8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 4, 2021

Alpha and Omega Semiconductor Limited

(Exact name of registrant as specified in its charter)

Bermuda	001-34717	77-0553536
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

(Address of principal registered offices)

(408) 830-9742

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☒  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	AOSL	The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

The information in Item 2.02 of this Current Report, including the accompanying exhibit, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18. The information in Item 2.02 of this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language contained in such filing.

On November 4, 2021, Alpha and Omega Semiconductor Limited (the “Company”) issued a press release regarding its financial results for the fiscal first quarter of 2022 ended September 30, 2021.  A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On or prior to November 1, 2021, Dr. Mike Chang, the Chief Executive Officer of the Company informed the Compensation Committee of the board of directors of the Company that he wishes to voluntarily forego a portion of any cash bonus payment that he may earn pursuant to the Calendar Year 2021 Executive Cash Bonus Plan (“Plan”) previously approved by the Compensation Committee. Dr. Chang explained to the Compensation Committee that the strong financial performance of the Company in calendar year 2021 is due in large part to the tremendous contribution made by all employees of the Company, therefore Dr. Chang believes it is appropriate to forgo voluntarily a portion of any such cash bonus he may receive, which the Company may use for general corporate purposes. On November 1, 2021, the Compensation Committee agreed to reduce Dr. Chang’s bonus payment under the Plan by 50% of the amount (if any) that would otherwise become payable to him under the Plan.

Item 9.01   Financial Statements and Exhibits.

(d)	Exhibits.
	99.1	Press Release dated November 4, 2021
	99.2	Script of Prepared Remarks for Earnings Call

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 4, 2021

Alpha and Omega Semiconductor Limited
By:	/s/    Yifan Liang
Name:	Yifan Liang
Title:	Chief Financial Officer and Corporate Secretary

EX-99.1

Exhibit 99.1

Alpha and Omega Semiconductor Reports Financial Results for the Fiscal First Quarter of 2022 Ended September 30, 2021

SUNNYVALE, Calif.--(BUSINESS WIRE)--November 4, 2021--Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL) today reported financial results for the fiscal first quarter of 2022 ended September 30, 2021.

The results for the fiscal first quarter of 2022 ended September 30, 2021 were as follows:

GAAP Financial Comparison
Quarterly
(in millions, except percentage and per share data)
(unaudited)
	Three Months Ended
	September 30, 2021			June 30, 2021			September 30, 2020
Revenue	$	187.0		$	177.3		$	151.6
Gross Margin	34.5		%	34.2		%	28.1		%
Operating Income	$	24.9		$	22.4		$	10.3
Net Income Attributable to AOS	$	23.4		$	19.5		$	9.6
Net Income Per Share Attributable to AOS - Diluted	$	0.85		$	0.71		$	0.36

Non-GAAP Financial Comparison
Quarterly
(in millions, except percentage and per share data)
(unaudited)
	Three Months Ended
	September 30, 2021			June 30, 2021			September 30, 2020
Revenue	$	187.0		$	177.3		$	151.6
Non-GAAP Gross Margin	35.3		%	34.9		%	29.0		%
Non-GAAP Operating Income	$	30.8		$	29.1		$	15.4
Non-GAAP Net Income Attributable to AOS	$	29.3		$	26.3		$	14.5
Non-GAAP Net Income Per Share Attributable to AOS - Diluted	$	1.06		$	0.95		$	0.55

The non-GAAP financial measures in the schedule above and under the section “Financial Results for Fiscal Q1 Ended September 30, 2021” below exclude the effect of share-based compensation expenses, amortization of purchased intangible, legal costs related to government investigation and income tax effect of non-GAAP adjustments in each of the periods presented, and production ramp up costs for the three months ended September 30, 2020. A detailed reconciliation of GAAP and non-GAAP financial measures is included at the end of this press release.

Financial Results for Fiscal Q1 Ended September 30, 2021

• Revenue was $187.0 million, an increase of 5.5% from the prior quarter and an increase of 23.4% from the same quarter last year.
• GAAP gross margin was 34.5%, up from 34.2% in the prior quarter and up from 28.1% in the same quarter last year.
• Non-GAAP gross margin was 35.3%, up from 34.9% in the prior quarter and up from 29.0% in the same quarter last year.
• GAAP operating expenses were $39.6 million, up from $38.2 million in the prior quarter and up from $32.2 million in the same quarter last year.
• Non-GAAP operating expenses were $35.1 million, an increase of $2.3 million from last quarter and an increase of $6.5 million from the same quarter last year.
• GAAP operating income was $24.9 million, up from $22.4 million in the prior quarter and up from $10.3 million in the same quarter last year.
• Non-GAAP operating income was $30.8 million as compared to $29.1 million for the prior quarter and $15.4 million for the same quarter last year.
• GAAP net income per share attributable to AOS was $0.85, compared to $0.71 net income per share for the prior quarter and $0.36 net income per share for the same quarter a year ago.
• Non-GAAP net income per share attributable to AOS was $1.06 compared to $0.95 for the prior quarter and $0.55 for the same quarter a year ago.
• Consolidated cash flow provided by operating activities was $80.6 million, compared to $44.2 million in the prior quarter. Operating cash flow provided by AOS alone (excluding the JV Company) was $84.4 million, compared to $32.6 million in the prior quarter.
• The Company closed the quarter with $252.5 million of cash and cash equivalents, including $20.9 million cash balance at the JV Company.

AOS Chairman and Chief Executive Officer Dr. Mike Chang commented, “Today, we celebrate an important milestone for AOS. For the first time in our history, we earned more than $1 a share on a non-GAAP basis in a single quarter. This demonstrates the effectiveness of our business strategies to deliver shareholder value, which we believe has enabled us to reach a sustainable level of earnings power of more than $4 per share annualized on a non-GAAP basis. This belief is supported by the earnings momentum we have established over the past two years and our prospects for even more growth in the years ahead. Our earnings power is underpinned by our outstanding teams that have demonstrated our sophistication in product development, sales and marketing effectiveness, and production acumen.”

Dr. Chang continued, “I am proud and thankful for our team’s execution, as we delivered double-digit growth in each of our market segments with record revenue, excellent profitability, and outstanding bottom-line performance. We have the right foundation for sustainable growth and the right technology in place to ensure that our earnings power grows even more in the years ahead. We are on track to achieve our mission of being a trusted technology partner and a global supplier of a broad portfolio of power semiconductors."

Business Outlook for Fiscal Q2 Ending December 31, 2021

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.

Our expectations for the second quarter of fiscal year 2022 are as follows:

• Revenue is expected to be approximately $188 million, plus or minus $3 million.
• GAAP gross margin is expected to be approximately 34.8% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 35.5% plus or minus 1%. Non-GAAP gross margin excludes $0.8 million amortization of acquired IP and $0.6 million of estimated share-based compensation charge.
• GAAP operating expenses are expected to be in the range of $39.3 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $34.5 million plus or minus $1 million. Non-GAAP operating expenses exclude $4.3 million of estimated share-based compensation charge and $0.5 million of estimated professional fees related to the government investigation.
• Income tax expense is expected to be approximately $1.2 million to $1.4 million.
• Loss attributable to noncontrolling interest is expected to be approximately $0.5 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 ended September 30, 2021 today, November 4, 2021 at 2:00 p.m. PT / 5:00 p.m. ET. To listen to the live conference call, please dial 877-683-1095 (or 647-689-5445 if dialing from outside the United States and Canada). The conference ID number is 5562789. A live webcast of the call will also be available in the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com/. The webcast replay will be available for seven days after the live call on the same website. In addition, a copy of the script of management's prepared remarks and a live webcast of the call will also be available in the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com.

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 anticipated earnings power and EPS on an annual basis, the valuation of our company and stock price, our growth opportunities and new markets, our ability to achieve sustained shareholder value, 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, our objectives to achieve long-term success, our ability to gain new customers and design wins, strategic partnership with customers, and other information under the section entitled “Business Outlook for Fiscal Q2 Ending December 31, 2021”. 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, the impact of COVID-19 pandemic on our business; 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; changes in regulatory environment and government investigation; 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, 2021 filed by AOS with the SEC and other periodic reports we filed with the SEC. 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), diluted earnings per share ("EPS") and EBITDAS. These supplemental measures exclude, among other items, share-based compensation expenses, legal and profession fees related to government investigation, amortization of purchased intangible, as well as production ramp up costs related to the JV Company. 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. We believe that these historical and forecast non-GAAP financial measures 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. 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 such non-GAAP financial measures 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. In addition, we included amount of income tax effect of non-GAAP adjustments in the non-GAAP net income of reconciliation table for all periods presented as the management believes that such non-GAAP presentation provides useful information to investors, even though the amounts are not significant. 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.

About Alpha and Omega Semiconductor

Alpha and Omega Semiconductor Limited, or AOS, is a designer, developer and global supplier of a broad range of power semiconductors, including a wide portfolio of Power MOSFET, IGBT, IPM, TVS, HVIC, GaN/SiC, Power IC and Digital Power products. AOS has developed extensive intellectual property and technical knowledge that encompasses the latest advancements in the power semiconductor industry, which enables us to introduce innovative products to address the increasingly complex power requirements of advanced electronics. AOS differentiates itself by integrating its Discrete and IC semiconductor process technology, product design, and advanced packaging know-how to develop high performance power management solutions. AOS’ portfolio of products targets high-volume applications, including personal and portable computers, graphic cards, flat panel TVs, home appliances, smart phones, battery packs, quick chargers, home appliances, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. For more information, please visit www.aosmd.com.

The following unaudited consolidated financial statements are prepared in accordance with U.S. GAAP.

Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
	Three Months Ended
	September 30, 2021			June 30, 2021			September 30, 2020
Revenue	$	187,035		$	177,309		$	151,551
Cost of goods sold		122,468			116,729			109,028
Gross profit		64,567			60,580			42,523
Gross margin		34.5	%		34.2	%		28.1	%
Operating expenses:
Research and development		17,812			17,282			14,691
Selling, general and administrative		21,806			20,935			17,505
Total operating expenses		39,618			38,217			32,196
Operating income		24,949			22,363			10,327
Interest expense and other income (loss), net		(2,192	)		(1,107	)		(549	)
Income before income taxes		22,757			21,256			9,778
Income tax expense		1,320			1,241			1,011
Net income including noncontrolling interest		21,437			20,015			8,767
Net income (loss) attributable to noncontrolling interest		(1,987	)		476			(807	)
Net income attributable to Alpha and Omega Semiconductor Limited	$	23,424		$	19,539		$	9,574
Net income per common share attributable to Alpha and Omega Semiconductor Limited
Basic	$	0.89		$	0.74		$	0.38
Diluted	$	0.85		$	0.71		$	0.36
Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share
Basic		26,365			26,251			25,340
Diluted		27,638			27,705			26,314

Alpha and Omega Semiconductor Limited
Condensed Consolidated Balance Sheets
(in thousands, except par value per share)
(unaudited)
	September 30, 2021			June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	252,453		$	202,412
Restricted cash		342			233
Accounts receivable, net		39,317			35,789
Inventories		163,437			154,293
Other current assets		17,518			14,595
Total current assets		473,067			407,322
Property, plant and equipment, net		441,279			436,977
Operating lease right-of-use assets, net		33,437			34,660
Intangible assets, net		12,570			13,410
Deferred income tax assets		5,216			5,167
Restricted cash - long-term		2,168			2,168
Other long-term assets		23,941			18,869
Total assets	$	991,678		$	918,573
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	81,681		$	80,699
Accrued liabilities		92,207			69,494
Income taxes payable		3,004			2,604
Short-term debt		57,955			58,030
Finance lease liabilities		16,722			16,724
Operating lease liabilities		5,537			5,679
Total current liabilities		257,106			233,230
Long-term debt		75,991			77,990
Income taxes payable - long-term		1,332			1,319
Deferred income tax liabilities		3,136			2,448
Finance lease liabilities - long-term		8,516			12,698
Operating lease liabilities - long-term		29,342			30,440
Other long-term liabilities		74,265			44,123
Total liabilities		449,688			402,248
Equity:
Preferred shares, par value $0.002 per share:
Authorized: 10,000 shares; issued and outstanding: none at September 30, 2021 and June 30, 2021		—			—
Common shares, par value $0.002 per share:
Authorized: 100,000 shares; issued and outstanding: 32,996 shares and 26,373 shares, respectively at September 31, 2021 and 32,975 shares and 26,350 shares, respectively at June 30, 2021		66			66
Treasury shares at cost: 6,623 shares at September 30, 2021 and 6,625 shares at June 30, 2021		(66,052	)		(66,064	)
Additional paid-in capital		264,321			259,993
Accumulated other comprehensive income		2,229			2,315
Retained earnings		200,307			176,895
Total Alpha and Omega Semiconductor Limited shareholder's equity		400,871			373,205
Noncontrolling interest		141,119			143,120
Total equity		541,990			516,325
Total liabilities and equity	$	991,678		$	918,573

Supplemental disclosures of financial information:
(in thousands)
	As of September 30, 2021							As of June 30, 2021
	AOS		CQJV			Consolidated		AOS		CQJV			Consolidated
Cash and cash equivalents	$	231,508	$	20,945		$	252,453	$	164,933	$	37,479		$	202,412
Bank borrowings liabilities	$	22,233	$	136,951	*	$	159,184	$	24,307	$	141,135	*	$	165,442
Inventory	$	109,471	$	53,966		$	163,437	$	100,246	$	54,047		$	154,293
Property, plant and equipment, net	$	175,068	$	266,211		$	441,279	$	174,507	$	262,470		$	436,977
* AOS is not a guarantor of CQJV's (Chongqing Joint Venture) debts.

	Three Months Ended September 30, 2021								Three Months Ended June 30, 2021							Three Months Ended September 30, 2020
	AOS		CQJV				Consolidated		AOS		CQJV			Consolidated		AOS		CQJV				Consolidated
Net cash provided by (used in) operating activities	$	84,384	$	(3,777	)		$	80,607	$	32,646	$	11,574		$	44,220	$	12,701	$	(2,853	)		$	9,848
Purchase of property and equipment, net of government grant	$	15,560	$	8,351			$	23,911	$	25,072	$	7,087		$	32,159	$	7,944	$	3,393			$	11,337
EBITDAS	$	39,866	$	3,424		**	$	45,277	$	33,602	$	7,780	**	$	40,906	$	22,156	$	4,609		**	$	27,572
** CQJV EBITDAS includes amounts attributable to noncontrolling interest.

Alpha and Omega Semiconductor Limited
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)
	Three Months Ended
	September 30, 2021			June 30, 2021			September 30, 2020
GAAP gross profit	$	64,567		$	60,580		$	42,523
Share-based compensation		569			561			385
Amortization of purchased intangible		812			812			812
Production ramp up costs related to joint venture		—			—			275
Non-GAAP gross profit	$	65,948		$	61,953		$	43,995
Non-GAAP gross margin as a % of revenue		35.3	%		34.9	%		29.0	%
GAAP operating expense	$	39,618		$	38,217		$	32,196
Share-based compensation		4,066			4,838			2,491
Legal costs related to government investigation		431			553			1,107
Non-GAAP operating expense	$	35,121		$	32,826		$	28,598
GAAP operating income	$	24,949		$	22,363		$	10,327
Share-based compensation		4,635			5,399			2,876
Amortization of purchased intangible		812			812			812
Production ramp up costs related to joint venture		—			—			275
Legal costs related to government investigation		431			553			1,107
Non-GAAP operating income	$	30,827		$	29,127		$	15,397
Non-GAAP operating margin as a % of revenue		16.5	%		16.4	%		10.2	%
GAAP net income attributable to AOS	$	23,424		$	19,539		$	9,574
Share-based compensation		4,635			5,399			2,876
Amortization of purchased intangible		812			812			812
Production ramp up costs related to joint venture		—			—			135
Legal costs related to government investigation		431			553			1,107
Income tax effect of non-GAAP adjustments		1			(2	)		(8	)
Non-GAAP net income attributable to AOS	$	29,303		$	26,301		$	14,496
Non-GAAP net margin attributable to AOS as a % of revenue		15.7	%		14.8	%		9.6	%
GAAP net income attributable to AOS	$	23,424		$	19,539		$	9,574
Share-based compensation		4,635			5,399			2,876
Amortization and depreciation		13,722			13,251			12,489
Interest expense (income), net		2,176			1,476			1,622
Income tax expense		1,320			1,241			1,011
EBITDAS	$	45,277		$	40,906		$	27,572
GAAP diluted net income per share attributable to AOS	$	0.85		$	0.71		$	0.36
Share-based compensation		0.16			0.19			0.11
Production ramp up costs related to joint venture		—			—			0.01
Legal costs related to government investigation		0.02			0.02			0.04
Amortization of purchased intangible		0.03			0.03			0.03
Income tax effect of non-GAAP adjustments		0.00			(0.00	)		(0.00	)
Non-GAAP diluted net income per share attributable to AOS	$	1.06		$	0.95		$	0.55
Shares used to compute Non-GAAP diluted net income per share		27,638			27,705			26,314

Contacts

Investor and media inquiries:

In the United States: The Blueshirt Group
Ralph Fong
+1 (415) 489-2195
ralph@blueshirtgroup.com

In China: The Blueshirt Group Asia
Gary Dvorchak, CFA
+86 (138) 1079-1480
gary@blueshirtgroup.com

EX-99.2

Exhibit 99.2

Alpha and Omega Semiconductor Limited

Prepared Remarks for the Investor Conference Call

for the Quarter Ended September 30, 2021

November 4, 2021

Gary Dvorchak (Moderator)

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2022 first quarter financial results.  I am Gary Dvorchak, Investor Relations representative for AOS.  With me today are Dr. Mike Chang, our CEO, Stephen Chang, our President, 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.  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 December quarter.  Finally, we will have the question-and-answer session.

The earnings release was distributed over wire services today, November 4, 2021, after the close of 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 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 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 obligations 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?

Mike Chang (Chief Executive Officer)

Thanks, Gary.  I would like to welcome everyone to today's call.  I am excited to be speaking with all of you again today.

In a moment I will review the operating highlights of the September quarter, which were strong.  Before I do that, I want to highlight an important milestone in the history of AOS, and what it means in a broader context.  Today you see that we earned over $1 per share on a non-GAAP basis.  We believe this legitimately reflects real economic earnings power of over $4 per share annually.

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Why do we think this earnings power is sustainable?  Because of the earnings momentum we have demonstrated over the past two years; because of the achievement of this milestone; and because of our prospects for growth in the years ahead.  Yes, we are in a cyclical industry, so our EPS on a quarterly basis will fluctuate, but in most quarters we believe that a quarterly EPS of more than $1.00 is achievable, and when you levelize our earnings, we believe that $4 to $5 per share is the annual earnings power of the business we have built.

Think about what we have achieved over the years!  We have developed new silicon and packaging platforms to expand our SAM and offer higher performance products.  We broadened our DMOS technology to cover a full range of voltage applications and have established a strong Power IC portfolio in addition to a line-up of IGBT and module solutions.  This has allowed us to diversify beyond our computing base into consumer, communications, and industrial markets.  This has led to the success we see today in smartphones, home appliances, and next generation computing applications. We have also engaged with our customers, strengthened relationships, and have become their trusted strategic partner.  We count among our expanding customer base some of the most well-known, sophisticated, and successful electronics companies in the world, giants that are leaders in mobile phones, computing, and gaming.

All this work translates not only into earnings, but into earnings power.  Our product portfolio is outstanding, but our R&D capability is even more valuable because it will keep our product line fresh, competitive and relevant in the years ahead.  Our design wins are wonderful, but our sales and marketing teams are even more valuable, because they will drive more design wins in the years ahead.  Our production capacity is state of the art, but our production teams mean more to us, because they will ensure we continue to be state-of-the-art a decade from now.  That is the difference between earnings, which can come and go in our industry, and earnings power, which is a long-term source of value. When we look at our company, we see valuable earnings power of $4 to $5 a share annually.  We intend to build an even better organization and grow that earnings power even more.  With our stock price in the mid-$30 range, the market is assigning a multiple of only 7 to 9 times our clearly demonstrated earnings power!

Today we celebrate this milestone of earning $1 a share in a single quarter.  The joy our team has today is justified, but it is also just the beginning.  Earnings power does not come on a single day or a quarter, it comes from a lifetime of work.  This milestone has energized our team to serve our customers even better, make our products even more competitive, and to create even more value for our shareholders.  In this long-term effort, we thank all of you for your confidence in us and your support.

Now, let’s me turn to other important highlights of the quarter.

First fiscal quarter results were strong across the whole P&L.  Revenue was $187 million, non-GAAP gross margin was 35.3% and non-GAAP earnings per share were $1.06.  We delivered double-digit growth in each of our market segments with record quarterly revenue, excellent profitability, and outstanding bottom-line performance.

Let me update you on a critical issue: how we are dealing with the supply chain constraints in the broader semiconductor industry.  We are expanding our production capacity in our Oregon fab, ramping production in our JV fab in Chongqing, and leveraging our relationships with our foundry partners to secure wafer supply.  Stephen will provide more details on our strategy later on this call.  We believe we are doing an outstanding job in managing the industry-wide supply chain constraints.  We want to be sure we minimize any interruptions to our customers.  While our own supply is tight, we are in an excellent position to access both internal and external capacity to support our business.

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In summary, this strong quarter once again proves the strength of the team we have at AOS.  I am very proud of and thankful for our team's execution and tireless work. We continue to believe that we have the right foundation for long-term growth and the right technology in place to ensure that we are successful in scaling our business.  More importantly, we have the people and capabilities to ensure that our earnings power expands even more in the years ahead.  We are on track to achieve our mission of being a trusted technology partner and a global supplier of a broad portfolio of power semiconductors.

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

Stephen Chang (President)

Thank you, Mike, and good afternoon, everyone.  I will start with an update on our business and then provide detailed segment highlights for the September quarter.

As Mike noted in discussing our earnings power, our products, revenue, and market share today are but a point in time, but the capability we have built ensures we can maintain and continue this leadership for years, if not decades, to come.  Our technical expertise enables us to develop a broader variety of power discrete and power IC technology platforms. We invest in core competences of silicon, packaging, and ICs as the foundation of our product technology.  This allows us to expand our product offerings and deliver complete power solutions for more target applications.  Over the years, we have evolved from a component supplier to a solution provider.  We have become a valued supplier to multiple tier-1 customers.  We sell into the #1 global smartphone maker, #1 gaming console manufacturer, #1 global home appliance manufacturer, and #1 power tool provider.

In the September quarter, in several end markets, demand for our products was greater than we could fulfill.  To manage these component shortages, we strategically shifted production to meet customer needs while driving growth in both revenue and gross margin.  Furthermore, we are relentlessly focused on customer engagement.  This focus on strategic customers enables us to leverage the current environment to stay closer to tier-one customers, optimize product mix and capacity allocation, and deliver strategic value to those customers.  Like our industry peers, we are managing longer lead times and limited component availability, but we believe that our competitive market position, strong customer relationships and supply chain responsiveness enable us to meet these commitments.

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We are taking a three-pronged approach to grow our capacity to meet the growing demand for our products:

• First, we are expanding capacity and enhancing the technological sophistication of our Oregon fab.  We will invest approximately $100 million, including $20 million to upgrade our capabilities and $80 million to expand capacity.  When complete, we believe this expansion will enable us to generate an additional $70 million in annual revenue.  We expect the new capacity to come online in the December quarter of 2022.

Importantly, we expect the investments to strengthen our competitive advantage in our target markets.  This is a part of our long-term strategic plan for sustainable growth and technology improvement.  With current challenges in the semiconductor industry, especially the global capacity shortages, we want to own and control our supply chain as much as possible.

• Second, the Phase I capacity ramp at our JV fab in Chongqing is complete.  We reached the target run rate of $150 million of annualized revenue in the September quarter.  The JV company is well into the process of determining how it will implement Phase 2.

• Third, we have close relationships with multiple foundry partners, and are actively working with them for additional wafer supply.

Now, let me drill down into each of our business segments.  Unless otherwise noted, the following figures refer to the September quarter of 2021.

Let’s start with Computing. Revenue was up 17.5% year over year and up 1.5% sequentially.   This segment represented 42% of our total revenue.  As expected, end demand for our products was strong. To best allocate capacity, we shifted resources and production to support the Computing segment, especially notebook, tablet, and desktop applications.  On the other hand, the graphic card business was temporarily down sequentially as we strategically shifted production capacity to support other segments in the face of component shortages.

Looking ahead, we expect Computing revenue to be up modestly in the December quarter.  We expect strong demand to continue at our ODM customers for desktop. In addition, we expect our graphic card business to rebound and grow significantly from the September quarter level.  This will be partially offset by a slight decline in notebook as we allocate our resources to support growth in our desktop and graphic cards.

Turning to the Consumer segment, which was 21.8% of total revenue, up 11.4% year-over-year and up 8.9% sequentially. This segment played out as expected.  Gaming grew double-digits due to both share gain and system growth at a major customer with both our MOSFET and Power IC products in multiple sockets.  Our overall home appliance business also demonstrated solid growth across different geographies.  We shipped higher volumes of module solutions to key home appliance customers in Korea, China, and Japan.  Looking to the December quarter, we expect the Consumer segment to increase by a low single-digit percentage, with strength in gaming and home appliances.

Next, let’s discuss the Communications segment, which was 13.8% of total revenue, up 26.8% year-over-year and up 13.9% sequentially.  This segment also played out as expected, as demand for battery protection was strong at two of our global smartphone customers to support the launch of new models.  That said, our shipments to China declined due to an inventory clean-up in the quarter.  For the December quarter, we expect Communications segment sales to decrease by mid-single digits sequentially.  While the major smartphone players in Korea and the U.S. are expected to reach peak production in the December quarter, we expect China's smartphone shipments to decline as smartphone manufacturers are navigating the component shortage.  We continue to believe we are in an excellent position for growth in battery protection over the next couple of quarters as we have secured designs at all the major global smartphone makers.

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Finally, let’s talk about the Power Supply and Industrial segment, which accounted for 20.3% of total revenue.  This segment was up 51.5% year-over-year and up 4.6% sequentially.  The solid growth was due to a couple of factors.  First, the demand for AC-DC power supplies for laptop adaptors was strong with incremental medium-voltage design engagement with major power supply customers in Taiwan.  Second, demand for our industrial solutions from a major power tool customer in the U.S. was strong. Power tools is an emerging application for us with great synergy given our product strengths in low and medium voltage products targeting battery management and brushless DC motors.  Looking ahead, we expect this Power Supply and Industrial segment to decrease slightly in the December quarter due largely to the temporary slow-down in our AC-DC power supply business attributable to end system production shortages and offset by growth in solar power.

In sum, we are off to a great start to fiscal year 2022.  Our business momentum continues, and we have the right strategy in place, which is generating strong results.  Despite the ongoing industry-wide semiconductor component shortages, we are working diligently to deliver products to our customers.  Our track record of consistent execution gives us confidence in our ability to capitalize on the many growth opportunities ahead of us.

With that, I will now turn the call over to Yifan for a discussion of our fiscal first quarter financial results and our outlook for the next quarter.

Yifan Liang (Chief Financial Officer)

Thank you, Stephen.  Good afternoon, everyone, and thank you for joining us. Unless otherwise noted, the following figures refer to the September quarter of 2021.

Revenue was $187.0 million, up 5.5% from the prior quarter and up 23.4% from the same quarter last year.

In terms of product mix, DMOS revenue was $130.7 million, up 2.7% sequentially and up 14.3% year-over-year.  Power IC revenue was $52.3 million, up 12.5% from the prior quarter and up 51.9% from a year ago.  Assembly service revenue was $4.0 million as compared to $3.6 million last quarter and $2.7 million for the same quarter last year.

Non-GAAP gross margin was 35.3%, up from 34.9% in the prior quarter and up from 29.0% in the same quarter last year.  The quarter-over-quarter increase in non-GAAP gross margin was mainly driven by better product mix.  Non-GAAP gross margin excluded $0.8 million of amortization of purchased IP each for the September quarter, the prior quarter, and the same quarter last year.  In addition, non-GAAP gross margin excluded $0.6 million of share-based compensation charges, as compared to $0.6 million for the prior quarter and $0.4 million for the same quarter last year.

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Non-GAAP operating expenses were $35.1 million, compared to $32.8 million for the prior quarter and $28.6 million for the same quarter last year.  The quarter-over-quarter increase was primarily due to higher variable compensation accruals this quarter to reward our outstanding financial performance.  Non-GAAP operating expenses excluded $4.1 million of share-based compensation charges and $0.4 million of legal expenses related to the government investigation.  This compares to $4.8 million of share-based compensation charges and $0.6 million of legal expenses related to the investigation for the prior quarter, as well as $2.5 million of share-based compensation charges and $1.1 million of legal expenses related to the investigation for the same quarter last year.

Income tax expense was $1.3 million, compared to $1.2 million for the prior quarter and $1.0 million for the same quarter last year.

Non-GAAP EPS attributable to AOS was $1.06 per share as compared to 95 cents for the prior quarter and 55 cents for the same quarter last year.

Now let’s look at cash flow.  On a stand-alone basis—not including the JV--AOS generated $84.4 million of GAAP operating cash flow; $44.2 million was from operations, and $40.2 was net customer deposits to secure capacity.  The non-deposit operating cash flow grew nicely: in the June quarter we generated $22.6 million, and non-deposit cash flow in the same quarter a year ago was $12.7 million.

Looking to Chongqing, GAAP operating cash flow used by the JV Company was $3.8 million, compared to $11.6 million of cash flow provided by the JV Company in the prior quarter and $2.9 million of cash flow used by the JV Company in the same quarter last year.

Consolidated EBITDAS was $45.3 million, compared to $40.9 million for the prior quarter and $27.6 million for the same quarter last year.  EBITDAS attributable to AOS was $39.9 million as compared to $33.6 million for the prior quarter and $22.2 million for the same quarter last year.  EBITDAS for the JV Company was $3.4 million, as compared to $7.8 million for the prior quarter and $4.6 million for the same quarter last year.

Now let’s look at the balance sheet.

We completed the September quarter with cash balance of $252.5 million, including $231.6 million at AOS and $20.9 million at the JV Company.  This compares to $202.4 million at the end of last quarter, which included $164.9 million at AOS and $37.5 million at the JV Company.  Our cash balance a year ago was $154.7 million, including $112.7 million at AOS and $42.0 million at the JV Company.

The bank borrowing balance was $159.2 million, including $22.2 million at AOS and $137.0 million at the JV Company.  During the quarter, AOS and the JV Company repaid $2.1 million and $4.3 million of existing term loans, respectively.

Net trade receivables were $39.3 million, as compared to $35.8 million at the end of the prior quarter and $26.3 million for the same quarter last year.  Days Sales Outstanding for the September quarter were 27 days, compared to 26 days in the prior quarter.

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Net inventory was $163.4 million at quarter-end, up from $154.3 million last quarter and up from $137.7 million in the prior year.  Average days in inventory were 117 days for the quarter, compared to 115 days in the prior quarter.

Net Property, Plant and Equipment was $441.3 million, slightly up from $437.0 million last quarter and up from $421.6 million last year.  Capital expenditures were $23.9 million for the quarter, including $15.5 million at AOS and $8.4 million at the JV Company.

Now I would like to discuss December quarter guidance.

We expect:

• Revenue to be approximately $188 million, plus or minus $3 million.

• GAAP gross margin to be 34.8% plus or minus 1%.  We anticipate non-GAAP gross margin to be 35.5% plus or minus 1%.  Non-GAAP gross margin excludes $0.8 million amortization of acquired IP and $0.6 million of estimated share-based compensation charges.

• GAAP operating expenses to be in the range of $39.3 million plus or minus $1 million.  Non-GAAP operating expenses are expected to be in the range of $34.5 million plus or minus $1 million.  Non-GAAP operating expenses exclude $4.3 million of estimated share-based compensation charges and $0.5 million of estimated legal expenses relating to the government investigation.

• Income tax expense to be approximately $1.2 million to $1.4 million.

• Loss attributable to non-controlling interests to be approximately $0.5 million.

Before we open the line for questions, I will turn the call back to Stephen.  He will briefly discuss a shareholder proposal to be voted on at the upcoming annual shareholder meeting.  Stephen?

Stephen Chang (President)

We want to call your attention to a proposal coming up for a vote at our annual shareholder meeting next week.  As described in the proxy statement for the annual meeting, Proposal #3 requests an additional one million shares to be authorized under our equity incentive plan.  We understand that ISS has recommended a vote against the proposal, primarily for certain technical reasons outlined in our proxy supplement filed with the SEC.  We are encouraging our shareholders to vote FOR the proposal.  As explained in our proxy statement and supplements, we expect to use these additional shares to incentivize our hard-working non-executive employees. These additional shares will only be earned if the company achieves certain revenue growth criteria and stock price appreciation over a multi-year period, which directly benefits shareholders despite the potential dilution.

Our employees show up every day and work diligently to create and sustain the earnings power that Mike described at the start of our call.  We want to motivate our people to stay and participate in the wealth creation they enable.  Technology companies like AOS face intense competition for talent, and therefore, equity incentive awards are critical for us to retain our best employees.  All of us share a common interest in offering meaningful performance incentives to the broadest range of employees possible.

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You can learn more about our reasoning for the proposal in our proxy filings.  We hope you agree and will vote FOR proposal 3.

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

Closing:

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

Important Additional Information Filed with the SEC

This prepared remark may be deemed to be solicitation material in respect of the solicitation of proxies from shareholders in connection with the Company’s 2021 Annual Meeting of Shareholders (the “Annual Meeting”). The Company and its directors and certain executive officers are deemed participants in the solicitation of proxies from shareholders in connection with the Annual Meeting.  On October 1, 2021, the Company filed a definitive proxy statement relating to the Annual Meeting and has mailed the Annual Report, the proxy statement and other proxy materials to its security holders (the “Proxy Statement”), which was supplemented by a proxy supplement filed on October 25, 2021 (the “Proxy Supplement”).  The Proxy Statement and Proxy Supplement contain important information regarding the participants in the solicitation and proposals submitted to the shareholders for approval at the Annual Meeting, including the proposal to increase the number of shares available under the Company’s 2018 Omnibus Incentive Plan by 1,000,000 shares.

Shareholders of the Company are advised to read the Proxy Statement and Proxy Supplement prior to voting at the Annual Meeting. Shareholders of the Company may obtain, free of charge once they become available, copies of the Proxy Statement, Proxy Supplement and other documents filed by the Company with the SEC at the internet website maintained by the SEC at www.sec.gov. These documents may also be obtained free of charge by visiting the Company’s website (www.aosmd.com) in the investor relations section.

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Special Notes Regarding Forward Looking Statements

This script 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 projected amount of revenues, gross margin, operating expenses, operating income, tax expenses, net income, noncontrolling interest and share-based compensation expenses, the ability to maintain earnings power and shareholder values; statements regarding expected financial performance of market segments; the global capacity shortage and the Company’s ability to maintain capacity; the ability of the JV Company to support market demand and growth; the expansion plan at the Oregon fab; fluctuation in customer demand and market segments; the execution of our business plan and strategies; and other information regarding the future development of our business. 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, the impact of COVID-19 pandemic on our business operation; 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 and seasonality; our ability to introduce or develop new and enhanced products that achieve market acceptance; decline of the PC industry and our ability to respond to such decline; 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, 2021 filed by AOS on August 30, 2021. 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.

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Entity Registrant Name	Alpha and Omega Semiconductor Limited
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