O2Micro International Limited

And welcome to the 2022 first quarter earnings release conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Daniel Mayberg. Please go ahead.

Thank you. Good morning, everyone. And thank you for joining O2 Micro's financial results conference call for the first quarter of 2022, ending March 31st, 2022. This is Daniel Mayberg, corporate communications for O2 Micro. If you'd like a copy of the press release reissued this morning, you can call me at 408-987-5920, extension 8888, and we will email you a copy. It is also posted on our O2 Micro website at www.o2micro.com under the heading Investors. There will be a replay available for the next 14 days by visiting the O2 Micro website under the heading Investors. Following the presentation by management, the conference will be open for questions and answers. I'd like to remind listeners that the discussion on 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 meaning 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. The statements made herein are dated information. The company assumes no responsibility to provide updates to this information. With me today are Perry Kuo, CEO and Director, Jim Kine, Head of Marketing and Sales and Director, and Sterling Du, O2 founder, CEO, and Chairman. After the prepared remarks from these gentlemen, the floor will be open for your questions. At this point, I'd like to introduce Perry Kuo. CFO of O2 Micro for a discussion of the financial highlights of the first quarter of fiscal year 2022 ending March 31, 2022. Thank you, Dan.

We will now review our financial results for Q1 2022. Please note that financial results will be presented on a gap basis unless we designate The non-GAAP results include 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 2022 was $21.6 million. GAAP net income in the first quarter of 2022 was $915,000. If we exclude stock-based compensation of $574,000 and one-time spatial project expense of $136,000, the non-GAAP net income will be $1.6 million. GAAP net income per fully diluted ADS in the first quarter of 2022 was $0.03. Non-GAAP net income per fully diluted ADS was $0.05. Gross margin was 52.6% in Q1. The gross margin reflects the current revenue level and the product mix. R&D expense was 4.8 million, or 22% of revenue. This amount is growth-based compensation expense of $207,000. SG&A expense. was $5.1 million or 23.4% of revenue. This amount is gross stock base compensation expense of $367,000 and the one-time special project expense of $136,000. The non-operating income was $285,000. Income tax was $203,000 in the first quarter. It is mainly based on the estimated effective tax rate on each taxable location. In Q1 2022, we repurchased 110,924 ADH units at a cost of $463,000. Q1 2022, revenue by end market breaks down into the flowing percentages. was 60% to 62% of revenue. Consumer was 36% to 38% of revenue. Computer was 2% to 4% of revenue. Communication was almost zero. At this moment, I would like to provide some additional information. Ultramicro finished the first quarter with $48.2 million in unrestricted cash and short-term investment. This represents cash and cash equivalent of $1.65 per ADS. In addition, O2 Micro has no debt. Account receivable at the end of Q1 was $16.2 million. Our DSO is 73 days. DSO is more than 60 days mainly from account mix. Inventory was $21.8 million at the end of the first quarter This represents 181 days of inventory, and inventory turnover was 2.0 times in Q1. The strategic increase in inventory is mainly for wafer, die bank, and the battery ICs. Net cash using operating activities in the first quarter was about 1.2 million. Capital expenditure was about 700 28,000 in the first quarter for texture, R&D, and IT equipment. Depreciation and amortization was 1.3 million in Q1. At the end of the first quarter of 2022, O2 Micro had 319 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 2022. Net revenue are expected to be 20.5 to 22.7 million as compared to Q1 2022 of 21.6 million. Product growth margin expected to be in the range of 51% to 53%. R&D expenses excluding stock-based compensation are expected to be in the range of $4.8 million to $5.3 million. SE&A expenses excluding stock-based compensation and one-time expense for special projects are expected to be in the range of $5 million to $5.5 million. Stock-based compensation is expected to be in the range of $550,000 to $650,000 Non-operating income 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 shareholder 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 20.5 million ADA shares for $102.2 million. As of the year of Q1, we have $6.7 million remaining in our share buyback authorization. There are still many dynamic factors associated in the business development. We will carefully plan and manage the inventory throughout 2022 and maintain at a strong cash level in the balance sheet. Given the uncertain demand and the macro environment, we are continuously investing in R&D, patent filing, expanding our supply chain with second sourcing suppliers, and capabilities in testing complex product and capacity. We always watch the expenses carefully and continue to manage costs as needed. Although we believe we have a lot of current costs 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 shareholders' value throughout this year. I would like to thank everyone for participating and turn the call over to Jim to talk more about our business.