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 2021. 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.o2micro.com under the heading investors. There'll be a replay available through November 14th, 2021 at 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 question 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 2021. ending September 30th, 2021. 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 material 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 associated risk factors. The 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 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 2021, ending September 30th, 2021. Kerry?

Thank you, Dan. We will now review our financial results for Q3 2021. Please note that financial results will be presented on a GAAP basis unless we designate otherwise. The non-GAAP result is gross stock base compensation expense, one-time charges, non-recurring gains and losses. Our full GAAP results are available in our pre-release This was issued earlier today. GAAP revenue in the third quarter of 2021 was $27.3 million. GAAP net income in the third quarter of 2021 was $3.7 million. If we exclude stock-based compensation of $443,000, the non-GAAP net income will be $4.1 million. GAAP Net income per fully diluted ADS in the third quarter of 2021 was $0.12. Non-GAAP net income per fully diluted ADS was $0.13. Gross margin was 52% in Q3. The gross margin reflects the current revenue level and the product mix. R&D expense was $5. million or 18.4% of revenue. This amount is gross stock base compensation expense of $98,000. SE&A expense was $5.1 million or 18.7% of revenue. This amount is gross stock base compensation expense of $345,000. The non-operating income was $342,000. Income tax was $279,000 in the third quarter, and it is mainly based on the estimated effective tax rate of each taxable location. In Q3 2021, there was no stock repurchase. Q3 2021, revenue by end market breaks down into the flowing percentages. Industrial was 63 to 65% of revenue. Consumer was 32 to 34% of revenue. Computer was 1 to 3% of revenue. Communication was almost zero. At this moment, I would like to provide some additional information. O2 Micro finished the third quarter with $50.7 million in unrestricted cash and short-term investment. This represents cash and the cash equivalent of $1.78 per ADS. In addition, O2 Micro has no debt. Account receivable at the end of Q3 was $16.7 million. Our DSO is 55 days. DSO is less than 60 days mainly from account miss. Inventory was $18 million at the end of the third quarter. This represents 117 days of inventory, and inventory turnover was 3.1 times in Q3. Net cash generated from operating activities in the third quarter was about $4.3 million. Capital expenditure was about $968,000 in the third quarter for R&D and IT equipment. Depreciation and amortization was $1.1 million in Q3. At the end of the third quarter of 2021, O2 Micro had 344 employees, 58% of which are engineers. Based on current market situation and the best updated managerial rolling forecast, the company has the following guidance for Q4 2021. Net revenue are expected to be 25.5 to 26.5 million or down 3% to down 7% as compared to Q3 2021 of 27.3 million. 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 5 to 5.5 million. SG&A expenses excluding stock-based compensation are expected to be in the range of 5 to 5.5 million. Stock-based compensation should be in the range of $550,000 to $650,000. Non-operating income is expected to be in the range of $150,000 to $250,000, excluding foreign exchange gain or loss. Income tax expense is 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 shareholder value. We have accomplished this by taking the necessary steps, which included managing operating expenses and monetizing assets on the balance sheet. Regarding our share purchase 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 Q3, we had $7.6 million remaining in our share buyback authorization. There are still many dynamic factors associated in the business development. We will carefully plan and execute to target revenue and maintain gross margin in the Q4 2021, and these efforts will be focused to continue. in 2022. We also monitor the supply chains tightly and have added timely both work-in-process level and inventory to support the dynamic demand from accounts in multiple end markets. In Q3, we added more dive banks to support Q4 2021 and Q1 2022. The wafer capacity remains very tight in the coming quarters. In Q4, We expand the investment in R&D, new ISO training, new tap-out, patent filing, and expanding our supply chain with more complete second-sourcing suppliers, testing capabilities of complex products, and capacity with new purchase testers in 2021. We will always watch the expenses. carefully and continue to manage costs as needed. Although we believe we have a high current cost based on current and anticipated revenue levels, 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. I would like to thank everyone for participating and turn the call over to Jim Kai to talk more about our business. Jim.