Good day, ladies and gentlemen and welcome to Alpha and Omega Semiconductor Fiscal Fourth Quarter and Year End 2016 Earnings Conference Call. At this time, all participant lines are in a listen-only mode to reduce background noise. But later we will be conducting a question-and-answer session after the prepared remarks and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to introduce your first speaker for today, So Yeon Jeong. You have the floor now.

Thank you. Good afternoon, everyone, and welcome to the Alpha and Omega Semiconductor conference call for fiscal fourth quarter and year-end financial results, our fiscal year ended June 30, 2016. This is So-Yeon Jeong, Investor Relations Representative for the company. With me today are Dr. Mike Chang, our CEO, and Yifan Liang, our CFO. This call is being recorded and broadcasted 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 at www.aosmd.com. The earnings release was distributed by Globe Newswire today, August 10, 2016, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include 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 would like to remind you that during the course of this conference call, we will make 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 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 discussion over to Yifan, our CFO, to provide an overview of the fourth fiscal quarter and the fiscal year 2016 financial results. Yifan?

Thank you, So-Yeon. Good afternoon and thank you for joining us. To begin, I will discuss financial results for the quarter and for the fiscal year ended June 30, 2016. Then I’ll turn the call over to Mike, our CEO, who will review the company’s business highlights, and then, I will follow-up with our guidance for the next quarter. Finally, we’ll reserve time for questions-and-answers. Revenue for the June quarter was $91.4 million, an increase of 10.1% from the prior quarter and an increase of 12.2% from the same quarter last year. Our new products continue to show growing momentum. In terms of product mix, MOSFET revenue was $69.3 million, up 9.2% both sequentially and year-over-year. Power IC revenue was $19.2 million, up 18% from the prior quarter and up 31.9% from a year ago. Service revenue was approximately $2.9 million as compared to $3.3 million for the prior quarter and $3.5 million for the same quarter last year. Regarding the segment mix, the June quarter’s Computing segment represented 35.4% of the total revenue; Consumer, 28.1%; Power Supply and Industrial, 21.8%; Communications, 11.4%; Service, 3.2%; and others 0.1%. As a reminder, we had improved our segment tracking system in the March 2016 quarter to better reflect our evolving business trend. For the full fiscal year 2016, revenue was $335.7 million, up 2.4% from last fiscal year. Gross margin for the June quarter was 21.3%, as compared to 19.7% in the prior quarter and 17.6% for the same quarter last year. The increase in gross margin quarter-over-quarter was mainly driven by the higher factory utilization and new product contribution. For the fiscal year, gross margin was 19.6% as compared to last fiscal year’s gross margin of 18.4%. Operating expenses for the quarter were $16.9 million, compared to $16.5 million for the…

Thank you. AOS once again demonstrated solid execution in the June quarter, delivering both the top and bottom lines above the high end of its guidance range. We closed the fiscal year 2016 on a positive note as demand for our new products continues to drive strong performance across all segments. I am especially pleased to report that we not only achieved $0.14 profit during the quarter, but also revived the full year profitability on a non-GAAP basis. Our bottom line swung to a profit of $0.09 from a loss of $0.12 a year ago, which is a testament to the high operating leverage of the AOS business model. Our focus on introducing differentiated and market driven products, gaining market share, and expanding customer penetration is creating strong momentum. This gives us more confidence in a successful turnaround. Some of the key products introduced last year, for instance, the unique multi-chip DMOS and Power IC package for Skylake, and the highly efficient and reliable Low- and Mid-Voltage DMOS products for smartphone battery management and quick charger applications, have already passed critical milestones as evidenced by our results. The steady execution of our plan is also accelerating AOS product diversification. The revenue from the Power IC line grew to $69.3 million during fiscal 2016, from $63.5 million in 2015 and $54 million in 2014. This represents a 9% year-over-year increase in fiscal 2016 after an 18% year-over-year growth in fiscal year 2015. Based on the current designing pipeline and customer engagement activities, we feel confident about the continued growth of the Power IC line. As we continue to expand our differentiated product offerings into broad based applications, we are now starting to earn name recognition among key potential customers. They are more willing to open the doors to us for their…

Thank you Mike. As we look forward to the first quarter of fiscal year 2017, we expect our September quarter’s revenue to be in the range of $93 million to $97 million; GAAP gross margin is expected to be approximately 21.5% plus or minus 1%; GAAP operating expenses are expected to be in the range of $18 million plus or minus $1 million, including $0.8 million expenses related to Chongqing joint venture. Tax expenses are expected to be about $1.2 million to $1.4 million. Loss attributable to non-controlling interest is expected to be around $0.4 million. Our share-based compensation should range from $1.3 million to $1.4 million. As per our regular practice, we are not assuming any obligations to update this information. With that, we will open up the floor for questioning. Operator?

[Operator Instructions] Our first question comes from the line of Tore Svanberg from Stifel. Your line is open.

Yes. Thank you. Sorry for that. Yes. Thank you, and congratulations on the results. First question, could you just talk a little bit about your relative visibility going into this quarter? Obviously, you are starting to see some good sequential growth. So just from your bookings perspective, how’s visibility looking for the September quarter?

Okay. Sure, Tore. Bookings have been coming in steadily throughout the quarter, and our book-to-bill ratio is healthy. Our current backlog position has been reflected in our September quarter’s guidance. I mean, right now, I would say reflected some unseasonal, normal seasonality at this point.

Very good. And also, could you talk a little bit more about your current utilization. Obviously, it was up sequentially with the revenue growth, and it looks like it’s going to be up again in the September quarter. But where do we stand? And perhaps, you can also give us a sense for what CapEx is going to be in the new fiscal year?

Okay. Sure. Factory utilizations definitely went up in the June quarter, because of the higher revenue delivered. So right now, if you look at the spectrum of the semiconductor, other companies' utilization range, I will say we are at the high end of the utilization range. So it also contributed to our margin expansion in the June quarter. In terms of next fiscal year, fiscal year 2017 in the CapEx on, we are still expecting around $20 million in the range, same as our last year’s CapEx target.

Very good. And maybe last question for Mike on the -- more on the product side. So you sound pretty upbeat on the communications business. Obviously, revenue's up very nicely here in the June quarter. But it also sounds like you’re going to have some quick charge design wins ramping in the September quarter. So I don’t -- is there any more color you can give on that topic please.

Communication segment is our -- one of our focus markets, beside I get [ph] one of course it is huge market opportunity there. Second, Alpha is a very small, if you paid attention. So there is tremendous opportunity for us. Therefore our R&D are really geared up for the new product for this area, whether there is a quick charger or smartphone battery and something, and all the things that are in the pipeline. Yes. This is our focus area. Thank you.

Great. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Craig Ellis from B. Riley. Your line is open.

Yes. Thanks for taking the questions, and congratulations as well on a good quarter and good outlook, guys.

Thank you.

Yes. You’re welcome. My first question is just a follow up to Tore’s. Mike, I think you said in your prepared remarks that you expect the battery management business to be a fast growing business. Are you seeing enough design win breadth and ramp potential that, that would rise through seasonally softer fiscal second and third quarter periods? Or would we still expect that to be a fairly seasonal business but with a strong ramp, within what is a seasonal segment overall?

You talked about September, September quarter?

Yeah, the question is how significant is the ramp that you are seeing and does it mean that the business, communications business can grow sequentially on a multi-quarter basis.

Well this segment indeed I see continue growing okay, of course I will not mislead you to what would be like [indiscernible] figure. [indiscernible] If we are steady state, [ph] mainly because the new product coming also kind of wave by wave. So we do feel highly confident in this area yeah, but it will be gradual. So the smartphone area, which probably will increase 5%, something like that.

Okay, helpful thank you. The second question is on the Power IC business. That looks like particularly strong growth there. Can you provide a little bit more color on what drove the exceptional growth in that part of your business in the quarter?

The power IC product lines we rolled out some of the new products last year and if you recall last year we got into expanded in addition to our TV business, and we expanded into PC area. So that's where we got some design wins. So right now it's started ramping. Another thing is as Mike mentioned in his remarks there is a high end 4K TVs nowadays and our customers are started ramping 4K TVs. So our power IC products are well prepared position for this run. So our new products it can provide higher current and higher frequency requirement for the 4K TV. So those are two major areas propelling our power IC product lines to grow. This quarter you also saw another factor is in we're diversifying into other TV makers besides our traditional strong position with the Korea and TV OEMs. So now we're getting into Japan, China, Taiwan area.

Okay thanks for that Yifan. So yeah the strong growth in power ICs seems seems to correspond well to strength in PCs and in the consumer business. In the PC business can you indicate or can you see what percent of your business now is related to Skylake platform and I'm wondering if Skylake is now greater than 50% of mix or if it's below that and where you think mix can go as we go through the rest of this year for Skylake, where you are meaningful content.

Okay sure. Skylake platform is again definitely in the June quarter and continued to ramp relative to the March quarter. But I don't think that it was up to 50% mark yet. I think it still needs some time in the second half of the year to ramp up the majority of the PC platform.

Okay that's helpful. And then just two last ones the first on the guidance for the joint venture expense, it's helpful to get that. Can you give us any color beyond the fiscal first quarter? Should we expect joint venture expense to be at a fairly steady level on subsequent quarters or would joint venture expense be expected to either rise or fall in the spring [ph] quarters, so how should we think about the longer term implications of that the expense item?

Okay sure. Right now we are in the process of selecting design houses and construction companies. So we expect to start construction after that. The facility is targeted to be completed in a year or so. So you're looking at next year summer fall timeframe from the current perspective. In terms of from now to next year mass production, the primary works for the joint venture is supervising this construction and then get the company running and then hire people for training all those things. So I would expect in this September quarter we'll start some hirings and then we forecasted about $0.8 million expenses for this quarter. I would say gradually that yeah we'll increase some hirings but the expenses will be not likely to increase from this, from the June quarter's $0.2 million to $0.8 million, not like in at that pace. But still a little bit inch up from $0.8 million and say to $1 million, $1.2 million range per quarter until the mass [ph] production timeframe.

Okay that's helpful and then my final question. Can you just comment on the market environment that you're seeing right now? Another NOI [ph] company reported earlier this week and they indicated that pricing was down 2% and I think normally it would be down about 1.5% to 2%. So for them it was normal but maybe on the more adverse side of normal. Can you characterize what you're seeing out there and any color on channel inventory or downstream inventory would be helpful as well. Thanks Yitan.

Okay, sure. In terms of pricing pressure, in the June quarter what we saw was a normal range of price erosion. I mean the range is normal, not any particular pressures on -- exceptional pressure. In terms of channel inventory, yes, right now, our channel inventory is at the low end of our targeted range of two to three months and that's our target. So right now at the low end of that range. Overall, we felt that, I mean the overall channel, like the PC area is in the normal range and we wouldn't feel otherwise so.

Thank you.

All right thank you.

Thank you. Our next question comes from the line of Christopher Longiaru from Sidoti & Company. Your line is open.

Hey guys. I'll add my congratulations, nice quarter.

Thank you.

Thank you, Chris.

My question has just to do with how the mix is going to change right. So I guess it sounds like you're in the fifth or maybe sixth inning in terms of Skylake. You've got lots of the smartphone battery products ramping off of a small base. So as you look out maybe a year, 1.5 year right in the Skylake ramp has leveled off and now a lot of the growth is coming from those other segments. How does your gross margin mix look and how does it change?

Sure I mean in terms of the segment mix in the short term, I mean this September quarter or next quarter or so, I would not expect the mix would change dramatically. In the long run I mean even a year or two years I would expect that yes communication segment and car supply, industrial segments would grow at a faster pace than computing segment. So I mean because of those two focused segments on having relatively smaller pace. So even they have grown at a faster pace but at a relatively to the overall impact still in -- I wouldn't say that the mix would change dramatically in a year or two. But in the long run we definitely expect our mix will be more balanced among those four segments.

And industrial was higher gross margin and the communication is lower than the corporate average. Is that accurate?

No. Well, the communications is definitely higher than corporate average. Than in the product supply and industrial area, there is kind of a mix, because of a lot of applications in that segment. And then for certain socket, we may have lower on margin profile than certain other sockets we may have on higher margin profile.

Okay. That makes sense. And just on the utilization front, you said you are pretty close to fully utilized?

It’s in the pretty high -- right now, the utilization improved quite a bit. Yes, and then we still have room to grow.

And at what point will you get to the point, where your fabs, manufacturing facilities are fully utilized? I mean, what kind of revenue run rate can those facilities service?

Well, that’s a very good question. That’s I think that’s what the Chongqing venture come from. So we believe that’s a very good transition for our capacity and for our growth. And we thank god for that.

Okay. All right. And so that’s going to come online, and you think the plan is for two years, around two years from now, a year and a half, two years from now, is when that comes into play?

It should be within two years. Hopefully we [indiscernible].

Two or three years.

Yes, yes.

Okay. And so between that timeframe when it comes online, I mean, are you going to be running it close to a 100% capacity in the facility you have now

In the current capacity?

Yes.

Yes, almost there, yes.

Okay.

So that’s Chongqing is almost a necessity.

Okay. That makes sense. All right. That’s my only questions. Guys, thank you very much.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Tom Sepenzis from Northland. Your line is open.

Hey, thank you for taking my questions. I was hoping you might be able to give us a little bit color on this graphics card win in terms of – is that just the initial win in that space. Is that an aftermarket type card? Or is it something that’s actually being built into PCs directly? How should we be thinking about that in terms of ASP, and what that could mean for top and bottom line?

Sure. I mean, we are excited about this new design win, major design wins with this graphic card application. Yes. This is just the beginning of this, our target into this application. Right now, it still had beginning stage of ramping. So it will take some time to ramp and then and that will, as a dollar amount, from the dollar amount perspective, it won’t impact our total computing segment margin. Right now, it’s only in the early stage for this application for us.

Any help in terms of what kind of ASPs you’re looking at for device there?

Well, the ASP is expected to be higher than our corporate ASP. Yes definitely.

Okay. And then, -- and then in terms of the product you announced yesterday I believe, the DrMOS that’s going in -- looks like it’s aimed at servers. Is this something that’s going to come into play now? Or is this something that comes into play with [indiscernible] introduction next year? And is this something that is Intel, AMD agnostic? Or is it more focused towards one or the other, like will this work with Zen product?

Well, this new product isn’t targeting the server area. And that’s one of the areas we want to get into, grow into these areas. We do have products intended to address those. And this new product actually can be used for other applications also. I mean servers, some other like the high end gaming and all those things and that's pretty much all high end computing functions. So that's our new product and we want to address those applications.

What percentage of your computing business is involved in like enterprise or servers right now, is it's basically nil, right?

Right now there is -- pretty small.

So 99% or 95% of consumer was there and the rest was other.

Actually Tom, you hear what we said before also. So even though the fishing market overall is kind of steadily decline maybe slowly. But we determine or we try hard to maintain our revenue level mainly by fabrication right into the server and other area which we will take [indiscernible] once at a time. So we do have the confidence that we'll keep this RPC revenue stable. But of course the overall percentage in our revenue will be decreased because other segment will increase.

Yeah. But would this give you the opportunity to actually grow that revenue if you were able to successfully penetrate the supermarkets?

No, I have to be as a business manager conservative because I hope this will increase our PC revenue. But then under the overall PC market decline rate. So I think our goal is to make sure that we maintain the revenue range by moving toward a higher value area.

Got it. Thank you very much.

Thank you.

Thank you. Looks like we have a follow up question from Tore Svanberg from Stifel. Your line is open.

Yes, thank you. Just a follow up on the CapEx $20 million. Could you elaborate maybe a little bit on what you intend to do with that spending please?

Sure. For the next fiscal year as our business is growing so we needed some new capacities and some old factories and our existing factories, that would need some upgrade and some equipment to support our new product lines. So pretty much those CapEx will be for our front end and back end.

Very good and then last question is now that we are starting to see the leverage truly play out in the model as your revenue continues to grow, how should we think about OpEx growth going forward? So I'm not just talking about the September quarter. But should we think of OpEx maybe growing at half the pace of revenue or do you have a number in mind?

Yeah. We are definitely were going to invest in the growth areas from a R&D perspective and sales and marketing perspective. That's our first priority to support our business growth. In terms of the pace I would say, yes we should have some -- we should see some leverage from there. I would not expect the operating expenses to grow faster than the revenue pace.

Sounds good. Congratulations again.

Thank you.

'Thank you.

Thank you. We have a question from the line of Craig Ellis from B. Riley. Your line is open.

Thanks for taking the follow-up question. Mike, I just want to give you an opportunity to elaborate a little bit further on something you alluded to in the press release and that you commented on in the prepared remarks. So the company has been executing a multi-year recovery plan. That plan is showing good results right now. Gross margins look like they are the highest in at least two years. The profitability level is positive for the first time in six quarters. I know you are very healthy overall. As we look ahead from here over the next 12 to 18 months perhaps you could help us with some of the key things that you are focused on some of the milestones you are looking at as you continue to execute against that recovery and improvement plan.

Well, this is a pretty good, but heavy question. And I’ll try to answer. We have our business model, which we say is very good leveraged business model from very beginning. Actually, we were pretty steady and successful before our way into the IPO, of that [ph]. So we may be chasing a white goose. So we lost our focus a little bit. And thank god our Board guide us back to our original business model, and that’s why we’re recovering, and that’s why we’re doing there. So we stick to our original business model, maybe humble, but steady and sure. So hopefully this give you some insight what we are doing.

From a financial perspective, does it mean that -- maybe you could help us understand from a financial perspective where the recovery plan has you now. Are we seeing most of the benefits of the recovery plan that you’re executing. Are significant, majority of those financial benefits still to come over the next year or two?

I would -- let me answer first -- the beginning okay. I think later Yifan will further elaborate from the financial point of view, because he’s good on that. So our business model basically is technology and volume. So centered in technology. So right now, our company is focused on reboot or re-polishing our capability, R&D and manufacturing, okay. With that, we’ll be able to produce right product for the customer for the market, expand our growth, our penetration and growth, right. So these of course will translate into higher revenue, greater increase revenue and was average that the margins will improve, but that’s what our company is driving. So maybe Yifan can you quantify?

Sure. I mean, in terms of financial impact. Yes, I would say right now, we saw our revenue go towards the new level. So right now, I would say for the next year or so we're targeting to outpace the industry. I mean that's industry wise, you can see anywhere the market survey companies they predict like 3% or 4% growth and we definitely want to outpace this industry average. So I will say in the high single digit range to grow. And then along with that, I would expect we continue to roll out our new products and address our diversified application areas. So that would also contribute accordingly to the margin profile improvement.

That’s helpful. Thanks, gentlemen.

Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question is from the line Peter Mark [ph] from Market Capital Management. Your line is open.

Hey, everyone. I’ll reiterate again, congrats on a great quarter. And I just kind of two quick questions, because I know this is going on long and it's been answered to some extent. But first off, just on the positive commentary around the power IC. Is that going to be -- in the future it looks like the growth is great. Is that going to be a margin driver, or is this going to depend on the wins within that sector? And then secondly, just in terms of capital allocation going forward, you guys have done a great job with the buyback in the last 12 months and what not. But just where the stock prices at? It’s higher, what do you think about capital allocation going forward?

Okay. Let me answer the first portion. Then I’ll ask Yifan answer the couple of questions later. About Power IC, okay it is a company strategy and policy. Yes, indeed Power IC will give us level high margin. The most important is the Power semiconductor company, Power IC in our point of view is complementary to our DMOS. So those are really help each other. And our strengths, our Power IC strength is different to other, which is generic company again, Power IC, we did great. But our Power IC is re-leveraging our power strengths, so together. So the growth power IC is a necessity is a key part of our strategy and they say it's a reality. So we'll continue to grow that and so then second point maybe that Yifan…?

Sure. In terms of the capital allocation, yes and our first priority is to support our business growth. I mean that's the business growth and then CapEx requirements along with it. So in terms of stock buyback or other way to return to shareholders, yes, I'm sure our board will evaluate and last year we decided to repurchase $30 million stock through Dutch tender offer. So going forward and yes depends on our business conditions and the business growth and the cash positions, yet we will evaluate it along the way.

Great. Just right now, as a reminder was there a shares buyback during the quarter or is it just kind of where it's at you guys aren't as active. I know that, but kind of where we are now, is there much left on the buyback.

Yes, this in the June quarter we did not repurchase our own stock.

Okay, thanks and good job. I think that's -- you guys did a great job of that. Thanks.

Thank you Peter.

Thank you. Ladies and gentlemen this now concludes question-and-answer session for the day. So I would like to turn the call back over to management for closing remarks.

Alright. So this would conclude our call today. We thank you for your interest in AOS and we look forward to talking with you next quarter. Thank you.

Thank you.

Ladies and gentlemen thank you again for you participation in today's conference call. This now concludes the program and you may all disconnect at this time. Everyone have a great day.