Alpha and Omega Semiconductor (NASDAQ:AOSL) Q3 2019 Earnings Call

0:00 My name is Jason and I will be your conference operator today. At this time I would like to welcome everyone to the Alpha and Omega Semiconductor financial results for the fiscal 2019 third quarter ended March 31st 2019 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you would like to ask a question during this time simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. So Yeon Jung, Investor Relations, you may begin your conference. Thank you, Jason. Good afternoon, everyone, and welcome to the Alpha and Omega Semiconductors conference call for fiscal 2019 third quarter results.

0:50 This is So Yeon Jung, Investor Relations representative for the company. With me today, are Dr. Mike Chang, our CEO, Yifan Liang, our CFO, and Stephen Chang, our Senior VP of Marketing. This call is being recorded and broadcasted live over the web and can be accessed for seven days following the call via the link in the investor relations section of our website at www.aosmd.com. Yifan will begin the call with the review of the financial results for the quarter. Then Mike will review the business highlights, followed by Stephen, who will provide a detailed segment report. After that, Yifan will follow up with the guidance for the next quarter. Finally, we'll reserve some time for questions and answers.

1:42 The earnings release was distributed by Business Wire today, May 2, 2019, after the market closed. The release is also posted on our company's website. Our earnings release and this presentation include certain non-GAAP financial measures. We use non-GAAP measures because we believe 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 certain forward-looking statements, including discussions of business outlook and financial projections.

2:32 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 third fiscal quarter financial results. Yifan? Thank you, Soyoung. Good afternoon and thank you for joining us. Revenue for the March quarter was $109.1 million, down 5.1% when compared to the prior quarter, and up 6% from the same quarter last year.

3:25 The quarter over quarter decrease was primarily due to the impact of worse than expected PC CPU shortage. In terms of product mix, MOSFET revenue was $89.9 million, down 3.6% sequentially, and up 7.1% year over year. Power AC revenue was $17.6 million, down 9% from the prior quarter and up 12.4% from a year ago. Assembly service revenue was $1.6 million as compared to $2.2 million for the prior quarter and $3.2 million for the same quarter last year.

4:10 Regarding the segment mix, computing segment represented 47.5% of the total revenue, consumer 18.9%, power supply and industrial 19.5%, communications 12.5%, service 1.4%, and others 0.2%. Non-GAAP gross margin for the March quarter was 27%, as compared to 29.2% in the prior quarter and 26.8% for the same quarter last year. The quarter-over-quarter decrease in non-GAAP gross margin was primarily due to the lower factory utilization of back-end operations, largely attributable to the decrease in revenue and the Lunar New Year holiday.

5:07 Non-GAAP gross margin excluded $0.5 million share-based compensation charge for the March quarter as compared to $0.5 million for the prior quarter and $0.4 million for the same quarter last year. Non-GAAP gross margin also excluded $3.4 million of production ramp-up costs related to the Chongqing joint venture for the March quarter as compared to $3.5 million for the prior quarter. Non-GAAP operating expenses were $23.2 million compared to $25.1 million for the prior quarter and $21.7 million for the same quarter last year.

5:52 The quarter-over-quarter decrease in the non-GAAP operating expenses was mainly due to the lower variable compensation accrues and fluctuation of engineering expenses. Non-GAAP operating expenses excluded $2.6 million of share-based compensation charge as compared to $3.9 million in the prior quarter and $2 million for the same quarter last year. Non-GAAP operating expenses also excluded $3.6 million of pre-production expenses related to the Chongqing joint venture as compared to $3.7 million in the prior quarter and $2.8 million for the same quarter last year.

6:40 Both GAAP and non-GAAP operating expenses included $2.3 million of digital power controller team expenses for the quarter as compared to $3.1 million for the prior quarter and $1 million for the same quarter last year. Digital Power Controller team continues to work with customers in product designs and is making steady progress toward our product roadmap. Income tax expense was $0.6 million for the quarter as compared to $0.7 million for the prior quarter and $0.8 million for the same quarter last year.

7:25 Non-GAAP EPS attributable to AOS for the quarter was 22 cents per share as compared to 30 cents per share for the prior quarter and 23 cents per share for the same quarter last year. AOS continued to generate positive operating cash flow. In the March quarter, we generated $9.5 million operating cash flow attributable to AOS as compared to $22.1 million for the prior quarter and $0.7 million for the same quarter last year. The March quarter cash flow included $5 million customer deposit for securing future shipments from AOS.

8:16 Cash flow used in operations attributable to our Chongqing joint venture was $17.5 million for the March quarter compared to $9.1 million for the prior quarter and $8.3 million for the same quarter last year. EBITDA for the March quarter was $11.8 million compared to $13.5 million for the prior quarter and $12.3 million for the same quarter last year. Moving on to the balance sheet. We completed the March quarter with cash and cash equivalent balance of $139.1 million, including $48.2 million cash balance at our Chongqing joint venture, as compared to $146.6 million at the end of last quarter, which included $53 million cash balance at the JV Company.

9:16 Our cash balance a year ago was and $25.2 million, including $46 million at the JV company. During the quarter, our JV company borrowed a working capital loan of approximately $3 million and a CapEx loan of approximately $28.3 million with $2.1 million compensating balance. which was recorded in the long-term restricted cash and investment. The JV company paid down $1.8 million for the financing lease and AOS paid down $2.1 million for the outstanding loans.

10:05 Net trade receivables were $28.4 million as compared to $33.9 million at the end of last quarter and $28.9 million for the same quarter last year. Day sales outstanding for the quarter was 22 days compared to 23 days in the prior quarter. Net inventory was $107.9 million at the quarter end, up from $103 million last quarter and from $90.5 million in the prior year. The inventory increase primarily occurred at the JV company as we are ramping up mass production of assembly and test and preparing inventories for the 12-inch fab.

10:59 Average days in inventory were 114 days for the quarter as compared to 106 days in the prior quarter. Net property, plant, and equipment balance was and $91.6 million as compared to $380.8 million last quarter and $258.8 million last year. Capital expenditures were $24 million for the quarter, including $15.8 million from the JV Company and $8.2 million from AOS. Before I turn the call over to Mike, I would like to say a few words on the progress of our Fengqing joint venture.

11:47 We are pleased that during the March quarter, we completed 20 customer audits, most of them being our Tier 1 customers. The assembly and test production continued to ramp up, and the 12-inch fab's product sampling and customer qualification process went well. We expect to start small mass production at our 12-inch fab in the month of June or July, while we are continuing to ramp up the assembly and test production toward its targeted production level. With that, now I would like to turn the call over to our CEO, Dr.

12:32 Mike Chen, who will provide the business highlights for the quarter. Mike? Thanks, Yifan. Good afternoon. Our team demonstrated solid execution in the challenging near-term market environment. We delivered revenue and EPS within our expectations. Our top line grew 6% year-over-year. This marks the company's 13th straight quarter of year-over-year revenue growth. We also responded quickly to the changing market conditions by prudently managing our costs resulting in a significant reduction of operating expense by almost $2 million as compared to December quarter. Additionally, AOS continued to generate healthy operating cash flow.

13:29 The soft market conditions we mentioned on our past earnings course, specifically in the home appliance and smartphone markets, played out as expected, and we navigated them well. We offset that softness with our high value products, including IGBT and medium voltage DMOS. I am very pleased with the major win at a Korean home appliance customer, coupled with our sheer expansion in the China market in both home Appliance and Smartphone Quick Charger Applications. Stephen will discuss these recent developments in detail shortly.

14:18 The unexpected trend in the March quarter was the prolonged CPU shortage. We had initially expected better supply-demand balance, which would be preceded by signs of supply ease as early as March. The shortage continues in the June quarter, and we expect that it should improve in the second half of calendar 2019. Even with the CPU constraint, the strategic relationships with our customers stand strong. As an example, we received $5 million deposit from another computing customer in the March quarter, while The CPU delay will cause temporary slowdown in our computing business in June quarter. We believe a recovery of processor supply in the second half will be a tailwind for us.

15:24 Looking at our new product and the design wind pipeline, I am very excited about the opportunities ahead of us. With our strong focus on product diversification, We have planted seeds for multi-year growth drivers in the past few years. Some of those opportunities are bearing fruit today. For example, we embarked on our mobile strategy and now we are a market leader in smartphone battery protection and quick chargers. Additionally, we debuted our IGBT line and module solutions for the home appliance market. As a matter of fact, these new businesses are already ramping now, which we expect to further accelerate in the second half of this calendar year, resulting in meaningful revenue contributions.

16:22 More importantly, our high-value new products are gaining strong traction at a number of Tier 1 customers. improving our market position as one of the top tier suppliers. This is exciting for us for two reasons. First, it brings us a multitude of design wins with attractive potential revenue. Second, it enables us to strengthen our market leading position, generating stickier and more sustainable revenue. To support this growth as well as the anticipated rebound of our computing business, we remain focused on ramping up the Chongqing joint venture in order to secure much-needed capacity, and that is our top near-term priority.

17:22 I remain confident in our ability to realize our mission. that is to become a total solution provider in the power semiconductor business. We have a proven business strategy, technology capability, manufacturing expertise, and most importantly, an ever stronger talented and dedicated team. All of these solidifies our foundation and positions us well for accelerated growth for years to come. While we are taking decisive actions in response to near-term challenges, we are committed to achieve our mid-term target model of $600 million in annual revenue by calendar year 2021.

18:14 The long-term demand outlook for AO's products remains very healthy, with tremendous growth opportunity across multiple markets. will continue to execute our strategy to drive sustainable long-term growth. With that, I would like to turn the call over to our Senior VP of Marketing, Stephen, to report the status for each business segment. Stephen? Thank you, Mike, and good afternoon. Let me start with computing. It represented 47.5% of total revenue in the March quarter. While it decreased by 7.1% sequentially, it increased 21.9% year over year.

19:01 As Mike mentioned earlier, the CPU shortage caused a marginal negative impact to the March quarter, and it will also continue into the June quarter. However, we expect processor shipments to improve in the second half of calendar 2019. Our customers are counting on us to supply them when the market rebounds. At this moment, we are prioritizing our production plan for commercial PC, which receives higher allocation, as well as other high growth business in other segments. Despite the near-term challenges, our computing business is healthy and strong as a result of our intense focus on product innovation and customer penetration. For example, the high-end tablet application business that I shared on our last call continue to expand in the March quarter. We have also designed in our high-value driver moths into leading notebook customers.

20:00 As such, we are a major supplier for all leading PC OEMs and ODMs. Now let's discuss the consumer segment, which was 18.9% of total revenue during the March quarter. As per our expectation, this segment increased 11% sequentially but slightly decreased year over year. The increase was due to strong design wins with home appliance in China and Korea as well as premium TVs. We are now ramping our IGBT-based module solutions into a Korean customer's refrigerator application. Our modules are highly integrated as we co-package multiple discrete and IC dies into a single package. This reduced footprint simplifies the design and allows our customers to develop smaller form factor motor assemblies, such as the compressor motors used in the refrigerator application.

21:00 In parallel, our discrete IGBT products are gaining a stronger foothold in the China home appliance market for a variety of applications. We are on track to increase our IGBT line by over 40% in calendar 2019. For the June quarter, we expect to see a slight growth in our overall consumer segment. Next, let's turn to the power supply and industrial segment. This segment accounted for 19.5% of total revenue, down 4.6% sequentially, and down 2.7% year over year. Our ACDC power supply business for computing slowed down in the March quarter due to CPU shortages.

21:46 On the other hand, the adoption of higher power quick chargers for smartphones continued. Our quick charger business demonstrated healthy growth in the March quarter despite the soft global smartphone market. As we continue to expand at top smartphone customers, we expect strong growth in our quick charger business. which we believe will more than offset further softness in the ACDC market. With that, we expect modest revenue increase for this segment in the June quarter. Finally, let's discuss the communications segment which was 12.5% of revenue in the March quarter. Segment revenue decreased 14.2% and 1.2% sequentially and year-over-year respectively.

22:34 As we expected, This segment troughed during the March quarter due to smartphone weakness coupled with low seasonality. That being said, we are excited to see strong momentum in our battery pack business as we continue to design into more premium phones. During the March quarter, we achieved another major design win in battery pack and quick charger with a top Chinese smartphone OEM. This design win broadens our customer base to include all major smartphone players. We are anticipating a smartphone recovery in the second half of calendar 2019 as newly introduced high-end phones are entering the market. We are already ramping production with our customers now in preparation for the peak season.

23:23 Additionally, our telecom business continues to grow as 5G gradually rolls out. For the June quarter, we expect a strong rebound in this segment. With that, I will now turn the call over to Yifan for the guidance. As we look forward to the fourth quarter of fiscal year 2019, we expect revenue to be between $110 million and $114 million as we assume the CPU shortage will continue in the June quarter. gross margin to be approximately 22.3% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 27.3% plus or minus 1%.

24:14 Non-GAAP gross margin excludes $0.5 million of estimated share-based compensation charge and $5.1 million of estimated production ramp-up costs relating to the Chongqing Joint Venture. Operating expenses to be in the range of $30.4 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $24.8 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $2.8 million to $3 million of estimated expenses relating to the development of our digital power controller business.

25:04 Non-GAAP operating expenses exclude an estimated share-based compensation charge of approximately $2.5 million and estimated pre-production expenses relating to the joint venture of $3.1 million. tax expense to be approximately $0.5 million to $0.7 million, loss attributable to non-controlling interest to be around $5.6 million. On a non-GAAP basis, excluding estimated pre-production expenses and production ramp-up costs relating to the joint venture, this item is expected to be approximately $1.2 million.

25:54 As part of our normal practice, we are not assuming any obligations to update this information. With that, we will open up the floor for questioning. Operator. At this time, I would like to remind everyone, in order to ask a question, simply press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jeremy Kwan from Stifo. Your line is open. Yes, thank you. And it's nice to see the progress on the China JV. I guess a question on the JV. It looks like operating cash flows there tend to fluctuate quite a bit.

26:39 Can you give us... I know some of that tends to be timing of payments and things like that. But can you give us a sense of maybe one where you might see We might start to see that start to stabilize or moderate in terms of the cash burn. And then in terms of the cash financing needs, the $28 million in CapEx loan, is that all you'll need to drive it to get to production where you want it to be? Sure, Jimmy. In terms of cash flow, right now, for the March quarter, actually, the joint ventures cash burn for the operations stayed at about the same level as prior quarters.

27:32 The increase in this quarter was primarily due to the buildup of some working capital, some inventories and those things. So as we ramp up production. So I would expect that, yes, it will stay at that level to continue to build up some inventory because assembly and test will continue to ramp up to its targeted level. And 12-inch fab, we would like to see going to mass production probably in the month of June or July time frame. So right now we're gearing up for the for their preparation.

28:17 So then, I mean, overall, I mean, this quarter we got close to $30 million CapEx loan. For the CapEx, that's pretty much in there. So we're probably okay for the CapEx. face one production. And then, well, right now, still in the negotiation for working capital loans. So we need a little bit more working capital loans. So then that's largely right now this cash flow is in line. Right now it's in place to support our production ramp.

29:06 And just to clarify, I guess, can you give us a sense of how much the working capital loan, you know, how much you expect that would be? It's in the, I would say, $20 million, $30 million range. And then for the CapEx loan, can you give us the interest rate that you're paying on that? You know, maybe some of the key terms? Oh, sure. The March quarter loan was for six years long and the interest rate was around 5-6% range. Great. And then I guess in terms of the, you mentioned the AOS actually paid back $2.1 million in outstanding loans.

29:57 Is that for the JVs? Is there a portion of the loans for the JVs? No, no, no, no. That one is for AOS loans. Like we took for the expansion of our Oregon FAB that we took like last year. Got it. Great. And speaking of the Oregon FAB, are you still supply constrained there? You know, with some of the maybe moderation and growth levels here, do you guys have a little bit more flexibility now at the Oregon FAB or are you still pretty tight? Right now it's still full, so very tight for certain products. So we're managing the mix right now, and also aligned with the run-up with our Chongqing joint venture.

30:47 Got it. And is the mass capacity still, with everything humming, is that still in the $115 million type range? are you still increasing? Yeah, at this stage, yes, still around there. And one last question before I give it up at this point. For the $600 million target for calendar 21, is that on a run rate basis that you hope to hit by the end of 21 or is that your expected aim for all of calendar 21? It's an annual revenue in 2021. in calendar year 2021. Got it. And any idea of target margins at that level?

31:36 Targeting above 30% at this point. Great. Thank you very much. Thank you. Once again, to ask a question, please press star and then the number one on your telephone keypad. Your next question comes from the line of Craig Ellis from B Reilly SBR. Your line is open. Hey guys, this is Carlin Lynch on for Craig Ellis. Congrats on the execution in a tough quarter. Just wanted to touch on the CPU weakness, particularly in the June quarter and in the back half of the year. Are you guys expecting any improvement in CPU supply in the June quarter? Are you guys guiding that kind of – or are your expectations – kind of flat quarter over quarter and then do you have like any initial expectations or any color for what the CPU supply kind of as it comes back online will look like through year end?

32:40 Sure, this is Stephen. Thanks for the question. So of course we look very closely and monitor the CPU shipments. What we originally expected at the beginning of the year was that the supply would resume sometime in the Q2 per Intel's statements. Right now, from what we see and what we hear in the market, that is being prolonged into the second half. We do know that they are expanding their capacity going into the second half, and so we are anticipating for a recovery at that time. In Q2, right now, what we are seeing is more of a mixed management, even on the processor side, with more allocation going, of course, towards server and commercial and then consumer last. So we likewise are also adjusting our business and production to match that for the June quarter.

33:32 Got it. And I guess moving on, for the consumer business, congrats on the design win. Can you provide any color there about how that changes your expectations for that business through year-end? Was that kind of a big one-quarter benefit? I know you guided that slightly up in... The second quarter, but I'm just wondering how we should think about that new relationship and as the refrigerator revenues ramp. Sure. So we've been investing into this IGBT line and our module line for the past few couple of years. So we are very excited to see this win at this major customer. And this particular customer just switched to us recently.

34:17 We got the design win late last year and we've been starting to ramp up in the March quarter and this will continue to grow in the coming quarters. We anticipate that this will also roll out into additional models, but right now we're counting on a gradual increase, not a sharp uptick, but a gradual increase in quarter by quarter because of this. Got it, got it. Excuse me. And then for the power segment, I know you guys had touched on kind of increased content in smartphones. We've had some of the Bellwether's report the last couple days, and they seem to be guiding kind of flat-ish year-on-year smartphone units. How should we think about content increases in high-end smartphones for you guys in a flat smartphone unit environment, and also kind of thinking about with 5G, I guess, you know, here now, what does your content increases look like?

35:19 How should we think about that, you know, this year? And then also next year, assuming more of a smartphone, a more normal smartphone unit growth. Sure. Let me ask, I understand the question is two parts regarding the communications. So let me touch upon the client side first, and this is more near term for us. on the smartphone. Our business and smartphone is actually in two different areas. One is in the battery protection and the second is in the quick charger side. On the battery protection side, the main growth driver for us is that we're actually winning and getting our products designed into more tier one customers. So a lot of the ramp up that we've been reporting on is due to that because more tier one customers are adopting our products in their smartphones. So even in this kind of soft global smartphone market, we've been able to win share because we didn't have a strong share before that. And on the quick charger side of it, the shift with the smartphones are these quick chargers.

36:25 And there is a trend that's happening in this market as well, moving towards higher power. As battery packs get larger and larger, and the chargers themselves, the output power also has to increase, which creates opportunity for us and an increased ASP. So we are also seeing more content or higher power MOSFETs being used in the application. So the story of BOM increased as well as share expansion on the client side. Now moving to the infrastructure side for Telecom 5G, this is a great opportunity actually for everyone playing in this space, but for us specifically because AOS hasn't really participated much in the 4G space before. So right now, our products are very well suited for this application, and right now we are being designed into major customers. We're starting to see some ramp right now in these coming quarters, in this past couple quarters, and that will continue in the next coming quarters as well.

37:20 Got it, got it. And did you guys see, I know that a few people had said that they saw maybe unexpected 5G infrastructure strengths this last quarter. Did you guys see any of that or is it still kind of too early for you guys to be seeing some of that maybe surprise strength? We did see an uptick in this last quarter. And for us, I think it's still a little bit early. We're still also in design in phase to get into more sockets and more customers. But for our own business that we see right now, yes, it did go up in Q1. And we're anticipating it will gradually grow in the coming quarters too. Got it. And if I could just ask one last question. Has the lower...

38:06 You guys had thrown out a 10% year-over-year growth target. Has the... The lower first quarter kind of changed your confidence in that at all for calendar 19. I kind of assume that once the joint venture comes online, that'll obviously be a big benefit. But I'm just kind of trying to get a sense of what the back half revenue will look like, if that has been any change in your thinking there. Thanks. Sure. So for the March quarter and June quarter, it was largely because of the CPU. shortage situation. So, you know, we see some reductions in our revenue. In the second half of the year, we expect, you know, we have some tailwind probably for the computing plus, you know, like Stephen mentioned in other areas, smartphone battery pack and quick chargers and from appliances will be expected to grow. So, I mean, we would expect in the second half that we can resume back on track to continue to grow. On the other hand, on our supply side, yes, we are expecting our Chongqing Joint Venture 12-inch fab can start ramping up in the month of June

39:39 to support our further growth. Those capacities are much needed because otherwise we will be capped at our current capacity. So we do need joint ventures ramp up. Got it. Got it. Thank you. And I'll hop back in the queue. Thank you. Our next question comes from the line of Jeremy Kwan from Stifel. Your line is open. Hi. Yes, just a question. I think, Mike, you mentioned last quarter that there's some talk about customers cleaning up the backlogs.

40:24 Is that still ongoing? Is there anything different one way or the other with, you know, customer ordering patterns and putting backlog in, guys? And maybe any comments on lead times? Actually, yes, we actively cleaned up the backlog in the last couple of quarters because I think they were clearly double ordered before. However, I think this whole end of our process there, and we do see the booking coming back right now. Great. And then a quick update on the digital power. Stephen, it was really good to see the progress at APEC and seeing a reference board. Can you give us an update in terms of the timing of when you might expect to start penetrating the market and maybe seeing revenues even? Thank you.

41:17 Thank you. This actually is a very, very interesting and very potential good field there. In this area, unfortunately or fortunately, it's totally deviated from the commodity market So even though we have some product platform for each application, but for every single customer, almost you have to special tune. You're more like a specific there. So it takes time to get in. But on that hand, once you get in there, it's also a bit more stickier. So we do have a lot of customer engagement there. And we expect, unfortunately, the remedy probably come next year, not this year. maybe some small ones this year, but most of them, anything significant will be next year.

42:08 Got it. Great. And just one last question in terms of the $5 million deposit that you received. I think you got one last quarter, too, and just wondering if that's part of the $90 million that you consider as part of AOS books and if there's any restrictions on those deposits. Yes, in the March quarter, we received the second $5 million customer deposit. Right now, there's no restrictions on the cash. Yes, it is sitting on AOS cash balance. Great. Thank you very much. Thank you. Thank you.

42:54 Your next question comes from the line of Craig Ellis from B Reilly SBR. Your line is open. Hey, guys. Just wondering if you guys could provide any update on some of the server power management initiatives. I know we had seen some commentary that maybe inventory digestion was going a little bit longer than expected. Does that change how you're thinking about the timing of that at all? Thanks. Are you asking regarding the digital power initiative or for our current business? Digital power initiatives, following up on the last question. Sure. So right now, we're still in the product development stage and we are engaging with our customers to get our product design in.

43:41 So for us right now, it's no major impact to us. Actually, it gives us some time to engage more with the customers. Got it, got it. And then one last question for me. I know you had said the joint venture kind of coming online in the second half. I know you guys probably can't give too much, but I was wondering if we could get any color on what the revenue ramp of that might look like through the back half of the year. Just any color would be great, and that's it for me. Okay, sure. Right now we are expecting our 12-inch fab from the joint venture can start small mass production in the month of June or July and then gradually ramp up in the September quarter and the December quarter. So our target is to ramp up to the phase one and many more. So, I mean, overall, you know, our estimate still holds.

44:48 You know, for phase one, once we fully ramped up, it can support AWS for annual revenue of additional $150 million. Got it. So we should expect kind of the FAB in December to be running at an annualized $150 million in revenue? That's correct? It will depend on the ramp-up speed. Got it.

45:35 Right now, either December quarter or next year, March or June. Got it, got it, got it. All right, thanks guys. Thank you. Thank you. Your next question comes from the line of Jeremy Quan from Stifel. Your line is open. Hi, sorry, just one last follow-up to that question. I recall that the JV is going to have a slight potential impact on the gross margin or it sounds like it might be neutral. with gross margin right now in the 27%-ish range. Now, how should we think about that as you look out into fiscal 20? Right now, because the 12-inch fab has not started production yet. Right now, with Performa out, the production run-up cost, until we ramp up to the target level.

46:34 So when we ramp up to the phase one level, our current estimate is our 12-inch fab wafer on the die basis would be on par with our 8-inch wafers. So that's our current estimate. So basically, next year, we're expecting that cost level. Great. Thank you. Thank you. There are no further questions at this time. I turn the call back over to team management for closing remarks.

47:19 Okay. This concludes our discussion Thank you for your interest in AOS and we look forward to talking with you again next quarter. Thank you. Thank you. Thank you. This concludes today's conference call. You may now disconnect.