Company: AOSL
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0001387467-25-000017
Chunk: 41

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-02-06
Form: 10-Q
Item: Item 1
Chunk 41
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 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 in-house facilities.

Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. 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 certain situations, we will grant price adjustments to the distributors reflecting such special pricing. We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee and milestone payments of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.  The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services.  We use the input method to measure progression of the transfer of services.  During the three and six months ended December 31, 2024, we recorded $5.4 million and $11.0 million of license and development revenue, respectively, and during the three and the six months ended December 31, 2023, we recorded $5.5 million and $11.1 million of license and development revenue, respectively.  As of December 31, 2024, we had recorded a total of $42.2 million of license and development revenue.  When our performance under the contract precedes our receipt of consideration from the customer, and the receipt of consideration is conditional upon factors other