Alpha and Omega Semiconductor Ltd (AOSL) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Alpha and Omega Semiconductor Fiscal Fourth Quarter and Fiscal Year 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to So-Yeon Jeong. You may begin.

Thank you. Good afternoon, everyone, and welcome to the Alpha and Omega Semiconductor's conference call for fiscal fourth quarter and year-end financial results.

Our fiscal year ended June 30, 2018. This is So-Yeon Jeong, Investor Relations representative for the company. With me today are Dr. Mike Chang, our CEO; and Yifan Liang, our CFO.

This call is being recorded and broadcast live over the web and can be accessed 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, August 8, 2018, after the market closed. The release is also posted on the company's website.

Our earnings release and this presentation include certain non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

We would like to remind you that during the course of the 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 a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call.

Now I'll turn the discussion over to Yifan, our CFO, to provide an overview of the fourth fiscal quarter and the fiscal year 2018 financial results.

Yifan?

Thank you, So-Yeon. Good afternoon, and thank you for joining us. To begin, I will discuss financial results for the quarter and for the fiscal year ended June 30, 2018. 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. Finally, we will reserve time for questions and answers.

Revenue for the June quarter was $109.9 million, an increase of 6.8% from the prior quarter and an increase of 12.1% from the same quarter last year, driven by the continued momentum of our diversified new products and supported by the increased internal capacity.

In terms of product mix, MOSFET revenue was $89.4 million, up 6.4% sequentially and up 16.5% year-over-year. Power IC revenue was $17.5 million, up 11.8% from the prior quarter and down 3.7% from a year ago. Service revenue was approximately $3 million as compared to $3.2 million for the prior quarter and $3 million for the same quarter last year.

Regarding the segment mix, the June quarter's Computing segment represented 43.7% of the total revenue; Consumer, 19.1%; Power Supply and Industrial, 20.1%; Communications, 14.1%; Service, 2.7%; and others, 0.3%.

For the fiscal year 2018, revenue was $421.6 million, up 10% from the prior fiscal year.

Non-GAAP gross margin for the June quarter was 27% as compared to 26.8% in the prior quarter and 26% for the same quarter last year. The increase in non-GAAP gross margin quarter-over-quarter was mainly driven by the improved product mix, partially offset by the inefficiency of factory operations due to the capacity expansion as well as higher raw material costs. Non-GAAP gross margin excluded $0.5 million of share-based compensation charge for the June quarter as compared to $0.4 million for the prior quarter and for the same quarter last year.

For the fiscal year 2018, non-GAAP gross margin was 26.9% as compared to last fiscal year's non-GAAP gross margin of 24.2%, representing an increase of 270 basis points.

Non-GAAP operating expenses for the quarter were $21.8 million compared to $21.7 million for the prior quarter and $19.9 million for the same quarter last year.

Non-GAAP operating expenses excluded $2.5 million of share-based compensation charge as compared to $2 million in the prior quarter and $1.6 million for the same quarter last year. Non-GAAP operating expenses also excluded $5 million of preproduction expenses related to the Chongqing joint venture for the June quarter as compared to $2.8 million in the prior quarter.

Non-GAAP operating expenses included $1.4 million of digital power team expenses for the quarter as compared to $1 million in the prior quarter. As of June 30, 2018, we had hired over 2/3 of the digital power team that we planned to build. The team has been engaging with customers in product designs.

Non-GAAP operating expenses for the fiscal year 2018 were $86 million compared to $73.1 million for the prior fiscal year. Non-GAAP operating expenses excluded $9.8 million of share-based compensation charges and $7.8 million of preproduction expenses related to our Chongqing joint venture in the current fiscal year as compared to $5.6 million of share-based compensation in the prior fiscal year.

Income tax expense was $0.7 million for the quarter as compared to $0.8 million for the prior quarter. Income tax expense for the fiscal year was $0.7 million, which included $2.7 million of onetime tax benefit from the impact of the tax reform. Income tax expense for the fiscal year 2017 was $3.7 million.

Non-GAAP EPS attributable to AOS for the June quarter was $0.31 earnings per share as compared to $0.23 earnings per share for the prior quarter and $0.25 earnings per share for the same quarter last year. Non-GAAP EPS attributable to AOS for the quarter excluded $2.9 million of share-based compensation charge and $3.6 million preproduction expenses as compared to $2.5 million of share-based compensation and $1.6 million of preproduction expenses in the prior quarter.

Non-GAAP EPS attributable to AOS for the fiscal year was $1.14 as compared to $0.83 earnings per share for the prior fiscal year.

In the June quarter, we generated $8.7 million operating cash flows attributable to AOS as compared to $0.7 million for the prior quarter and $14.5 million for the same quarter last year.

Cash flows used in operations attributable to our Chongqing joint venture was $19.5 million for the June quarter as compared to $8.3 million for the last quarter and $0.9 million for the same quarter last year.

Cash flows from operations attributable to AOS for the fiscal year were $36.9 million as compared to $44.8 million for the prior year. Cash flows used in the operations attributable to the joint venture were $33.4 million for the year compared to $2.1 million for the prior fiscal year.

EBITDAS for the June quarter was $12.8 million compared to $12.3 million for the prior quarter and $14 million for the same quarter last year. EBITDAS for the year was $56.1 million as compared to $51.2 million in fiscal year 2017.

Moving on to the balance sheet. We've completed the June quarter with cash and cash equivalents balance of $131.5 million, including $43.3 million cash balance at our Chongqing joint venture as compared to $125.2 million at the end of last quarter, including $46 million cash balance at the joint venture.

Our cash balance a year ago was $115.7 million, including $6.1 million at the joint venture.

As we previously filed with the SEC on May 11, 2018, our Chongqing joint venture entered a lease financing agreement and received approximately $60.4 million for its equipment purchases and payments of constructions. In addition, AOS borrowed $17.8 million mortgage against the Oregon fab's land and building to fund its capacity expansion.

With that, bank borrowing balance at the end of the June quarter was $91.3 million, including $30.9 million from AOS and $60.4 million from the joint venture as compared to $13.2 million from AOS and $0 from the joint venture at the end of the March quarter.

Net trade receivables were $33.8 million as compared to $28.9 million at the end of last quarter and $28.4 million at the end of -- at the same quarter last year. Day sales outstanding for the quarter was 29 days compared to 30 days in the prior quarter.

Net inventory was $90.2 million at the quarter end compared to $90.5 million for last quarter and $76.3 million for the prior year. Average days in inventory were 101 days for the quarter compared to 105 days for the prior quarter.

Net property, plant and equipment balance was $331.7 million as compared to $258.8 million last quarter and $148.2 million for the prior year. Capital expenditures were $55.1 million for the quarter, including $13.8 million from AOS and $41.3 million from our Chongqing joint venture.

Capital expenditures for the fiscal year were $177.7 million, including $49.4 million from AOS and $128.3 million from the joint venture.

As we have largely finished our internal capacity expansion, we expect that capital expenditures from AOS for fiscal year 2019 to be down to the range of 6% to 8% of the total revenue.

During the June quarter, we've repurchased 201,000 shares of our stock from the open market for approximately $3.1 million under our existing share repurchase program.

Before I conclude the financial review, let me update -- let me add a brief update on the progress of our Chongqing joint venture. We substantially completed the facilities for assembly and test and the 12-inch fab by the end of the June quarter as per our plan. We expect to commence small mass production for assembly and test during the September quarter and start the 12-inch wafer trial production toward the end of calendar year 2018.

With that, now I would like to turn the call over to our CEO, Dr. Mike Chang, who will provide the business highlights for the quarter. Mike?

Yifan, thank you, and thank you, everyone, for listening to us. AOS once again delivered outstanding execution for the June quarter. As the new capacity came online, we achieved another record quarterly revenue and all of the core financial metrics came in above the midpoint of our guidance range.

We closed a solid fiscal year 2018, setting a new record with annual revenue and the highest non-GAAP earnings per share in 7 years. I am pleased with the annual revenue growth by 10% year-over-year and the non-GAAP gross margin expansion by 270 basis points. I am more pleased that we improved the annual non-GAAP earnings per share by 37% as compared to a year ago.

The set up in the revenue run rate and the earnings -- the step-up in the revenue run rate and the earnings leverage were driven by strong demand for our diversified new products and were enabled by the increased internal capacity.

Looking back at the fiscal year 2018 every effort we dedicated has been about making fundamental improvements towards our goal to accelerate growth. In terms of demand-side improvement, we continue to bring the market-driven R&Ds and the technology road map that coincide with our customers' emerging interests and needs. The demand for our products remained very strong across all DMOS technology platforms. Including low, medium, high-voltage and IGBT. And some of the design activities are now transitioning to a stable revenue stream.

Our Power IC product line that was severely impacted by the supply constraint is expected to resume to growth starting from September quarter. Our new DrMOS products are gaining traction in Vcore applications, and we are allocating more capacity to support our customers.

Additionally, we are just starting the ramp of our products for smartphone battery pack and high-value, high-performance graphics card. I'm very excited about the opportunity -- opportunities for scalable expansion led by [AOS] customer friendly products.

With regard to the supply side, the Chongqing joint venture plan reached several major milestones throughout the year. The construction of building, infrastructure and the phase 1 clean room were completed ahead of schedule.

We started to gradually equip the clean room a couple of quarters ago and successfully finished the trial production at the assembly and the test facility.

In addition, we have been gradually expanding our internal capacity over the past multiple quarters to support increasing demand.

I am pleased to announce that the critical investments in internal capacity are already in place, and the heavy lifting is behind us. Our proactive and deliberate planning and execution have presented us with an opportunity to cultivate enhanced customer engagement.

At AOS, our investments are always fundamentally aligned with customers' success. Among all the business considerations, the top priority during allocation planning was to help customers keep their production lines running even if it sometimes doesn't maximize our product mix.

The AOS strong culture and the commitment to customer support were even further recognized and rewarded during last year, which in turn, advanced us to play a greater role in business partnership.

As a point in case, our hard work and dedication to the success of Chinese smartphone OEMs in the past few years solidified customer confidence in AOS, and the new customers, including global brand names, opened the door to us. The improved partnership position is reflected in the future business pipeline, and it is a critical asset that provides us with the ability to scale.

Our focused execution of business plan is accelerating the financial road map, which we believe will enhance our shareholders' value.

About a year ago, we have published both near to midterm and long-term target models. The near to midterm goal is to achieve a high single-digit revenue growth and a mid-20% gross margin. The long-term target [indiscernible] to reach $600 million in revenue [was] greater than 30% gross margin.

I am pleased to announce that we have achieved the near to midterm financial goals. With the current capacity run rate, we expect -- we now expect to grow the top line by 10% in fiscal year 2019 with notable improvements in the bottom line.

Once Chongqing joint venture ramps up in fiscal year 2020, which we strategically planned since 2015, we are confident that it will significantly enhance our growth opportunity.

As we march toward to our next set of goals, we will certainly encounter challenges that will test our patience and determination. But I am optimistic that the critical investments we have made in demand creation and the supply capability will better position us to capitalize on the next phase of accelerated growth.

I will now move on to segment review starting with Computing. It represented 43.7% of total revenue in the June quarter. We posted 13% sequential increase and 19.8% growth year-over-year. Bolstered by the strong share gain across all notebook applications, this segment grew 17.1% in fiscal year 2018. The Computing industry is increasingly expanding beyond personal computing to include artificial intelligence, big data and Internet of Things. As a leader of power management, especially in the computing area, we have been relentlessly sharpening our capability to support the customers' needs.

Computing market continues to be an important segment for AOS based on our core competencies and the customer partnership, and we are committed to stay on the forefront of the evolving technology. As the demand for our product increases, we expect this segment to grow modestly quarter-over-quarter in the September quarter.

Second, Consumer. It was 19.1% of the total revenue. It decreased by 1.7% and 13.2% sequentially and year-over-year, respectively. The decline in TV revenue caused by the soft demand from one of the major TV OEM customers continued in the June quarter, leading the fiscal year to be down by 7.2%. However, our IGBT product line continues to demonstrate solid improvement as we capture additional market shares through design wins with home appliance customers in China.

To mitigate the constraint from the third-party suppliers, we have been strategically migrating new product developments, such as higher power application for TV and home appliance, into our own production facilities. This strategy will enable us to gradually resume our consumer business strength.

With that, we expect a slight increase in this segment next quarter.

Turning to the Power Supply and the Industrial segment. It was 20.1% of the total revenue, which grew 1.5% sequentially and was up 26.3% from the same quarter last year. This segment grew by 11.5% in fiscal year 2018, driven by industrial IGBT, aMOS5, high-voltage and the medium-voltage platforms. We were able to firmly secure our market position, driven by the superior performance of our medium-voltage products. We are encouraged by the share gain with quick charges and the adoption of USB PD applications. We expect to maintain the same level of sales in the September quarter for the segment as compared to June quarter, primarily due to mix management.

Lastly, we also saw strong progress with the Communication segment. It represented 14.1% of the June quarter's revenue. It demonstrated a healthy growth of 12.1% and 19.2% sequentially and year-over-year, respectively.

We are showing strong footing and the continued share gain in the AlphaDFN product line for smartphone battery management applications. Coupled with growing demand in telecom networking products, this segment posted a 22% growth in fiscal year 2018. Fueled by the further production ramp up of our AlphaDFN, we expect this growth to continue in September quarter.

In closing, we enter fiscal year 2019 with expanded capacity, stronger portfolio in growing markets and enhanced customer partnerships. We see great opportunities ahead of us. We are keenly focused on executing our plan to deliver accelerated growth and improved profitability for many years to come.

With that, I will now turn the call over to Yifan for the guidance. Yifan?

Thank you, Mike. As we look forward to the first quarter of fiscal year 2019, we expect revenue to be between $113 million to $117 million. Gross margin to be approximately 26.5%, plus or minus 1%. Non-GAAP gross margin is expected to be approximately 28.5%, plus or minus 1%. Non-GAAP gross margin excludes $0.6 million of estimated share-based compensation charge and $1.7 million of estimated production ramp up costs relating to the Chongqing joint venture.

Operating expenses to be in the range of $32 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $24.2 million, plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $2.1 million to $2.3 million of estimated expenses relating to the development of our digital power team.

Non-GAAP operating expenses exclude an estimated share-based compensation charge of approximately $2.8 million and estimated preproduction expenses relating to the joint venture of $5 million.

Tax expense to be approximately $0.6 million to $0.8 million. Loss attributable to noncontrolling interest to be around $4.2 million. On a non-GAAP basis excluding approximately $3.5 million estimated preproduction expenses and production ramp up costs relating to the joint venture, this item is expected to be approximately $0.7 million.

As part of our normal practice, we're not assuming any obligations to update this information.

With that, we'll open up the floor for questioning. Operator?

(Operator Instructions) And our first question comes from Jeremy Kwan from Stifel Nicolaus.

Congratulations on the nice growth and outlook. Question about the outlook for the fiscal year. That 10% growth, is that -- any of that dependent on the JV ramping up? Or is your current install capacity at AOS enough to support that growth?

Thank you, Jeremy. That 10% growth in -- for fiscal year '19 is largely -- depends on our internal capacity at this point, plus -- of course, plus third-party foundries. We're not placing that much on the joint ventures ramp up.

Great. And then just shifting gears to the Consumer segment. You mentioned the China [home clients] market being a restraint. Have you seen any impacts maybe further specifically with regard to that segment or in general, relating to the ongoing tariff challenges?

At this moment, we have not seen. Of course, this trade dispute is just the beginning. And second, we are new. We are fused more, so probably we would not be -- would be not impacted too much by that if there is any.

Got it. Great. And just a question in terms of the JV operating cash burn, $19.5 million this quarter was quite an increase from last quarter. Can you give some idea of where you see that going forward? And maybe if you can kind of see you when it might be kind of achieve breakeven status? Whether on operating or a free cash flow basis?

You mean the OpEx?

Sorry, for the JV cash burn. The operating cash flow, yes.

Okay. Well, from the cash flow perspective, I would like to separate AOS and the joint venture. So that's why in this quarter, we've increased some supplemental disclosure in our earnings release toward the end of the press release. For AOS, cash contribution, capital contribution. If we completed that, pretty much then we've completed our obligations. So for the joint venture, yes, it seemed that construction building pretty much finished at this point. And then we are importing, installing the machines for the 12-inch fab. So at this point, I mean, they have their capacity to borrow. As you saw last quarter in May, we -- the joint venture entered into a lease financing for $67 million financing. So -- I mean, yourself -- this cash can support its own construction and equipment purchases. So if they need, they can -- they still have other -- some additional capacity to borrow. So I mean, that's -- I would like to see it separately from the cash flow perspective.

Understood. I guess, I was referring to the -- there's a line that says net cash used in operating activities for the Chinese Chongqing joint venture that was supposed to be at $19.5 million. Can you give us an idea where that might go next quarter? And maybe even the next couple of quarters if you ramp up production.

Well, the increase from $19 million, [because that in] $19 million mainly pay for the current expenses, salaries and then some inventory purchases. So next quarter, in the September quarter, as assembly and test starts some small mass productions, we would expect we need more working capital to support the ramp.

Jeremy, you mind if I give you some perspective from a business point of view about our Chongqing joint venture?

I'm sorry, can you say that again?

I said would you mind if I give you some of what our point about this Chongqing joint venture from a business point of view?

Yes, I understand. Yes, that's going to help.

All right. Do you want -- let me give you a little bit of perspective about the whole thing, so maybe if I can give understanding. Okay. For a couple of years, okay, there's this tremendous demand for the semiconductor product there, which is from, probably -- will probably last to early next year. So everybody is scrambling -- or struggling for capacity for foundry, okay. So with $35 million cash, we have got a huge facility, 12-inch with good equipment there. But we only -- because joint venture, right, if any exposure, we only have half the exposure, right. But we're going to harvest the full benefit of the capacity. So that's why we're so excited about that. Of course, the going up there, it's always kind of a challenge there. But that's a good challenge that we are really happy to face to, to work on. This activity is [$0.02] of a point. So if I have the right perspective, why we're so excited about this Chongqing joint venture. You could say we're taking advantage when somebody else share the risk.

Right. No, that makes sense to share the risk and gain full side capacity. But that $35 million, that includes the $25 million additional contribution in cash? And that payment, has that hit yet?

That will be in the September quarter.

And our next question comes from Edgar Roesch from Sidoti.

Mike, I appreciate all the color you provided on the various end markets and the products. I did want to follow-up on 1 point. Would you say overall that the mix management that was imposed by your supply constraints in 2018 was overall fairly neutral to the gross margin or a drag? What would be your perspective on the overall impact of that mix management?

Sure. I mean, mix management has definitely contributed positively to the gross margin improvement of 270 basis points in fiscal year '18. That 270 basis points improvement in the year, some contributed from the utilization perspective. But by and large, some bigger portion of it contributed from the mix management.

Okay. And then on the operating expense side, is it fair to think the next step-up in non-GAAP expenses, so excluding the preproduction items, would that be higher in the next 1/3 or 2/3 of the digital power team? And that would really be the next step or 2 steps, and then it might start to flatten out a little bit sequentially?

Yes. Well, the digital power team, as of the end of the June quarter, we hired about 2/3 of the team already. So we'll continue to fill in a few openings. Yes, we do expect the digital power team expenses to increase in the September quarter. I've provided guidance. We estimate it at this point, $2.1 million to $2.3 million for the digital power team versus in the June quarter, it was $1.4 million. So we should expect it steps up. Eventually -- I mean, the team is fairly close to be complete. And right now, the team is working with customers, multiple customers in design -- in product designs. So it progressed pretty well at this point.

Okay, terrific. And that's the main driver of the increase in expenses at this point. Are there some other things on the horizon you'd highlight?

Oh, yes. I mean, in the other area of businesses, we see a lot of growth opportunities. So we're continuing to invest in R&D and sales marketing to further secure our growth. In the meantime, I mean, for the June quarter, if you look at it, our R&D expenses are actually fluctuated toward the lower numbers. So that's just the nature of R&D expenses, fluctuating from time-to-time. So we would expect and get back to the normal level. So you may see in the June quarter, on R&D expenses and kind of temporarily and a little bit lower than even the March quarter.

All right. Is it too early for the -- to be any meaningful inventory held at the JV? Because I was just interested that you were flat sequentially on inventory. Was there anything in the JV that built up in the quarter?

Not much because in the June quarter, JVs and assembly and test did not start in the mass production. So it's only a trial. It was a trial production there. In the September quarter, we'll see a little bit material buildup in the joint venture for assembly and test. But then I would not expect too much because it's only starting at a small mass production, not at full scale production yet.

Okay, great. And then Mike, I think you mentioned the Power IC business is set for growth again. And is that just the internal Oregon capacity coming online that is supplying the components?

A good portion was from our Oregon, yes, internal, with still some portion from outside. But the outside is pretty secure. So that should be helpful.

Yes, DrMOS, and as Mike mentioned in his prepared remarks, our DrMOS product is gaining pretty good tractions in the Vcore business And so we do expect that product line to start growing again.

(Operator Instructions) And our next question comes from Craig Ellis from B. Riley FBR.

This is actually Peter Peng calling in for Craig Ellis. First, I wanted to concentrate on just some of the near-term variance. The operating expenses for the quarter came in a little bit lighter despite the higher revenue. Wondering if that's just some of the shift in the R&D that you mentioned into the September quarter?

Yes. I mean, that partially is the reason. Yes. I mean, the R&D expenses tend to fluctuate from quarter-to-quarter.

Great. And then on the September OpEx, does that kind of embed all the full hire of the power management team? Or is that still partial? Wanted to understand if that captures the whole digital power team.

Yes, that's pretty much the way we expect, with further the hire field headcounts for the digital power team in the September quarter. So yes, that's why the expenses for that team steps up from $1.4 million to $2.1 million to $2.3 million range.

Got it. And then on the gross margins. For the guidance, it seems like it's above what we expected. So wondering if you can talk about the gives and takes. Is there some kind of, I guess, less rising wafer costs and raw material costs? Or is that -- a lot of that utilization picking up? So if you can just provide some color on that.

Sure. I mean, gross margin for the September quarter, that increase came from the 2 or 3 factors. One is the product mix. We continue to expect our newer products gaining more revenues proportionally. And then at the same time, we also manage the product mix. Given the current favorable MOSFET environment, we would expect we continue to improve our gross margin. Offsetting factor is mainly from the increase of the raw materials, such as substrates, epis and foundry wafers. And even some back-end lead frames, some materials, we see some cost increases.

Got it. And then kind of looking at the fiscal 2019 10% year-on-year growth. Can you just talk about the end segment expectations, whether you're still expecting those double digits in the compute and the comps and then more of the mid-single-digits in industrial? Maybe if you can provide some color on these segment expectations.

Sure. In terms of segment in fiscal year '19, yes, I would expect the good growth still comes from these communication areas. And we'll continue to gain shares in the smartphone battery pack area and some telecom areas. In the Computing area, we would expect some fairly good growth there as well. And then the Power Supply and Industrial area, yes, we are expecting some gains because we rolled out our aMOS5 high-voltage platform not very long ago. So we do expect that new platform can generate additional revenue for us. Also in the areas such as quick charger, some power USB PD area. And then in the Consumer area, yes, our IGBT product line is performing very well. Last calendar year, that new product line crossed the $10 million annual revenue. So for this year, calendar year '18, we expect it to continue to grow significantly for that product line, last -- primarily in the home appliances area. And other, like in our high-voltage aMOS5 platform can also be used them in some other, like, consumer devices area, such as TV, power, so on. We do expect the growth is from almost all the segments. Some faster, some maybe did less than 10%. But by and large, we should see a higher growth rate. Last year, we guided single -- high single-digit growth rate. And then this year, we guided 10%.

Okay, great. And just going back to that gross margin. Is that a gross margin that you're comfortable in sustaining throughout the year? Or is this more of a mix for 1 quarter kind of thing?

We would expect that, that September guidance can be viewed as whole year. Even for the whole year, we'll probably -- we'll see even higher gross margin a little bit. I mean, we do expect it in the next few quarters, and we can continue to improve our gross margin.

Okay. And one more question before I hop back into queue. On the cash, can you talk about the cash availability for buybacks and your expectations for buyback pacing?

Yes. Last year, I believe it was September quarter also. Last year, we set up a $30 million buyback program. So far, we have already repurchased half of it, $15 million. In the June quarter, we repurchased $3 million. We'll see. I mean, it depends on our situation and then cash flow and other things. So that program is still in place.

And we have a follow-up question from Jeremy Kwan from Stifel.

I just wanted to follow-up on the assembly and test ramp up. As -- I guess, first question is, has the equipment been fully transferred there? And also, can you help us understand the dynamics of how that's going to affect -- flow through the income statement? From what I understand, you transferred a majority of the back end equipment, about $60 million worth. So presumably some of it's going to be split with the JV and some of it, you get to capture back for yourselves. Can you just help us understand the dynamics there?

Okay, sure. Yes, for the total contribution, we plan to move about half or slightly half, higher than half of our Shanghai facilities equipment to contribute to the joint venture. In the September quarter, we'll continue to move. At the end of the June quarter, we only moved a small portion of it. So that get line set up, qualified and then qualified with customers. And so we'll continue to gradually move more equipments from our Shanghai facility to the joint venture because we want to manage it this transition carefully, so that it won't jeopardize our -- the production schedule. So in the September quarter, they only produce a small amount of mass production to us. So basically, their function is like our sub-con. So they produce for us, so that we sell the products to our customers.

And that concludes today's Q&A session. I would now like to turn the call back over to the speakers for any closing remarks.

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

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now disconnect. Everyone, have a great day.