O2Micro International Limited

Good morning, and thank you for joining us today to discuss O2 Micro's financial results for the third quarter of fiscal year 2020. If you would like a copy of the press release we issued this morning, please call Daniel Myberg at 408-987-5920, extension 8888, and we will email you a copy immediately. It is also posted on the O2 Micro website at www. There will be a replay available through November 13, 2020, 9 a.m. Pacific Time, or by visiting the O2 Micro website under the heading Investors. Following the presentation by management, the conference will be open for questions and answers as time permits. Gentlemen, you may begin.

Thank you. Good morning, everyone, and thank you for joining O2 Micro's Financial Results Conference Call for the third quarter of 2020, ending September 30, 2020. This is Daniel Myberg, Corporate Communications for O2 Micro. I'd like to remind listeners that the discussion of business outlook for O2 Micro contains forward-looking statements. Statements made in this release that are not historical fact are forward-looking statements within the meanings of the federal securities laws. Actual results may differ materially due to numerous risk factors. Such risk factors are enumerated in the company's 20F annual filings, our annual reports, and other documents filed with the SEC from time to time. Listeners are referred to the O2 microearnings press release and the documents filed with the SEC to understand these forward-looking statements and the associated risk factors. These statements are herein our dated information. The company assumes no responsibility to provide updates to this information. With me today are Perry Kuo, CFO and Director, Tim Kime, Head of Marketing and Sales and Director, and Sterling Du, O2's Founder, CEO, and Chairman. After the prepared remarks from these gentlemen, the floor will be open for your questions. At this point, I would like to introduce Perry Kuo, CFO of O2 Micro, for a discussion of the financial highlights of the third quarter of fiscal year 2020, ending September 30, 2020. Terry?

Thank you, Dan. We will now review our financial results for Q3 2020. Please note that financial results will be presented on a GAAP basis unless we designate otherwise. The non-GAAP results include stock-based compensation expense, one-time charges Now, recurring gains and losses. Our full GAAP results are available in our press release that was issued earlier today. GAAP revenue in the third quarter of 2020 was $22.2 million. GAAP net income in the third quarter of 2020 was $2.9 million. If we exclude stock-based compensation of $326,000, and net loss recognized on long-term investment of $171,000. The non-GAAP net income will be $3.4 million. GAAP net income per fully diluted ADS in the third quarter of 2020 was $0.10. Non-GAAP net income per fully diluted ADS was $0.12. was 51.8% in Q3. The growth margin reflect the current revenue level and the product mix. R&D expense was 4 million or 18% of revenue. This amount is closed stock based compensation expense of 66,000. SE&A expense was 4.1 million or 18.3% of revenue. This amount is close to the base compensation expense of $260,000. The non-operating income was $68,000. Income tax was $255,000 in the third quarter and is mainly based on the estimated effective tax rate on each taxable location. In Q3 2020, we repurchased 14,993 ADS units at a cost of $44,000. Q3 2020, revenue by end market breaks down into the following percentages. Consumer was 42% to 44% of revenue. Computer was 5% to 7% of revenue. Industrial was 50% to 52% of revenue. Communications was almost zero. At this moment, I would like to provide some additional information. O2 Micro finished the third quarter with $40.8 million in unrestricted cash and short-term investment. This represents cash and the cash equivalent of $1.51 per ADS. In addition, O2 Micro has no debt. Accounts receivable at the end of Q3 was 16.8 million. Our DSO is 58 days. DSO is less than 60 days, mainly from account mix. Inventory was 12.9 million at the end of the third quarter. This represents 106 days of inventory and the inventory turnover was 3.4 times in Q3. Net cash using operating activities in the third quarter was about $1.1 million. Capital expenditure was about $733,000 in the third quarter for R&D and IT equipment. Depreciation and amortization was was $913,000 in Q3. At the end of third quarter of 2020, Ultramicro had 298 employees, 56% of which are engineers. Based on current market situation and the best updated managerial rolling forecast, the company has the following guidance for Q4 2020. Net revenue are expected to be up 2% to 8% from Q3 2020. Product growth margin is expected to be in the range of 50% to 52%. R&D expenses, excluding stock-based compensation, are expected to be in the range of $4 million to $4.5 million. SG&A expenses, excluding stock-based compensation, are expected to be in the range of $4 million to $4.5 million. Stock-based compensation should be in the range of $300,000 to $400,000. Non-operating income is expected to be in the range of $200,000 to $300,000, excluding foreign exchange gains or losses, and net gains or losses recognized on long-term investments. Income tax expense expected to be in the range of $200,000 to $300,000. The goal of our measurement team and the board of directors is to maximize shareholder value. We have accomplished this by taking the necessary steps, which included managing operating expenses and the monetizing asset on the balance sheet. In regards to our share repurchase program, We have been active in this program historically, and we plan to continue going forward. Since 2002, we have repurchased over 20.3 million ADS shares for $101.3 million. As of the end of Q3, we have $7.6 million remaining in our share buyback authorization. We believe now our quarterly cash break-even point will be 14 to 16 million, and the profitability break-even point will be 16 to 18 million, excluding one-time charges, non-recurring gains and losses. We will continue to invest our R&D and high-performance testers in the current and the coming quarters. We also monitor the supply chains tightly and have added a working process to support the dynamic demand from multiple and market timelines. In Q3 2020, 165,000 shares of EMC was sold and about US $658,000 cashing. The average selling price of EMC in Q3 is around US $4 per share with a regular cost of US $0.53 per share. We will continue to sell EMC shares in Q4. As of September 30, 2020, We own around 424,000 shares of EMC. EMC share price was US $3.57 on September 30th and it was close at $3.64 on today, October 30th, 2020. Returns to shareholders are very much on our minds and will continue to be a focus in the future. we will provide updates to the additional measures to enhance shareholders' value throughout this year. Given the uncertain demand and macro environment, we are prepared to continue to match costs as needed. Although we believe we have a light current cost based on current and anticipated revenue levels, I would like to thank everyone for participating and turn the call over to Jim Kai to talk more about our business. Jim, please.