Alpha and Omega Semiconductor Limited

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Mike Chen, who will provide the business highlights for the quarter. Mike?