -- it's a higher performance socket. It's a better business for us and our customer is coming to us for more support.

So, it's -- in general, you kind of see the theme as we see the market dynamics that the higher-end applications are generally faring better and AOS is shifting our resources to support those applications..

Got it.

And then moving on to a supply side issue, and I'm not sure if this is best directed to you or at Yifan, can you provide a little bit more color on what the specific issues are with the contractors that are working on the fab clean room completion? And then given how close we are the ramp, any update on expectations for the pace and magnitude of revenue ramp out of that facility?.

Sure. I mean, this one, we have to thank to the booming fab construction in the U.S. And then I mean, right now, there's a lot of fabs constructions going on. People are competing for skilled and certified laborers.

And I mean, those are fab equipment and they're all large and complicated and then you need a certain certified people to handle it and then to install. So right now, our contractors have been experiencing some labor shortage and some materials.

And then I mean, certain materials like tubes and those are all very specialized, the tubes, for fab operations and so on. I mean, in those areas, we are seeing some shortages. So that's why our current estimate is that probably the delay for a quarter.

So previously, we estimate that in the December quarter, we can get it online, but now it's more likely in the March quarter range. So -- and then March quarter, and then it will gradually ramp up. So, we would say it probably take a quarter or two to probably fully ramp up to the anticipated expansion capacity..

Got it. And then a follow-up question, and it goes back to one of the themes from the prior question and it's related to just the environment that we're seeing out there where there's more and more visible signs of consumer weakness, but obviously, the company has a number of levers that they can pull.

But the question is this, given what you're seeing with growing signs of inventory correction across the end markets that you serve, and given the seasonal dynamics of the business with consumer and enterprise builds typically stronger in Calendar 2Q and 3Q and weaker in 1Q.

Stephen, can you give us some help on how we should think about some of the gives and takes as we look out to fiscal 2Q? Not looking for guidance, but just do you have any new programs like the two we just talked about that we'd be picking up in fiscal 2Q or anything that would be a particular headwind, anything that's coming off of a particularly strong ramp in fiscal 1Q?.

Sure. For us, when we look outward to the December quarter, and seasonally, typically, the strength of it depends on the strength of the peak season of the previous quarter, of the September quarter. So, we are looking carefully at the adoption of the new smartphone from one of the major OEMs.

That's one of the major customers that we have been supporting not only for their smartphone, but also the other applications like the tablet and quick chargers. And we're also looking carefully at what's happening in the PC market in terms of how long the inventory correction will take place.

Of course, we're still gravitating towards the higher end in that area, AOS is focusing on supporting more of during this time as they're going through inventory correction of the other low to mid-end products. So, for us, I think that's what we're carefully watching now.

We're not giving specific guidance for December quarter, but at the same time, we are making careful use of our allocation right now..

And lastly, on the December quarter. There was, I think, a significant gaming card launch that I think a lot of us thought would occur in Calendar 3Q, fiscal 1Q, and it looks like due to the inventory correction that's going to happen under 4Q, fiscal 2Q.

So, it seems like that would be one thing if it occurred at that time frame, that would be a sequential benefit to the business? Or has a lot of the product for that product cycle already been produced and shipped to that customer?.

We are still shipping and producing for that particular customer. I think they're dealing with their own challenges right now with balancing the inventory of existing graphics cards from their current platform. So that we do expect that, that transition is going to be delayed. But AOS is continuing to ship into that application.

But at the same time, we're also taking some of that product supply support to support other stronger applications such as the gaming consoles..

Our next question is with Jeremy Kwan from Stifel..

Let me add my congrats to you on the strong execution here in the quarter. Stephen, you mentioned that your backlog is still higher than overall capacity.

Would you mind giving us a little bit more color in terms of the makeup of the backlog and maybe the quality of it? Is it cancelable? Are there different dynamics going on between DMOS backlog versus Power ICs..

I think for us, it reflects what the change in the backlog, yes, we see some inventory correction going on. But as I mentioned before, it is different depending on which products are involved. The higher-end products, the higher performance products are still hand-to-mouth and backlog is tight on those.

But the lower to mid end, this is where we're seeing more competition coming from other suppliers, including local suppliers that are starting to get more access to foundries in this market landscape. So overall, we are seeing some backlog adjustments.

Actually, we welcome that because it's a good time to clean up the backlog, so that it?s a better clear picture of where the true demand is. And so, part of this is initiated by the customer, but part of this is also initiated by us in order to have a clean look at what to build..

Great. That's very helpful.

And maybe if I could just press a little bit more on the color in terms of the tenure of that backlog? Like how much of it is still 12 months out? Have you seen a shift in maybe customers placing orders that far out? And how much of it is for the next three months?.

Right now, on our total backlog, we still have about six months of backlog. And generally, we have the next quarter cover plus some more. And so, our backlog still goes through the December quarter and some of it trickles into the following quarter after that. But our focus is always still on the near-term quarter first..

Great. And I guess, can you give us insight into how order linearity is looking currently? I know last quarter, there was probably a lot of catch-up in the month of June, which probably helped drive DSOs up.

But can you talk about how things are trending this quarter so far?.

Do you mean order linearity to our delivery? What are you --.

Sorry, delivery. Yes, sales linearity..

Okay. So, our building -- the main thing about for the June quarter was we were affected by the lockdown, right? So, once we were able to get back to full production, June was a much heavier month for us. And our operations team did an excellent job to bring things back online and get our products out the door. So last quarter was an abnormal quarter.

Usually, we see the shipments spread more evenly through the quarter. But because of the lockdown recovery, it was more back heavy. We do expect the September quarter to be more linear back to our normal shipping patterns..

And also, if you wouldn't mind adding some color on the order linearity to, has that been pretty stable as well?.

It's -- well, as we mentioned before, the backlog itself is going through inventory correction. So, we're seeing some areas where they are going to inventory correction. That means, yes, canceling some old delinquent and backlog, but also pausing on some of the new orders for the lower to mid-end products that are starting to build up some inventory.

But the areas with high performance where our supply is still hand to mouth to the customer, those orders are still coming in steady..

Great. And another question, if I could, on the -- could you give any color on the pricing ESPs? I know some of your peers have talked about 8% year-over-year pricing increases and even a 2% sequential.

Is that something that you're seeing as well? And maybe if there's a differentiation between like you said, at the higher end and the lower end and where you see that trending next quarter?.

I mean overall pricing environment and I think it's kind of steady at this point. And then, I mean, yes, I mean we selectively pass on to some input cost increases to certain customers. But overall, I mean, it's kind of steady at this point..

Great. And one last question before I get back in the queue. But last quarter, you mentioned CapEx was $43.4 million and that you were expecting something similar for this quarter. Can you give us that number for this quarter? And how you see things trending, especially in light of the different delays in installation..

Sure. June quarter's CapEx spending was $34 million, $35 million-ish in that range. So compared to the quarter before, it was $40 million. For the September quarter, we still expect a similar level, $30 million, $40 million range. So that's primarily for the -- our Oregon fab expansion and plus some back-end facility expansion as well..

Our next question is with David Duley from Steelhead Securities..

A couple of clarifications. You mentioned that your June quarter was back-end weighted. I saw receivables were up at least $25 million, $26 million. I'm assuming since this next quarter is going to be linear, that you're going to kind of have a very strong cash flow from operations quarter as you unwind the receivables and perhaps the inventory.

Could you just comment on how much you think cash flow might be from lowering the working capital needs?.

Sure. Yes. For the June quarter, yes, our operating cash flow got impacted by this receivable balance. Yes, June quarter, first half of the quarter, then our production got suspended in our Shanghai facilities. So now that's back up to normal production at our Shanghai factories at this point.

Yes, for the September quarter, I would expect receivable balance to come down a little bit. And then how much to come down. It will depend. Also keeping in mind that our total revenue guidance also increased compared to last quarter's $194 million.

So, both factors together, I would say that yes, and we'll see -- we should be able to see some accounts receivable balance drop.

In terms of inventory, the inventory increase in the June quarter was primarily due to the wafer inventory increase because our Shanghai factory shutdown, so the Shanghai assembly and test facilities consume less wafer inventory. So, I want -- it will depends on the back-end capacity in certain wafers and the back-end capacities. It's also full.

So, it will gradually be digested. So, it's kind of a dynamic for the inventory balance. I would say that roughly flattish to slightly down..

Okay. And then you mentioned you have this delay in the -- bringing on this new capacity in the Oregon fab by a quarter, but you also mentioned a lot of the equipment is already installed.

So, I'm just assuming because you can't finish everything that you can delay it hitting the depreciation button on all that equipment that's installed until the March or the June quarter?.

Right, right. Because that production and then the wafer production depends on a lot of equipment. So even though you have certain equipment installed, you won't be able to formulate additional capacity. So, we have to wait until all the equipment is online..

Okay. And so, I'm assuming the depreciation clock then starts like roughly at the end of the March quarter..

Yes. When they start the production.

Okay. And then I noticed the Power IC business was down sequentially, I think, more than the overall revenue. Could you just comment on perhaps why? And then would this business be expected -- can you just talk about the growth prospects in the back half of the calendar year here, given that it's a higher margin and higher value-added slot..

Okay. Sure. I can comment on the June quarters, Power IC revenue decrease. Yes, that one was largely because of the Shanghai factory shutdown. I mean our Power IC products and we use more advanced packaging technologies, proprietaries of the technologies. So those products tend to be produced more at our Shanghai facility.

So, I mean, because of the factory shutdown in April and partially in May, so that was a limited Power IC revenue growth. We would expect the September quarter Power IC revenue to ..

Should it grow faster than the overall revenue?.

In the bigger picture, yes. And as you've seen the growth of our Power IC business that was tied to the gaming console tied to PC and also a bit to graphics too. Yes, I think graphics might slow down a little bit, but in regards to the PC and gaming. I think this is still a key area where our Power IC has still had strength..

Okay. Final question from me is, I think, in the prepared remarks, someone mentioned that your Tier 1 market share is the highest it's ever been.

Can you just frame that for us? Do you have -- is 20% of your revenue coming from Tier 1 accounts or I don't need an exact number, but what does that mean?.

I would say, overall, in terms of the majority of our business is tied to Tier 1 accounts these days.

That's been a major change from, I think, over the last probably three or four years that we've really been going after the market leaders in every application that we're in; whether it's in the PC market, whether it's in the home appliance or the gaming market or the graphic cards, we've been focusing our attention in designing end products as well as our -- as allocating our supply to these Tier 1 customers.

So, it's a reflection of that effort and we see it in the revenue and also in our market share..

Our next question is with Craig Ellis from B. Riley..

I wanted to come back and follow up on the point on customer deposits. So, the increase in the quarter was moderate at $3 million for $10 million in the last two quarters. But I have been a little bit surprised that we've taken customer deposits in two and now 10% above the expected capital cost of the expansion that they continue to come in.

So, one, can you talk about what's been driving the increase rate? And is it possible that as we look into the back half of the year that we would have continued customer deposit intake and if so, to what extent?.

Sure. I mean, yes, in the June quarter, we had about $3 million or $4 million in net customer deposits. And I mean, going forward, I would not expect a whole lot of deposits that we can take concern those deposits are earmarked with our delivery support to our customers.

So right now, I mean a lot of the Oregon fab expansion capacity already pretty much allocated to whoever put down the deposits. So, I would not expect going forward, we take a whole lot of deposits. But certain customers and strategic customers, they still want to secure their supply.

And yes, and then we want to foster those and deepening our partnership with those Tier 1 customers, yes, we still selectively take some deposits..

And Yifan, can you provide some color on where those -- are coming in from? I think the last time I asked a question of that nature was more of the PC customer base.

But can you provide any color on how many different customers have placed deposits? And if it remains more PC-centric or if it's broadened out into some of the other application areas?.

Listen, deposits came in from pretty much all the segments, the customers in the different industries. And I mean, in PC, in smartphone, in the power supply and the home appliances and from a variety of customer base..

Our final question will be with Jeremy Kwan from Stifel..

Just a quick follow-up or two on first, the delay in the capacity expansion from December to March.

Is that -- would that impact your ability to potentially grow? Are you guys pretty maxed out at this point? Or are there other levers you can keep pulling to kind of, I guess, manage your way through these delays? And then as a follow-up to that, is there -- what's giving you the confidence that these issues will be resolved in that time line that you guys have outlined?.

Sure. Maybe I'll address the second one first. So overall, we are working very closely to resolve those challenges of the labor as well as the specialized equipment that we need. We have great relationships with the local labor force. And they are very cooperative to helping us to resolve and resolve and try to close the gap.

So just keep in mind, in terms of the total project, this is like the last leg that we're getting through. The major equipment is already installed. Now we're trying to get all these accompanying equipment also tools up and installed as well too.

So, we have confidence that with our team and our partnerships with the local vendors they can help us to get this done. For us, yes, it will impact our expansion, and we were hoping to get some of that benefit at the end of this calendar year. But it's not going to stop our overall direction.

We still plan to grow next year, even when the market changes even. We do expect the supply, even if it's one quarter or late, it's still going to start to help us in the first half of next year.

And at the same time, we talked about our -- what we know we talked about our demand growth, but we're also talked about our supply strategy that it's a three-pronged strategy. First is on internal but also depending on external, both with our JV partner and also with external foundries.

And we believe that with next -- over the course of the next year, we will start to see more benefit coming from external foundries also too. So, I think that will help us to grow in addition to when our 8-inch fad expansion comes online..

And just a quick clarification on external foundries.

Is this for your Power ICs mainly? Or are you speaking about DMOS even?.

It's for both, but it's mainly for the DMOS side..

I see. Okay. And one last question. You mentioned you’re seeing some more local competition in the low to mid-end range of your products.

Can you help us understand like what would you classify as low to mid-end? And what are kind of the distinguishing features? Is it just pricing? Or are there other things that – or maybe some applications that you’re seeing being targeted first?.

It’s really tied to more lower performance sockets where it’s easier for competitors to copy.

In the products that we make, power density is a big deal, right? And if you can make the – deliver the same power in a smaller form factor, then you have an advantage, right? But in some cases, where space may not be an issue than some of our competitors can come in with the inferior process use a bigger die and compete with lower margin in – with us.

So, this happens much more in the low end of the market in the more, I would say, standardized type of products. And for us, AOS has been focused on differentiating ourselves more and more with our products, both for the high-end discretes and MOSFETs, but also especially for our Power IC.

So the trend generally is towards more integration, both of our customers as well, and that’s reflected in our product portfolio. So the more that we differentiate, the more that we can defend or avoid the challenges from the local competitors..

This concludes our Q&A session. So, I'll pass the call back to the management team for any closing remarks..

This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking to you again next quarter. Thank you..

Thank you all..

today's call. Thank you for your participation. You may now disconnect your lines..