Alpha & Omega Semiconductor Ltd.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 15:03
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters addressed in this Item 2 constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements include information set forth under the heading "Factors Affecting Our Performance." Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by the Company's management. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the Act. The Company undertakes no obligation to publicly release the results of any revisions to its forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words "AOS," the "Company," "we," "us" and "our" refer to Alpha and Omega Semiconductor Limited and its subsidiaries.
Management's discussion should be read in conjunction with management's discussion included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the Securities and Exchange Commission on August 28, 2025.
Overview
We are a designer, developer, and global supplier of a broad range of discrete power devices, wide band gap power devices, power management ICs and modules, including a wide portfolio of Power MOSFET, SiC, IGBT, IPM, TVS, HV Gate Drivers, Power IC, and Digital Power products. Our portfolio of power semiconductors includes approximately 2,800 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2025, and over 100 and 60 new products in the fiscal years ended June 30, 2024 and 2023, respectively. During the three months ended September 30, 2025, we introduced 16 new products. Our teams of scientists and engineers have developed extensive intellectual properties and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 951 patents and 71 patent applications in the United States as of September 30, 2025. We also have a total of 1,067 foreign patents, which primarily were based on our research and development efforts through September 30, 2025. We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for computers, servers and telecommunications equipment.
Our business model leverages global resources, including research and development and manufacturing in the United States and Asia. Our sales and technical support teams are localized in several growing markets. We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon, or the Oregon Fab, which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. For assembly and test, we primarily rely upon our in-house facilities in China. In addition, we utilize subcontracting partners for industry standard packages. We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time.
During the fiscal quarter ended September 30, 2025, we continued our product diversification program by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, and power IC product portfolio also expanded.
On March 29, 2016, we formed a joint venture (the "JV Company") with two investment funds owned by the Municipality of Chongqing (the "Chongqing Funds"), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility ("Fab") in the LiangJiang New Area of Chongqing, China. As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The
joint venture was accounted under the provisions of the consolidation guidance since we had controlling financial interests until December 1, 2021. In December 2021, we sold a portion of our equity interest in the JV Company to a third-party investor, pursuant to which we reduced our ownership from 50.9% to 48.8% of outstanding equity of the JV Company, and reduced our representation on the board of directors of the JV Company. As a result, the JV Company was deconsolidated from our consolidated financial statements effective as of December 2, 2021.
From December 2021 to June 2025, we completed several transactions to sell additional equity interests of the JV Company to third-party investors, while the JV Company also issued additional equity interests to new investors that diluted our ownership interest. Accordingly, as of June 30, 2025, the percentage of outstanding JV equity interest beneficially owned by us was further reduced to 39.2%.
On July 14, 2025, we entered into an equity transfer agreement with a strategic investor to sell approximately 20.3% of outstanding equity interest in the JV Company held by us for an aggregate cash consideration of $150 million to be paid in four installments, subject to satisfaction of certain conditions. On August 29, 2025, the amended Shareholders' agreement for the JV Company was signed, which reduced our equity interest in the JV Company by 20.3% to an ownership percentage of 18.9%. As of August 29, 2025, all of the conditions for the first installment were satisfied, and we received our first installment payment of RMB 676 million (or $94.5 million based on the currency exchange rate between RMB and U.S. Dollar on August 29, 2025), and recorded a receivable of $56.4 million for the remaining installments, which is included in the receivable from sale of equity interest in the JV Company line on the Condensed Consolidated Balance Sheets. We expect to receive the remaining installment payments and close the transaction prior to the end of calendar year 2025. We believe this sale provides additional and significant capital for us to continue investment in technology, R&D projects and acquisition of assets complementary to our business operations, which will facilitate and accelerate our efforts to develop and distribute innovative and diverse power semiconductor products to customers worldwide.
In addition, the JV Company will continue to provide us with significant level of foundry capacity to enable us to develop and manufacture our products. Pursuant to an agreement with the JV Company and other shareholders of the JV Company, the JV Company is committed to provide us with a specified level of monthly wafer production capacity.
Other Factors affecting our Performance
The global, regional economic and PC market conditions:Because our products primarily serve consumer electronic applications, any significant changes in global and regional economic conditions could materially affect our revenue and results of operations. A significant amount of our revenue is derived from sales of products in the PC markets, such as notebooks, motherboards and notebook battery packs. Therefore, a substantial decline in the PC market could have a material
adverse effect on our revenue and results of operations. The PC markets have experienced a modest global decline in recent years due to continued growth of demand in tablets and smart phones, worldwide economic conditions and the industry inventory correction which had and may continue to have a material impact on the demand for our products. In addition, the PC market may be affected by evolving laws and regulations governing international trade, such as export control regulations.
A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures. We have executed and continue to execute strategies to diversify our product portfolio, penetrate other market segments, including the consumer, communications and industrial markets, and improve gross margins and profit by implementing cost control measures. While making efforts to reduce our reliance on the computing market, we continue to support our computing business and capitalize on the opportunities in this market with a more focused and competitive PC product strategy to gain market share.
Manufacturing costs and capacity availability:Our gross margin is affected by a number of factors including our manufacturing costs, utilization of our manufacturing facilities, the product mixes of our sales, pricing of wafers from third party foundries and pricing of semiconductor raw materials. Capacity utilization affects our gross margin because we have certain fixed costs at our Shanghai facilities and our Oregon Fab. If we are unable to utilize our manufacturing facilities at a desired level, our gross margin may be adversely affected. In addition, from time to time, we may experience wafer capacity constraints, particularly at third party foundries, that may prevent us from meeting fully the demand of our customers. While we can mitigate these constraints by increasing and re-allocating capacity at our own fab, we may not be able to do so quickly or at sufficient level, which could adversely affect our financial conditions and results of operations. We also rely on third parties to provide foundry capacity to manufacture our products, including the JV Company, therefore it is important that we maintain continuous access to such capacity, which may not be available at sufficient level or at pricing terms favorable. If these third-party foundries, take actions or make decisions that prevent us from accessing required capacity, our operations may be adversely affected.
Erosion and fluctuation of average selling price: Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of our existing products to decline in the future. However, in the normal course of business, we seek to offset the effect of declining average selling price by introducing new and higher value products, expanding existing products for new applications and new customers and reducing the manufacturing cost of existing products. These strategies may cause the average selling price of our products to fluctuate significantly from time to time, thereby affecting our financial performance and profitability.
Product introductions and customers' product requirements: Our success depends on our ability to introduce products on a timely basis that meet or are compatible with our customers' specifications and performance requirements, including our Tier 1 customers who often have stringent requirements. Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins with our customers. As we accelerate the development of new technology platforms, we expect to increase the pace at which we introduce new products and seek and acquire design wins. If we were to fail to introduce new products on a timely basis that meet customers' specifications and performance requirements, particularly those products with major OEM customers, and continue to expand our serviceable markets, then we would lose market share and our financial performance would be adversely affected.
Distributor ordering patterns, customer demand and seasonality: Our distributors place purchase orders with us based on their forecasts of end customer demand, and this demand may vary significantly depending on the sales outlook and market and economic conditions of end customers. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly, which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us. As a result, our revenue and operating results may fluctuate significantly from quarter to quarter. In addition, because our products are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by numerous factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. Typically, we generate lower revenue during the first quarter of the calendar year as compared to other quarters. However, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the changing PC market conditions, have had a more significant impact on our results of operations than seasonality. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control. If these major customers
experience significant decline in the demand of their products, encounter difficulties or defects in their products, or otherwise fail to execute their sales and marketing strategies successfully, it may adversely affect our revenue and results of operations.
Principal line items of Condensed Consolidated Statements of Income (Loss)
The following describes the principal line items set forth in our Condensed Consolidated Statements of Income (Loss).
Revenue
We generate revenue primarily from the sale of power semiconductors, consisting of power discretes and power ICs. Historically, a majority of our revenue has been derived from power discrete products. Because our products typically have three-year to five-year life cycles, the rate of new product introduction is an important driver of revenue growth over time. We believe that expanding the breadth of our product portfolio is important to our business prospects, because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our in-house facilities.
Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period. At our discretion or upon our direct negotiations with the original design manufacturers or original equipment manufacturers, we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In certain situations, we will grant price adjustments to the distributors reflecting such special pricing. We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.
In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and provided 24-months of engineering and development services for a total fee of $45.0 million. The license and development fee required significant integration to create a combined output to the customer and was determined to be one performance obligation and was recognized over the 24 months during which we performed the engineering and development services. We use the input method to measure progress and recognize revenue, based on the effort expended relative to the estimated total effort to satisfy the performance obligation. As of June 30, 2025, all revenue has been recognized and all consideration has been received associated with the license agreement, therefore we no longer have any obligations under the license agreement. During the three months ended September 30, 2025 and 2024, we recorded $0 and $5.6 million of license and development revenue, respectively. We also entered into an accompanying supply agreement to provide limited wafer supply to the customer.
Cost of goods sold
Our cost of goods sold primarily consists of costs associated with semiconductor wafers, packaging and testing, personnel, including share-based compensation expense, overhead attributable to manufacturing, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. As the volume of sales increases, we expect cost of goods sold to increase. While our utilization rates cannot be immune to the market conditions, our goal is to make them less vulnerable to market fluctuations. We believe our market diversification strategy and product growth will drive higher volume of manufacturing which will improve our factory utilization rates and gross margin in the long run.
Operating expenses
Our operating expenses consist of research and development, and selling, general and administrative expenses. We expect our operating expenses as a percentage of revenue to fluctuate from period to period as we continue to exercise cost control measures in response to the declining PC market as well as align our operating expenses to the revenue level.
Research and development expenses. Our research and development expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by outside contractors and consultants, amortization of software and design tools, depreciation of equipment and overhead costs. We continue to invest in developing new technologies and products utilizing our own fabrication and packaging facilities as it is critical to our long-term success. We also evaluate appropriate investment levels and stay focused on new product introductions to improve our competitiveness. We expect that our research and development expenses will fluctuate from time to time.
Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, product promotion costs, occupancy costs, travel expenses,
expenses related to sales and marketing activities, amortization of software, depreciation of equipment, maintenance costs, other expenses for general and administrative functions, and costs for outside professional services, including legal, audit and accounting services, as well as impairment of long-lived assets. We review all long-lived assets whenever events or changes in circumstance indicate that these assets may not be recoverable. When evaluating long-lived assets, if we conclude that the estimated undiscounted cash flows attributable to the assets are less than their carrying value, we recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. We expect our selling, general and administrative expenses to fluctuate in the near future as we continue to exercise cost control measures.
Income tax expense
We are subject to income taxes in various jurisdictions. Our interim period tax provision for (or benefit from) income taxes is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period. Our quarterly tax provision and estimate of its annual effective tax rate are subject to variation due to several factors, including variability in forecasting its pre-tax income or loss and the mix of jurisdictions to which they relate, and changes in how we do business.
Significant judgment and estimates are required in determining our worldwide income tax expense. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally. We establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more likely than not to be realized upon settlement with a taxing authority. If the actual tax outcome of such exposures is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Changes in the location of taxable income (loss) could result in significant changes in our income tax expense.
We record a valuation allowance against deferred tax assets if it is more likely than not that a portion of the deferred tax assets will not be realized, based on historical profitability and our estimate of future taxable income in a particular jurisdiction. Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the deferred tax assets may increase or decrease, resulting in corresponding changes in income tax expense. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide profits or losses, the tax laws and regulations in each geographical region where we have operations, the availability of tax credits and carry-forwards and the effectiveness of our tax planning strategies.
Bermuda Corporate Income Tax for Tax Years Beginning in 2025
We are subject to income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income (loss) and the provisions of currently enacted tax laws. The parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, we are not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025. In particular, the CIT applies to multinational companies with annual revenue of 750 million euros or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply.
We did not generate more than 750 million euro revenue in any of the four fiscal years before the tax year starting July 1, 2025. We continue to monitor and assess if and when it may be within the scope of the CIT. If we become subject to the Bermuda CIT, we may be subject to additional income taxes, which may adversely affect our financial position, results of operations and our overall business.
One Big Beautiful Bill Act, Enacted July 4, 2025
On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the "OBBB"), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. The key provisions include allowing immediate expensing of domestic research and experimental expenditures, new limitations on interest expense deductibility, reinstatement of 100% bonus depreciation for qualified assets placed in service in the United States after January 19, 2025 as well as changes to the calculation of taxable income resulting from the foreign derived intangible income deduction. ASC 740 Income Taxes requires the effects of changes in tax rates and
laws to be recognized in the period in which the relevant legislation is enacted. We have concluded that the impact of OBBB for the current quarter is immaterial.
Equity method investment gain (loss)
We use the equity method of accounting when we have the ability to exercise significant influence, but we do not have control, as determined in accordance with generally accepted accounting principles, over the operating and financial policies of the company. Effective December 2, 2021, we reduced our equity interest in the JV Company below 50% of outstanding equity ownership and experienced a loss of control of the JV Company. As a result, we record our investment under equity method of accounting. Since we are unable to obtain accurate financial information from the JV Company in a timely manner, we record our share of earnings or losses of such affiliate on a one quarter lag.
We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations. Profits or losses related to intra-entity sales with the equity method investee are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized. Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. In the fourth quarter of fiscal year 2025, the impairment loss of $76.8 million was recorded within equity method investment loss in the consolidated statement of operations.
Results of Operations
The following tables set forth statements of income (loss), also expressed as a percentage of revenue, for the three months ended September 30, 2025 and 2024. Our historical results of operations are not necessarily indicative of the results for any future period.
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | (% of revenue) | ||||||||||||||||||||||
| Revenue | $ | 182,501 | $ | 181,887 | 100.0 | % | 100.0 | % | |||||||||||||||
|
Cost of goods sold
|
139,656 | 137,361 | 76.5 | % | 75.5 | % | |||||||||||||||||
| Gross profit | 42,845 | 44,526 | 23.5 | % | 24.5 | % | |||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 24,145 | 22,478 | 13.2 | % | 12.4 | % | |||||||||||||||||
| Selling, general and administrative | 23,284 | 22,300 | 12.8 | % | 12.3 | % | |||||||||||||||||
| Total operating expenses | 47,429 | 44,778 | 26.0 | % | 24.7 | % | |||||||||||||||||
| Operating loss | (4,584) | (252) | (2.5) | % | (0.2) | % | |||||||||||||||||
|
Other income (loss), net
|
2,468 | (650) | 1.3 | % | (0.4) | % | |||||||||||||||||
| Interest income | 892 | 1,265 | 0.5 | % | 0.6 | % | |||||||||||||||||
| Interest expenses | (360) | (812) | (0.2) | % | (0.4) | % | |||||||||||||||||
| Net loss before income taxes and equity method investment income (loss) | (1,584) | (449) | (0.9) | % | -0.009 | (0.4) | % | ||||||||||||||||
| Income tax expense | 1,927 | 1,040 | 1.1 | % | 0.6 | % | |||||||||||||||||
| Net loss before equity method investment income (loss) | (3,511) | (1,489) | (2.0) | % | (1.0) | % | |||||||||||||||||
| Equity method investment income (loss) | 1,389 | (1,007) | 0.8 | % | (0.6) | % | |||||||||||||||||
| Net loss | $ | (2,122) | $ | (2,496) | (1.2) | % | (1.6) | % | |||||||||||||||
Share-based compensation expense was recorded as follows:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | (% of revenue) | ||||||||||||||||||||||
| Cost of goods sold | $ | 1,065 | $ | 1,015 | 0.6 | % | 0.6 | % | |||||||||||||||
| Research and development | 1,859 | 1,935 | 1.0 | % | 1.1 | % | |||||||||||||||||
| Selling, general and administrative | 4,208 | 3,952 | 2.3 | % | 2.2 | % | |||||||||||||||||
| Total | $ | 7,132 | $ | 6,902 | 3.9 | % | 3.9 | % | |||||||||||||||
Three Months Ended September 30, 2025 and 2024
Revenue
The following is a summary of revenue by product type:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Power discrete | $ | 108,506 | $ | 122,454 | $ | (13,948) | (11.4) | % | |||||||||||||||
| Power IC | 72,708 | 52,940 | 19,768 | 37.3 | % | ||||||||||||||||||
|
Packaging and testing services and other
|
1,287 | 852 | 435 | 51.1 | % | ||||||||||||||||||
| License and development services | - | 5,641 | (5,641) | (100.0) | % | ||||||||||||||||||
| $ | 182,501 | $ | 181,887 | $ | 614 | 0.3 | % | ||||||||||||||||
The following is a summary of revenue by end market:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | (% of revenue) | ||||||||||||||||||||||
| Computing | $ | 97,131 | $ | 76,411 | 53.2 | % | 42.0 | % | |||||||||||||||
| Consumer | 23,514 | 31,696 | 12.9 | % | 17.4 | % | |||||||||||||||||
| Communication | 32,667 | 35,426 | 17.9 | % | 19.5 | % | |||||||||||||||||
| Power Supply and Industrial | 27,902 | 31,861 | 15.3 | % | 17.5 | % | |||||||||||||||||
|
Packaging and testing services and other
|
1,287 | 852 | 0.7 | % | 0.5 | % | |||||||||||||||||
| License and development services | - | 5,641 | - | % | 3.1 | % | |||||||||||||||||
| $ | 182,501 | $ | 181,887 | 100.0 | % | 100.0 | % | ||||||||||||||||
Total revenue was $182.5 million for the three months ended September 30, 2025, an increase of $0.6 million, or 0.3% as compared to $181.9 million for the same quarter last year. The increase was primarily due to an increase of $19.8 million in sales of power IC products and an increase of $0.4 million in packaging and testing services and other, partially offset by a decrease of $13.9 million in sales of power discrete products, as well as a decrease of $5.6 million in license and development services. The net increase in power discrete products and power IC products sales was primarily due to a 0.4% increase in unit shipment and a 2.9% increase in average selling price as compared to same quarter last year due to a shift in product mix. The net increase in revenues was primarily driven by a significant increase in the computing markets, particularly in graphics cards , note books and mother board products, partially offset by a decrease in consumer markets, particularly in home appliances and gaming products, and a decrease in power supply and industrial markets, particular in power tools products and quick chargers products, as well as a decrease in communication market, particularly in battery products. The increase in revenue of packaging and testing services for the three months ended September 30, 2025, as compared to same quarter last year, was primarily due to increased demand. The decrease in license and development services for the three months ended September 30, 2025 was related to the license agreement with a customer to license our proprietary SiC technology and provided 24-month engineering and development services, which was completed during the three months ended March 31, 2025.
Cost of goods sold and gross profit
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Cost of goods sold | $ | 139,656 | $ | 137,361 | $ | 2,295 | 1.7 | % | |||||||||||||||
| Percentage of revenue | 76.5 | % | 75.5 | % | |||||||||||||||||||
| Gross profit | $ | 42,845 | $ | 44,526 | $ | (1,681) | (3.8) | % | |||||||||||||||
| Percentage of revenue | 23.5 | % | 24.5 | % | |||||||||||||||||||
Cost of goods sold was $139.7 million for the three months ended September 30, 2025, an increase of $2.3 million or 1.7%, as compared to $137.4 million for the same quarter last year. The increase was primarily due to 0.3% increase in sales. Gross margin decreased by 1.0 percentage points to 23.5% for the three months ended September 30, 2025, as compared to 24.5% for the same quarter last year. The decrease in gross margin was primarily due to higher material costs during the three months ended September 30, 2025.
Research and development expenses
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Research and development expenses | $ | 24,145 | $ | 22,478 | $ | 1,667 | 7.4 | % | |||||||||||||||
Research and development expenses were $24.1 million for the three months ended September 30, 2025, an increase of $1.7 million, or 7.4%, as compared to $22.5 million for the same quarter last year. The increase was primarily attributable to a $1.6 million increase in employee compensation and benefit expense mainly due to increased headcount, merit salary increases, and higher bonus expense.
Selling, general and administrative expenses
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Selling, general and administrative | $ | 23,284 | $ | 22,300 | $ | 984 | 4.4 | % | |||||||||||||||
Selling, general and administrative expenses were $23.3 million for the three months ended September 30, 2025, an increase of $1.0 million, or 4.4%, as compared to $22.3 million for the same quarter last year. The increase was primarily due to a $0.9 million increase in employee compensation and benefits expenses primarily due to merit salary increases and higher bonus expense, a $0.2 million increase in share-based compensation expense as a result of more grants of awards, and a $0.2 million increase in audit fees, partially offset by $0.2 million decrease in design-win commission.
Other income (loss), net
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Other income (loss), net | $ | 2,468 | $ | (650) | $ | 3,118 | (479.7) | % | |||||||||||||||
Other income (loss), net increased in the three months ended September 30, 2025, as compared to the same periods last year primarily due to an increase in foreign currency exchange gain as a result of the depreciation of RMB against USD, as well as $1.9 million of certain services were provided by the Company to the JV Company.
Interest income
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Interest income | $ | 892 | $ | 1,265 | $ | (373) | (29.5) | % | |||||||||||||||
Interest income decreased in the three months ended September 30, 2025, as compared to the same periods last year primarily due to lower interest rates in the current periods.
Interest expense
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Interest expenses | $ | (360) | $ | (812) | $ | 452 | (55.7) | % | |||||||||||||||
Interest expense decreased in the three months ended September 30, 2025 as compared to the same periods last year primarily due to less outstanding loan balance in the current periods.
Equity method investment loss
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Equity method investment income (loss) | $ | 1,389 | $ | (1,007) | $ | 2,396 | (237.9) | % | |||||||||||||||
Equity method investment income increased in the three months ended September 30, 2025, as compared to the same period last year as a result of the gain from the sales of 20.3% outstanding equity interest in the JV Company in August 2025, as well as an income recorded from the equity method investment during the three months ended September 30, 2025, compared to the equity method investment loss in the same periods last year.
Income tax expense
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| (in thousands) | (in thousands) | (in percentage) | |||||||||||||||||||||
| Income tax expense | $ | 1,927 | $ | 1,040 | $ | 887 | 85.3 | % | |||||||||||||||
We recognized income tax expense of approximately $1.9 million and $1.0 million for the three months ended September 30, 2025 and 2024, respectively. The income tax expense of $1.9 million for the three months ended September 30, 2025 included a $0.1 million discrete tax expense. The income tax expense of $1.0 million for the three months ended September 30, 2024 included a $0.1 million discrete tax expense. Excluding the discrete income tax items, the income tax expense for the three months ended September 30, 2025 and 2024 was $1.9 million and $1.0 million, respectively, and the effective tax rate for the three months ended September 30, 2025 and 2024 was (952.4)% and (65.8%), respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year, including reporting $0.6 million of income tax expense
related to the Company's income from its investment in CQJV for the three months ended September 30, 2025 versus an $0.2 million tax benefit for the three months ended September 30, 2024.
We file our income tax returns in the United States and in various foreign jurisdictions. The tax years 2004 to 2025 remain open to examination by U.S. federal and state tax authorities. The tax years 2019 to 2025 remain open to examination by foreign tax authorities.
Our income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. These assessments can require considerable estimates and judgments. As of September 30, 2025, the gross amount of unrecognized tax benefits was approximately $10.8 million, of which $7.4 million, if recognized, would reduce the effective income tax rate in future periods. If our estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. We do not anticipate any material changes to its uncertain tax positions during the next twelve months.
Liquidity and Capital Resources
Our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business. To date, we finance our operations and capital expenditures primarily through funds generated from operations and borrowings under our term loans, financing lease and other debt agreements.
In September 2021, Jireh Semiconductor Incorporated ("Jireh"), one of the wholly-owned subsidiaries, entered into a financing arrangement agreement with a company ("Lender") for the lease and purchase of a machinery equipment manufactured by a supplier. This agreement includes a payment term of five (5) years, pursuant to which Jireh commenced payments of interests and principal to the Lender in September 2022 when the final installation and acceptance of the equipment were completed. After the end of such payment term, Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes. The total purchase price of this equipment was euro 12.0 million. In April 2021, Jireh made a down payment of euro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for euro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment. The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million. The financing arrangement is secured by this equipment and other equipment at Jireh, which had the net book value of $11.7 million as of September 30, 2025. As of September 30, 2025, the outstanding balance of this debt financing was $5.8 million.
On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the "Bank") in an amount up to $45.0 million for the purpose of expanding and upgrading our fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by us. The agreement has a 5.5 year term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted SOFR plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that we are required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2025, Jireh was in compliance with these covenants and the outstanding balance of this loan was $20.3 million. In August 2025, we paid the outstanding balance in full. As of August 2025, this agreement was terminated with no outstanding balance.
On August 9, 2019, one of our wholly-owned subsidiaries (the "Borrower") entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited ("HSBC"), whereby the Borrower assigns certain of its accounts receivable with recourse. This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the Secured Overnight Financing Rate ("SOFR)", plus 2.01% per annum. We are the guarantor for this agreement. We are accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. On August 11, 2021, the Borrower signed an agreement with
HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. In August 2025, this factoring agreement was terminated with no outstanding balance.
We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs, including working capital and capital expenditures, for at least the next twelve months. In the long-term, we may require additional capital due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash is insufficient to meet our needs, we may seek to raise capital through debt financing. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. If we decide to raise capital through equity financing, the issuance of additional equity may result in dilution to our shareholders. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.
Cash, cash equivalents and restricted cash
As of September 30, 2025 and June 30, 2025, we had $223.9 million and $153.5 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consist of cash on hand, restricted cash, and short-term bank deposits with original maturities of three months or less. Of the $223.9 million and $153.5 million cash, cash equivalents and restricted cash, $166.9 million and $40.7 million, respectively, are deposited with financial institutions outside the United States.
The following table shows our cash flows from operating, investing and financing activities for the periods indicated:
| Three Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 10,187 | $ | 11,021 | |||||||
| Net cash provided by (used in) investing activities | 81,945 | (6,738) | |||||||||
| Net cash used in financing activities | (21,634) | (3,706) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (66) | 105 | |||||||||
|
Net increase in cash, cash equivalents and restricted cash
|
$ | 70,432 | $ | 682 | |||||||
Cash flows from operating activities
For the three months ended September 30, 2025, the $0.8 million decrease in cash provided by operating activities compared to the same period last year was primarily due to a decrease of net loss of $0.4 million, a decrease of non-cash expenses of $10.5 million, which includes an increase of $8.0 million in deferred income tax, net and an increase of $2.4 million in equity method investment gain due to the 20.3% equity method investment sales and income recorded from the equity method investment in current period, compared to a loss recorded from the equity method investment in the same period last year, an increase of $17.3 million in inventory purchase, and a decrease of accounts payable of $7.7 million primarily due to timing of payment. These sources of cash were offset by an increase of $10.8 million in income tax payable primarily due to the sale of the 20.3% interest in the equity method investment, a decrease of $9.7 million in accounts receivable, an increase of $5.6 million in accrued and other liabilities, a decrease of $3.1 million in contract assets, an increase of $2.6 million in deferred revenue and an increase of $1.8 million in net payable, equity investee.
Cash flows from investing activities
For the three months ended September 30, 2025, the $88.7 million increase in cash provided by investing activities compared to the same period last year was primarily due to $92.1 million of proceeds from sale of equity interest in the JV Company, net with transaction costs, partially offset by $2.8 million of more purchases of property and equipment in the three months ended September 30, 2025 compared to the same period last year.
Cash flows from financing activities
For the three months ended September 30, 2025, the $18.0 million increase in cash used in financing activities compared to the same period last year was primarily due to repayment of loan borrowings.
Commitments
See Note 12 of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for a description of commitments.
Contractual Obligations
There were no material changes outside of our ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Recent Accounting Pronouncements
See Note 1of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.
Alpha & Omega Semiconductor Ltd. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 21:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]