Ladies and gentlemen, thank you for standing by, and welcome to the Alpha N Omega Semiconductor Reports Financial Results for the fiscal fourth quarter of 2020 conference call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today. Gary Dvorchak, Investor Relations representative. Thank you. Please go ahead, sir.
Good afternoon, everyone, and welcome to Alpha and Omega semiconductor's conference call to discuss fiscal 2020 fourth quarter year end financial results. I'm Gary Devorchak, investor relations representative for the company. With me today are Doctor Mike Chang, our CEO, Yvonne Young, our CFO, and Steven Chang, our executive vice president. This call is being recorded and broadcasted live over the web and can be accessed for 7 days following the call via the link in the Investor Relations of our website at www.aosmd.com. Mike will begin with a review of the business overview for the quarter.
Then, Stephen will provide a detailed segment report. After that, Yvonne will continue with a review of financial results for the quarter and fiscal year and provide guidance for the next quarter. Then we'll have the question and answer session. The earnings release distributed by Business Wire today, August 11, 2020, 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 the non GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the gap measures that we provide. A reconciliation of these non GAAP measures comparable GAAP measures is included in our earnings release. We remind you that during the course of 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 obligation to update the information provided in today's call. Now I'll turn the call over to our CEO, Mike, to provide an overview of the business. Mike?
Thanks, Gary. Welcome, everyone. Before we discuss our 4th quarter results, I want to briefly address the COVID 19 situation, which continues to impact families, businesses, and the market across the globe. I want to thank our employees for staying resilient and being flexible as we navigate this new working environment. Our primary focus is to ensure the safety and the well-being of our of all our employees and their families.
Meanwhile, we continue to work closely with customers to support them in every way we can during this challenging time. Now some key highlights of the June quarter started execution enabled us to deliver results ahead of expectations fueled by our product trends and growing customer penetration, Revenue of $122,000,000 was up 9% year over year and above the high end of our guidance range. Coupled with tightly controlled operating expenses, this resulted in non GAAP earnings. Per share that exceeded the consensus. Our core business generated solid operating cash flow of $20,000,000 and the free cash flow of $11,000,000.
Yifan will provide the details of our 2 quarter results later on the call. The favorable financial results were driven by high demand in certain segments and started operating execution. Shipments rebounded for our products in computing and gaming applications, driven by the recent shift to a work, learn, and, entertainment from home environment. We also focused on our cost structure and prudently managed our expenses. We reduced nonessential spending and the benefit from travel ban while still pursuing strategic and critical R and D projects to expand our customer reach.
The strong 4th quarter capped a solid fiscal year, This is very encouraging. Given the backdrop of our COVID 19 pandemic heightened trade tensions between US and China, and global economic uncertainty. Our results demonstrate the strength of our business strategy diversify the product for the portfolio and expand customer base. Next, I will discuss our strategic plan that further strengthen to further strengthen the foundation to achieve our longer term objectives. 1st, our joint venture fab in Chongqing.
As part of our strategic plan, We build this fab to fulfill growing customer demand. Indeed, during this quarter, the JV fab made a major contribution to capture surge in demand. Even though the COVID 19 pandemic as slowed ramping ramp up production, we were able to make persistent progress. Importantly, these efforts allowed the JV to achieve positive EBITDA for the June quarter. We expect to approach Our focused R and D is driving broader and better product innovation.
As a solution provider, we are able to deepen our relationships with customers becoming their trusted strategic partner. As such, our new products are driving growth primarily by expanding our farm content in core applications. The design of our product, especially our power IC solutions into an upcoming gaming system and a new PC graphics card demonstrates the opportunity created when we secure trust and confidence from our customers. Looking back in the fiscal year, we are pleased with our accomplishments. The power semiconductor industry is a large market, and we are making significant progress to capture opportunities and increase market share.
We also recognize that conditions are still fragile. Acknowledged condition could change at any moment due to factors beyond our control, including the COVID 19 pandemic resurgence, because of this, we continue to operate cautiously. And take prudent actions, even as we identify and see new opportunities. I would like to thank our customers, business partners and shareholders for their continued support and confidence in AAOS. I especially want to acknowledge our employees as our success could not have been possible.
Without their hard work, dedication, and sacrifice in the past year. Now I will turn the call over to Steven for detailed segment report. Steven.
Thank you, Mike, and good afternoon. Let me start with computing. It represented 40.2 percent of our total revenue in the June quarter. Revenue was up 4.1% sequentially and flat year over year. While sell in was okay, sell through was quite dramatic.
Many customers that had paused production in the 1st calendar quarter were catching up in the June quarter. End demand is strong, and we were able to meet it with ramping supply from our JV fab. With so many people around the world Because we did not shut down fully in the March quarter, we were able to meet this resurgence in demand. Going forward, we continue to optimize our production mix to satisfy the anticipated high demand for PC related products. We are especially excited about the ramp in some key customers upcoming graphics card platforms.
We expect computing revenue to be strong in the September quarter, with mid teens sequential growth. Now turning to the Consumer segment, it represented 22.5% of total revenue in the June quarter. Revenue increased 37.5 percent sequentially and was up 31.7% year over year. COVID driven home sheltering boosted sales of gaming, TVs and home appliances, enabling those segments to achieve healthy growth. Gaming was up significantly sequentially, and is expected to grow rapidly.
We have multiple sockets across multiple products. Our IC and Moskett in an upcoming gaming system Looking to the September quarter, we anticipate strong double digit growth in the consumer segment, driven by home entertainment, gaming and TVs. I want to note that Power IC is regaining traction. Since 2018, we realigned our power IC product line by focusing on our core competencies of proprietary MOSET technology, advanced packaging, and intelligent ICs, ideally suited for the application. We chose to go after high volume applications within the computing and consumer segments given our established MOSTED business.
As a result, today, our multi ship package pod deliver the small size and high efficiency required in the latest gaming and graphic card platforms. As you can see in recent computing and consumer design wins. Now let's discuss the power supply and industrial segment. It accounted for 19.4 percent of total revenue, up 24.2% sequentially and up 3% year over year. After a pause in the March quarter, this segment rebounded in the June quarter, driven by higher demand for adapters used for PCs and gaming systems.
Our ACDC power supply business was up significantly versus the March quarter, tracking the surge in PC sales. Demand was good in medium and high voltage products. Once again, we were able to meet high voltage demand with supply from our JAD fab. We expect this segment to be down somewhat in the September quarter due to a bit softer demand for quick chargers and DC fan. Finally, let's move to the communications segment, which was 16.2% of total revenue in the quarter.
Up 3% sequentially and up 16.1% year over year. Telecom drove the growth, although over time, we expect unevenness as the 5G rollout advances. Meanwhile, the smartphone market was subdued, One large customer slowed production in the June quarter, so our battery protection line was down slightly sequentially. Looking to the September quarter, this segment appears to be resuming growth across all our core customers. We expect the Communications segment to be up single digits sequentially in the September quarter.
With that, I will now turn the call over to Yifan for a discussion of our fiscal fourth quarter financial results and our outlook.
Thank you, Steven. Good afternoon everyone and thank you for joining us. Revenue for the June quarter was $122,400,000, up 14.5% from the prior quarter, and up 9.4% from the same quarter last year. In terms of product mix, MOSFET revenue was $100,000,000, up 11.2% sequentially and up 3.8% year over year. Power IC revenue was $20,300,000, up 29.2% from the prior quarter, and up 47.1% from a year ago.
As Stephen discussed earlier, This is a welcome reversal for our Power IC product line. The result of our focus on regaining traction with new and better solutions. Assembly service revenue was $2,100,000 as compared to $1,300,000 last quarter $1,700,000 for the same quarter last year. For the fiscal year 2020, revenue was $464,900,000, up 3.1% from fiscal year 2019. Non GAAP gross margin for the June quarter was 27 point 5%, flat with the prior quarter and up slightly from 27.4% for the same quarter last year.
Non GAAP gross margin excluded $300,000 of share based compensation charges for the June quarter as compared to $400,000 for the prior quarter Non GAAP gross margin also excluded $4,400,000 of production ramp up costs related to the JV company for the June quarter as compared to $6,600,000 for the prior quarter and $2,600,000 for the same quarter last year. For the fiscal year 2020, Non GAAP gross margin was 27.9% as compared to 28.4% for the prior year. Non GAAP operating expenses for the June quarter was $25,300,000 as compared to 20 $5,800,000 for the prior quarter $22,600,000 for the same quarter last year Non GAAP operating expenses for the quarter excluded $2,400,000 of share based compensation charges and $2,600,000 of legal expenses related to the government investigation. This compares to $2,500,000 of share based compensation charges, $2,100,000 of legal expenses related to the investigation $600,000 impairment charge related to an investment in a privately held startup company for the prior quarter, as well as $2,100,000 of share based compensation charges and $3,900,000 of pre production expenses related to the JV company for the same quarter last year. Both GAAP and non GAAP operating expenses included $3,000,000 of digital power team expenses for the quarter, as compared to $3,100,000 for the prior quarter and $2,300,000 for the same quarter last year.
In July, we made Non GAAP operating expenses for the fiscal year 2020 were $102,500,000, compared to $95,300,000 for the prior year. Non GAAP operating expenses excluded $8,900,000 of share based compensation charges, $4,700,000 of legal expenses, related to the investigation and 0.6 as compared to $11,200,000 of share based compensation charges and $15,800,000 of pre production expenses related to our JV company in the prior fiscal year. Income tax expense for the quarter was $400,000 compared to a tax benefit of $1,000,000 for the prior quarter and $600,000 for the same quarter last year. The tax benefit in the prior quarter was primarily driven by relief from the Cares Act. Income tax expense for the fiscal year was $300,000, compared to one point attributable to AOS for the quarter was $0.29 per share as compared to $0.11 for the prior quarter and $0.35 for the same quarter last year.
Non GAAP EPS attributable to AOS for the fiscal year was $0.88 as compared to $1.23 for the prior fiscal year. AOS continued to generate positive operating cash flow. AOS on a stand alone basis generated $20,200,000 of operating cash flow $15,200,000 by operations attributable to the JV company was $20,100,000 in the June quarter, primarily due to a refund Cash flow used by the JV company in the prior quarter and the same quarter last year was $15,200,000 and $6,900,000 respectively. Cash flow from operations attributable to AOS for the fiscal year was $58,000,000 as compared to $65,300,000 Cash flow provided by operations attributable to the JV company was $4,400,000 for the year, compared to $33,900,000 Consolidated EBITDAS for the June quarter was $14,900,000 compared to $8,800,000 for the prior quarter, and $14,200,000 for the same quarter last year. EBITDA's attributable to AOS for the quarter was $12,000,000 as compared to $6,500,000 The JV company achieved its 1st positive quarterly EBITDA of $1,100,000 in the June quarter.
As compared to negative $1,100,000 for the prior quarter and negative $5,600,000 for the same quarter last year. Consolidated EBITDAs for the fiscal year was fiscal year 2019. EBITDA's attributable to AOS for the year was $44,800,000 as compared to $61,000,000 a year ago. Now let's look at the balance sheet We completed June quarter with cash balance of $158,500,000, including $110,300,000 at AOS and $48,200,000 at the JV company. This compares to $110,200,000 at the end of last quarter, which included 99 $500,000 at AAOS and $10,700,000 at the JV company.
Our cash balance a year ago was $121,900,000, including $100,700,000 at AAOS and $21,200,000 at the JV company. The bank borrowing balance at the end of June was $173,400,000, including $32,700,000 at AAOS and $140,700,000 at the JV company. During the June quarter, The JV company borrowed a total of $47,100,000. AOS and the JV company repaid $2,100,000 $25,400,000 of existing loans, respectively. Net trade receivables were $13,300,000 at the end of June quarter as compared to $17,500,000 at the Base sales outstanding for the quarter were 18 days compared to 22 days in the prior quarter.
Net inventory was $135,500,000 at the quarter end, up from $127,400,000 loss quarter and up from $111,600,000 in the prior year. Average days in inventory was 127 days for the quarter compared to 131 days in the prior quarter. Net property plant and equipment was $412,300,000, flat compared to the prior quarter and up from $409,700,000 last year. Capital expenditures were $13,200,000 for the quarter including $9,000,000 at AAOS and $4,200,000 at the JV company. With that, now I would like to discuss the guidance for the next $4,000,000 $138,000,000.
GAAP gross margin to be 26% plus or minus 1%. We anticipate non GAAP gross margin to be 27.7 percent plusor-1 percent. Note that non GAAP gross margin excludes $400,000 of estimated share based compensation charges and $2,000,000 of estimated production ramp up costs relating to the JV company. GAAP operating expenses to be in the range Non GAAP operating expenses are expected to be in the range of $27,800,000 plus or minus $1,000,000. Both GAAP and non GAAP operating expenses include 3 point $2,000,000 to $3,500,000 of estimated expenses related to the development of our Digital Power business.
Non GAAP operating expenses exclude $2,500,000 of estimated legal expenses related to the government investigation $2,500,000 of estimated share based compensation charges. Income tax expense to be approximately $500,000 to $700,000. Loss attributable to non controlling interest to be around $1,200,000, On a non GAAP basis, excluding the estimated production ramp up costs relating to the JV company, This item is expected to be approximately $200,000. As part of our normal practice, were not obligated to update this information. With that, we will open the call for questions.
Operator,
Your first question comes from the line of Craig Ellis from B Riley FBR. Your line is open.
Yes, thanks for taking the question and congratulations on the nice execution in the quarter, guys. Yifan, the first one is really just a clarification. Did you mention what the JV phase 1 revenues were in the quarter and what are they expected to be inside of the fiscal first quarter market?
Yeah. This, during the 2 quarter, majority of our revenue increased was supported by our joint venture. You saw the joint venture achieved 1st, EBITDA positive quarter. You know, we're happy with that. Right now, the because of the uncertainty of this pandemic situation, We expect that we'll continue to ramp this joint venture fab right now our September guidance also factored in those support from the joint venture.
So as Mike mentioned and we're going to progressively continue to ramp this JV fab during the course of fiscal year 2021.
Okay. And as long as we're just talking about the fab ramp and what happens in the fiscal year before coming back to some other near term items, how should we expect that to play out through what's typically a seasonally softer part of the business in fiscal 2Q and 23. Would would we expect, fab production and and fab sales to to mirror historic seasonality, or is there something about the design win profile you've been able achieve with products from, phase 1 that would allow that, that fab to continue to grow output and revenue sequentially. Through, next year when you expect to get to that original, 37,500,000 target.
I would expect there are some seasonalities along the way in this fiscal year 2021 On the other hand, and yes, we have some design wins and company specific and that we we're going to continue to run the joint ventures and fab. Overall, I would think the some, still some uncertainties down the road in terms of December quarter, March quarter. We're just to go quarter by quarter. So right now, our September quarter's guidance reflected in our expected ramp continue to ramp.
Okay. Thanks for that. The next one is a question for Steve and Steven. I think 3 months ago, we thought that the new gaming platform might deliver $6,000,000 in sales. And it looked like consumer was up, significantly enough that that $6,000,000 might have been 7,000,000 dollars, $7,500,000 One, can you confirm what the revenue contribution was from the new gaming platform?
What would you expect in the fiscal first quarter and somewhat similar, follow on as I had for for Yifan given the highly seasonal nature to gaming platforms would we expect revenues from this set of design wins to moderate, in fiscal 2Q and 3Q before reaccelerating mid next year?
Yes. So we are very excited about the gaming business that's ramping up now. We saw that ramp up already happening in the June quarter. Platforms, this gaming console is not going to release until later part of this year, more towards the end of end Q3 beginning of Q4. However, obviously, the production has already started for that.
We, I'm not quoting any specific numbers for these quarters, but it's very healthy and we expect another big jump going into the September quarter. Beyond that, we to see how, how the deceptance of this console to the market and see whether there's any also any production hiccups or anything on our customers So far, we don't see anything. Right now, we are pretty happy with this business. And as Efon mentioned, this is one of the key design wins for new business that we are counting on for the December quarter.
Okay, great. And then, interesting teaser about server power shipping in the June quarter. So can you give us some further color on what happened there and what's happening in the back half of the year?
Sure. So digital power, and we're very excited to be in the, one of the upcoming graphics card platforms. This is going into one of the high end models that gets released at the start of the platform release So we have our SPS product, gonna be shipping already in the in this September quarter. As well as ramping going into the December quarter. So naturally, as we talked about before, our digital power is focused on 2 key markets going after advanced computing as well as telecom.
So it's not too surprising that we see the first business win coming more from a kind of client side portion of of the computing portion of the business. So we're pretty excited about this. This will ramp up some more next year as well. At the same time, we have other opportunities that are being cooked up at the moment for the other applications.
Okay. That sounds good. And then lastly, just a long term question, to, to Yifan and maybe even for Mike. So guys, thanks for clarifying the phase phase 1 FabRamp target, got it, fiscal 1Q, 22, it sounds like. How should we think about what was the calendar 20 $31,000,000,000 revenue target.
Is calendar 23 still the right period for that revenue target or would that shipped out due to the COVID crisis?
Well, I'll take the first and craft in. The original target of billing dollars revenue for calendar year 2023. I would expect that, yes, probably more, more so pushed out than by 1 year and because of this 20 years pandemic situation. So That's how we're going to be. I mean, it may change down the road depending on the market situation.
So leave it that way.
This is Mike Chen. Let me follow-up the hi. Yeah. Let me follow-up I believe you find a little bit, give a little bit in-depth. You know, when we are looking to the future business, okay, especially like a kind of far away 2023, and a $1,000,000,000, which, of course, always our our our challenging goal.
Actually, only thing I made is your technology and a new product development. And the acceptance. And which is, does take time in a patient. And, we are quite in encourage during this, this type of a time, this pandemic time there. Our products have to get exact.
Which is a tremendous encouragement to our people to us. So I agree with, if I'm Okay. You know, we cannot find it with natural. Right? So this was affect us, but the momentum is there.
We believe it should not lower more than delay 1 year.
That's helpful, Mike. And then if I could just follow-up on that, useful color. Since you mentioned long term technology roadmap, where does wideband gap fit? Silicon Carbide, GaN, on your long term technology roadmap? And And where are you in development of those technologies?
This this is another another slow cooker, okay, So we've been, in this r and d in this area for quite many years. Recently, we just want to release 1, 1 prepaid the, certain car by 1200 volt product. But, however, I I don't want to create too much excitement there. Because such kind of thing would take time for customs to accept. K?
So you got product there, and I just click good, you know, product there. But, you know, you just happen to take time for customer to really, to, you know, to to accept to grow to to to buy and to to expand. So I can only tell you that we have a capability. We have R and D there, but I will put it longer term. Yeah.
Thanks for the help guys.
Thank you.
Your next question comes from the line of David Williams from Loop Capital Markets.
Thank you. And, appreciate you letting me ask a question guys. Congrats on the solid solid quarter and the guide. Thank you. So the gross margin came in a little better than we had expected.
And of course, ahead of the guide, can you maybe talk through any puts and takes there of the the margin? Was that more mix related or just, productivity out of the JV or what, what really led to the the better margin profile this quarter?
Sure. I mean, the gross margin came in at a high end of our guidance. So I mean, we are the priest to see that. Since the majority of the increase of our revenue was from our joint venture. So, you know, we our non GAAP gross margin, we pro form a out and production and run type of costs.
So that actually make the normalized, non GAAP gross margin already. So the June quarter's non GAAP gross margin was flat compared to the March quarter. So our relatively stable compared to the March quarter. In terms of product mix and the factory utilizations and so on. Basically, the $2,200,000 reduction in the production ramp up costs from March quarters $6,600,000 to $4,400,000 in the 2 quarter.
That's $2,200,000 basically that would be the margin increase. If we did not perform well off and then production ramp up costs. So that will be the margin gain there. But since we already normalize non GAAP margin. So the 2 quarters margin was basically stable compared to the March quarter.
Okay, great. And then maybe if you can just maybe rank order the growth of the underlying trends that's going to continue to support the growth. If you kind of exclude some of the shorter term trends that you're seeing What are the the, I guess, the largest, maybe, secular growth drivers that you see that that will support you to that $1,000,000,000 run rate that you that you talked about?
Yes. Hi, David. I can take that question. We're definitely heading more and more towards on diversification. In order to get to the $1,000,000,000 on revenue, we're expecting contribution from all the core markets.
Of course, we'll continue to be strong in computing. And even in computing, we are finding ways to expand bomb content. We expect that with the future platforms coming from in tell in AMD that, you know, our bomb content is actually going to increase and, and also, you know, not only for the Vcore and system power, but also finding new sockets like getting into Type C as well as some other areas that we are investing in. So computing would definitely be strong. We even have the server market as part of the mid term growth for computing.
Communications has also been strong for us in the past and will continue to be strong with strength in the, in the battery protection going into phones. We have a very good position and going into that that we talked about during the earnings release. We expect that to continue going forward as we also look to supplement that also with a business from our telecom side. We also expect to see our, our power supply and grow as well. Right now in the short term, It's been growing mainly with the PC boom, because of the work from home situation.
A big part of that is because, we've been able to to service than the high voltage market, which we have ignored in the past and due to allocation. Now, because, we have CQ and we have the ability to support that, This is going to be a new area of growth for us to support not only power supplies for, for PCs, but also for gaming systems, for industrial power, for solar and other applications. And of course, gaming, we've been and consumer, we've been talking about, that's a brand new area for us. Gaming is will be a big part of consumer going forward, but so will our other existing business. We're pretty pleased with our home appliance business there based on RGBTs in our module solutions.
And then this is the one area that we'll continue to grow. We're still on track to grow by more than 40% year over year for the whole for the calendar year. So, and as well as our TV business will continue to be strong. So in the end, we have to grow by diversification. We can't count only on just a few areas of the market.
We've gotten big enough and established enough in in our current applications, and we are expanding into new applications to help us to get to that $1,000,000,000.
Great. That's very helpful. Thank you. And then Steve, maybe, or Mike, on the digital controller front, you've obviously making some very nice progress. Shipping in the queue.
How do you think that layers in as you move forward? What does that ramp look like? Is it is it slow and steady or could we expect to see maybe a a nice more hockey stick approach as you get into the middle part of next year?
We expect it to be more slow and steady And we do expect again, the client portion of the business to grow a little sooner and faster just because of the nature of shorter design cycles for going into client computing. The longer ones are going into the server platforms and going to the telecom platforms which we are engaging, but they simply just take more time to both design in as well as to ramp up. So I think study is probably the right word for that. This kind of business takes longer to design in, but, it's much stickier and we'll stay for much longer because these, because these platforms endure for a much longer time.
Any thoughts on the bomb content addition that you can pick up?
Oh, the content can be pretty large, but really depends on the end application. There's different scale of base stations and servers. It depends how many rails and they are looking down to use digital power for. So but it can be on the 10s and 20s of dollars per system, but it's a pretty wide range of, you know, depending on the application. Okay.
Fantastic. And one more if I can. Just, kind of thinking about the health of the inventory. Can you maybe, talk about the different and takes there? How do you feel, in terms of the the inventory that's, maybe in the channel?
And, are you shipping to consumption, or are you seeing any, any type of of bills that'll really, that could be helping your 1Q guide? Sure.
I would I would kind of inventory right now is what I consider pretty healthy. It's within the targeted range of 2 to 3 months and right now it's close to the midpoint of that target range. So, we don't have much concerns about the channel inventory at this point.
Great. Thanks so much guys. Appreciate it. And best of luck on the quarter.
Your next question is open.
Thank you. And, let me add my congratulations to the excellent results and outlook and especially, the cash flow generation.
Thank you. Thank you.
Thank you.
I guess, first question, maybe regarding the, a follow-up on some of the seasonality questions. It seems like some of the growth near term has been driven a lot by the consumer, gaming and graphics cards, some of the cell phone builds Could you see potentially some maybe a stronger seasonal trend? Coming up in the next couple of quarters because of that? Like, is there are there certain design wins that are that you maybe make up for some of that potentially increase seasonality?
Sure. First, I want to comment that because of COVID, there's not much of normal seasonality this year. But there's been a lot more disruption because of how COVID has affected our customers both their demand as well as their production. Computing typically is a Q3 our September quarter, then major major peak season. This year, we basically saw that peak season pulled in from September into June that's partly because also March was a pretty disaster quarter for our computing customers because their factories were located in China and a lot of them in the epicenter of work COVID was, you know, was starting out from.
So we, but because of the because of the work from home and the strong demand, the September the June quarter was very strong and the September quarter remains very healthy also. We so far, we don't know how this will play out over the longer timeframe. Q4 so far looks still okay, but we really need to wait and see to see how demand changes. But right now, that still looks strong. Going into smartphones, smartphone, I would say is probably a little more depends on how each of the major, whether each of the major players customers in the space are doing.
Some of them, one of our customers, they launch a new phone back in the March quarter, and they actually didn't pull back reduction until the June quarter. And so but then coming in this into the September quarter, they're actually starting up production pretty heavily again. In anticipation of possibly another factory shutdown that may have to happen, in the coming cold season. We're seeing a lot of disruption like that happening. Overall, right now, I know, smartphone typically is strong in Q3.
And actually, we do see that from all three vendors on demand is very healthy and strong, going into them with the second half of this year. Now some of the newer areas for us are at least for AOS is gaming as well as graphics cards. And both of these areas are relatively new for AOS. So it's not really seasonal. It's tied to their platform releases that are launching at the end of the in the second half of this year.
Graphice cards, typically, the platforms last around 2 years. And this is the beginning of that cycle. For gaming systems, those last much longer, you're talking about typically 6 to 7 years. This is the beginning of that cycle. And even during that 6, 7 year, there's multiple revisions that are made to platforms along the way to create different price points for the customer or maybe cost down.
So there's additional opportunities for us to get more business, get more sockets, And, so I would say that that's not really a seasonal thing. It's more of, you know, out of that, that product life cycle. We're at the beginning of that life cycle. And, and so it's additional business that we're layering on top of our current business. Does that help?
Yes, that's very helpful. Thank you, Steven. And maybe just a quick follow-up on the comments that some customers, especially in the smartphone industry are building ahead of potential shutdowns later on? Is that something that you see? Is it pretty widespread within cell phones?
And do you see that across other industries?
I see, this particular vendor, I think it's only one vendor, one customer that's mainly that's doing that more so than other ones. So I wouldn't say it's necessarily reflective of the whole market or industry. But at least, you know, they're doing it much more than others are. And the other major vendors are seeing, you know, are seeing their normal seasonality that's coming. So, but right now, I know we see all three vendors asking for product.
Got it. Great. And then maybe just, you know, do you can you give us an idea of, you know, linearity in the in the quarter and maybe your backlog and visibility for the upcoming September quarter?
Sure, Jeremy. Our backlog has been healthy and studied since the month of March. If you recall back to the March quarter toward the mid March I saw the surging demand that started and then, backlog started fitting in I guess this reflected in the recovery of supply chains and then surging demand and due to the work from home, learning from home, those things. And also is also our company specific design wins. So Of course.
And then, I mean, then under this challenging and volatile pandemic environment, we want to be vigilant and cautious and then monitored and dynamic changes carefully. So right now, our backlog can support our September's guidance.
Can you give us maybe a comparison on a relative basis, maybe this quarter versus prior quarters? Some of the, you know, other analog peers have reported very high backlog coverage. I was just wondering if that's the same case for you guys?
It has been steadily increasing, yeah. Better than last quarter and position, I would say.
Great. And Yifan, just looking at the balance sheet, I noticed other assets was down about $26,000,000. Is this the VAT refund, the value added tax getting, you know, converting to cash?
Yes. Yes. Exactly. Yes.
So then is that, you know, is that the full amount? So about 20 $6,000,000, if we look at because your the operating cash flow was had a very nice bump from the March quarter, the June quarter. So if you take that out, would that be roughly the operating cash flow for the, excluding the the the refund?
Yeah. I mean, for AOS and then when we separate an AOS from the JV, AOS generated about $20,000,000 operating cash flow, $11,000,000 free cash flow in the quarter. JV, yes, about $25,000,000 in refund they got it from a local government related to the, value added tax. You know, last couple of years. And when they imported it, equipment, then they had to pay value added tax and like 13 some percent of each machine.
So that one has been accumulated for at least a couple of years. So in the June quarter, they got a refund pretty much all of them, from the government. So on the other hand, part of that, they were using those receivables are from the VAT tax against that they borrowed from a local bank against those VAT receivables. And so So at the same time, when they got the refund, they also repaid about the $15,000,000, $16,000,000 or so. Those are loans.
So that's a net net, yes, they did get more working capital.
Got it. And did you say all the that tax has been fully refunded by now or is there still some waiting to be collected?
That's pretty much all the refunded already.
Great. And then just a question as the JV has been ramping, I think Mike said earlier that you guys are expecting to hit the target around this time next year. So presumably, you probably need to invest ahead of that. So can you talk to us about CapEx plans and also And also just for the JV, what so it looks like the operating cash flow is still not quite breakeven at this point. Do you do you have targets for when you might expect to hit operating cash flow breakeven and also on a free cash flow basis?
Decision for AOS and our CapEx spending is pretty much in the range of normal range and I would say 6% to 8% of our revenue. For the joint venture, yes, right now, we are doing some planning work and for the next round and so. But right now, our main focus is to ramp up 12 inches fab first. So that will have a longer term planning for the JV.
So, sorry. So were there any CapEx or breakeven targets that you can give us?
Well, that's a target we'll see along with our business and the growth and expectations. So that's a kind of a you have to wait and see. We will disclose when the time comes. Great.
Okay. This is my can I maybe put in a few words about this JV? Yes, please. Thank you. K.
You know, I think, 1st of all, we need to differentiate, okay, this JV was a authority, a purpose driven. It's a strategic investment to match with our business growth plan. So it's not a purely financial investment. Therefore, you know, we're really looking to what our business grows in the AOS business grows there. Then we tailor this venture to support that.
In meanwhile for residential growth too. So this is this is a primary and secondary. The primary really is to support its growth. Yeah. So that wants to differentiate a little bit.
That's very helpful. Thank you. And understood, it's strategic for ALS, as a standalone, and there's, you know, the cash flow implications are It's a consideration, but it's not the primary one for for you.
Right. Of course, it would be very prudent. Right? So now it's it's the the the yeah. Yes.
Yeah. Thank you. Right. Great.
Thank you. And just one last question, to help us model the government investigation, Is it still going to be $2,500,000 for the remainder of the year or is there some drop off that we can expect at some point?
Well, this one is really hard to estimate. You know, that's the depending on the activities. Right now, you know, for the June quarter, our expenses were in the $2,500,000, $2,600,000 range. So I wouldn't think I just use $2,500,000 at this point for the guidance. And that's hard to estimate at this point.
Okay. That's fair. And that's all I had and congrats again on the solid results.
Your next question comes from the line of Craig Ellis from B. Riley FBR. Your line is open.
Yes. A couple of
them and thanks for taking the follow ups guys. First, I just wanted to get your views on how you're looking at production optimization and demand planning. And I wanna do it in the following context. I think when we, started into calendar 20, the company was optimizing its business for communication centric growth. A lot's happened since you relied on your feet, and it looks like the back half of the year, we're really gonna see, you know, mid year, late year.
Our growth is driven by gaming platforms and compute. So good for you for realizing that. And I think the communications business has been fairly flattish from the first quarter. The question is, as we look at calendar 'twenty one, so the second half of your fiscal 'twenty one, first half of fiscal 'twenty two, do we think about the way you're optimizing your production and your demand planning? Is it going to stick with being much more of a compute and total, incremental demand business, or do you see, the communications business coming back and contributing more to growth next year than has over the last couple of quarters?
Yes, this is Steven.
I can address that. So it's similar to what I was saying before and even giving up the total picture. In the long term, we are heading more towards diversification. So, but in the short term, you're right. Right now, we're seeing a big strong growth in the and PCs because from work from home.
As well as consumer because of the newer platforms that we're getting into for gaming. In the longer run, I do expect the other platforms also to continue to grow communications. We do expect the cell phone still still to be the main, I guess, the foundation of that. We have a very strong position in each of the 3 major markets and we'll continue to be strong going forward. On the power supply side, we saw the beginning of some growth over there because of our high voltage business.
Initially, again, going after the PC market, but that has the potential to expand to be more than that. So in your definitely, I think the gaming as well as the graphics cards will be big. And computing itself, graphics cards is part of the computing segment. Will grow over there as well as within some bomb content increase in the upcoming platforms for Intel and MD.
That's really helpful color, Steven. And then the follow-up, I believe the company is spending about $3,000,000 a quarter in its Digital Power R and D. So just trying to think through, the the dynamics that get that business to breakeven on an operating basis. So we started ship product. It's going into, gaming card products.
Do you feel like you've got visibility now to 6 to 8,000,000 in quarterly revenue for digital power? Or when would you expect to get that visibility so we would be at a point where on an operating basis, we were breakeven on a quarterly basis?
I think it's still further out. We expect the digital power
to take time to establish as a
first player going into digital power. But also as for the markets that we're going into, where we want to get into both the server and telecom, we're still relatively new to those on is in the applications that we do know well going into the client side on the graphics and the well as client PCs. So we expect to see earlier traction there. It's not gonna get to the the breakeven point that quickly. I think steady, we'll, but we'll be making steady progress, towards that.
So I think we're still a few years out, at least, in getting to the breakeven. But, you know, this this is just the beginning of the revenue. It's coming from one customer right now, but we hope to expand that in the coming quarters.
This is Mike Chang. Can I add a few words?
Yep. Go ahead, Mike.
You know, what seems to say is exactly true. Okay. However, I would like to also share some of our, excitement there. As you know, over here, some from Steven, right? We are actually strong in clients.
Okay. The, you know, the the telecom, which is called the new, you know, the car there. You know, in the client side, there's a lot of synergy. Okay? Among ourselves is power and our existing power, I see there.
So even though they may not get a revenue, say, hey, but this revenue come from this power, but they will contribute greatly to the other side there. So as in the benefits, not just what does Steven say so? Is there some, how to say there's an indirect benefit there, which is really, really beneficial.
Got it. So there's more than meets DI. Thanks for that clarification, Mike.
There are no further questions at this time. I turn the call back to the presenters for closing comments.
This concludes our earnings call today. Thank you for your interest in iOS and we look forward to talking to you again next quarter. Thank you.
Thank you everybody for joining.
That concludes your conference call today. Have a wonderful day. You may now disconnect.