Alpha and Omega Semiconductor Limited

Hello and welcome to today's Alpha and Omega Semiconductor Fiscal Third Quarter 2022 Earnings Call. My name is Bailey and I'll 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 followed by one on your telephone keypad. I would now like to pass the call over to Gary Dvorak. Gary, please go ahead.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2022 third quarter financial results. I'm Gary Dvorak, investor relations representative for Quest. With me today are Dr. Mike Chang, our CEO, Stephen Chang, our president, and Yifan Liang, our CFO. This call is being recorded and broadcast live over the web. A 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 June quarter. Finally, we'll have a question and answer session. The earnings release was distributed over wire services today, May 5, 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 release. We remind you that during 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 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 will 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 good to be speaking with all of you again. Q3 was another great quarter, and once again, we succeeded in outperforming our guidance. Revenue was a record $203 million, which represented 20% growth year over year, and it was the first time in our history to cross the $200 million threshold. This was achieved by obtaining additional wafer capacity from our existing foundry partners and continuing to optimize product mix. This resulted in non-GAAP growth margin of 36.7% and a record non-GAAP operating profit margin of 19.9%. Non-GAAP EPS was $1.34. representing a 74% growth year over year. I am extremely proud of this result and continue to be amazed at our team's effort and ability to execute quarter after quarter in such uncertain and challenging times. However, I am very saddened today by the evolving situation in China, particularly the lockdowns in Shanghai. As you know, our in-house packaging and testing facilities are in Shanghai, which handles a good portion of our final packaging and testing requirements prior to shipping. After the initial lockdowns were imposed in late March, our Shanghai packaging and testing facilities remained operating because our dedicated employees made an extraordinary sacrifice to live inside the facility to keep operations going. However, continuing operations required daily testing and negative COVID results. In early April, a few of our employees tested positive for COVID-19. and our operations were forced to shut down by the Shanghai government. Therefore, our ability to complete the assembly of our products and ship to customers were severely limited. Fortunately, at the end of April, the Shanghai government classified AOS as an essential business and cleared us to restart operations. We are quickly getting production starting again. However, the pace at which we can resume for four operations still remains challenging due to difficulties in bringing back the labor workforce, procuring certain raw materials, and resolving logistics bottlenecks. At this time, the timing of when the lockdowns will be lifted is still unknown. Even after the lockdown for the city is lifted, we expect sometime before all the support supply chain issues are fully resolved and the business there return to normal. As a result, we expect our revenue in the June quarter will be impacted based on the latest estimates. including three weeks of limited operations during April and ongoing logistics and supply chain challenges. We expect the lockdowns will impact June quarter revenue by approximately $20 to $25 million. However, we still anticipate June quarter revenue could be around $119 million. This represents 7% growth year over year. Excluding the Shanghai lockdown impact, we estimate the growth would have been 20% year over year for the June quarter. As our operation went back to full capacity and the surrounding supply chains normalized, we do anticipate to recover a portion of the lost revenue in the second half of the calendar year. as our wafer production was not impacted by the lockdown. As a result, we actually built a stock of pre-assembly stage wafer inventory. Given the global wafer shortage over the past years, we expect this build-up of wafer will help fully utilize our packaging assembly lines once things return to normal. If I would provide more details on our guidance during this portion of this call. But please understand, those margins are currently more difficult to focus as our allocation mix for each business line is still moving around while we re-rent our assembly lines. On a positive note, we have been strategically diversifying our packaging and testing operations and have begun to accelerate the pace of these initiatives. Our JV in Chongqing already handles a good portion of our back-end requirements, and we also have began the process to outsourcing some of these steps to other contract manufacturers, although that will take some time. Also, I think it goes without saying, we are very thankful to have our Oregon production facility, which is not exposed to this kind of risk. The impact of the Shanghai lockdown to our operations highlights the benefit of our capacity diversification strategy. We believe this impact will only be temporary and will make us even stronger in the long run. The global trend of electrification of everything is just getting started, and our power product sits at the forefront of that trend. We are building a very resilient and diversifying global business and remain well on track towards our goal of achieving $1 billion annual revenue and beyond. Before I turn the call over to Stephen, I want to say Our hearts go out to everyone in Shanghai that have been affected by this situation, and we pray for a quick resolution. I also want to give a very special thanks to our employees for their extreme sacrifice and dedication during these very challenging times. Their dedication to health has really been awe-inspiring. and made me realize once again how special our team truly is, and I'm very grateful to have their support. Thank you, and I will now turn the call over to Stephen for an update on our business and a detailed segment report. Stephen.