Except for the historical information contained herein, the matters addressed in this Item 2 constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements include, but are not limited to, statements regarding future financial performance of the Company; the expected ramp up timeline of the 12-inch fab at theJV Company ; the impact of government investigation and coronavirus on our financial performance; and other statements and information set forth under the heading "Factors Affecting Our Performance". Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by the Company's management. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the Act. The Company undertakes no obligation to publicly release the results of any revisions to its forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words "AOS," the "Company," "we," "us" and "our" refer toAlpha and Omega Semiconductor Limited and its subsidiaries. This management's discussion should be read in conjunction with the management's discussion included in the Company's Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 , filed with theSecurities and Exchange Commission onAugust 30, 2021 .
Insight
We are a designer, developer and global supplier of a broad portfolio of power semiconductors. Our portfolio of power semiconductors includes approximately 2,400 products, and has grown significantly with the introduction of over 160 new products in each of the fiscal years endedJune 30, 2021 and 2020, respectively, and 200 new products in the fiscal year endedJune 30, 2019 . During the nine months endedMarch 31, 2022 , we introduced an additional 116 new products. Our teams of scientists and engineers have developed extensive intellectual property and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 883 patents and 55 patent applications inthe United States as ofMarch 31, 2022 . We also have a total of 927 foreign patents, which were based primarily on our research and development efforts throughMarch 31, 2022 . We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal and portable computers, graphic cards, flat panel TVs, home appliances, smart phones, battery packs, game consoles, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. Our business model leverages global resources, including research and development and manufacturing inthe United States andAsia . Our sales and technical support teams are localized in several growing markets. We operate an 8-inch wafer fabrication facility located inHillsboro, Oregon , or theOregon fab, which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. For assembly and test, we primarily rely upon our in-house facilities inChina . In addition, we utilize subcontracting partners for industry standard packages. We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time. During the fiscal quarter endedMarch 31, 2022 , we continued our product diversification program by developing new silicon and packaging platforms to expand our serviceable available market, or SAM and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, and power IC product portfolio expanded significantly. Our high performance products and deepened customer relationships with our OEM and ODM customers have contributed to the achievement of our record high quarterly revenue of$203.2 million for the three months endedMarch 31, 2022 , a 20.1% growth compared to the same quarter last year. OnMarch 29, 2016 , we formed a joint venture (the "JV Company ") with two investment funds owned by the Municipality ofChongqing (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 ofChongqing, China . The Fab is being built in phases. As ofDecember 1, 2021 , we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in theJV Company . The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interest untilDecember 1, 2021 . 33 -------------------------------------------------------------------------------- EffectiveDecember 1, 2021 , we entered into a share transfer agreement (the "STA") with a third-party investor (the "Investor"), pursuant to which we sold to the Investor approximately 2.1% of outstanding equity interest held by us in theJV Company for an aggregate purchase price ofRMB 108 million or approximately$16.9 million (the "Transaction"). The STA contained customary representations, warranties and covenants. The Transaction was closed onDecember 2, 2021 (the "Closing Date"). As a result of the Transaction, as of the Closing Date, our equity interest in theJV Company decreased from 50.9% to 48.8%. Also, our right to designate directors on the board ofJV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction. As ofDecember 2, 2021 , we no longer have a controlling financial interest in theJV 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 or represent, a majority of the subsidiary's Board of Directors. All of these loss of control factors were present for us as ofDecember 2, 2021 . Accordingly, sinceDecember 2, 2021 , we have deconsolidated theJV Company in our Consolidated Financial Statements and accounted for our investment in theJV Company using the equity method of accounting. OnDecember 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 theJV Company for an aggregate purchase price ofRMB 60 million or approximately$9.4 million based on the currency exchange rate as ofDecember 24, 2021 . In addition, theJV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of theJV Company to exchange in cash. As a result, we owned 45.8% of the equity interest in theJV Company as ofDecember 31, 2021 . OnJanuary 26, 2022 , theJV Company completed a financing transaction pursuant to a corporate financing agreement (the "Financing Agreement") between theJV Company and certain third-party investors (the "New Investors "). Under the Financing Agreement, theNew Investors purchased newly issued equity interest of JV for a total purchase price ofRMB 509 million (or approximately$80 million based on the currency exchange rate as ofJanuary 26, 2022 ) (the "Investment"). Following the closing of the Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2%. We reduced our ownership of theJV Company to below 50% to increase the flexibility of theJV Company to raise capital to fund its future expansion. Following the Transaction and the successful ramp up to its Phase I target run rate in the September quarter of 2021, as planned, theJV Company intends to raise up to$200 million , including the$80 million funding onJanuary 26, 2022 , through private funding rounds for its Phase II expansion. In addition to immediate private funding rounds, theJV Company is also contemplating an eventual listing on the Science and Technology innovAtion boaRd, or STAR Market, of theShanghai Stock Exchange . The Transaction assists theJV Company in meeting certain regulatory listing requirements. A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by theJV Company will be successful or will be completed in a timely manner, or at all. In addition, theJV Company will continue to provide us with significant level of foundry capacity to enable us to develop and manufacture our products.
Impact of the COVID-19 pandemic on our business
Our business operations have been impacted by the global COVID-19 pandemic and the resulting economic downturn. Numerous governmental jurisdictions, including the States ofCalifornia ,Oregon andTexas in theU.S. and countries throughout theAsia Pacific region have imposed various restrictions on commercial activities, resulting in business closures, work stoppages, labor shortage, disruptions to ports, vaccine mandates and other shipping infrastructure, border closures, thereby negatively impacting our customers, suppliers, distributors, employees, offices, and the entire semiconductor ecosystem. As a result of the COVID-19 pandemic and changing consumer behaviors due to various government restrictions and the growing trend to provide remote-working options by employers, , we have experienced shifting market trends, including an increasing demand in markets for notebooks, PCs, gaming devices and other products. While we have benefited from the increasing demand for PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue or decline if government authorities relax or terminate COVID-19 related restrictions and consumer behaviors change in response to the reopening of certain economic activities. In an effort to protect the health and safety of our employees and to comply with various government and regulatory guidelines, we also took proactive actions to adopt policies and protocols at our locations around the world, including social distancing guidelines, vaccine and testing protocols, Since the start of the second quarter of calendar year 2021, there have been increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government activities and functions, and a gradual resumption of economic activities and consumer spending in our industries. However, infection rates continued to fluctuate in various regions and new strains of the virus remain a risk, including a surge of COVID-19 cases and hospitalization due to the spread of Omicron variants in late 2021 and early 2022. During the first calendar quarter of 2022, 34 -------------------------------------------------------------------------------- COVID-19 cases and hospitalization rate continued to decline and governments in various jurisdictions, including theU.S. andEurope , have lifted various restrictions and limitations on economic activities. However, there are ongoing global impacts resulting from the pandemic, including disruption of the product supply chains, shortages of semiconductor components, and delays in shipments, product development, and product launches and rising inflation rates. InApril 2022 , the operations of our two packaging and testing facilities inShanghai, China were suspended due to a strict lockdown of the city imposed by the local government in response to surging COVID cases. Our facilities inShanghai were required to shut down and production was halted beginning in mid-April. Transportation suspension in and out ofShanghai also interrupted the shipping of raw materials and finished parts to and from our facilities. We have been working closely with factory management to separate non-infected employees from infected employees, perform regular COVID-19 testing, and secure food, water, and other necessary supplies to support employees who have been affected. In addition, we have been working with local authorities to obtain permission to reopen the facilities, and as of the date of this Form 10-Q, we have received permission to reopen our facilities partially under a "closed-loop" arrangement. Under this arrangement, some of our employees are allowed to live and work on the premises. However, the pace at which we can resume full operations remains challenging due to difficulties in bringing back our workforce to the facilities, procuring certain raw materials and resolving logistical bottlenecks, and we also expect to incur additional costs to implement and maintain public health safety measures and protocols at our factories as required by theShanghai authorities. Currently we intend to gradually ramp up production at these facilities in May and return to normal operation inJune 2022 , assuming no additional restriction and lockdown are imposed by the government. Furthermore, while we seek to secure alternative sources of packaging capacity from third-party providers to mitigate the loss of in-house packaging capacity, there is no guarantee that such sources are available. Even if alternative sources are available, it will be difficult to complete the transition to a new supplier efficiently and timely, and we currently do not expect to secure sufficient third-party sources to substitute or replace fully our in-house packaging and testing capacity. The suspension of ourShanghai facilities, and the subsequent partial resumption of production, reduces our ability to complete orders from our customers in a timely manner, or at all, which is expected to adversely affect our revenue and results of operation for the three months endingJune 30, 2022 . It is uncertain how long theShanghai government intends to impose a shutdown, and even when lifted, the government may reimpose strict zero-positive-case requirements and lockdown. It is not possible to predict at this time the ultimate duration of these restrictions or the impact on financial results in the near-term. The full extent of the longer-term impact of the COVID-19 pandemic on our operational and financial performance is uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the spread of new variants of COVID-19; the continued and renewed imposition of protective public safety measures, including local and regional lockdown and quarantines; the disruption of global supply chain; and the impact of the pandemic on the global economy and demand for consumer products. Although we are unable to predict the full impact and duration of the COVID-19 pandemic on our business, we are actively managing our business operations and financial expenditures in response to continued uncertainty.
Other factors affecting our performance
In addition to the COVID-19 pandemic and related events described above, our performance is affected by several key factors, including the following:
The global, regional economic and PC market conditions: Because our products primarily serve consumer electronic applications, any significant change in global and regional economic conditions could materially affect our revenue and results of operations. A significant amount of our revenue is derived from sales of products in the personal computing ("PC") markets, such as notebooks, motherboards and notebook battery packs, therefore a substantial decline or downturn in the PC market could have a material adverse effect on our revenue and results of operations. The PC markets have experienced a modest global decline in recent years due to continued growth of demand in tablets and smart phones, worldwide economic conditions and the industry inventory correction which had and may continue to have a material impact on the demand for our products. However, we recently have experienced a significant increase of demand in PC market due to the impact of the COVID-19 pandemic and resulting shift in market trend and consumer behaviors. We cannot predict whether and how long this trend will continue due to the uncertainty and unpredictability of COVID-19 pandemic. A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures. We have executed and continue to execute strategies to diversify our product portfolio, penetrate other market segments, including the consumer, communications and industrial markets, and improve gross margins and profit by implementing cost control measures. While making efforts to reduce our reliance on the computing market, we continue to support our computing business and capitalize on the opportunities in this market with a more focused and competitive PC product strategy to gain market share. Manufacturing costs and capacity availability: Our gross margin is affected by a number of factors including our manufacturing costs, utilization of our manufacturing facilities, the product mixes of our sales, pricing of wafers from third party foundries and pricing of semiconductor raw materials. Capacity utilization affects our gross margin because we have 35 -------------------------------------------------------------------------------- certain fixed costs at ourShanghai facilities and ourOregon fab. If we are unable to utilize our manufacturing facilities at a desired level, our gross margin may be adversely affected. In addition, from time to time, we may experience wafer capacity constraints, particularly at third party foundries, that may prevent us from meeting fully the demand of our customers. 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. 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 recently commenced a plan to enhance the manufacturing capability and capacity of ourOregon 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 theJV 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 theJV Company's operation. As a result of sales of our JV equity interests and issuance of additional equity interests by theJV Company to third-party investors in financing transactions, our equity interest in theJV Company was reduced to 42.2%, which reduced our control and influence over theJV Company . While we continue to maintain a business relationship with theJV Company to ensure uninterrupted supply of manufacturing capacity, and we are currently negotiating a foundry agreement for theJV Company to provide guarantee level of capacity, theJV Company may take actions or make decisions that adversely impact our ability to access required capacity, and our lack of control and influence may prevent us from eliminating or mitigating such risk. Erosion and fluctuation of average selling price: Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of existing products to decline in the future. However, in the normal course of business, we seek to offset the effect of declining average selling price by introducing new and higher value products, expanding existing products for new applications and new customers and reducing the manufacturing cost of existing products. These strategies may cause the average selling price of our products to fluctuate significantly from time to time, thereby affecting our financial performance and profitability. Product introductions and customers' product requirements: Our success depends on our ability to introduce products on a timely basis that meet or are compatible with our customers' specifications and performance requirements. Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins with our customers. As we accelerate the development of new technology platforms, we expect to increase the pace at which we introduce new products and seek and acquire design wins. If we were to fail to introduce new products on a timely basis that meet customers' specifications and performance requirements, particularly those products with major OEM customers, and continue to expand our serviceable markets, then we would lose market share and our financial performance would be adversely affected. Distributor ordering patterns, customer demand and seasonality: Our distributors place purchase orders with us based on their forecasts of end customer demand, and this demand may vary significantly depending on the sales outlook and market and economic conditions of end customers. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly, which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us. As a result, our revenue and operating results may fluctuate significantly from quarter to quarter. In addition, because our products are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by numerous factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. 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. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control. If these major customers experience significant decline in the demand of their products, encounter difficulties or defects in their products, or otherwise fail to execute their sales and marketing strategies successfully, it may adversely affect our revenue and results of operations.
Main income statement items
36 --------------------------------------------------------------------------------
The following section describes the main items presented in our condensed consolidated statements of income:
Revenue
We generate revenue primarily from the sale of power semiconductors, consisting of power discretes and power ICs. Historically, a majority of our revenue has been derived from power discrete products. Because our products typically have three-year to five-year life cycles, the rate of new product introduction is an important driver of revenue growth over time. We believe that expanding the breadth of our product portfolio is important to our business prospects, because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our subsidiaries. Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period. At our discretion or upon our direct negotiations with the original design manufacturers ("ODMs") or original equipment manufacturers ("OEMs"), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In these 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.
Cost of Goods Sold
Our cost of goods sold primarily consists of costs associated with semiconductor wafers, packaging and testing, personnel, including share-based compensation expense, overhead attributable to manufacturing, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. As the volume of sales increases, we expect cost of goods sold to increase. While our utilization rates cannot be immune to the market conditions, our goal is to make them less vulnerable to market fluctuations. We believe our market diversification strategy and product growth will drive higher volume of manufacturing which will improve our factory utilization rates and gross margin in the long run.
Operating Expenses
Our operating expenses consist of research and development, selling, general and administrative expenses and impairment of long-lived assets. We expect our operating expenses as a percentage of revenue to fluctuate from period to period as we continue to exercise cost control measures in response to the declining PC market as well as align our operating expenses to the revenue level.
Research and development costs. Our research and development expenses primarily include salaries, bonuses, benefits, stock-based compensation expenses, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by external contractors and consultants, amortization of software and design tools, depreciation of equipment and overheads. We continue to invest in the development of new technologies and products using our own manufacturing and packaging facilities, as this is essential to our long-term success. We are also evaluating appropriate levels of investment and remain focused on introducing new products to improve our competitiveness. We expect our research and development expenses to fluctuate from time to time.
Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, product promotion costs, occupancy costs, travel expenses, expenses related to sales and marketing activities, amortization of software, depreciation of equipment, maintenance costs and other expenses for general and administrative functions as well as costs for outside professional services, including legal, audit and accounting services. We expect our selling, general and administrative expenses to fluctuate in the near future as we continue to exercise cost control measures.
income tax expense
We are subject to income taxes in various jurisdictions. Significant judgment and estimates are required in determining our worldwide income tax expense. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally. We establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more likely than not to be realized upon settlement with a taxing authority. If the actual tax outcome of such 37 -------------------------------------------------------------------------------- exposures is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Changes in the location of taxable income (loss) could result in significant changes in our income tax expense. We record a valuation allowance against deferred tax assets if it is more likely than not that a portion of the deferred tax assets will not be realized, based on historical profitability and our estimate of future taxable income in a particular jurisdiction. Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the deferred tax assets may increase or decrease, resulting in corresponding changes in income tax expense. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide profits or losses, the tax laws and regulations in each geographical region where we have operations, the availability of tax credits and carry-forwards and the effectiveness of our tax planning strategies.
OnDecember 22, 2017 ,the United States enacted tax reform legislation through the Tax Cuts and Jobs Act ("the Tax Act"), which significantly changes the existingU.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 afterDecember 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 US affiliates, where such payments reduce the US tax base . 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. 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.
“
OnDecember 27, 2020 ,the United States enacted the Consolidated Appropriations Act, 2021, which made changes to existingU.S. tax laws. There was no material impact of the tax law changes included in the Consolidated Appropriations Act, 2021 to the Company.
‘US Bailout Act 2021’ signed into law
OnMarch 11, 2021 ,the United States enacted the American Rescue Plan Act of 2021, which made changes to existingU.S. tax laws. There was no material impact of the tax law changes included in the American Rescue Plan Act of 2021 to the Company. 38 --------------------------------------------------------------------------------
Investment gain/loss under the equity method from an investee
We use the equity method of accounting when we have the ability to exercise significant influence, but not control, as determined in accordance with general accepted accounting principles, over the operating and financial policies of the company. EffectiveDecember 2, 2021 , we reduced our equity interest in theJV Company below 50% of outstanding equity ownership and experienced a loss of control of theJV Company . As a result, we record our investment under equity method of accounting. Since we are unable to obtain accurate financial information from theJV Company in a timely manner, we record our share of earnings or losses of such affiliate on a one quarter lag. We record our interest in the net earnings of its equity method investees, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Income. Profits or losses related to intra-entity sales with its equity method investees are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Operations. Results of Operations The following tables set forth statements of income, also expressed as a percentage of revenue, for the three and nine months endedMarch 31, 2022 and 2021. Our historical results of operations are not necessarily indicative of the results for any future period. Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021 (in thousands) (% of revenue) (in thousands) (% of revenue) Revenue$ 203,239 $ 169,212 100.0 % 100.0 %$ 583,593 $ 479,593 100.0 % 100.0 % Cost of goods sold 130,837 116,521 64.4 % 68.9 % 378,259 335,630 64.8 % 70.0 % Gross profit 72,402 52,691 35.6 % 31.1 % 205,334 143,963 35.2 % 30.0 % Operating expenses Research and development 16,545 15,557 8.1 % 9.2 % 50,873 45,671 8.7 % 9.5 % Selling, general and administrative 24,625 19,338 12.1 % 11.4 % 70,563 56,579 12.1 % 11.8 % Total operating expenses 41,170 34,895 20.2 % 20.6 % 121,436 102,250 20.8 % 21.3 % Operating income 31,232 17,796 15.4 % 10.5 % 83,898 41,713 14.4 % 8.7 % Other income (loss), net 263 (253) 0.2 % (0.1) % 720 2,087 0.1 % 0.4 % Interest income (expense), net (308) (1,562) (0.2) % (1.1) % (3,025) (4,832) (0.5) % (1.0) % Gain on deconsolidation of theJV Company - - - % - % 399,093 - 68.4 % - % Gain (loss) on changes of equity interest in theJV Company , net 4,501 - 2.2 % - % (3,140) - (0.5) % - % Net income before income taxes 35,688 15,981 17.6 % 9.3 % 477,546 38,968 81.9 % 8.1 % Income tax expense 2,902 1,014 1.4 % 0.6 % 38,318 2,694 6.6 % 0.6 % Net income before loss from equity method investment 32,786 14,967 16.2 % 8.7 % 439,228 36,274 75.3 % 7.5 % Equity method investment loss from equity investee 1,136 - 0.6 % - % 1,136 - 0.2 % - % Net income 31,650 14,967 15.6 % 8.7 % 438,092 36,274 75.1 % 7.5 % Net gain (loss) attributable to noncontrolling interest - (1,133) - % (0.7) % 20 (2,303) - % (0.5) % Net income attributable toAlpha and Omega Semiconductor Limited $ 31,650 $ 16,100 15.6 % 9.4 %$ 438,072 $ 38,577 75.1 % 8.0 % 39
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Share-based compensation expense was recognized as follows:
Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021 (in thousands) (% of revenue) (in thousands) (% of revenue) Cost of goods sold$ 1,282 $ 427 0.6 % 0.3 %$ 3,560 $ 1,195 0.6 % 0.2 % Research and development 1,814 1,316 0.9 % 0.8 % 4,769 3,639 0.8 % 0.8 % Selling, general and administrative 5,177 2,082 2.5 % 1.2 % 13,125 5,091 2.2 % 1.1 % Total$ 8,273 $ 3,825 4.0 % 2.3 %$ 21,454 $ 9,925 3.6 % 2.1 %
Three and nine months ended
Revenue
Here is a summary of revenue by product type:
Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage) Power discrete$ 140,572 $ 122,615 $ 17,957 14.6 %$ 406,235 $ 355,487 $ 50,748 14.3 % Power IC 60,359 43,385 16,974 39.1 % 167,782 115,224 52,558 45.6 % Packaging and testing services 2,308 3,212 (904) (28.1) % 9,576 8,882 694 7.8 %$ 203,239 $ 169,212 $ 34,027 20.1 %$ 583,593 $ 479,593 $ 104,000 21.7 % Total revenue was$203.2 million for the three months endedMarch 31, 2022 , an increase of$34.0 million , or 20.1%, as compared to$169.2 million for the same quarter last year. The increase was primarily due to an increase of$18.0 million and$17.0 million in sales of power discrete products and sales of power IC products, respectively. The increase in power discrete and power IC product sales was primarily due to an 24.1% increase in average selling price, offset by an 2.4% decrease in unit shipments as compared to same quarter last year due to a shift in product mix. The decrease in revenue of packaging and testing services for the three months endedMarch 31, 2022 , as compared to same quarter last year, was primarily due to decreased demand. Total revenue was$583.6 million for the nine months endedMarch 31, 2022 an increase of$104.0 million , or 21.7%, as compared to$479.6 million for the same period last year. The increase was primarily due to an increase of$50.7 million and$52.6 million in sales of power discrete products and sales of power IC products, respectively. The increase in power discrete and power IC product sales was primarily due to an 25.3% increase in average selling price, partially offset by a 2.9% decrease in unit shipments as compared to same period last year due to a shift in product mix. The increase in revenue of packaging and testing services for the nine months endedMarch 31, 2022 , as compared to same period last year, was primarily due to increased demand.
Cost of goods sold and gross profit
Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage) Cost of goods sold$ 130,837 $ 116,521 $ 14,316 12.3 %$ 378,259 $ 335,630 $ 42,629 12.7 % Percentage of revenue 64.4 % 68.9 % 64.8 % 70.0 % Gross profit$ 72,402 $ 52,691 $ 19,711 37.4 %$ 205,334 $ 143,963 $ 61,371 42.6 % Percentage of revenue 35.6 % 31.1 % 35.2 % 30.0 % 40
-------------------------------------------------------------------------------- Cost of goods sold was$130.8 million for the three months endedMarch 31, 2022 , an increase of$14.3 million , or 12.3%, as compared to$116.5 million for the same quarter last year. The increase was primarily due to 20.1% increase in revenue. Gross margin increased by 4.5 percentage points to 35.6% for the three months endedMarch 31, 2022 , as compared to 31.1% for the same quarter last year. The increase in gross margin was primarily due to better product mix during the three months endedMarch 31, 2022 . Cost of goods sold was$378.3 million for the nine months endedMarch 31, 2022 , an increase of$42.6 million , or 12.7%, as compared to$335.6 million for the same period last year. The increase was primarily due to 21.7% increase in revenue. Gross margin increased by 5.2 percentage points to 35.2% for the nine months endedMarch 31, 2022 , as compared to 30.0% for the same period last year. The increase in gross margin was primarily due to better product mix during the nine months endedMarch 31, 2022 .
Research and development costs
Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage) Research and development expenses$ 16,545 $ 15,557 $ 988 6.4 %$ 50,873 $ 45,671 $ 5,202 11.4 % Research and development expenses were$16.5 million for the three months endedMarch 31, 2022 , an increase of$1.0 million , or 6.4%, as compared to$15.6 million for the same quarter last year. The increase was primarily attributable to a$1.6 million increase in employee compensation and benefits expense mainly due to higher salary related expenses and higher bonuses accrual, a$0.5 million increase in share-based compensation expense due to an increase in stock awards granted and$0.3 million in allocation, partially offset by$1.3 million decrease in product prototyping engineering expense as a result of decreased engineering activities during the current quarter. Research and development expenses were$50.9 million for the nine months endedMarch 31, 2022 , an increase of$5.2 million , or 11.4%, as compared to$45.7 million for the same period last year. The increase was primarily attributable to a$4.8 million increase in employee compensation and benefits expense mainly due to higher salary related expenses and higher bonuses, a$1.1 million increase in share-based compensation expense due to an increase in stock awards granted, a$0.2 million increase in depreciation expense and$0.6 million in allocation, partially offset by a$1.7 million decrease in product prototyping engineering expense as a result of decreased engineering activities during the current period.
Selling, general and administrative expenses
Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage) Selling, general and administrative$ 24,625 $ 19,338 $ 5,287 27.3 %$ 70,563 $ 56,579 $ 13,984 24.7 % Selling, general and administrative expenses were$24.6 million for the three months endedMarch 31, 2022 , an increase of$5.3 million , or 27.3%, as compared to$19.3 million for the same quarter last year. The increase was primarily attributable to a$0.9 million increase in employee compensation and benefits expenses mainly due to higher salary related expenses, higher bonus expenses accrual and increased business insurance expenses, a$3.1 million increase in share-based compensation expense due to an increase in stock award granted, and a$1.5 million in loss of a cybersecurity incident, partially offset by a$0.4 million decrease in legal expense related to the government investigation during the current quarter. Selling, general and administrative expenses were$70.6 million for the nine months endedMarch 31, 2022 , an increase of$14.0 million , or 24.7%, as compared to$56.6 million for the same period last year. The increase was primarily attributable to a$7.0 million increase in employee compensation and benefits expenses mainly due to higher salary related expenses, higher bonus expenses and business insurance expenses, a$8.0 million increase in share-based compensation expense due to an increase in stock award granted as well as$1.5 million in loss of a cybersecurity incident, partially offset by a$1.8 million decrease in legal expenses related to the government investigation, a$0.3 million decrease in marketing demo and trade shows costs as a result of the COVID-19 pandemic, and a$0.4 million decrease in depreciation during the current period.
Other income (loss), net
41 -------------------------------------------------------------------------------- Three Months Ended March 31, Nine Months Ended March 31, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage)
Other income (loss), net
(204.0) %$ 720 $ 2,087 $ (1,367) (65.5) % Other income (loss), net increased by$0.5 million during the three months endedMarch 31, 2022 as compared to the same quarter last year was primarily due to decrease in foreign currency exchange loss as a result of the appreciation of RMB against USD. Other income (loss), net decreased by$1.4 million during the nine months endedMarch 31, 2022 as compared to the same quarter last year was primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
Interest income (expense), net
Three Months EndedMarch 31 ,
Nine month period ended
2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage) Interest income (expense), net$ (308) $ (1,562) $ 1,254 (80.3) %$ (3,025) $ (4,832) $ 1,807 (37.4) % Interest income (expense), net decreased by$1.3 million during the three months endedMarch 31, 2022 as compared to the same quarter last year was primarily due to a$1.2 million decrease in interest expenses as a result of theJV Company being deconsolidated inDecember 2021 . Interest income (expense), net decreased by$1.8 million during the nine months endedMarch 31, 2022 as compared to the same period last year was primarily due to a$1.6 million decrease in interest expenses as a result of theJV Company being deconsolidated inDecember 2021 .
Gain on deconsolidation of
EffectiveDecember 1, 2021 , we entered into a share transfer agreement (the "STA") with a third-party investor (the "Investor"), pursuant to which we sold to the Investor approximately 2.1% of outstanding equity interest held by us in theJV Company for an aggregate purchase price ofRMB 108 million or approximately$16.9 million (the "Transaction"). The STA contained customary representations, warranties and covenants. The Transaction was closed onDecember 2, 2021 (the "Closing Date"). As a result of the Transaction, as of the Closing Date, our equity interest in theJV Company decreased from 50.9% to 48.8%, Also, our right to designate directors on the board ofJV 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 theJV 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 ofDecember 2, 2021 . Accordingly, sinceDecember 2, 2021 , AOS has accounted for its investment in theJV Company using the equity method of accounting. OnDecember 24, 2021 , we entered into a STA with another third-party investor, pursuant to which we sold to this investor 1.1% of outstanding equity interest held by us in theJV Company for an aggregate purchase price ofRMB 60 million or approximately$9.4 million . In addition, theJV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of theJV Company to exchange in cash. As a result, the Company owned 45.8% of the equity interest in theJV Company as ofDecember 31, 2021 . OnJanuary 26, 2022 , theJV Company completed a financing transaction pursuant to a corporate financing agreement (the "Financing Agreement") between theJV Company and certain third-party investors (the "New Investors "). Under the Financing Agreement, theNew Investors purchased newly issued equity interest of JV for a total purchase price ofRMB 509 million (or approximately$80 million based on the currency exchange rate as ofJanuary 26, 2022 ) (the "Investment"). Following the closing of the Investment, the percentage of outstanding JV equity interest beneficially owned by us was reduced to 42.2%. 42 -------------------------------------------------------------------------------- During the nine months endedMarch 31, 2022 , we recorded a$399.1 million of gain on deconsolidation of theJV Company . During the three and nine months endedMarch 31, 2022 , we recorded a$4.5 million of gain on changes of equity interest in theJV Company and$3.1 million of loss on changes of equity interest in theJV Company . We account for our investment in theJV Company as an equity method investment and reports its equity in earnings or loss of theJV Company on a three-month lag due to an inability to timely obtain financial information of theJV Company . During the three and nine months endedMarch 31, 2022 , we recorded$1.1 million of its equity in loss of theJV Company , net of tax, using lag reporting. Income tax expense Three Months EndedMarch 31 ,
Nine month period ended
2022 2021 Change 2022 2021 Change (in thousands) (in thousands) (in percentage) (in thousands) (in thousands) (in percentage)
Income tax expense$ 2,902 $ 1,014 $ 1,888 186.2 %$ 38,318 $ 2,694 $ 35,624 1,322.3 % The Company recognized income tax expense of approximately$2.9 million and$1.0 million for the three months endedMarch 31, 2022 and 2021, respectively. The income tax expense of$2.9 million for the three months endedMarch 31, 2022 included a$0.7 million discrete tax expense related to the Company's$4.5 million of gain related to the revaluation of the Company's equity interest in a joint venture. The income tax expense of$1.0 million for the three months endedMarch 31, 2021 included immaterial discrete tax. Excluding the$4.5 million revaluation gain and the$0.7 million of discrete income tax items, the effective tax rate for the three months endedMarch 31, 2022 and 2021 was 7.4% and 6.3%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of$34.5 million ($30.0 million of pretax book income excluding the$4.5 million of gain related to the revaluation of the Company's equity interest in a joint venture) for the three months endedMarch 31, 2022 as compared to a pretax book income of$16.0 million for the three months endedMarch 31, 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. The Company recognized income tax expense of approximately$38.3 million and$2.7 million for the nine months endedMarch 31, 2022 and 2021, respectively. The income tax expense of$38.3 million for the nine months endedMarch 31, 2022 iincluded 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 switches from the consolidation method of accounting to the equity method of accounting related to this investment and no longer asserts permanent reinvestment related to the Company's investment in the joint venture as well as$0.1 million of other discrete income tax items. The income tax expense of$2.7 million for the nine months endedMarch 31, 2021 included a$0.04 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 nine months endedMarch 31, 2022 and 2021 was 6.0% and 7.0%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of$476.4 million ($80.4 million of pretax book income excluding the$396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the nine months endedMarch 31, 2022 as compared to a pretax book income of$39.0 million for the nine months endedMarch 31, 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. The Company files its income tax returns inthe United States and in various foreign jurisdictions. The tax years 2001 to 2021 remain open to examination byU.S. federal and state tax authorities. The tax years 2013 to 2021 remain open to examination by foreign tax authorities. The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As ofMarch 31, 2022 , the gross amount of unrecognized tax benefits was approximately$7.8 million , of which$4.8 million , if recognized, would reduce the effective income tax rate in future periods. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.
Cash and capital resources
43 -------------------------------------------------------------------------------- Our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business. To date, we finance our operations and capital expenditures primarily through funds generated from operations and borrowings under our term loans, financing lease and other debt agreements. OnAugust 18, 2021 , Jireh entered into a term loan agreement with a financial institution (the "Bank") in an amount up to$45.0 million for the purpose of expanding and upgrading the Company's fabrication facility located inOregon . 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 year term and matures onFebruary 16, 2027 . Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down$45.0 million onFebruary 16, 2022 . As ofMarch 31, 2022 , there was$45.0 million outstanding balance under the loan. OnOctober 2019 , the Company's subsidiary inChina entered into a line of credit facility withBank of Communications Limited inChina . This line of credit matures onFebruary 14, 2021 and is based on the China Base Rate multiplied by 1.05, or 4.99% onOctober 31, 2019 . The purpose of the credit facility is to provide short-term borrowings. The Company could borrow up to approximatelyRMB 60.0 million or$8.5 million based on the currency exchange rate between the RMB and theU.S. Dollar onOctober 31, 2019 . InSeptember 2021 , this line of credit was renewed with maximum borrowings up toRMB 140.0 million with the same terms and a maturity date ofSeptember 18, 2022 . During the three months endedDecember 31, 2021 , the Company borrowedRMB 11.0 million , or$1.7 million , at an interest rate of 3.85% per annum, with principal due onNovember 18, 2022 . As ofMarch 31, 2022 , the total outstanding balance of this loan was$1.7 million . OnNovember 16, 2018 , the Company's subsidiary inChina 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 approximatelyRMB 72.0 million or$10.3 million based on currency exchange rate between RMB andU.S. Dollar onNovember 16, 2018 . TheRMB 72.0 million consists ofRMB 27.0 million for trade borrowings with a maturity date ofDecember 31, 2021 , andRMB 45.0 million for working capital borrowings or trade borrowings with a maturity date ofSeptember 13, 2022 . During the three months endedDecember 31, 2021 , the Company borrowedRMB 5.0 million , or$0.8 million , at an interest rate of 3.7% per annum, with principal due onSeptember 12, 2022 . As ofMarch 31, 2022 , the total outstanding balance of this loan was$0.6 million . OnAugust 9, 2019 , one of the Company's wholly-owned subsidiaries (the "Borrower") entered into a factoring agreement with theHongkong 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 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. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. OnAugust 11, 2021 , the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to$8.0 million with certain financial covenants required. Other terms remain the same. As ofMarch 31, 2022 , the Borrower was in compliance with these covenants. As ofMarch 31, 2022 , there was no outstanding balance and the Company had unused credit of approximately$8.0 million . OnMay 1, 2018 , Jireh entered into a loan agreement with the Bank that provided a term loan in the 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 onJune 1, 2023 . BeginningJune 1, 2018 , Jireh made consecutive monthly payments of principal and interest to the Bank. The outstanding principal accrues 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. InAugust 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 onAugust 18, 2021 discussed above. The amendment was accounted for as a debt modification and no gain or loss was recognized. The Company was in compliance with these covenants as ofMarch 31, 2022 . As ofMarch 31, 2022 , the outstanding balance of the term loan was$14.4 million . OnAugust 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 Company's fabrication facility located inOregon . The obligation under the credit agreement is secured by substantially all assets of Jireh and guaranteed by the Company. The credit agreement has a five-year term and matures onAugust 15, 2022 . InJanuary 2018 andJuly 2018 , Jireh drew down the loan in the amount of$13.2 million and$16.7 million , respectively. Beginning inOctober 2018 , Jireh is required to pay to the Bank on each payment date, the outstanding principal amount of the loan in monthly installments. The loan accrues interest based on an adjusted LIBOR as defined in the credit agreement, plus a specified applicable margin in the range of 1.75% to 2.25%, based on 44 -------------------------------------------------------------------------------- the outstanding balance of the loan. The credit agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio. InAugust 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 onAugust 18, 2021 discussed above. The amendment was accounted for as a debt modification and no gain or loss was recognized. The Company was in compliance with these covenants as ofMarch 31, 2022 . As ofMarch 31, 2022 , the outstanding balance of the term loan was$3.7 million . InSeptember 2017 , the Board of Directors approved a repurchase program (the "Repurchase Program") that allowed us to repurchase our common shares from the open market pursuant to a pre-established Rule 10b5-1 trading plan or through privately negotiated transactions up to an aggregate of$30.0 million . The amount and timing of any repurchases under the Repurchase Program depend on a number of factors, including but not limited to, the trading price, volume and availability of our common shares. Shares repurchased under this program are accounted for as treasury shares and the total cost of shares repurchased is recorded as a reduction of shareholders' equity. We did not repurchase any shares pursuant to the Repurchase Plan during the nine months endedMarch 31, 2022 . Since the inception of the program, we repurchased an aggregate of 6,784,648 shares for a total cost of$67.3 million , at an average price of$9.92 per share, excluding fees and related expenses. As ofMarch 31, 2022 , of the 6,784,648 repurchased shares, 166,645 shares with a weighted average repurchase price of$10.07 per share, were reissued at an average price of$5.02 per share pursuant to option exercises and vested restricted share units. We had$13.4 million remained available under the Repurchase Program as ofMarch 31, 2022 . We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs, including working capital and capital expenditures, for at least the next twelve months. In the long-term, we may require additional capital due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash is insufficient to meet our needs, we may seek to raise capital through equity or debt financing. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.
Cash, cash equivalents and restricted cash
As ofMarch 31, 2022 andJune 30, 2021 , we had$323.4 million and$204.8 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consist of cash on hand, restricted cash, and short-term bank deposits with original maturities of three months or less. Of the$323.4 million and$204.8 million cash, cash equivalents and restricted cash,$277.0 million and$134.6 million , respectively, are deposited with financial institutions outsidethe United States .
The following table presents our cash flows from operating, investing and financing activities for the periods indicated:
Nine Months Ended March 31, 2022 2021 (in thousands) Net cash provided by operating activities$ 193,196 $ 84,524 Net cash used in investing activities (91,142) (40,412) Net cash provided by (used in) financing activities 16,351 (16,323)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
152 3,982
Net increase in cash, cash equivalents and restricted cash
45 --------------------------------------------------------------------------------
Cash flow from operating activities
Net cash provided by operating activities of$193.2 million for the nine months endedMarch 31, 2022 resulted primarily from net income of$438.1 million and net changes in assets and liabilities using cash of$62.0 million , partially offset by non-cash expenses of$306.9 million . The non-cash expenses of$306.9 million primarily included$399.1 million of gain on deconsolidation of theJV Company , partially offset by$3.1 million of loss on changes of equity interest in theJV Company ,$30.0 million of deferred income tax on deconsolidation and changes of equity interest in theJV Company ,$34.3 million of depreciation and amortization expenses,$1.1 million of loss on equity investment,$21.5 million of share-based compensation expense, and$2.2 million of deferred income taxes. The net changes in assets and liabilities of$62.0 million were primarily due to a$65.1 million increase in accrued and other liabilities, a$3.5 million increase in income taxes payable on deconsolidation and changes of equity interest in theJV Company , a$15.6 million increase in accounts payable due to timing of payments, and a$34.4 million increase in other payable from equity investee, partially offset by a$3.6 million increase in accounts receivable as a result of timing of the shipments and payments collected, a$42.9 million increase in inventories as a result of our inventories built up for preparation of uncertainty of supply chains, a$10.1 million increase in other current and long-term assets due to increase in advance payments to vendors. Net cash provided by operating activities of$84.5 million for the nine months endedMarch 31, 2021 resulted primarily from net income of$36.3 million and non-cash expenses of$50.1 million , partially offset by net changes in assets and liabilities using cash of$1.9 million . The non-cash expenses of$50.1 million primarily included$39.4 million of depreciation and amortization expenses,$9.9 million of share-based compensation expense and$0.7 million of deferred income taxes. The net changes in assets and liabilities of$1.9 million were primarily due to a$20.4 million increase in accounts receivable as a result of higher revenue, a$9.6 million increase in inventories due to a continued ramp of theJV Company , a$2.3 million increase in other current and long-term assets due to increase in advance payments to vendors, and a$0.2 million decrease in accounts payable due to timing of payments, partially offset by a$29.6 million increase in accrued and other liabilities and a$1.1 million increase in income taxes payable.
Cash flow from investing activities
Net cash used in investing activities of$91.1 million for the nine months endedMarch 31, 2022 was primarily attributable to cash disposed upon deconsolidation of theJV Company of$20.7 million , purchases of property and equipment of$15.0 million for theJV Company , and purchases of property and equipment of$83.0 million for other than theJV Company , partially offset by proceeds from the sale of equity interest in theJV Company of$26.3 million and government grants related to fixed assets of$1.2 million . Net cash used in investing activities of$40.4 million for the nine months endedMarch 31, 2021 was primarily attributable to$40.5 million purchases of property and equipment, including$15.6 million purchased by theJV Company .
Cash flow from financing activities
Net cash used in financing activities of$16.4 million for the nine months endedMarch 31, 2022 was primarily attributable to$59.3 million proceeds from borrowings, and$3.3 million of proceeds from exercise of stock options and ESPP, partially offset by$33.7 million in repayments of borrowings,$4.2 million in payment of finance lease obligations, and$8.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units. Net cash used in financing activities of$16.3 million for the nine months endedMarch 31, 2021 was primarily attributable to$44.1 million in repayments of borrowings,$12.3 million in payment of finance lease obligations, and$6.2 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, partially offset by$42.9 million proceeds from borrowings and$3.3 million of proceeds from exercise of stock options and ESPP.
Commitments
See Note 12 of the Notes to the Summary Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for a description of the covenants.
Off-balance sheet arrangements
From
Contractual obligations
46 -------------------------------------------------------------------------------- There were no material changes outside of our ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 .
Recent accounting pronouncements
See Note 1 of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference. 47
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