Alpha and Omega Semiconductor Limited

Ladies and gentlemen, thank you for standing by and welcome to the Alpha and Omega Semiconductor Fiscal Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, simply press star one on your telephone keypad. Please be advised that today's conference is being recorded. Thank you. I'll now turn the conference over to Soyeon Jeong. You may begin.

Thank you. Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2020 first quarter financial results. I am Soyeon Jeong, investor relations representative for the company. With me today are Dr. Mike Chang, our CEO, Yifan Liang, our CFO, and Stephen Chang, our executive vice president. His 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 the website at www.aosmd.com Yifan will begin with a review of 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 conclude with guidance for the next quarter. Then we'll have a question and answer session. The earnings release was distributed by BusinessWire today, November 4th, 2019 after the close of market. 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 we 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 through comparable GAAP measures is in our earnings release. We remind you that during the course of this conference call, we'll make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For 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 information provided in today's call. Now, I'll turn the call over to our CFO, Yifan, to provide an overview of the first fiscal quarter financial results. Yifan.

Thank you, Suyang. Good afternoon, everyone, and thank you for joining us. Revenue for the September quarter was $117.8 million, up 5.3% when compared to the prior quarter, and up 2.4% from the same quarter last year. In terms of product mix, MOSFET revenue was $100.6 million, up 4.3% sequentially, and up 9% year over year. Power IC revenue was $15.7 million, up 14.1% from the prior quarter, and down 19% from a year ago. Assembly service revenue was $1.5 million, as compared to $1.7 million for the prior quarter and $3.4 million for the same quarter last year. Regarding the segment mix, computing represented 39.2% of the total revenue, consumer, 18.2%, power supply and industrial, 23.2%, communications, 18.1%, and service, 1.3%. Non-GAAP growth margin for the September quarter was 28.3% as compared to 27.4% for the prior quarter and 29.7% for the same quarter last year. The quarter-over-quarter increase in non-GAAP growth margin was mainly driven by the improvement of operation efficiency and product mix, partially offset by price erosion. Non-GAAP gross margin excluded $0.4 million of share-based compensation charge for the September quarter as compared to $0.4 million for the prior quarter and $0.5 million for the same quarter last year. Non-GAAP gross margin also excluded $6 million of production ramp-up costs related to the Chongqing joint venture for the September quarter as compared to $2.6 million for the prior quarter and $1.1 million for the same quarter last year. As the JV Company's 12-inch fab started production in July 2019, all fab-related costs were moved from GMA to cost of goods sold for the September quarter. Non-GAAP operating expenses for the September quarter were $25.6 million compared to $22.6 million for the prior quarter and $24.5 million for the same quarter last year. The quarter-over-quarter increase in non-GAAP operating expenses was primarily due to the increase in R&D engineering expenses and our annual merit increase started in the new fiscal year. Non-GAAP operating expenses excluded $1.9 million share-based compensation charge as compared to $2.1 million for the prior quarter and $2.6 million for the same quarter last year. Both GAAP and non-GAAP operating expenses included $2.8 million of digital power controller team expenses for the quarter as compared to $2.3 million for the prior quarter and $2.7 million for the same quarter last year. Our digital power controller team continues to engage with customers in product designs and is making steady progress toward our product roadmap. Income tax expense for the quarter was $0.4 million as compared to income tax benefits of $0.6 million for the prior quarter and income tax expense of $0.6 million for the same quarter last year. Non-GAAP EPS attributable to AOS for the quarter was 26 cents per share as compared to 35 cents for the prior quarter and 36 cents for the same quarter last year. Historically, AOS has been generating positive operating cash flow. However, in the September quarter, net cash used in operating activities by AOS was $4.2 million. This was largely impacted by two items totaling $15.1 million. First, $9.2 million one-day delay of receivable payment from one of our major distributors due to the bank shutdown on September 30th, 2019 because of Typhoon Mittag in Taiwan. Second, $5.9 million net intercompany receivable impact from the JV company. For the prior quarter, it was generated $15.2 million operating cash flow and $18.4 million for the The JV company generated $1.6 million operating cash flow in the September quarter compared to $6.9 million used in operating activities for the prior quarter and $0.4 million for the same quarter last year. The $1.6 million operating cash flow was largely attributable to the $5.9 million intercompany payable to AOS and a $2.7 million interest refund received from the local government under the joint venture agreement. This refund program will continue for the next two years at the same amount each year. Consolidated EBITDAs for the September quarter was $14.3 million compared to $14.2 million for the prior quarter and $15.4 million for the same quarter last year. EBITDAs attributable to AOS for the quarter was $13.8 million as compared to $15.1 million for the prior quarter and $16.7 million for the same quarter last year. Now let's look at the balance sheet. We completed the September quarter with cash and cash equivalents of $103.1 million, including $88 million at AOS and $15.1 million at the joint venture. This compares to $121.9 million at the end of last quarter, which included $100.7 million at AOS and $21.2 million at the JV Company. Our cash balance a year ago was $113.2 million, including $81.2 million at AOS and $32 million at the JV Company. Bank borrowing balance at the end of September quarter was $136.4 million, including $41 million at AOS and $95.4 million at the JV Company. In the September quarter, AOS borrowed $2 million from a new line and paid back $2.1 million of the existing loans. The JV Company borrowed $0.8 million from a new working capital line and paid back $1.7 million of the existing loans. Net trade receivables were $39.3 million as compared to $24.3 million at the end of last quarter and $37.1 million for the same quarter last year. Day sales outstanding for the quarter was 25 days compared to 24 days in the prior quarter. Net inventory was $118.6 million at the quarter end up from $111.6 million last quarter and from $98 million in the prior year. Average days in inventory came down to 114 days for the quarter as compared to 117 days in the prior quarter. Net property plant and equipment was $400.3 million as compared to $409.7 million last quarter and $368.5 million last year. Capital expenditures were $14.4 million for the quarter, including $8.3 million at AOS and $6.1 million at the JV Company. Before I turn the call over to Mike, I would like to share the progress at our JV Company. During the September quarter, assembly and test production continued to ramp up and the 12-inch fab started small mass production in July 2019. We expect to continue to ramp up phase one of the 12-inch fab in accordance with our plan to approach the target run rate by the September quarter of calendar year 2020. 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.