Alpha and Omega Semiconductor Limited

Good evening. Thank you for attending today's Alpha and Omega Semiconductor Fiscal Q2 2022 Earnings Call. My name is Bethany and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Gary Dvorak with Alpha and Omega. Please go ahead.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2022 second quarter financial results. I'm Gary Dvorak, investor relations representative for ALS. With me today are Dr. Mike Chang, our CEO, Stephen Chang, our president, and Yifan Yang, our CFO. This call is being recorded and broadcast live over the web. The replay will be available for seven days following the call via the link in the investor relations section of our website. Our call will proceed as follows. Mike will begin with strategic highlights. Then Stephen will provide business updates and a detailed segment report. After that, Yvonne will review the financial results and provide guidance for the March quarter. Finally, we'll have the question and answer session. The earnings release was distributed over the wire services today, February 7, 2022, after the close of the market. The release is also posted on the 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 the earnings. We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on Mannington's current expectations and involve risks and uncertainties that could cause our 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 of the FCC. We assume no obligation to update the information provided in today's call. Now, I'll turn the call over to our CEO, Dr. Mike Chang, to provide strategic highlights. Mike? Thank you, Gary.

I would like to welcome everyone to today's call. It is a pleasure to be speaking with all of you again today. To begin, I would like to briefly summarize some of the major achievements from last year and outline why we believe we have achieved a critical milestone in our operations and are in a very strong position to deliver growth and value to our shareholders in the years to come. Looking back, Canada's year 2021 was an exceptional year for AOS, both in terms of our business execution as well as our financial results. Due to the global semiconductor supply shortage, we focused on executing our three-pronged production capacity strategy. First, we made a significant investment to expand our capacity and further enhance our R&D capabilities at our Oregon facility. Second, the joint venture in Chongqing completed phase one of its capacity ramp in September. and in december we sold 3.2 percent of our active interest in the jv for approximately 26 million dollars the strategic intent of this conception was to reduce our shareholder below 50 percent to allow the jv more flexibility to one raise capital as a more independent company two accelerate the further expansion plan and three take away for a eventual ipo on shanghai star market or star market additionally i am delighted to see that less than two months after our initial sales transaction the jv successfully raised 18 million dollars from outside investors as part of phase two of its expansion plan, which the JV expects to complete sometime in 2023. To see the first part of our original plan for the JV company come to fruition has been a joy. One of the core tenets of our three-pronged capacity strategy is ensuring our supply security. Not only do we need to expand our capacity to meet our aggressive growth business plan, but we also need to manage unforeseen risks associated with today's uncertain world, such as natural disasters and geopolitical risks through diversification. In this regard, The JV Company will be one of our important foundry partners. And on the flip side, AOS will continue to be a key customer of the JV Company. Lastly, but not the least, we are also actively expanding our relationships with multiple third-party foundry partners for additional capacity to meet the increasing demand for our products. Another dimension of our business that has undergone significant change over the past year that may not be as obvious is the quality of the customers that we are serving. As an example, in our computing business, we sell to the world's leading PC brands. In our communication segment, we sell to the number one smartphone brand in the United States. the number one smartphone brand in Korea, and all the leading smartphone OEMs in China. In our other business segments, we sell to the number one graphics card maker, the number one gaming console manufacturer, the number one global home of price manufacturer, and the number one power tools provider. In summary, Q1 OEMs now make up the majority of our revenue mix. The effect of this dynamic makes our business much more resilient to downturns because during difficult economic conditions, consumer demand typically declines faster to lower tier brands than it does for premium brands. In addition, due to the uncertainty created by COVID pandemic, we have worked tirelessly with our customers over the past two years to avoid interruptions to their production lines. As a result of our efforts, our customers' trust and respect for us as a strategic partner has deepened, and our relationship with them has never been stronger. Also in 2021, through multiple well-planned initiatives and the diligent, precise execution Our PowerIC business finally has emerged to become a significant portion of our business, representing nearly $200 million annual revenue runway. This greatly helped AOS pursue our ultimate goal of providing system-level total power solutions to our customers, going beyond our traditional pattern of just offering component sales. This not only offers more convenience and value to our customers, but also improves our margin while enabling secure design wins. 2021 was also a record year in each of our business segments financially. A few years ago, we set out to achieve a target annual revenue of $600 million in the current year 2021. Today, Our business has a product portfolio, customer relationships, and the production capacity to deliver well over our original revenue target. In addition, because air market demand was strong across the board, we strategically optimized our product mix, which resulted in gross margin expansion in each consecutive quarter. with the December quarter come in at a 36.7% on a non-GAAP basis, which is a record. All these factors significantly contributed to us crossing $1 quarterly non-GAAP EPS milestone in the last quarter. This quarter, we're happy to report a non-GAAP earnings per share of $1.20, which further reinforces our company's strong earning power of $4 to $5 annual EPS. In summary, we achieved record results in 2021 thanks to our long-term planning and execution, our extensive product portfolio driven by our R&D capabilities, and by serving as a dedicated and trusted partner to our customers. Our confidence in our business model and the strategic position has never been greater than it is today. Now, with most of our revenue coming from Tier 1 OEM, I am proud to say that we believe we have crossed the chasm as an established company and are now a leading global power semiconductor supplier. I want to thank our customers business partners and shareholders for their support and confidence in the company. I also want to acknowledge our employees for outstanding job and for staying focused and engaged with our customers while we navigate this challenging market environment, especially in the midst of the continuing adversity of the pandemic. I'm proud of the way we have come together while placing our employees' health and safety at the center of our objectives in achieving our success. As we look to the future, we now have our sights set on actively planning and marching toward $1 billion annual revenue. with much stronger and more sophisticated R&D capabilities and supply chain operations, and with most of our customer base consisting of the world's leading OEMs in the market that we serve. We are excited about our growth trajectory. Now, I will turn the call over to Stephen for an update on our business and the detailed segments Stephen.