What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-23 compared with 2023-08-29 · 134 added, 190 removed, 413 unchanged (44% of the section changed)

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Our consolidated financial statements contained in this annual report are prepared in accordance with U.S.

We are a designer, developer and global supplier of a broad range of power discretes, ICs, modules and digital power solutions including a wide portfolio of Power MOSFET, SiC, IGBT,IPM, TVS, Gate Drivers, Power IC, and Digital Power products.

Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal year ended June 30, 2022 and 2021, respectively.

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 2,700 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, respectively.

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.

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Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.

During fiscal year 2024, we accelerated the development of new technology platforms which allowed us to introduce 36 medium and high voltage MOSFET products, targeting primarily the industrial markets and computing marketing, as well as 17 low voltage MOSFET products primarily for the computing market.

In addition, we introduced 37 Power IC new products for computing applications, communication and consumer markets.

Our business model leverages global resources, including research and development and manufacturing in the United States and Asia.

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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.

On March 29, 2016, we formed the JV Company with the Chongqing Funds, for the purpose of constructing and operating the Chongqing Fab in the LiangJiang New Area of Chongqing, China.

The Chongqing Fab was being built in phases.

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 JV Company was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021.

The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interests until December 1, 2021.

On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd.

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Also, the Company’s right to designate directors on the board of JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction.

As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company and has determined that the JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.

On December 24, 2021, we entered into a share transfer agreement with another third-party investor, pursuant to which the Company sold to this investor 1.1% of outstanding equity interest held by us in the JV Company.

As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company.

The JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.

In addition, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company in exchange for cash.

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On January 26, 2022, the JV Company completed a financing transaction pursuant to a corporate investment agreement (the “Investment Agreement”) between the JV Company and certain third-party investors (the “New Investors”).

Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”).

Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at both June 30, 2022 and 2023.

509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”).

Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at June 30, 2022.

In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%.

As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%.

We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion.

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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.

On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company provided us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level.

Impact of COVID-19 Pandemic to Our Business

During the first half of calendar year 2022, our operations were negatively impacted by China’s zero-Covid policy that resulted in factory shutdowns and supply chain shortages, including the temporary suspension of our factory operations in Shanghai from April to June 2022.

In December 2022, the Chinese government issued new guidelines easing some of its strict zero-COVID policies, including the relaxation of testing requirements and travel restrictions.

In May 2023, World Health Organization (WHO) declared an end to the COVID-19 pandemic.

As of June 30, 2023, our business operations and financial performance were no longer affected by the pandemic.

On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level.

Other Factors Affecting Our Performance

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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.

Since mid-2022, we have experienced an industry-wide decline of customer demand for semiconductor products.

This decline has negatively affected our recent financial performance in 2023.

While we expect some continued recovery of our revenue in the September quarter of 2023, there is no guarantee that it will occur.

A prolonged and extended downturn in the semiconductor industry would have a substantial impact on our operating results and financial conditions.

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.

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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.

For example, the recent global shortage of semiconductor manufacturing capacity has provided us with both challenges and opportunities in the market, and highlighted the importance of maintaining sufficient and independent in-house manufacturing capabilities to meet increasing customer demands.

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.

In addition, we enhanced the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding our factory facilities, which we expect will have a positive impact on our future new product development and revenue, particularly during the period of global shortage of capacity.

We also rely substantially on the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation.

As a result of sales of our JV Company equity interests and issuance of additional equity interests by the JV Company to third-party investors in financing transactions, our equity interest in the JV Company was reduced to 42.2%, which reduced our control and influence over the JV Company.

We also rely on the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation.

We continue to maintain a business relationship with the JV Company to ensure uninterrupted supply of manufacturing capacity.

On July 12, 2022, we entered into an agreement with the JV Company, pursuant to which the JV Company agrees to provide us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level.

Because we continue to rely on the JV Company to provide us with manufacturing capacity, if the JV Company take actions or make decisions that prevents us from accessing required capacity, our operations may be adversely affected.

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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 existing products to decline in the future.

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.

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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.

Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins with our customers.

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.

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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.

In recent periods, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the decline of the PC market conditions, have had a more significant impact on our results of operations than seasonality.

In recent periods, 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.

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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 subsidiaries.

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.

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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, pre-approved future 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 to provide 24-months of engineering and development services for a total fee of $45 million, consisting of an upfront fee of $18 million and 6.8 million paid to us in the March and July 2023, with the remaining amount to be paid upon the achievement of

specified engineering services and product milestones.

The license and development fee is determined to be one performance obligation and is recognized over the 24 months when we perform the engineering and development services.

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.

We received payments of such fees in the amount of $18.0 million, $6.8 million and $9.0 million in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.

The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services.

We use the input method to measure progression of the transfer of services.

During the fiscal years ended June 30, 2024 and 2023, we recorded $21.2 million and $9.9 million of license and development revenue, respectively.

We also entered an accompanying supply agreement to provide limited wafer supply to the customer.

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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.

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.

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On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S.

tax laws, including, but not limited to, (1) a reduction in the corporate tax

rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The Company is not currently subject to the Base Erosion and Anti-Abuse (BEAT) tax, which is a tax imposed on certain entities who make payments to their non U.S.

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The BEAT tax is imposed at a rate of 10% on Adjusted Taxable Income, excluding certain payments to foreign related entities.

It is an incremental tax over and above the corporate income tax and is recorded as a period cost.

incremental tax over and above the corporate income tax and is recorded as a period cost.

It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes.

Coronavirus Aid, Relief and Economic Security Act” (“CARES Act”), Enacted March 27, 2020

On March 27, 2020, the United States enacted the CARES Act, which made the changes to existing U.S.

tax laws, including, but not limited to, (1) allowing U.S.

federal net operating losses originated in the 2018, 2019 or 2020 tax years to be carried back five years to recover taxes paid based upon taxable income in the prior five years, (2) eliminated the 80% of taxable income limitation on net operating losses for the 2018, 2019 and 2020 tax years (the 80% limitation will be reinstated for tax years after 2020), (3) accelerating the refund of prior year alternative minimum tax credits, (4) modifying the bonus depreciation for qualified improvement property and (5) modifying the limitation on deductible interest expense.

As a result of the ability to carryback net operating losses from the June 2018 and June 2019 years to the June 2015 to June 2017 tax years, net operating losses which were previously tax-effected using the current 21% U.S.

federal tax rate were revalued to the U.S.

tax rates in effect for the June 2015 to June 2017 tax years due to the ability of receiving tax refunds for the taxes paid in these years.

Accordingly, we reported a discrete tax benefit of $1.1 million in the third quarter of fiscal year 2020 related to the re-measurement of the net operating losses that could be realized via the new net operating loss carryback provisions.

Consolidated Appropriations Act, 2021” (“CAA 2021”), Enacted December 27, 2020

On December 27, 2020, the United States enacted the Consolidated Appropriations Act, 2021, which made changes to existing U.S.

There was no material impact of the tax law changes included in the Consolidated Appropriations Act, 2021 to the Company.

“The American Rescue Plan Act of, 2021”, Enacted March 11, 2021

On March 11, 2021, the United States enacted the American Rescue Plan Act of 2021, which made changes to existing U.S.

There was no material impact of the tax law changes included in the American Rescue Plan Act of 2021 to the Company.

“The Chip and Science Act of 2022”, Enacted August 2, 2022

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The CAMT is currently not applicable to the Company.

Bermuda Corporate Income Tax for Tax Years Beginning in 2025

The Company is 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, the Company is 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.

The Company is not in a position to determine whether the annual revenues may meet and/or cross the 750 million Euro threshold for at least two of the four fiscal years immediately preceding the fiscal year when CIT may apply.

The Company continues 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.

Equity method investment income/loss from equity investee

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

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.

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Total operating expenses 175,674 177,007 166,518 26.7 % 25.6 % 21.5 %

Operating income 22,529 102,038 64,076 3.3 % 13.0 % 9.7 %

Operating income (loss)

(3,756) 22,529 102,038 (0.5) % 3.3 % 13.0 %

Other income (loss), net (73) (1,730) 999 — % (0.3) % 0.1 %

Interest expense, net (1,087) (3,920) (6,308) (0.2) % (0.5) % (1.0) %

Interest income (expense), net 1,186 (1,087) (3,920) 0.2 % (0.2) % (0.5) %

Gain on deconsolidation of the JV Company — — 399,093 — % — % 51.3 %

Loss on changes of equity interest in the JV Company, net — — (3,140) — % — % (0.4) %

Net income before income taxes 19,712 495,070 60,224 2.8 % 63.5 % 9.1 %

Net income (loss) before income taxes (2,643) 19,712 495,070 (0.3) % 2.8 % 63.5 %

Income tax expense 3,649 5,937 39,258 0.6 % 0.9 % 5.0 %

Net income before loss from equity method investment 13,775 455,812 56,289 1.9 % 58.5 % 8.5 %

Net income (loss) before loss from equity method investment (6,292) 13,775 455,812 (0.9) % 1.9 % 58.5 %

Equity method investment loss from equity investee (4,789) (1,411) (2,629) (0.7) % (0.1) % (0.3) %

Net income 12,364 453,183 56,289 1.8 % 58.2 % 8.5 %

Net income (loss) attributable to noncontrolling interest — 20 (1,827) 0.0 % 0.0 % (0.3) %

Net income attributable to Alpha and Omega Semiconductor Limited $ 12,364 $ 453,163 $ 58,116 1.8 % 58.2 % 8.8 %

Net income (loss) (11,081) 12,364 453,183 (1.6) % 1.8 % 58.2 %

Net income attributable to noncontrolling interest — — 20 0.0 % 0.0 % 0.0 %

Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ (11,081) $ 12,364 $ 453,163 (1.6) % 1.8 % 58.2 %

(1) Includes share-based compensation expense as follows:

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Power IC 205,778 218,620 220,882 (12,842) (5.9) % (2,262) (1.0) %

Packaging and testing services 3,979 11,535 12,458 (7,556) (65.5) % (923) (7.4) %

Packaging and testing services and other

4,119 3,979 11,535 140 3.5 % (7,556) (65.5) %

License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 %

$ 657,274 $ 691,321 $ 777,552 $ (34,047) (4.9) % $ (86,231) (11.1) %

The following is a summary of revenue by end market:

Year Ended June 30, Change

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Power Supply and Industrial 128,963 150,158 149,000 (21,195) (14.1) % 1,158 0.8 %

Packaging and testing services 3,979 11,533 12,458 (7,554) (65.5) % (925) (7.4) %

Packaging and testing services and other

4,119 3,979 11,533 140 3.5 % (7,554) (65.5) %

License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 %

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The decrease was primarily due to a decrease of $32.6 million and $12.8 million in sales of power discrete products and power IC products, respectively.

The decrease in power discrete and power IC product sales was primarily due to a 17.3% decrease in average selling price as compared to last fiscal year due to a shift in product mix, offset by a 12.3% increase in unit shipments.

The decrease in revenues was primarily driven by the decreased sales in the consumer markets, particularly in gaming products, offset by the increase in the computing market, particularly in notebook and motherboard products.

The increase in revenue from packaging and testing services and other for the fiscal year 2024 as compared to last fiscal year was primarily due to increased demand.

The increase in license and development services for the fiscal year 2024 was related to the license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services in February 2023.

Fiscal 2023 vs 2022

Total revenue was $691.3 million for fiscal year 2023, a decrease of $86.2 million, or 11.1%, as compared to $777.6 million for fiscal year 2022.

The decrease was primarily due to a decrease of $86.3 million and $2.3 million in sales of power discrete products and power IC products, respectively.

The decrease in power discrete and power IC product sales was primarily due to a 30.1% decrease in unit shipments, offset by a 26.9% increase in average selling price as compared to last fiscal year due to a shift in product mix.

The decrease in revenues was primarily driven by the significant decrease in the computing market, reflecting weaker demand for computers and inventory correction by our customers, in response to the industry-wide downturn in the semiconductor industry, partially offset by increased sales in the consumer markets, particularly in gaming products.

The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last fiscal year was primarily due to decreased demand.

The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last

fiscal year was primarily due to decreased demand.

The increase in license and development services for the fiscal year 2023 was related to the license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services in February 2023.

During fiscal year 2023, we accelerated the development of new technology platforms which allowed us to introduce 19 medium and high voltage MOSFET products, targeting primarily the industrial markets and communication marketing, and 6 module products primarily for the consumer markets, as well as 4 low voltage MOSFET products primarily for the computing and communication markets.

In addition, we introduced 40 Power IC new products for computing applications, communication and consumer markets.

Fiscal 2022 vs 2021

Total revenue was $777.6 million for fiscal year 2022, an increase of $120.7 million, or 18.4%, as compared to $656.9 million for fiscal year 2021.

The increase was primarily due to an increase of $62.4 million in sales of power discrete products and an increase of $59.2 million in sales of power IC products.

The increase in power discrete and power IC product sales was primarily due to a 21.0% increase in average selling price as compared to last fiscal year due to a shift in product mix, partially offset by a 2.1% decrease in unit shipments.

The decrease in revenue of packaging and testing services for the fiscal year 2022 as compared to last fiscal year was primarily due to decreased demand.

Cost of goods sold and gross profit

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Gross margin decreased by 2.7 percentage points to 26.2% for the fiscal year 2024, as compared to 28.9% for the fiscal year 2023.

The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the fiscal year ended June 30, 2023.

The decrease in gross margin was primarily due to higher material costs and less favorable product mix during the fiscal year ended June 30, 2024.

We expect our gross margin to continue to fluctuate in the future as a result of variations in our product mix, semiconductor wafer and raw material pricing, manufacturing labor cost and general economic and PC market conditions.

Fiscal 2023 vs 2022

Cost of goods sold was $509.0 million for fiscal year 2022, an increase of $56.6 million, or 12.5%, as compared to $452.4 million for fiscal year 2021.

The increase was primarily due to 18.4% increase in revenue.

Gross margin increased by 3.4 percentage points to 34.5% for the fiscal year 2022, as compared to 31.1% for the fiscal year 2021.

The increase in gross margin was primarily due to better product mix during the fiscal year ended June 30, 2022.

Cost of goods sold was $491.8 million for fiscal year 2023, a decrease of $17.2 million, or 3.4%, as compared to $509.0 million for fiscal year 2022.

The decrease was primarily due to 11.1% decrease in revenue.

Gross margin decreased by 5.6 percentage points to 28.9% for the fiscal year 2023, as compared to 34.5% for the fiscal year 2022.

The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the fiscal year ended June 30, 2023.

Research and development expenses

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Research and development expenses were $89.9 million for fiscal year 2024, an increase of $1.8 million, or 2.0%, as compared to $88.1 million for fiscal year 2023.

The increase was primarily attributable to a $3.9 million increase in employee compensation and benefit expense mainly due to increased headcount and higher medical insurance expenses, partially offset by lower vacation accrual and lower bonus accrual, a $2.4 million increase in share-based compensation expense due to an increase in stock awards granted, a $3.6 million increase in depreciation expenses, a $2.2 million increase in allocation, and a $4.8 million increase in product prototyping engineering expense as a result of increased engineering activities.

The increase was primarily attributable to a $3.0 million increase in employee compensation and benefit expense mainly due to increased headcount and higher business and medical insurance expenses as well as higher bonus expense and vacation expense, a $0.8 million increase in depreciation expenses, and a $2.1 million increase in allocation expenses, partially offset by a $4.2 million decrease in share-based compensation expense as a result of a cancellation of certain performance-based restricted stock units and an assessment of zero attainment for certain market-based restricted stock units.

We continue to evaluate and invest resources in developing new technologies and products utilizing our own fabrication and packaging facilities.

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Research and development expenses were $88.1 million for fiscal year 2023, an increase of $16.9 million, or 23.7%, as compared to $71.3 million for fiscal year 2022.

The increase was primarily attributable to a $6.8 million increase in employee compensation and benefit expense mainly due to higher bonus accrual, increased headcount and annual merit increase, a $1.7 million increase in share-based compensation expense due to an increase in stock awards granted, a $0.2 million increase in depreciation expenses, and a $0.2 million increase in professional fees, partially offset by a $0.8 million decrease in product prototyping engineering expense as a result of decreased engineering activities.

increase in stock awards granted, a $3.6 million increase in depreciation expenses, a $2.2 million increase in allocation expenses, and a $4.8 million increase in product prototyping engineering expense as a result of increased engineering activities.

Selling, general and administrative expenses

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Selling, general and administrative expenses were $85.7 million for fiscal year 2024, a decrease of $3.1 million, or 3.5%, as compared to $88.9 million for fiscal year 2023.

The decrease was primarily attributable to a $11.3 million decrease in employee compensation and benefits expenses mainly due to lower bonus expenses accrual and lower vacation accrual, partially offset by increased headcount, higher medical and business insurance expenses, as well as a $1.5 million decrease in cyber security incident, partially offset by a $3.1 million increase in share-based compensation expense due to an increase in stock award granted and the incremental expenses for one of our former officers' equity shares resulting from the modification, a $1.1 million increase in legal expenses, a $0.7 million increase in recruiting and consulting fees, a $1.2 million increase in allocation, and a $0.8 million increase in employee business expenses.

The decrease was primarily attributable to a $9.2 million decrease in share-based compensation expense as a result of a cancellation of certain performance-based restricted stock units and an assessment of zero attainment for certain market-based restricted stock units, partially offset by a $1.5 million increase in employee compensation and benefits expenses mainly due to increased headcount and higher bonus expense and vacation expense, offset by lower business insurance expenses, a $1.0 million increase in consulting fees, a $1.0 million increase in audit fees, a $1.8 million increase in allocation expenses and $0.7 million increase in employee business expenses.

Fiscal 2023 vs 2022

Selling, general and administrative expenses were $95.3 million for fiscal year 2022, an increase of $17.7 million, or 22.9%, as compared to $77.5 million for fiscal year 2021.

The increase was primarily attributable to a $8.6 million increase in employee compensation and benefits expenses mainly due to increased headcount, annual merit increase, higher bonus expenses and increased employee and business insurance expenses, as well as $10.9 million increase in share-based compensation expense due to increase in stock award granted, partially offset by a $2.2 million decrease in legal expense related to the government investigation.

Selling, general and administrative expenses were $88.9 million for fiscal year 2023, a decrease of $6.4 million, or 6.7%, as compared to $95.3 million for fiscal year 2022.

The decrease was primarily attributable to a $11.3 million decrease in employee compensation and benefits expenses mainly due to lower bonus expenses accrual and lower vacation accrual, partially offset by increased headcount, higher medical and business insurance expenses, as well as a $1.5 million decrease in loss incurred in connection with a cyber security incident, partially offset by a $3.1 million increase in share-based compensation expense due to an increase in stock award granted and the incremental expenses for one of our former officers' equity shares resulting from the modification, a $1.1 million increase in legal expenses, a $0.7 million increase in recruiting and consulting fees, a $1.2 million increase in allocation expenses, and a $0.8 million increase in employee business expenses.

Other income (loss), net

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Other income (loss), net $ (73) $ (1,730) $ 999 $ 1,657 (95.8) % $ (2,729) (273.2) %

Other income (loss), net decreased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.

Other income (loss), net decreased by $1.5 million in fiscal year 2022 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.

Interest expense, net

Other income (loss), net decreased by $1.7 million in fiscal year 2024 as compared to the last fiscal year primarily due to decrease in foreign currency exchange loss as a result of the appreciation of RMB against USD.

Other income (loss), net increased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.

Interest income (expense), net

Year Ended June 30, Change

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(in thousands) (in thousands) (in percentage) (in thousands) (in percentage)

Interest expense, net $ (1,087) $ (3,920) $ (6,308) $ 2,833 (72.3) % $ 2,388 (37.9) %

Interest expense was primarily related to bank borrowings.

Interest expense decreased by $2.8 million in fiscal year 2023 as compared to the prior fiscal year primarily due to a $3.6 million increase in interest income as a result of higher interest rate, offset by a $0.7 million increase in interest expense as a result of an increase in bank borrowings during the periods.

Interest expense decreased by $2.4 million in fiscal year 2022 as compared to the fiscal year 2021 primarily because of deconsolidation of the JV Company in December 2021.

Gain on deconsolidation of the JV Company and Gain/loss on changes of equity interest in the JV Company

Effective December 1, 2021, we entered into the STA with the Investor, pursuant to which we sold to the Investor approximately 2.1% of outstanding equity interest held by us in the JV Company for an aggregate purchase price of RMB 108 million or approximately $16.9 million.

The STA contained customary representations, warranties and covenants.

The Transaction was closed on December 2, 2021.

As a result of the Transaction, as of the Closing Date, our equity interest in the JV Company decreased from 50.9% to 48.8%.

Also, our right to designate directors on the board of JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction.

We no longer have a controlling financial interest in the JV Company under generally accepted accounting principles.

Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or the ability to obtain, a majority of the subsidiary’s board of directors.

All of these loss of control factors were present for us as of December 2, 2021.

Accordingly, since December 2, 2021, AOS has accounted for its investment in the JV Company using the equity method of accounting.

On December 24, 2021, we entered into a share transfer agreement with another third-party investor, pursuant to which we sold to this investor 1.1% of outstanding equity interest held by us in the JV Company for an aggregate purchase price of RMB 60 million or approximately $9.4 million.

In addition, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company to exchange in cash.

As a result, the Company owned 45.8% of the equity interest in the JV Company as of December 31, 2021.

On January 26, 2022, the JV Company completed a financing transaction pursuant to the Financing Agreement between the JV Company and certain New Investors.

Under the Financing Agreement, the New Investors purchased newly issued equity interest of the JV Company for a total purchase price of RMB 509 million (or approximately $80 million based on the currency exchange rate as of January 26, 2022).

Following the closing of the Investment, the percentage of outstanding JV Company equity interest beneficially owned by us was reduced to 42.2%.

During the fiscal year ended June 30, 2022, we recorded a gain of $399.1 million on deconsolidation of the JV Company, and a $3.1 million of loss on changes of equity interest in the JV Company.

We account for our investment in the JV Company as an equity method investment and report our equity in earnings or loss of the JV Company on a three-month lag due to our inability to timely obtain financial information of the JV Company.

For the fiscal year ended June 30, 2023 and June 30, 2022 using lag reporting, we recorded $1.4 million and 2.6 million of its equity in loss of the JV Company, respectively.

Interest income (expense), net

$ 1,186 $ (1,087) $ (3,920) $ 2,273 (209.1) % $ 2,833 (72.3) %

Interest income (expense), net increased by $2.3 million in fiscal year 2024 as compared to the prior fiscal year primarily due to a $1.4 million increase in interest income as a result of higher interest rate as well as a $0.9 million decrease in interest expense as a result of a decrease in bank borrowings during the fiscal year 2024.

Interest income (expense), net decreased by $2.8 million in fiscal year 2023 as compared to the fiscal year 2022 primarily due to a $3.6 million increase in interest income as a result of higher interest rate, offset by a $0.7 million increase in interest expense as a result of an increase in bank borrowings during the fiscal year 2023.

Income tax expense

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Income tax expense decreased by $2.3 million, or 38.5% in fiscal year 2024 as compared to fiscal year 2023.

The income tax expense of $3.6 million for the year ended June 30, 2024 included a $0.2 million discrete tax expense, and the income tax expense of $5.9 million for the year ended June 30, 2023 included a $0.1 million discrete tax expense.

Excluding the discrete income tax items, the effective tax rate for the years ended June 30, 2024 and 2023 was (130.6)% and 29.4%, respectively.

The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book loss of $2.6 million for the year ended June 30, 2024 as compared to a pretax book income of $19.7 million for year ended June 30, 2023 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

Fiscal 2023 vs 2022

Income tax expense for fiscal years 2023 and 2022 was $5.9 million and $39.3 million, respectively.

Income tax expense decreased by $33.3 million, or 84.9% in fiscal year 2023 as compared to fiscal year 2022.

The income tax expense of $5.9 million for the year ended June 30, 2023 included a $0.1 million discrete tax expense, and the income tax expense of $39.3 million for the year ended June 30, 2022 included a $33.5 million discrete tax expense related to the Company’s $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company changed from the consolidation method of accounting to the equity method of accounting.

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The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $19.7 million for the year ended June 30, 2023 as compared to a pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

Fiscal 2022 vs 2021

Income tax expense for fiscal years 2022 and 2021 was $39.3 million and $3.9 million, respectively.

Income tax expense increased by $35.3 million, or 897.7% in fiscal year 2022 as compared to fiscal year 2021.

The income tax expense of $39.3 million for the year ended June 30, 2022 included a $33.5 million discrete tax expense related to the Company’s $396.0 million

of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company changed from the consolidation method of accounting to the equity method of accounting.

In addition, we recorded a tax benefit of $0.4 million from other discrete income tax items.

The income tax expense of $3.9 million for the year ended June 30, 2021 included a $0.3 million discrete tax benefit.

Excluding the discrete income tax items ($396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as well as other discrete items), the effective tax rate for the years ended June 30, 2022 and 2021 was 6.3% and 7.1%, respectively.

The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as compared to a pretax book income of $60.2 million for the year ended June 30, 2021 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

Liquidity and Capital Resources

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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.

On February 6, 2023, we entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to our Silicon Carbide (SiC) MOSFET and diode technology.

Pursuant to the agreement, we license and provide 24-months of engineering support for our proprietary SiC technology to the supplier for a total fee of $45 million, consisted of an upfront fees of $18 million and $6.8 million paid to us in March 2023 and July 2023, respectively, and the remaining amount to be paid upon our achievements of specified business and product milestones.

In addition, we entered an accompanying supply agreement with the supplier to provide it with limited wafer supply.

In January 2023, one of the Company's subsidiaries in China entered into a line of credit facility with Bank of Communications Limited in China.

In March 2024, Bank of Communications Limited in China provided a line of credit facility to one of the Company's subsidiaries in China.

The purpose of the credit facility is to provide working capital borrowings.

The Company could borrow up to approximately RMB 140 million or $20.6 million based on currency exchange rate between RMB and U.S.

Dollar on January 31, 2023 with a maturity date of December 1, 2023.

The Company could borrow up to approximately RMB 140 million o r $19.3 million based on currency exchange rate between RMB and U.S.

Dollar on June 30, 2024 with a maturity date of March 15, 2025.

As of June 30, 2024, there was no outstanding balance for this loan.

In September 2022, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China.

In December 2023, Industrial and Commercial Bank of China provided a line of credit facility to one of the Company's subsidiaries in China.

The purpose of the credit facility was to provide working capital borrowings.

The Company could borrow up to approximately RMB 72.0 million, or $9.9 million based on currency exchange rate between RMB and U.S.

Dollar on September 20, 2022 with a maturity date of September 30, 2023.

As of June 30, 2023, there was no outstanding balance.

Dollar on June 30, 2024, with a maturity date of December 31, 2024.

As of June 30, 2024, there was no outstanding balance for this loan.

In September 2023, China Construction Bank provided a line of credit facility to one of the Company's subsidiaries in China.

The purpose of the credit facility is to provide working capital borrowings.

The Company could borrow up to approximately RMB 50 million or $6.9 million based on currency exchange rate between RMB and U.S.

Dollar on June 30, 2024 with a maturity date of September 8, 2025.

As of June 30, 2024, there was no outstanding balance for this loan.

Pursuant to the agreement, we license and provide 24-months of engineering support for our proprietary SiC technology to the supplier for a total fee of $45.0 million.

We received payments of such fees in the amount of $18.0 million, $6.8 million and 9.0 million in March 2023, July 2023 and February 2024, respectively, and the remaining amount to be paid upon our achievements of specified business and product milestones.

In addition, we entered an accompanying supply agreement with the supplier to provide it with limited wafer supply.

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.

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The purchase price of this hardware was $0.2 million.

The financing arrangement is secured by this equipment and other equipment which had the carrying amount of $15.2 million as of June 30, 2023.

The financing arrangement is secured by this equipment and other equipment which had a carrying amount of $13.6 million as of June 30, 2024.

As of June 30, 2024, the outstanding balance of this debt financing was $9.2 million.

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The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company.

The agreement has a 5.5 years term and matures on February 16, 2027.

The agreement has a term of 5.5 years and matures on February 16, 2027.

Jireh is required to make consecutive quarterly payments of principal and interest.

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As of June 30, 2024, Jireh was in compliance with these covenants and the outstanding balance of this loan was $29.2 million.

In October 2019, one of the Company's subsidiaries in China entered into a line of credit facility with Bank of Communications Limited in China.

This line of credit matured on February 14, 2021 and was based on the China Base Rate multiplied by 1.05, or 4.99% on October 31, 2019.

The purpose of the credit facility is to provide short-term borrowings.

The Company could borrow up to approximately RMB 60.0 million or $8.5 million based on the currency exchange rate between the RMB and the U.S.

Dollar on October 31, 2019.

In September 2021, this line of credit was renewed with maximum borrowings up to RMB 140.0 million with the same terms and a maturity date of September 18, 2022.

During the three months ended December 31, 2021, the Company borrowed RMB 11.0 million, or $1.6 million, at an interest rate of 3.85% per annum, with principal due on November 18, 2022.

As of June 30, 2023, there was no outstanding balance and this loan was expired.

On August 9, 2019, one of the Company's 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.

On August 9, 2019, one of the Company's 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 one month London Interbank Offered Rate ("LIBOR") plus 1.75% per annum.

The interest rate is based on the Secured Overnight Financing Rate ("SOFR)", plus 2.01% per annum.

The Company is the guarantor for this agreement.

The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance.

The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets

In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing.

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The Borrower was in compliance with these covenants as of June 30, 2024.

As of June 30, 2023, there was no outstanding balance and the Company had unused credit of approximately $8.0 million.

On November 16, 2018, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China.

The purpose of the credit facility was to provide short-term borrowings.

The Company could borrow up to approximately RMB 72.0 million or $10.3 million based on currency exchange rate between RMB and U.S.

Dollar on November 16, 2018.

The RMB 72.0 million consists of RMB 27.0 million for trade borrowings with a maturity date of December 31, 2021, and RMB 45.0 million for working capital borrowings or trade borrowings with a maturity date of September 13, 2022.

During the three months ended December 31, 2021, the Company borrowed RMB 5.0 million, or $0.8 million, at an interest rate of 3.7% per annum, with principal due on September 12, 2022.

As of June 30, 2023, there was no outstanding balance and this loan was expired.

On May 1, 2018, Jireh entered into a loan agreement with the Bank that provided a term loan in an amount of $17.8 million.

The obligation under the loan agreement is secured by certain real estate assets of Jireh and guaranteed by the Company.

The loan has a five-year term and matures on June 1, 2023.

Jireh made consecutive monthly payments of principal and interest to the Bank.

The outstanding principal shall accrue interest at a fixed rate of 5.04% per annum on the basis of a 360-day year.

The loan agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios.

In August 2021, Jireh signed an amendment of this loan with the Bank to modify the financial covenants requirement to align with the new term loan agreement entered into on August 18, 2021 discussed above.

The amendment was accounted for as a debt modification and no gain or loss was recognized.

The Company paid this loan in full on May 1, 2023.

As of June 30, 2023, there was no outstanding balance and this loan was expired.

On August 15, 2017, Jireh entered into a credit agreement with the Bank that provided a term loan in an amount up to $30.0 million for the purpose of purchasing certain equipment for the fabrication facility located in Oregon.

The obligation under the credit agreement was secured by substantially all assets of Jireh and guaranteed by the Company.

The credit agreement had a five-year term and matured on August 15, 2022.

In January 2018 and July 2018, Jireh drew down on the loan in the amount of $13.2 million and $16.7 million, respectively.

Beginning in October 2018, Jireh was required to pay to the Bank on each payment date, the outstanding principal amount of the loan in monthly installments.

The loan accrued interest based on an adjusted London Interbank Offered Rate ("LIBOR") as defined in the credit agreement, plus specified applicable margin in the range of 1.75% to 2.25%, based on the outstanding balance of the loan.

The credit agreement contained customary restrictive covenants and included certain financial covenants that required the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio.

The amendment was accounted for as a debt modification and no gain or loss was recognized.

The loan was fully paid off in September, 2022.

As of June 30, 2023, there was no outstanding balance and this loan was expired.

As of June 30, 2024, there was no outstanding balance of this factoring agreement.

The Chinese government imposes certain currency exchange controls on cash transfers out of China.

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Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.

In calculating accumulated profits, foreign-invested enterprises in China are required to allocate 10% of their profits each year, if any, to fund the equity reserve account unless the reserve has reached 50% of the registered capital of the enterprises.

A Chinese company must pay 10% of its annual after-tax profits into the statutory reserve fund to fund the statutory reserve fund unless it has reached 50% of the registered capital of the company.

Where the accumulative amount of the company’s statutory reserve is not enough to make up for the losses of the previous year, the current year’s profits must first be used to make up for the losses before the statutory reserve is accrued..

While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China.

25 unchanged sentences

Cash flows from operating activities

Net cash provided by operating activities of $20.5 million for fiscal year 2023 resulted primarily from net income of $12.4 million, non-cash charges of $80.9 million and net change in assets and liabilities providing net cash of $72.8 million.

Net cash provided by operating activities of $25.7 million for fiscal year 2024 resulted primarily from net loss of $11.1 million, non-cash charges of $79.4 million and net change in assets and liabilities using net cash of $42.6 million.

The non-cash charges of $79.4 million included depreciation and amortization expenses of $53.8 million, share-based compensation expense of $21.6 million, equity method investment loss from equity investee of $4.8 million, the net deferred income taxes of $0.9 million, and loss on disposal of property and equipment of $0.1 million.

The net change in assets and liabilities providing net cash of $72.8 million was primarily due to $45.5 million decrease in accrued and other liabilities, other payable on equity investee of $17.0 million, and $19.6 million decrease in accounts payable primarily due to timing of payment, $25.2 million increase in inventories, $18.7 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, partially offset by $43.3 million decrease in accounts receivable due to timing of billings and collection of payments, $8.1 million increase in deferred revenue, and $2.0 million increase in income taxes payable.

The net change in assets and liabilities using net cash of $42.6 million was primarily due to $33.8 million decrease in accrued and other liabilities, $12.5 million increase in inventories, $2.4 million decrease in accounts payable primarily due to timing of payment, $5.5 million decrease in deferred revenue, and $2.0 million decrease in income taxes payable, partially offset by $9.9 million decrease in accounts receivable due to timing of billings and collection of payments, increase in other payable on equity investee of $1.7 million, $1.9 million decrease in other current and long-term assets primarily due to decrease in advance payments to suppliers.

The non-cash charges of $80.9 million included depreciation and amortization expenses of $43.2 million, share-based compensation expense of $37.5 million, equity method investment loss from equity investee of $1.4 million, the net deferred income taxes of $1.4 million and loss on disposal of property and equipment of $0.2 million.

The net change in assets and liabilities using net cash of $72.8 million was primarily due to $45.5 million decrease in accrued and other liabilities, decrease in other payable on equity investee of $17.0 million, and $19.6 million decrease in accounts payable primarily due to timing of payment, $25.2 million increase in inventories, $18.7 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, partially offset by $43.3 million decrease in accounts receivable due to timing of billings and collection of payments, $8.1 million increase in deferred revenue, and $2.0 million increase in income taxes payable.

Net cash provided by operating activities of $218.9 million for fiscal year 2022 resulted primarily from net income of $453.2 million, non-cash charges of $287.6 million and net change in assets and liabilities providing net cash of $53.3 million.

The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsoidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in

the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million.

The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsolidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million.

The net change in assets and liabilities providing net cash of $53.3 million was primarily due to $76.4 million increase in accrued and other liabilities, income taxes payable on deconsolidation and changes of equity interest in the JV company of $3.5 million, other payable on equity investee of $48.2 million, and $23.8 million increase in accounts payable primarily due to timing of payment, partially offset by $30.1 million increase in accounts receivable due to timing of billings and collection of payments, $57.4 million increase in inventories, $9.4 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, and $1.7 million decrease in income taxes payable.

Net cash provided by operating activities of $128.7 million for fiscal year 2021 resulted primarily from net income of $56.3 million, non-cash charges of $70.0 million and net change in assets and liabilities providing net cash of $2.5 million.

The non-cash charges of $70.0 million included depreciation and amortization expenses of $52.7 million, share-based compensation expense of $15.3 million, loss on disposal of property and equipment of $0.4 million, and net deferred income taxes of $1.6 million.

The net change in assets and liabilities providing net cash of $2.5 million was primarily due to $48.5 million increase in accrued and other liabilities and $1.7 million increase in income taxes payable, partially offset by $22.5 million increase in accounts receivable due to timing of billings and collection of payments, $18.8 million increase in inventories, $5.8 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, and $0.5 million decrease in accounts payable primarily due to timing of payments.

Cash flows from investing activities

Net cash used in investing activities of $35.7 million for the fiscal year 2024 was primarily attributable to $37.1 million purchases of property and equipment, partially offset by $1.0 million government grant related to equipment and $0.4 million in proceeds from sale of property and equipment.

Net cash used in investing activities of $109.6 million for the fiscal year 2023 was primarily attributable to $110.4 million purchases of property and equipment, partially offset by $0.6 million government grant related to equipment and $0.2 million in proceeds from sale of property and equipment.

Net cash used in investing activities of $130.8 million for the fiscal year 2022 was primarily attributable to $138.0 million purchases of property and equipment, and $20.7 million deconsolidation of cash and cash equivalents of the JV Company, partially offset by $1.4 million government grant related to equipment in the JV Company, $26.3 million proceeds from sale of equity interest in the JV Company and $0.1 million proceeds from sale of property and equipment.

Net cash used in investing activities of $72.5 million for the fiscal year 2021 was primarily attributable to $72.7 million purchases of property and equipment, which was partially offset by $0.1 million government grant related to equipment in the JV Company.

Cash flows from financing activities

Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of capital lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP.

Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of capital lease obligations, and $35.7 million in repayments of borrowings.

Net cash used in financing activities of $19.0 million for the fiscal year 2021 was primarily attributable to $6.9 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $16.5 million in payments of capital lease obligations, and $66.6 million in repayments of borrowings, partially offset by $65.9 million of proceeds from borrowings and $5.1 million of proceeds from exercises of share options and issuance of shares under the ESPP.

Net cash used in financing activities of $9.9 million for the fiscal year 2024 was primarily attributable to $7.7 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.9 million in payments of finance lease obligations, and $11.5 million in repayments of borrowings, partially offset by $10.1 million of proceeds from exercises of share options and issuance of shares under the ESPP.

Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of finance lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP.

Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of finance lease obligations, and $35.7 million in repayments of borrowings.

Contractual Obligations

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We also provide special pricing to certain distributors primarily based on volume, to encourage resale of our products.

We estimate the expected price adjustments at the time the revenue is recognized based on distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products.

We estimate the expected price adjustments at the time the revenue is recognized based on distributor inventory levels, forecasted future distributor selling prices, distributor margins and demand for our products.

If actual stock rotation returns or price adjustments differ from our estimates, adjustments may be recorded in the period when such actual information is known.

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License and Development Revenue Recognition

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45 million, consisting of an upfront fee of $18 million and $6.8 million paid to us in March 2023 and July 2023, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee of $18.0 million, $6.8 million and $9.0 million paid to us in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.

The license and development fee is determined to be one performance obligation and is recognized over the 24 months when we perform the engineering and development services.

We use the input method to measure progression, representing a faithful depiction of the transfer of services.

During the fiscal year ended June 30, 2023, we recorded $9.9 million of license and development revenue.

During the fiscal years ended June 30, 2024 and 2023, we recorded $21.2 million and $9.9 million of license and development revenue.

The amount of contract liability is recorded as deferred revenue on the consolidated balance sheets.

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JV Company for the period from December 2, 2021 to March 31, 2022 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2022.

And our share of losses of the JV Company for the period of April 1, 2022 to March 31, 2023 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2023.

And our share of losses of the JV Company for the periods of April 1, 2022 to March 31, 2023 and April 1 2023 to March 31, 2024 were recorded in our Consolidated Statement of Operations for the fiscal years ended June 30, 2023 and 2024.

We recognize and disclose intervening events at the JV Company in the lag period that could materially affect our consolidated financial statements.

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We will maintain a partial valuation allowance equal to the state research and development credit carryforwards until sufficient positive evidence exists to support reversal of the valuation allowance.

We have not provided for withholding taxes on the undistributed earnings of our foreign subsidiaries because we intend to reinvest such earnings indefinitely.

However, we have recorded a deferred tax liability of $27.9 million at June 30, 2023 related to our investment in the JV Company.

As of June 30, 2023, the cumulative amount of undistributed earnings of our foreign subsidiaries considered permanently reinvested was $374 million.

The determination of the unrecognized deferred tax liability on these earnings is not practicable.

Should we decide to remit this income to the Bermuda parent company in a future period, our provision for income taxes may increase materially in that period.

We intend to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd.

and AOS International LP.

As of June 30, 2024, the cumulative earnings of Alpha and Omega Semiconductor (Cayman) and AOS International LP totaled $46.2 million, and there was no deferred tax liability recorded as there is no income nor withholding tax amongst the applicable jurisdictions.

As of June 30, 2024, the cumulative amount of undistributed earnings of its foreign entities considered permanently reinvested is $414.6 million.

Should the Company decide to remit this income to its Bermuda parent company in a future period, its provision for income taxes may increase materially in that period.

The determination of the unrecognized deferred tax liability on these earnings is not practicable due to the complexity and variety of assumptions necessary to estimate the tax.

As of June 30, 2024, the Company has recorded a deferred tax liability of $26.3 million for the basis difference related to our investment in the JV Company.

The Financial Accounting Standards Board ("FASB") has issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized.

The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical

merits of the position.

The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement.

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Recently Issued Accounting Pronouncements

See Note 1 of the Notes to the consolidated financial statements under Item 15 in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition.

See Note 1 of the Notes to the consolidated financial statements contained in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis