Ladies and gentlemen, thank you for standing by, and welcome to the Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Third Quarter of 2020. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised, that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, So-Yeon Jeong. Thank you. Please go ahead, madam.

Good afternoon, everyone and welcome to Alpha and Omega Semiconductor’s conference call to discuss fiscal 2020 third quarter financial results. I’m So-Yeon Jeong, Investor Relations representative for the company. With me today are Dr. Mike Chang, our CEO; Yifan Liang, our CFO; and Stephen Chang, our Executive Vice President. This call is being recorded and broadcast live over the web and can be accessed for seven days following the call via the link in the Investor Relations section of our website. Mike will begin with a review of business overview for the quarter, and Stephen will provide a detailed segment report. After that, Yifan will continue with a review of financial results for the quarter and guidance for the next quarter. Then we’ll have the question-and-answer session. The earnings release was distributed today, May 5th, 2020, after the close of the market. Our earnings release and this presentation includes 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 our earnings release. We remind you that during the conference call, we’ll make certain forward-looking statements, including discussions of 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’ll turn the call over to our CEO, Mike, to provide an overview of our business and the impact of COVID-19 pandemic. Mike?

Thank you, So-Yeon. Welcome everyone, and thank you for joining us for our March quarter earnings call. I hope that all of you and your families are safe and healthy. As we navigate the unprecedented challenges of this COVID-19 pandemic, we think it is important to update you on our business operations and how we are staying resilient. Before we begin the usual review of quarterly results, I will take a few minutes to talk about the challenges and the risks we face and our actions to mitigate them. Our top priority is the health and well-being of our employees and their families. In addition to the mandatory measures enacted by federal, state, and regional agencies, we proactively implemented precautionary measures and established operating guidelines to safeguard our employees and their families. As part of our business continuity plan, we instituted a work-from-home policy before it was mandatory. This helped us mitigate the impact of sudden disruptions to our operations and ensured that our employees had full access to the connectivity infrastructure required to work remotely. We are thankful that all 4,000 of our employees are currently safe and well, and our global operations are running. In addition to safeguarding our employees, we are committed to fully supporting our customers during these trying times. When we discussed our outlook for the March quarter back in early February, our guidance factored in an estimate of our lost production in China. As it turned out, production in China was severely disrupted during February. However, we were fortunate that we maintained partial production throughout the Lunar New Year holiday, during which we ran 24/7. When more people returned to work after the holiday, our employees went above and beyond their typical roles to ensure delivery of our products while complying with various governmental orders and managing logistical challenges. The Oregon fab also ran non-stop during the quarter. Our diversified manufacturing footprint helped us quickly respond to shifting market demand. Since March, our total production level has recovered significantly faster than we anticipated. Today, I am pleased to report that we are running at the level we expected. Obviously, COVID-19 negatively impacted our customers. Some of them are recovering more slowly than others due to factories located in the COVID-19 epicenters, while others are exposed to greater supply chain disruptions because they source numerous components to complete an entire kit of parts. Travel restrictions and logistical challenges also restricted our ability to support customers with demo boards, evaluation kits, and design-in support. With utmost dedication, we are working closely and creatively to support our customers in every way we can. We are providing excellent service and meeting demand by being flexible and nimble with production schedules, thus demonstrating solidarity with our customers. As of this stage, we are able to work around temporary disruptions to achieve our operating objectives. While visibility beyond the June quarter is very limited given the uncertainty of the impact of COVID-19, we are managing risks by optimizing product mix, vigilantly seeking new business opportunities, and accelerating product time-to-market. Against this backdrop, we reported an in-line March quarter with revenue within our guidance range. Yifan will provide details of our March quarter results later on the call. Let me now touch on some key business highlights and what we are seeing in the current environment. Even with the overall downturn in the economy, near-term end demand for Computing and Gaming is very strong. This is due to the shelter-in-place and social distancing mandates, which are driving the need for higher computing power for working-from-home activities, online learning, and gaming. The computing industry has been expanding and transforming to support and connect businesses and individuals worldwide. While we have rapidly diversified into other applications, such as mobile and home appliances, we remain the leader in power management, especially in the computing area. Our unwavering commitment in the past years to our computing customers has rewarded us with much-welcomed business during this downturn. In difficult times like these, supporting customers through the uninterrupted supply of our products is more important than ever. Also noteworthy is that our Chongqing Joint Venture is starting to fulfill its purpose, as highlighted in our strategic plan for sustainable growth. Indeed, it has played a critical role in enabling us to meet the surging demand in the computing market. As you would expect, given the environment, we are prudently managing expenses. We are reducing non-essential spending while also pursuing strategic and critical R&D projects in order to expand our market reach and total addressable market. Stephen is diligently working with our R&D team on these special projects, and he will provide more details later on the call. Finally, I want to highlight that our core business is generating consistent and sustained cash flow. Our balance sheet is strong. Yifan will provide you with more color on our cash position. As I look at our performance in the quarter, I am both humbled by and proud of our amazing group of employees. They delivered extraordinary performance with a strong sense of ownership and commitment while sustaining a safe and healthy working environment. We look forward to a gradual return to normalcy for our country, our industry, and our economy. The power semiconductor market is large and growing, and we are determined to accomplish our mission to rapidly expand and become a top-tier supplier in this market. Now, I will turn the call over to Stephen for a detailed segment report. Stephen?

Thank you, Mike, and good afternoon. Let me start with Computing. It represented 44.2% of our total revenue in the March quarter. Revenue was down 2.9% sequentially and down 8.8% year-over-year. Starting in the second half of March, we saw a rise in demand for our Computing products, especially for notebook PCs. As a result of various stay-at-home orders by governments in response to the COVID-19 pandemic, PCs have become indispensable worldwide as more people are working from home and transitioning to distance learning. We don’t know how this demand picture will play out in the second half of this year, but at the moment, we are optimizing our production mix to satisfy this surge in demand for the next quarter. Our graphics card business has also been strong with both our high-performance DrMOS and MOSFET Vcore solutions. Graphics cards have been selling well as demand in both PC and Gaming is up. We expect Computing to be strong in the June quarter, with mid-single-digit sequential growth. Now turning to the Consumer segment, it represented 18.7% of total revenue in the March quarter. Revenue decreased 5.3% sequentially and was down 2.9% year-over-year. Our TV business was seasonally down in the March quarter, but we now expect it to grow in the June quarter. We are excited to share that AOS has achieved a strong design into an upcoming gaming system platform that is expected to launch later this year. Our content in this gaming system has multiple sockets, including DrMOS and MOSFETs to power processors as well as Type C smart load switches and TVS surge protection devices to protect the controller ports. Gaming systems feature higher resolutions and faster graphics, along with plenty of software features while still needing to meet energy efficiency, temperature, and safety requirements. AOS won this design because our power solutions offer the high performance needed to keep the system operating coolly and efficiently. With the ramp-up underway, we anticipate double-digit growth for the June quarter in the Consumer segment. Next, let’s discuss the Power Supply and Industrial segment. It accounted for 17.8% of total revenue, down 24.6% sequentially and down 10.3% year-over-year. COVID-19 market disruptions in China impacted our Power Supply/Industrial business during the March quarter. This was caused primarily by a drop in chargers and adapters used for smartphones and PCs. However, as China recovers, we expect to see a rebound in production and demand. The quick charger application has increasingly been migrating to higher power output, from 18 watts to 24 watts and even up to 65 watts. This performance-driven market opportunity comes with higher value content and fewer competitors, and is well suited for our medium voltage products. We expect a return to growth in the June quarter in this segment as the demand for notebook chargers and smartphone quick chargers recovers. Finally, let’s move on to the Communications segment, which was 18.1% of revenue in the quarter, down 8.5% sequentially but up 41.4% year-over-year. The smartphone market was severely impacted by the COVID-19 pandemic, and the disruption in production and demand is spreading globally. While we don’t have clear visibility on the smartphone market in the near term, we are seeing a rebound in demand for our telecom business as 5G continues to roll out. We think we can maintain this segment’s revenue in the June quarter. With that, I will now turn the call over to Yifan for additional comments and guidance.

Thank you, Stephen. Good afternoon, everyone and thank you for joining us. Revenue for the March quarter was $106.9 million, down 9.3% from the prior quarter and down 2% from the same quarter last year. In terms of product mix, MOSFET revenue was $89.9 million, down 11.4% sequentially and flat year-over-year. Power IC revenue was $15.7 million, up 7.1% from the prior quarter and down 11% from a year ago. Assembly service revenue was $1.3 million as compared to $1.7 million last quarter and $1.5 million for the same quarter last year. Non-GAAP gross margin for the March quarter was 27.5%, down from 28.3% for the prior quarter and up from 27% for the same quarter last year. Non-GAAP gross margin excluded $0.4 million of share-based compensation charge for the March quarter as compared to $0.4 million for the prior quarter and $0.5 million for the prior year period. Non-GAAP gross margin also excluded $6.6 million of production ramp-up costs relating to the Chongqing joint venture for the March quarter as compared to $8.5 million for the prior quarter and $3.4 million for the same quarter last year. Non-GAAP operating expenses for the March quarter were $25.9 million compared to $25.7 million for the prior quarter and $23.2 million for the same quarter last year. Non-GAAP operating expenses for the quarter excluded $2.5 million of share-based compensation charge, $2.1 million of legal costs related to the government investigation, and $0.6 million impairment charge related to an investment in a privately held start-up company as compared to $2.1 million of share-based compensation charge for the prior quarter and $2.6 million of share-based compensation charge and $3.6 million of pre-production expenses related to the joint venture company for the same quarter last year. Both GAAP and non-GAAP operating expenses included $3.1 million of digital power expenses for the quarter as compared to $3 million for the prior quarter and $2.3 million for the same quarter last year. Our digital power development is also progressing well, and we are close to securing a design win at a graphics card maker. Income tax benefit for the quarter was $1 million compared to tax expense of $0.6 million for both prior quarter and the same quarter last year. The tax benefit was primarily driven by the tax relief from the CARES Act. Non-GAAP EPS attributable to AOS for the quarter was $0.11 per share as compared to $0.23 for the prior quarter and $0.22 for the same quarter last year. AOS on a stand-alone basis generated $29.5 million of operating cash flow in the March quarter as compared to $12.5 million in the prior quarter and $9.5 million in the same quarter last year. Working capital management contributed $22 million in the quarter. Cash flow used in operations attributable to the Joint Venture Company was $15.2 million for the March quarter compared to $3.5 million for the prior quarter and $17.5 million for the same quarter last year. Consolidated EBITDAS for the March quarter was $8.8 million compared to $13.9 million for the prior quarter and $11.8 million for the same quarter last year. EBITDAS attributable to AOS for the quarter was $6.5 million as compared to $12.5 million for the prior quarter and $13.5 million for the same quarter last year. Now, let’s look at the balance sheet. We completed the March quarter with cash and cash equivalents of $110.2 million, including $99.5 million at AOS and $10.7 million at the JV Company. This compares to $107.2 million at the end of last quarter, which included $86.1 million at AOS and $21.1 million at the JV Company. Our cash balance a year ago was $139.1 million, including $90.9 million at AOS and $48.2 million at the JV Company. The bank borrowing balance at the end of March was $153.6 million, including $34.8 million at AOS and $118.8 million at the JV Company. During the March quarter, AOS and the Joint Venture Company repaid $2.1 million and $6.6 million of the existing loans, respectively. The JV Company obtained $15.4 million of working capital loans. Subsequent to the quarter end, the JV Company also entered into two loan agreements with local banks for a total of $50 million. We believe that this would largely be sufficient to achieve the Phase 1 plan at the JV Company. Net trade receivables were $17.5 million, as compared to $33.9 million at the end of prior quarter and $28.4 million for the same quarter last year. Day sales outstanding for the quarter were 22 days, compared to 28 days in the prior quarter. Net inventory was $127.4 million at the quarter end, up from $117.6 million last quarter and up from $107.9 million in the prior year. Average days in inventory was 131 days for the quarter, compared to 114 days in the prior quarter. Net property, plant, and equipment was $412.3 million, as compared to $416.1 million prior quarter and $391.6 million last year. Capital expenditures were $16.8 million for the quarter, including $13.1 million at AOS and $3.7 million at the JV Company. We estimate that the capital expenditure for AOS alone to be in the range of 8% to 9% of the total revenue for the fiscal year 2020. Before I move on to the guidance for the next quarter, I would like to update you on the progress at the JV Company. During the March quarter, the 12-inch fab and assembly and test facility performed better than we expected, considering the conditions of the COVID-19 outbreak in China. Given this situation of the global pandemic and resulting economic recession, our visibility into overall market demand beyond the June quarter is very limited. At this point, we are unable to determine when we can ramp up the 12-inch fab to its Phase 1 target run rate. We will continue to monitor and evaluate market conditions closely and provide further guidance when we gain more visibility. For the June quarter, we expect the JV Company to increase production volumes sequentially to support our business growth opportunities as our Oregon fab is running at full capacity. With that, now I would like to discuss the guidance for the next quarter. We expect revenue to be between $117 million and $121 million; GAAP gross margin to be 22%, plus or minus 1%. We anticipate non-GAAP gross margin to be 26.5%, plus or minus 1%. Note that non-GAAP gross margin excludes $0.4 million of estimated share-based compensation and $5 million of estimated production ramp-up costs relating to the JV Company. GAAP operating expenses to be in the range of $29 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $25.7 million, plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $3.2 million to $3.5 million of estimated expenses relating to the development of our digital power business. Non-GAAP operating expenses exclude $1 million to $2 million of estimated professional fees related to the government investigation and $2.3 million of estimated share-based compensation. Income tax expense to be approximately $0.3 million to $0.5 million. Loss attributable to non-controlling interests to be around $2.7 million. On a non-GAAP basis, excluding estimated production ramp-up costs relating to the JV Company, this item is expected to be approximately $0.1 million. As part of our normal practice, we’re not assuming any obligations to update this information. With that, we will open the call for questions. Operator, please start the Q&A session.

Your first question comes from David Williams from Loop Capital. Please go ahead.

Hey. Good evening. Thanks for taking my question and congratulations on the guidance. That’s a very strong revenue. If I look back over the last couple of quarters or couple of years, that looks to be a fairly high level of revenue. Can you kind of talk a little bit about where the greatest level of demand is and maybe what your confidence level is in the guidance range?

Sure, David. This guidance for the June quarter primarily reflected the demand surge in the Computing and Gaming area that we are seeing right now. As you know some other areas that are not performing to the level that last year we saw. For example, in the smartphone area, some industrial areas, those areas are definitely down. For us, and you know with our long-term commitment in the Computing area, you know, this time, we saw a pretty strong surge in the month of March. Our joint venture actually provided us with flexibility of production and a much-needed capacity to support this sudden surge in Computing demand. We are managing this surge and going after those business opportunities. But on the other hand, I want to be cautious about the outlook for the second half of the year. We don’t know whether this surge in demand will be short-term or can extend for a while. So at this point, we’re very happy with the Chongqing Joint Venture supporting us for much-needed supply.

Thank you, Yifan, and thank you, David, for the question. Actually, we’re very thankful. Thank goodness that in such a difficult time, we have the PC business surging. And let me speak a little bit about the Chongqing JV, as Yifan mentioned. Our core business model is technology and volume all along. The technology will enable us to create new demand and also of course extend benefit more to newer customers. However, this new business will need capacity to support. Our Oregon fab's capacity is very limited. Since last year, it started to be at full capacity. The JV has come in at the right time, and it’s coming to serve this surge and start to produce good results for us.

Fantastic and thanks for the comment too. If we think about how much flexibility, how much capacity came out of the JV this quarter, can you give us anything that maybe quantifies that or to what level of revenue was provided by the JV?

At this point, because of the uncertainties about overall market demand, it’s hard to say about the second half of the year right now. We are unable to determine when we can ramp up this Phase 1 to the target rate. But you can tell from our June quarter’s guidance that these incremental revenues are all supported by our Chongqing Joint Venture. We still have capacity to support even higher demand if the market plays out well in the second half of the year. Right now, there’s so much uncertainty and our visibility beyond the June quarter is very limited.

Okay, fantastic.

Indeed, we still have some capacity in the Chongqing JV for more business. However, our first phase plan is really to reach breakeven in cash flow. We do have the capacity, but not excessively so. That’s the fact.

So you feel comfortable that you can say solid demand coming in the June quarter through the additional capacity in the JV?

Yes!

Got it. And maybe if you have a sense of the channel inventory health, are you seeing any pull-in orders or anything that would give you any concern in terms of inventory overstocking or just generally the health of the channel?

Channel inventory right now is in the mid-range of our target, like in two to three months. In the last couple of quarters, we were at the low end of the channel inventory. This quarter, because of the better-than-expected production recovery, we benefited from this production recovery to better serve on this demand surge.

Okay, fantastic. And just one more, if I can here and I’ll jump back in the queue. But you talked a little bit about the controller and the progress there. Do you think there’s an opportunity to accelerate that and maybe drive that controller revenue up before the year-end?

Hi David, this is Stephen. Our digital power has been addressing two markets. One has been advanced computing, and the second one is telecom. We’re actually pretty close to getting a design win on the advanced computing side at a graphics card maker. We’re hoping and expecting this to generate revenue closer to the end of the year once the project ramps up. The other portions will still take some time to develop revenue. In a nutshell, we expect some business in the short term, but it will be kind of small just to start out with, with some more mild growth going into 2021.

Okay, great. Well, thanks again and best of luck on the quarter. Stay healthy, please.

Thank you.

Thank you.

Your next question comes from Tore Svanberg from Stifel.

Yes, thank you. A question on gross margin. I recognize the Oregon fab is full, but I was expecting a little bit more fall-through from the $10 million to $15 million higher revenue in the June quarter. So is the lower gross margin just a pure function of the revenue mix?

Hi, Tore. The higher revenue guidance for the June quarter, the margin. We did not increase much over there. One thing is we baked in some ASP erosion, and we expect at the economic recession time, that other areas could see some price erosion. Moreover, this incremental revenue is supported by our joint venture, which has production ramp-up costs impacting margins. In the March quarter, that was about $6.5 million of production ramp-up costs. For the June quarter, we’re expecting around a $5 million production ramp-up cost from the joint venture.

That’s very helpful. And you mentioned a $50 million loan. Could you elaborate a little bit on the terms of that loan? Is that going to go down to pay down some of the JV debt or is that going to be spent more on CapEx as you continue to ramp up Phase 1 and eventually Phase 2?

This $50 million of loans are for CapEx and for working capital. The terms are pretty much similar to our previous loans, in the five-year range with similar interest rates, slightly better than before. This will be used for remaining CapEx payment for Phase 1 and for some working capital for the company.

Great, and do you have a CapEx number for the JV for this year?

CapEx, I would think it's going to be a little bit higher than the March quarter’s $3 million or $4 million CapEx payment, depending on the timing of the payment.

That’s very helpful. Thank you.

Thank you.

Your next question comes from Craig Ellis from B. Riley FBR.

Yeah. Thanks for taking the question, team and congratulations on doing such a good job in the March quarter, navigating a real volatile environment. I wanted to start just with a couple of clarifications. The first one with respect to the prior target for the JV ramp; we had been looking for a revenue ramp to $37.5 million in the September quarter and I understand we’ve got a much different environment. But what I wanted to dig into is, is the reason that the company is uncomfortable sticking with that guidance, because the design wins aren’t there to get to the $37.5 million or the design wins are there but maybe the unit volumes on those wins are now different than you thought or is it that those two things are fine and maybe you’re just concerned about parts from other suppliers that would go in kits that are related to the design wins that you have? I’m trying to understand what the specific factors are and where you stand overall relative to the design wins that are needed to get to a $37.5 million run rate for that facility?

This is primarily because of the overall market demand. At this point, it’s so volatile. In the March quarter, we saw this market shift, like a roller coaster, with mobile market demand down significantly. Later on in the quarter, we saw a surge in demand for Computing. We have a lot of uncertainties related to the pandemic, and we can’t predict how long it will last. Even after the reopening of cities and the economy, we don’t know how people are going to behave and react. We are not able to offer guidance on when we can ramp up to the target run rate of Phase 1. We’ll closely monitor it and provide further guidance as we gain more visibility.

Okay. Going back to a clarification on gross margin. Tore fleshed out the fiscal fourth quarter. But on the third quarter, it was about 150 basis points better than I expected. What allowed the company to perform so well? Were there any incremental positives in the quarter that allowed you to offset some of what were likely incremental COGS costs in a COVID environment?

In the March quarter, our gross margin came in higher than our guidance primarily because our production recovery was better than we expected. We expected more decline in the production level. So I have to give credit to our employees. Especially in China, they fought through lockdowns and labor shortages for pretty much most of the time in February and March. With limited workforce, they produced a much higher output through overtime, commitment, and ownership. Given the situation, this contributed to our overall gross margin and allowed us to perform better than we expected for March.

Okay, got it. And then moving to the consumer gaming ramps. It looks like gaming is accounting for about half of the sequential growth, if I’ve got the bottoms-up modeling right in the June quarter. So twofold question. Once we exit the June quarter, where will we be with respect to that ramp? Is there further growth coming in September? Or will you realize all the benefits of the gaming design win in the June quarter? Since this is half the sequential growth and given the decline in gross margins, would it be fair to assume that this design win is a high volume design win coming in below corporate average?

We’re pretty excited to share this, because we are winning on multiple sockets in this gaming system. The system is not released yet but is expected to launch in the second half of the year. We do expect our business with this to continue to grow, depending on the customer’s own ramp-up rate. Whenever these things launch, there’s usually a strong push, especially since they’re trying to do it for Christmas. We believe this will be a pretty good growth area for us. However, we’re also cautious about the coronavirus impact.

And do you have any sense for what your share is with that socket's fee?

Our share in each socket depends on what socket it is. Some we have a better share than others. The good thing is we have quite a few sockets inside, but none of them are sole-sourced, as they always prefer multiple sources for these systems.

Okay, great. And then just connecting to the end markets. Can PCs get back to some of the highs that we had seen last year, with the strength that you’re seeing near-term team? Secondly, as we look to the back half of the calendar year, do you feel like you have the opportunity to really grow that business in the back half or should we look to calendar ‘21 before we’re able to see significant growth of current revenue levels?

We expect computing to continue to be strong. We’ve always held PC as one of our core areas of business. We will continue to grow there into higher content with power ICs and DrMOS. We believe our position is good, but we hesitate to pin down a firm growth number for the second half due to overall market uncertainties. Potentially, we could be growing significantly as we progress into the second half.

And just to clarify, do you see the interface of the design wins that you have?

We don’t always know which model we’re design-ins for until they are finally released, but we feel pretty confident about our position at each of the phone makers. We are preparing for a ramp, but we don’t know how strong it will be yet.

Okay, great. Thanks for all the help. Good luck, team.

Thank you.

Thank you.

There are no further questions. At this time, I would turn the call back over to the presenters.

This concludes our earnings call for today. Thank you for your interest in AOS, and we look forward to talking to you again next quarter.

Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.