O2Micro International Limited

Good morning and thank you for joining us today to discuss O2 Micro's financial results for the first quarter of fiscal year 2021. If you would like a copy of the press release with the issue this morning, please call Daniel Myberg at 408-987-5920 extension 8888. We'll email you a copy immediately. It is also posted on the O2 Micro website at www. o2micro.com under heading investors. There'll be a replay available through May 14th, 2021, 9 a.m. Pacific time or by visiting the o2micro 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 us. O2 Micro's financial results conference call for the first quarter of 2021, ending March 31st, 2021. This is Daniel Myberg, Corporate Communications for O2 Micro. I would like to remind listeners that the discussions 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. Statements made herein are dated information. The company assumes no responsibility to provide updates to this information. With me today are Perry Kuo, CFO and Director, Jim Kine, 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 first quarter of fiscal year 2021 ending March 31st, 2021. Gary?

Thank you, Dan. We will now review our financial results for Q1 2021. Please note that financial results will be presented on a GAAP basis unless we designate otherwise. The non-GAAP result excludes stock-based compensation expense, one-time charges, non-recurring gains and losses. Our full GAAP results are available in our press release that was issued earlier today. GAAP revenue in the first quarter of 2021 was $23.2 million. GAAP net income in the first quarter of 2021 was $2.5 million. If we exclude stock-based compensation of $405,000, the non-GAAP net income would be $2.9 million. Gap net income per fully diluted ADS in the first quarter of 2021 was $0.08. Non-gap net income per fully diluted ADS was $0.09. Gross margin was 51.6% in Q1. The gross margin reflects the current revenue level and the product mix. R&D expense was 4.5 million or 19.3% of revenue. This amount is gross stock base compensation expense of $91,000. SG&A expense was 4.7 million or 20.4% of revenue. This amount is gross stock base compensation expense of $314,000. The non-operating income was $358,000. Income tax was $244,000 in the first quarter and is mainly based on the estimated effective tax rate on each taxable location. In Q1 2021, there was no stock repurchase. Q1 2021, revenue by end market breaks down into the following percentages. Consumer was 36% to 38% of revenue. Computer was 2% to 4% of revenue. Industrial was 60% to 62% of revenue. Communications was almost zero. At this moment, I would like to provide some additional information. O2 Micro finished the first quarter with $47.6 million in unrestricted cash and short-term investment. It presents cash and cash equivalent of $1.68 per ADS. In addition, Ultramicro has no debt. Accounts receivable at the end of Q1 was $17.4 million of DSO is 66 days. DSO is more than 60 days, mainly from account mix. Inventory was $14.7 million at the end of the first quarter. This meant 109 days of inventory, and the inventory turnover was 3.3 times in Q1. Net cash generated from operating activities in the first quarter was about $1.1 million. Capital expenditure was about $2.4 million in the first quarter for R&D and IT equipment. Depreciation and amortization was $969,000 in Q1. At the end of the first quarter of 2021, O2 Micro had 327 employees, 57% of which are engineers. Based on current market situation and the best updated managerial rolling forecast, the company has the following guidance for Q2 2021. Net revenues are expected to be flat to up 8% or 23.2% to $25.1 million as compared to Q1 2021. Product gross margin 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 $4.3 million to $4.8 million. SG&A expenses excluding stock-based compensation are expected to be in the range of $4.4 million to $4.5 million. Stock-based compensation should be in the range of $400,000 to $500,000. Non-operating income is expected to be in the range of $200,000 to $300,000, excluding foreign exchange gain or loss. Income tax expense expected to be in the range of $200,000 to $300,000. The goal of our management team and the board of directors is to maximize shareholders' value. We have accomplished this by taking the necessary steps, which included managing operating expenses and monetizing assets on the balance sheet. In regards to our share repurchase program, We have been active in this program historically. Since 2002, we have repurchased over 20.3 million ADS shares for $101.3 million. As of the end of Q1, we had $7.6 million in our share buyback authorization. There are many dynamic factors associated in the business development we will carefully plan and execute to target revenue growth and maintain growth margin in the first half to 2021. First is to continue to invest in new products while allocating some resources for the second source development for the capacity support. An in-house R&D testing center was placed in March quarter, and more advanced testers for advanced IC testing ship and will be shipped through 2021. We also monitor the supply chains tightly and have added timely both work in process level and inventory to support the dynamic demand from account in multiple end markets. 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 shareholder value throughout this year. Given the uncertain demand and the macro environment, we are prepared to continue to manage costs as needed. Although we believe we have aligned current costs 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.