Good day ladies and gentlemen and welcome to the Alpha and Omega Semiconductor Fiscal Fourth Quarter and Fiscal Year 2018 Financial Results Conference call. At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I’d now like to turn the conference over to So-Yeon Jeong. You may begin.

Thank you. Good afternoon everyone and welcome to the Alpha and Omega Semiconductor’s conference call for fiscal fourth quarter and year-end financial results. Our fiscal year ended June 30, 2018. 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 business wire today, August 8, 2018, 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 the 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 discussion over to Yifan, our CFO, to provide an overview of the fourth fiscal quarter and the fiscal year 2018 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, 2018. Then I’ll turn the call over to Mike, our CEO, who will review the company’s business highlights. After that 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 $109.9 million, an increase of 6.8% from the prior quarter and an increase of 12.1% from the same quarter last year, driven by continued momentum of our diversified new products and supported by the increased internal capacity. In terms of product mix, MOSFET revenue was $89.4 million, up 6.4% sequentially and up 16.5% year-over-year. Power IC revenue was $17.5 million, up 11.8% from the prior quarter and down 3.7 from a year ago. Service revenue was approximately $3 million as compared to $3.2 million for the prior quarter and $3 million for the same quarter last year. Regarding the segment mix, the June quarter’s computing segment represented 43.7% of the total revenue, Consumer 19.1%, Power Supply and Industrial 20.1%, Communications 14.1%, Service 2.7% and others 0.3%. For the fiscal year 2018, revenue was $421.6 million, up 10% from prior fiscal year. Non-GAAP gross margin for the June quarter was 27%, as compared to 26.8% in the prior quarter and 26% for the same quarter last year. The increase in non-GAAP gross margin quarter-over-quarter was mainly driven by the improved product mix, partially offset by the inefficiency of factory operations due to the capacity expansion as well as higher raw material costs. Non-GAAP gross margin excluded $0.5 million of share-based compensation charge for the June quarter, as compared to $0.4 million for the prior quarter and for the same…

Yifan, thank you and thank you everyone for listening us. AOS once again delivered outstanding execution for the June quarter. As the new capacity came on line, we achieved another record quarterly revenue and all of the core financial metrics came in above the mid-point of our guidance ranges. We closed a solid fiscal year 2018 setting a new record with annual revenue and highest non-GAAP earnings per share in 7 years. I am pleased with the annual revenue growth by 10% year-over-year and non-GAAP gross margin expansion by 270 basis points. I am more pleased that we improved the annual non-GAAP earnings per share by 37%, as compared to a year ago. The step up in the revenue run rate and the earnings leverage were driven by strong demand for our diversified new products, and were enabled by the increased internal capacity. Looking back at the fiscal year 2018, every effort we dedicated has been about making fundamental improvements towards our goal to accelerate growth. In terms of demand-side improvement, we continued to bring the market-driven R&Ds and the technology roadmap that coincide with our customers’ emerging interests and needs. The demand for our product remained very strong across all DMOS technology platforms including Low-, Medium-, HighVoltage and IGBT, and some of the design activities are now transitioning to a stable revenue stream. Our Power IC product line that was severely impacted by the supply constraint is expected to resume the growth starting from the September quarter. Our new DrMOS products are gaining traction in Vcore applications, and we are allocating more capacity to support our customers. Additionally, we are just starting the ramp of our products for smartphone battery pack and high-value, high-performance graphics card, I am very excited about the opportunities for scalable expansion led by AOS’s…

Thank you, Mike. As we look forward to the first quarter of fiscal year 2019, we expect revenue to be between $113 million and $117 million. Gross margin to be approximately 26.5% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 28.5% plus or minus 1%. Non-GAAP gross margin excludes $0.6 million of estimated share-based compensation charge and $1.7 million of estimated production ramp-up costs relating to the Chongqing joint venture. Operating expenses to be in the range of $32 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $24.2 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $2.1 million to $2.3 million of estimated expenses relating to the development of our digital power team. Non-GAAP operating expenses exclude an estimated share-based compensation charge of approximately $2.8 million and estimated pre-production expenses relating to the joint venture of $5.0 million. Tax expense to be approximately $0.6 million to $0.8 million. Loss attributable to non-controlling interest to be around $4.2 million. On a non-GAAP basis, excluding approximately $3.5 million estimated pre-production expenses and production ramp-up costs relating to the joint venture, this item is expected to be approximately $0.7 million. As part of our normal practice, we are not assuming any obligations to update this information. With that, we will open up the floor for questioning. Operator?

Thank you. [Operator Instructions] And our first question comes from Jeremy Kwan from Stifel Nicolaus. Your line is now open.

Yes. Thank you congratulations on the nice growth and outlook, question about the outlook for the fiscal year that 10% growth is that any of that dependent on the JV ramping up or is your current install capacity at ASO enough to support that growth?

That 10% growth in the fourth fiscal year '19 is largely depends on our internal capacity at this point and plus off course person or third party foundries'. We are not placing that much on the joint ventures ramp-up.

So shifting gears to the consumer segment you mentioned the channel home and science market being your strength have you seen any impacts maybe rather specifically regard to that segment or in general relating to the ongoing tariff challenges?

At this moment we have not seen off course this trade dispute just the beginning and that's second that we are new not we are still small so probably we would not -- would be not impacted too much by that.

Got it great and just a question in terms of the JV operating cash burn 19.5 million this quarter was quite an increase from last quarter can you give some idea where you see that going forward and maybe if you can kind of see when it might be kind of achieve breakeven status whether on operating or a free cash flow basis?

You mean OpEx?

Sorry, for the JV cash burn the operating cash flow.

Okay, from the cash flow perspective and I would like to separate AOS and joint venture so that's why in this quarter we had increased to some supplemental disclosure in earnings release toward the end of the press release. For AOS there is an cash contribution capital contribution in the if we completed that and that's pretty much and then we've completed our obligations so for this joint venture yes it's in the construction building pretty much finished at this point and then we are importing the installing the machines for the 12 inch fab so at this point I mean they have in their capacity to borrow actually you saw on last quarter in May we that joint venture entered into a lease financing for 60 some million in financing so I mean yourself and you can this cash can support and it's in the own the construction and the equipment purchases sold. If they need and they can they are still having other some the addition of capacity to borrow, so I mean that's been I will like to see it separately from the cash flow perspective.

Understood I guess I was referring to the there is a line of those net cash used in operating activities for the Chongqing joint venture. That reflects 19.5 million can you give us an idea where that might go next quarter and or maybe even the next couple of quarters as you ramp up production?

We’re increasing some from $19 million because that 19 million maybe pay for the current the expenses and salaries and then some inventory purchases, so next quarter in the September quarter assembly and test and as far as some small metric production and we would expect we would need more working capital to support the run.

Jeremy you mind, I give you some perspective from the business point of view about our Chongqing joint venture?

I am sorry can you say that again?

So do you mind I’ll give you some of what our point about this Chongqing joint venture from business point of view?

Yes I understand yes it’s going to help.

Do you want, let me give you a little bit of perspective about the whole thing so maybe so to be able to understanding. So for a couple of years okay, this was meant for the semiconductor product there and that which from probably last earnings to next year. So everybody is wondering or shopping for capacity for funding. So, with 35 million cash we’ve got a huge facility 12 inch was a good equipment there but we only -- because joint venture, if any exposure, we only have half of the exposure, but we’re going to harvest the full benefit of the capacity but that’s why we’re so excited about that. Our cost is going up there and now it is a always a challenge there, but this good challenge we're really happy to face to, to work on. So this gives you $0.02 of a point, so if I have the right perspective why we’re so excited about this Chongqing joint venture. Strategy with somebody to shared risk.

Right that makes sense it, this should have risk and gain full side capacity but that 35 million that includes the 25 million additional contribution in cash and that payment has that hit yet?

No it’ll be in the September quarter.

Thank you. And our next question comes from Edgar Roesch from Sidoti. Your line is now open.

Good afternoon and congratulations on a great quarter. Mike I appreciate all the color you provided on the various end markets and the products I did want to follow-up on one point, would you say overall that the mix management that was imposed by your supply constraints in 2018 was overall fairly neutral to the gross margin or a drag what would be your perspective on the overall impact of that mix management?

Mix management has definitely contributed positively to the gross margin improvement of 270 basis points in fiscal year '18. That 270 basis points improvements in the year some contributed from that US legislation perspective about buying larger and some bigger portion of it contributed from the mix management.

Okay, thank you. And then on the operating expense side is it fair to think the next step up in non-GAAP expenses excluding the pre production item would that be hiring in the next third or two thirds of the digital power team and that would really be the next or two steps and then it might start to flatten out a little bit sequentially?

For the digital power team as of the end of the June quarter, we've hired about two third of the team already so we will continue to fill in a few openings. Yes we do expect and on that digital powers team the expenses to increase in the September quarter, I've provided guidance we estimated at this point $2.1 million to $2.3 million and from for that digital power team versus in the June quarter it was $1.4 million so we should be expect and as it steps up eventually I mean the team is very close to be complete right now as the team is working with customers and customer in design in the product designs so it progressive and then progressing pretty well at this point.

Okay, terrific and that's the main driver of the increase in expenses at this point. Are there some things on the horizon you would highlight?

I mean that's an in that other area of business is we see this a lot of the growth opportunities so we will continue to invest into R&D and sales marketing to further secure our growth . At the same time I mean that for the June quarter if you look at it and our R&D expenses actually fluctuated towards the lower number. So and that's been just the nature of an R&D expenses. Fluctuating from time to time so we would expect and get back to that normal level so you may see and as noted in the June quarter on R&D expenses temporarily lower than the even the March quarter.

Alright, thank you, and then is too early for there to be any meaningful inventory held at the JV because I was just interested that you are flat sequentially on inventory was there anything in the JV that built-up in the quarter?

Not much in the two quarter JVs and the assembly and test and did not start production, so that's only a trial, it was a trial production there. In the September quarter we will see a little bit material buildup in the joint venture for assembly and test but then I would not expect too much because it’s only starting at small mass production not at full scale production yet.

And then Mike I think you mentioned the Power IC business is set for growth again and is that just the internal Oregon capacity coming online that is supplying the components?

A good portion from our Oregon, yes internally with still some portion from outside but outside is pretty secured, so that should be helpful.

DrMOS and as Mike mentioned in his prepared remarks, in our DrMOS product is gaining pretty good traction in the core business and so we do expect that product line started growing again.

Thank you. [Operator Instructions] And our next question comes from Craig Ellis from B. Riley FBR. Your line is now open.

Hi this is actually Peter Paine calling in for Craig Ellis and thanks for letting us ask a few questions and congratulations on the execution and the outlook. First of all concentrating on just some of the near term variants, the operating expenses for the quarter came in a little bit lighter despite the higher revenue, I am wondering if that’s just some of the shift in the R&D that you mentioned into the September quarter?

Yes I mean that’s partially is the reason, yes I mean R&D expenses tend to fluctuate from quarter to quarter.

And then on the September OpEx does that kind of embed all the full hire of the power management team or is that still partial just want to understand if that captures the whole digital power team?

Yes that’s a pretty much in the wings and we expect and we further hire a few headcounts for the digital power team in the September quarter so then yes that’s why the expenses for that team steps up from 1.4 million to 1 million -- to 2.1 million to 2.3 million range.

Got it, and then on the gross margins for the guidance that’s it seems like it’s above what we expected so wondering if you can talk about the gives and takes, is there is some kind of a I guess less rising wavier costs and raw material costs or is that a lot of that utilization picking up, so if you can just provide some color on that?

I mean gross margin for the September quarter that the increase came from the two or three factors. One is in the product mix, we continue to excited in our newer products and gaining more revenues proportionally and then at the same time, we also managing the product mix given the current favorable in the market and the environment we would expect we continue to improve our gross margin an offsetting factor is lending from the increase of other raw materials in such as substrates and RFPs and foundry wafers and some backend lead frames and some materials we see some cost increases.

Got it. And then kind of looking at the Cisco 2019 10% year-on-year growth can you just talk about the end segment, expectations, whether you are still expecting those double digits in the compute and the comps and then more of the mid-single-digits in industrials maybe if you can provide some color on the segment expectation?

In terms of segment in the fiscal year in '19 and yes I would expect and the good growth in still comes from this communication areas and we will continue to gain shares in the smartphone and then battery pack an area and in some telecom areas. In the computing area and we would you expect there is some fairly good growth there as well and then product supply and your industrial area yes we are expecting some gains because we rolled out our Optimus 5 high voltage platform and not very long ago so we do expect them the new platform can generate additional revenue for us. So in the areas and such quick charger and some power USB PD area and then in the consumer area and yes in our IGBT product lines is performing very well last calendar year that new product line across the $10 million annual revenue, so the full this year calendar year '18 we expect it to then continue to grow significantly for that product line that's primarily in the home appliances area and then others like in our high voltage Optimus 5 platform we can also be used in some other like consumer devices area such as TV power, so we do expect the growth is from almost all the segments. Some are faster some maybe did less than 10% but by and large we should see the higher growth rate, last year we've guided single, high single digit growth rate and then this year we guided 10% .

Okay great, and just going back to that gross margin is that a gross margin that you’re comfortable in sustaining throughout the year or is this more of a mix for a one quarter kind of thing?

We would expect that September guidance can be viewed as whole years and even for the whole year we will probably will see even higher gross margins a little bit I mean we do expect in the next few quarters if we can continue to improve our gross margin.

One more question before I hop back into queue, on the cash can you talk about the cash availability for buybacks and your expectations for buyback pacing?

We last year I believe it was September quarter also and last year we set up $30 million buyback program so far we have already repurchased half of $15 million, in the June quarter we repurchased $3 million, we’ll see then I mean depends on our situation and then cash flow although same and, that program is still in place.

Thank you. And we’ve a follow-up question from Jeremy Kwan from Stifel. Your line is now open.

I just wanted to follow-up on the assembly and test ramp up, I guess first question is has the equipment been fully transferred there and also can you help us understand that the nameplate how that’s going to affect flow through the income statement, from what I understand you transferred a majority of the back end equipment about 60 million worth so presumably some of it’s going to split with the JV and some of it just to capture back for yourself, can you just help us understand the dynamics there?

For the total contribution we do plan to move about an half or slightly half higher than half of the -- of our Shanghai facilities equipment to contribute to the joint venture. In the September quarter we will continue to move, at the end of the June quarter we only moved the small portion of it so that get the line set up and qualified and then quantify with customers and so we will continue to gradually move more equipments from our Shanghai facility to the joint venture because we want to manage this transition carefully so that it won’t jeopardize our production schedule. So in the September quarter they have only produced a small amount of mass production to us. So basically their function is like our subcon, so they produce for us so that we sell the products to our customers.

And that concludes today’s Q&A session. I would now like to turn the call back over to speakers for any closing remarks.

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

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.