Alpha and Omega Semiconductor Ltd (AOSL)

Interest coverage

		Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	-15,152	-16,365	-13,389	-3,756	57	-3,841	5,175	21,328	37,433	83,067	102,902	102,317	106,261	92,825	78,698	64,076	40,386	13,971	-2,989	-13,937
Interest expense (ttm)	US$ in thousands	2,521	2,196	2,544	1,961	1,636	1,370	718	1,097	1,905	2,208	2,352	3,936	4,148	5,655	5,495	3,852	2,973	3,440	3,694	3,316
Interest coverage		-6.01	-7.45	-5.26	-1.92	0.03	-2.80	7.21	19.44	19.65	37.62	43.75	26.00	25.62	16.41	14.32	16.63	13.58	4.06	-0.81	-4.20

March 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-15,152K ÷ $2,521K
= -6.01

The analysis of Alpha and Omega Semiconductor Ltd’s interest coverage ratios over the specified period reveals significant fluctuations in the company's ability to meet its interest obligations.

In the fiscal quarter ending June 30, 2020, the company experienced a notably negative interest coverage ratio of -4.20, indicating that it was unable to generate sufficient earnings before interest and taxes (EBIT) to cover its interest expenses, reflecting significant financial distress at that time. This situation slightly improved by September 30, 2020, with the ratio declining further to -0.81, suggesting ongoing challenges in covering interest costs without generating positive EBIT.

A marked improvement occurred in the quarter ending December 31, 2020, when the ratio shifted to a positive 4.06, signaling a turnaround as the company’s EBIT became sufficient to cover its interest expenses. This upward trend continued into subsequent periods, with ratios reaching 13.58 by March 31, 2021, and further ascending through 16.63, 14.32, and 16.41 in the following quarters, culminating in peak ratios of around 25.62 and 26.00 in March and June 2022, respectively. These figures reflect a strong capacity to service interest obligations under stable or improving profitability conditions during this period.

From late 2022 onwards, though the ratios remained largely positive, a declining trend became apparent. By September 30, 2022, the ratio was 43.75, which started to diminish thereafter, reaching 19.65 in March 2023. This suggests a reduction in EBIT relative to interest expenses, possibly due to waning profitability or increased interest costs.

A significant deterioration is evident in the subsequent periods. The interest coverage ratio dropped to 7.21 by September 30, 2023, and turned negative at -2.80 at the end of December 2023, indicating the company’s EBIT once again fell short of covering its interest expenses entirely. This negative trajectory continued through March and June 2024, with ratios of 0.03 and -1.92, respectively, and worsened further in upcoming quarters, culminating in a ratio of -7.45 by December 2024 and -6.01 in March 2025. These negative ratios imply persistent profitability challenges, potentially reflecting increased interest burdens, operational difficulties, or both.

Overall, the data depict a company that experienced a notable recovery from severe financial difficulties in 2020, maintained relatively strong interest coverage during 2021 and into mid-2022, but faced substantial setbacks starting in late 2022 and into 2023 and 2024. The recurrent negative interest coverage ratios in the most recent periods signal significant concerns regarding the company’s ability to service its debt without additional improvements in operational performance or restructuring efforts.