Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alpha And Omega Semiconductor Fiscal Q1 2019 Earnings Call. All lines have
session.
Thank you. Soyoung Zheng of Investor Relations, you may begin your conference.
Thank you. Good afternoon, everyone, and welcome to the Alpha And Omega Semiconductors conference call for fiscal 2019 first quarterly results. This is Soyan Zheng, Investor Relations representative for the company. With me today are Doctor. Mike Chang, our CEO and Yifan Liang, our CFO.
This call is being recorded and broadcasted live over the web and can be test for 7 days following the call via the link in the Investor Relations section of our website at www aosmd.com. The earnings release was distributed by Business Wire today, November 1st, 2018 after the market closed. The release is also posted on our company's website. Our earnings release and this presentation include certain non GAAP financial measures. We use non GAAP measures because we believe these 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 our earnings release. We would like to remind you that during the course of this conference call, we'll make forward looking statements, including discussions of business outlook, and financial projections. These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause the actual results to differ materially from such expectations. For more detailed description of these risks and uncertainties, Please refer to our current and subsequent filings with you. We assume no obligations to update the information provided in today's call.
Now I'll turn the discussion over to Yifan, our CFO, to provide an overview of the 1st fiscal quarter financial results. Yifan?
Thank you, Soyan. Good afternoon and thank you for joining us. To begin, I will discuss financial results for the quarter Then I'll turn the call over to Mike, our CEO, who will review the company's business highlights. After that, I will follow-up with our guidance for the next quarter. Revenue for the September quarter was an increase of 4.7% from the prior quarter, an increase of 9.7% from the same quarter last year.
The revenue growth was driven by solid demand for Mike will elaborate on that shortly. In terms of product mix, Mossfet revenue was $92,300,000, up 3.2% sequentially and up 10.3% year over year. Power IC revenue was $19,400,000, up 10.7% from the prior quarter, and up 7.3% from a year ago. Service revenue was $3,400,000, as compared to $3,000,000 Regarding the segment mix, this quarter's computing segment represented 43.8 percent of the total revenue Consumer, 18.5%, power supply and industrial, 18.9%, communications, 15.5%, service 3% and others.3%. Non GAAP gross margin for the September quarter was 29.7% as compared to 27% in the prior quarter, and 26.6 percent for the same quarter last year.
The increase of 270 basis points in gross margin quarter over quarter was primarily driven by the improved product mix. Non GAAP gross margin $1,000,000 of share based compensation charge for the September quarter as compared to $500,000 for the prior quarter and $300,000 for the same quarter last year. Non GAAP gross margin also excluded $1,100,000 of production ramp up costs related to the Chongqing joint venture for the September quarter. Non GAAP operating expenses for the quarter were $24,500,000, compared to $21,800,000 Non GAAP operating expenses excluded $2,600,000 of share based compensation charge as compared to $2,500,000 in the prior quarter $1,700,000 for the same quarter last year. Non GAAP operating expenses also excluded $4,600,000 of preproduction expense related to our Chongqing joint venture as compared to $5,000,000 in the prior quarter and $0 for the same quarter last year.
Non GAAP operating expenses included $2,700,000 of digital power controller team expenses for the quarter. As compared to $1,400,000 As of September 30, 2018, we had largely completed the hiring of the digital power controller team. The team has been engaging with customers in product designs and is making steady progress toward our product roadmap. The remaining increase in operating expenses quarter over quarter was mainly due to more variable compensation accrual because of the higher profitability. Income tax expense was 0.6 as compared to $700,000 for the prior quarter and $1,300,000 for the same quarter last year.
Non GAAP EPS attributable to AOS for the quarter was $0.36 earnings per share. As compared to $0.31 earnings per share for the prior quarter and $0.27 earnings per share for the same quarter last year. AOS continued to generate positive cash flow. In the September quarter, we generated $18,400,000 prior quarter and $15,300,000 for the same quarter last year. Cash flow used in operations attributable to our Chongqing joint venture was $400,000 for the September quarter compared to $19,500,000 for the prior quarter EBITDAS for the September quarter was $15,400,000 compared to $12,800,000 for the prior quarter $15,000,000 for the same quarter last year Moving on to the balance sheet.
We completed the September quarter with cash and cash equivalents balance of 100 and $13,200,000, including $32,000,000 cash balance at our Chongqing joint venture. As compared to $131,500,000 at the end of last quarter, including $43,300,000 cash balance at the joint venture. Our cash balance a year ago was 180,200,000 including $79,100,000 at the Chongqing joint venture. During the quarter, AOS further drew down $16,700,000 from our equipment line. With that, The debt balance of our Oregon fab was $47,300,000 at the end of the September quarter, as compared to $30,900,000 at the end of the June quarter.
As we continue to generate positive cash flow we expect AOS net cash position to grow from the December quarter. Net trade receivables were $37,100,000 as compared to $33,800,000 at the end of last quarter and $25,400,000 during the same quarter last year. Day sales outstanding for the quarter was 27 days, compared to 29 days in the prior quarter. Net inventory was 90 up from $90,200,000 About $3,800,000 inventory increase was from the joint venture in preparation of the mass production of assembly and test and the trial production of the 12 inches fab. Average days in inventory were 103 days for the quarter compared to 101 days in the prior quarter.
Net property, plant and equipment balance was $368,500,000, as compared to $331,700,000 last quarter and $167,900,000 for the prior year. Capital expenditures were $49,500,000 and $15,200,000 from AOS. We expect the capital expenditures from AOS to be in the range of During the September quarter, we purchased 112,000 shares of our stock phone approximately $1,500,000 under our existing share repurchase program. Before I conclude the financial review, let me add a brief update on the progress of our Chongqing joint venture. We had commenced a small mass production for assembly and test during the September quarter and expect to ramp up in the next two quarters.
The progress at the 12 inches fab is on track. We expect to start trial production of 12 inches wafers during the December quarter and gradually ramp up throughout calendar year 2019. With that, now I would like to turn the call over to our CEO, Doctor. Max Chen, who will provide the business highlights for the quarter. Mike?
Ivan, thank you, and good afternoon.
We are off to a great start in fiscal year 2019 with excellent financial results. As we delivered another record breaking quarter, AOS reached an all time high quarterly revenue in September quarter, driven by strong demand for our new products across the board, especially in smartphone factory management and Vcore applications. This is the 3rd time of breaking record revenue since September quarter of last year. Most notably, our non GAAP gross margin reached 29.7 percent above the high end of our guidance range. Which was the highest since 2011.
The significant improvement in gross margin reflects continued progress in migrating to higher value products and improving product mix. There have been some macro headwinds and industrial cycle concerns. That have increased the overall market uncertainty. In fact, we did see some softness in home appliance and smartphone applications in China. However, we do not expect This trend to have a material impact in the near term, primarily due to two reasons 1, our product portfolio has been well diversified in terms of customer base and geographic regions.
2, we are still on allocation with higher demand across most applications. While no one can be completely immune to market impact, we, nonetheless, remain confident about our own business execution and long term growth sustainability. We believe that there are fundamental factors behind our performance and the sustainability that are AOS specific, which we didn't have in the past. So what has changed? The first factor is the unmatched breadth and the depth of our current product portfolio.
Undoubtedly, we are in a healthier position than any other point in the company's history. Today, as exemplified by our recent revenue growth, we have established solid footings in the applications we target. We have been adding and upgrading our innovative technology platforms across all the most categories ranging from low, mid, high voltage to IGP, BT, as well as powerIG product line in the past few years. From these technology platforms, we steadfastly derive high performance, customer friendly new products, For diversified applications, which with large volume such as high end computing, notebook gaming, home appliance, high end smartphones, quick charges and industrial power tools, where we can scale our business. Many of them were new market opportunities for AOS.
That required long design cycle time and the diligent customer interactions. With our disciplined product execution, some of our new products have crossed the major threshold and some have already entered production ramp up. The demand continues to strengthen. And still file our trips our capacity to date, which forms a good base for our growth. The second factor is our heightened market position, with the innovative new products AOS has been securing significant design wins and design wins with new customers as well as existing customers.
In the past few years, we have brought in many new customers including were renowned brand names. More importantly, we have taken a leap in our market positioning, both by enhanced customer relationships. As always, we are committed to support our customers whether through good times or bad, with an unwavering focus on their success. Recently, our effort was gratified, gratiforally acknowledged by leading OTMs and OEMs worldwide in the forms of awards and, of course, meaningful orders. AOS has emerged from 1 of many small alternative vendors to a major strategic partner.
These partnerships allows early customer engagement in design cycles and a deeper involvement with product definition, presenting us with not only scalable opportunities but also better visibility. The result of this transformation are reflected in our financial performance. We finished our fiscal year 2016 with $336,000,000 in revenue and $0.08 non GAAP earnings per share. Since then, we grew our revenue by 26% with a 14 fold increase in non GAAP EPS in only 2 years. We continue to expect another 10% revenue growth in fiscal year 2019, which paved the way for us to achieve our midterm goal of 600,000,000 in revenue.
We also believe this transformation that has fundamentally upgraded us as a stronger force in the power semiconductor space will make our business structure more resilient to market fluctuation. With that, let me turn to the segment review starting with computing. It represented 43.8 percent of total revenue in September quarter. We posted a 4.8% sequential increase and a 23.8% growth year over year. The main driver in this segment was the continued share GaN with our Dragonmos power IG products into Vcore and graphics card applications.
Central to the AOS outperformance in this segment is the increasing advancement in our product portfolio today as well as enhanced customer engagement that we have cultivated for many years. The computing industry is expecting is expanding beyond personal computing to include high growth segments, such as artificial intelligence, big data, and the internet of things. As a leader of power management, especially in the computing area, we have been continuously shopping our capability to stay on forefront of evolving technologies. As AAOS position and ranking have strengthened in the competing market, we expect a healthier growth in the December quarter. 2nd, consumer.
It was 18.5% of the total revenue, It increased 1.8% sequentially, but decreased 17.2% year over year. The shipment for the TV applications grew quarter over quarter on its seasonal strength. Offsetting the softness in home appliance market in China. You may recall that our IGBT product line had crossed the $10,000,000 annual revenue threshold for calendar year 2017. Even with the soft outlook in the Chinese home appliance market in December quarter, we expect our IGBT line to achieve about a 40% year over year growth for calendar year 2018 as we expand our product offerings.
With SkipCo's seasonality in TV, we expect this segment to be done
next quarter.
Turning to the Power Supply And Industrial segment. It was 18.9% of the total revenue which was down by 1.5% sequentially but up by 8.5% from the same quarter. Last year. We are firmly fitted in our market position with the superior performance of our mid voltage products and continued to gain shares with quick chargers. Our investment into high performance and medium voltage technology has enabled us to be well positioned as quick charger and the USB PD charger applications are moving 2 high power outputs.
With further adoption of quick charges and USB PD, we expect this segment to grow sequentially. Lastly, Communications segment It represented 15.5 percent of the September quarter's revenue, fueled by the production ramp of our alpha DFM product line for smartphone battery management application. This segment demonstrated a healthy growth of 15.4%, 4%, 17.8 percent sequentially and year over year respectively. As I mentioned earlier, we saw the overall demand slowing down in Chinese smartphone market. Fortunately, our dedication to the success of Chinese smartphone OEMs in the past.
Past increased customer confidence and are now new customers, including a high end global brand, have opened the door to us. The production ramp for this new customer is near offsetting softness at others. So in December quarter, we only expect a slight sequential decline in these segments. In closing, we are pleased with the strength of our healthy revenue growth and improved gross margin. Our relentless effort to execute on our strategic transformation over the past few years is yielding results.
AAOS is now a stronger force within our industrial industry. We are armed with a better and more diverse product portfolio. And the digital customer partnerships with global brands. All this improvement give us more confidence in the resilience of our business model. We have made great progress toward our plan and will continue to build up the momentum in our growth and profitability in fiscal year 2019 and onward.
With this, I'll let Ivan, our CFO, to keep you the guidance. Ivan?
Thank you, Mike. As we look forward to the second quarter of fiscal year 2019, we expect revenue to be between $112,000,000 $116,000,000. Gross margin to be approximately 26% plus or minus 1%. Non GAAP gross margin is expected to be approximately 29% plus or -1 percent. Non GAAP gross margin excludes $500,000 of estimated share based compensation charge, and $3,000,000 of estimated production ramp up costs related to the Chongqing joint venture.
Operating expenses to be in the range of $32,000,000 plus or minus $1,000,000. Non GAAP operating expenses are expected to be in the range of $25,000,000 plus or minus $1,000,000. Both GAAP and non GAAP operating expenses include $3,100,000 to $3,300,000 of estimated expenses relating to our digital power controller team. Non GAAP operating expenses exclude an estimated share based compensation charge of approximately $3,100,000 and estimated pre production expenses relating to the joint venture of $3,900,000. Tax expense to be approximately $500,000 to $700,000.
Loss attributable to non controlling interest to be around $4,000,000. On a non GAAP basis, excluding estimated pre production expenses and production ramp up costs relating to the joint venture, this item is expected to be approximately $400,000. As part of our normal practice We are not assuming any obligations to update this information. With that, we'll open up the floor for questions.
Certainly. And your first question comes from the line of Jeremy Kwan from Stifel Nicholas. Your line is open.
My first question is in terms of your lead times, can you talk about where they stand now and where they've been before? Just wanted to see, get a little bit, better picture of the visibility that you guys have.
I'll try to give you exact lead time, okay? But I can tell you one thing that I'll lead time just as long as before. Yes.
At this point, Jermaine, our overall demand is still strong. Across most of the applications, the demand right now is is still exceeding our capacity to date. So right now we're still on allocation. So I mean, the situations for us is same as prior quarter at this point.
I want to apologize to you, look, but it sounds like a rude look, actually, really, because we have so many different products there, the lead time are all different. That's why I cannot give you one.
That's totally fair. I appreciate that. I guess in terms of the capacity then, can you talk about maybe the capacity expansion at the Oregon fab. It sounds like it's mostly done at this point. CapEx is going to come down quite a bit over the next couple of quarters.
Can you I think in the past you talked about kind of the revenue level that it can support. Can you give us a quick update there where that stands today?
Okay, sure. Our current capacity situation and a backlog situation on reflected in our guidance. We guided midpoint of 1.14 for the December quarter, pretty much reflecting our current capacity, slightly decline compared to last quarter's revenue is primarily reflected holiday impact next quarter will be the holiday season. So, that's at this point, pretty much the well constrained still constrained by the supply. So when we get into the March quarter next year, we would expect similar situation.
Great. And last question
before I give up the queue, I guess. In terms of the cash burn of the JV, it looks like things have it's fluctuating quite a bit. It's nice to see that come down. So it does less than 500,000 this quarter. Can you help us understand what's going on there and where you see that operating cash flow going forward?
Okay, sure. I mean, this, yeah, I mean, right now, in our joint venture for the assembly and test piece, we started a small mass production in the September quarter. So we expect we'll ramp it up in the next couple of quarters. For the 12 inches fab, we expect to start, trial production in the December quarter and then ramp up throughout next calendar year. And that's our current view.
In terms of its operating cash flows, last quarter, that cash outflow, the $19,000,000. And it was majority of it was because of the value added tax, we have to pay to import those 12 inches fab equipment. So most of the machines were imported in the June quarter. So that's pretty much the one time cash flow impact and it was down in the June quarter. So the September quarter was reduced quite a bit.
So can we expect going forward that it's pretty close to breakeven at this point and maybe even eventually generate cash in coming quarters?
Well, I wouldn't expect it can generate cash, but then it can fluctuate because of working capital, generally when we started ramping our productions, I would expect and we need some working capital support.
Your next question comes from the line of Edgar Roche from Sidoti. Your line is open.
Yeah. Hi. Nice quarter. I wanted to check-in with you about your distributors and what you're hearing from them And are they leading the charge on slowing things down a little bit in the home appliance or industrial side of the business?
Sure. I mean, right now, overall, our channel inventory is either very low level, even below our targeted range, we target 2 to 3 months and channel inventory right now is below the low end of our target range even. So at this point, right now this, our business is still constrained by our supply. So overall situations, I mean, in the home appliances in China, That one is mainly we feel is mainly because of the housing market, new house building in China kind of started slowing down. So because a lot of the home appliances will be consumed when they have a new apartments or housing over there.
Okay. I appreciate that. And then one other question for you. Just on MOSFETs generally, I'm trying to just understand if the industry is still generally tight or, or not at point? And if you have any insights as to when things might get into balance a little bit more, is it within reach in a quarter or 2 or is it just outlook is to remain tight as long as you can see?
We can you know, this kind of thing, you'd never be able to see it's too far, okay. But in 1 or 2 quarters, it's still tight. I mean, there's nothing can change, because nobody know, right? But what we can see the order wise? I mean, overall,
I think it did We don't know other people, but the overall demand for our products across most of the applications are still very strong. So we have a very strong backlog right now.
Great. Glad to hear it. Thanks guys.
And there are no further questions at this time. I will turn the call back over to Alpha and Omega Semiconductor for some closing remarks.
This concludes our earnings call today. Thank you for your interest in AOS and we look forward to talking to you again next quarter. Thank you.
This concludes today's conference call. You may now disconnect.