AOS(AOSL) - 2020 Q2 - Quarterly Report

Product Development - The company introduced approximately 2,100 power semiconductor products, with 200 new products launched in both fiscal years 2019 and 2018, and an additional 45 new products in the six months ended December 31, 2019[108]. - The company has an extensive patent portfolio consisting of 804 patents and 87 patent applications in the United States, along with 833 foreign patents as of December 31, 2019[108]. Revenue and Sales Performance - Revenue from the personal computing (PC) market accounted for approximately 41.3% and 48.5% of total revenue for the three months ended December 31, 2019 and 2018, respectively[119]. - Total revenue for Q3 2019 was $117.9 million, an increase of$2.9 million, or 2.6%, compared to $114.9 million in Q3 2018[139]. - Total revenue for the six months ended December 31, 2019, was$235.7 million, an increase of $5.7 million, or 2.5$230.0 million in the same period last year[140]. - Power discrete sales increased by $8.2 million, while power IC sales decreased by$4.7 million, leading to a net increase in sales[139]. - Sales of power discrete increased by $16.5 million, while power IC sales decreased by$8.4 million during the six-month period[140]. - Average selling price increased by 7.6% compared to the same quarter last year, despite a 4.1% decrease in unit shipments[139]. - Average selling price for power discrete and power IC products increased by 14.1% compared to the same period last year, despite a 9.1% decrease in unit shipments[140]. Financial Performance - Cost of goods sold for Q3 2019 was $93.5 million, representing 79.3$24.4 million, or 20.7% of revenue, down from 25.7% in Q3 2018[135]. - Operating expenses for Q3 2019 totaled $27.8 million, or 23.6$12.1 million, representing 10.3% of revenue, slightly down from 11.0% in Q3 2018[135]. - Gross profit for the three months ended December 31, 2019, was $24.4 million, a decrease of$5.1 million, or 17.3%, compared to $29.5 million for the same quarter last year[141]. - Gross margin for the six months ended December 31, 2019, decreased by 5.2 percentage points to 21.8$24.5 million, an increase of $0.5 million, or 2.2$24.0 million for the same period last year[144]. - Selling, general and administrative expenses for the six months ended December 31, 2019, were $30.8 million, a decrease of$9.6 million, or 23.8%, compared to $40.5 million for the same period last year[146]. Joint Venture and Market Position - The joint venture company recorded a net loss of$3.6 million and $6.4 million attributable to noncontrolling interest during the three and six months ended December 31, 2019[110]. - The company anticipates that the joint venture will enhance market positions in China and drive improvements in capital expenditures[110]. - The company is incurring increased operating expenses due to costs associated with ramping up production at the joint venture and developing a new digital power business[114]. Future Outlook - The company expects a decrease in production during the quarter ending March 31, 2020, due to the coronavirus outbreak and extended Chinese New Year holiday[110]. - The company expects average selling prices of existing products to decline in the future, consistent with historical trends in the industry[117]. Compliance and Investigations - The company is currently under investigation by the U.S. Department of Justice regarding compliance with export control regulations, which may negatively impact financial performance[122]. Cash Flow and Financing - As of December 31, 2019, the company had$111.5 million in cash and cash equivalents, down from $124.3 million as of June 30, 2019[168]. - Net cash used in operating activities for the six months ended December 31, 2019 was$7.7 million, primarily due to a net loss of $6.4 million and net changes in assets and liabilities of$12.4 million[169]. - Net cash used in investing activities for the six months ended December 31, 2019 was $31.2 million, mainly for purchases of property and equipment totaling$32.4 million[173]. - Net cash provided by financing activities for the six months ended December 31, 2019 was $11.0 million, primarily from$33.7 million in borrowings[175]. - The outstanding balance of the lease financing as of December 31, 2019 was approximately $50.3 million[160]. - The company had an unused credit of approximately$30.0 million under a factoring agreement with HSBC as of December 31, 2019[159]. - As of December 31, 2019, the outstanding balance of a loan agreement with China Development Bank was $24.0 million[161]. - The company had$13.4 million remaining available under the share repurchase program as of December 31, 2019[166]. - The company drew down 190 million RMB (approximately $28.2 million) from a loan agreement with The Export-Import Bank of China as of December 31, 2019[162]. - The company was in compliance with all financial covenants as of December 31, 2019[163].