Good afternoon, my name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Alpha and Omega Semiconductor Fiscal Year and Q4 2019 Conference Call. [Operator Instructions]. Thank you.So-Yeon Jeong, Investor Relations, you may begin your conference.

Thank you, Christine. Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2019 fourth quarter and year-end financial results. I am 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 Senior VP of Marketing. This call is being recorded and broadcasted live over the Web and can be accessed for 7 days following the call via the link in the Investor Relations section of our website at www.aosmd.com.Yifan will begin with a review of financial results for the quarter and the fiscal year. Then, Mike will review the business highlights, followed by Stephen who will provide a detailed segment report. After that, Yifan will conclude with guidance for the next quarter. Then, we will have the question-and-answer session.The earnings release was distributed by business wire today, August 7, 2019, after the close of market. 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 remind you that during the course of this conference call, we will make certain forward-looking statements, including discussions of the 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 CFO, Yifan, to provide an overview of the fourth fiscal quarter and the fiscal year 2019 financial results. Yifan?

Thank you, So-Yeon. Good afternoon, everyone, and thank you for joining us. Revenue for the June quarter was $111.9 million, up 2.6% when compared to the prior quarter and up 1.8% from the same quarter last year. In terms of product mix, MOSFET revenue was $96.4 million, up 7.1% sequentially and up 7.8% year-over-year. Power IC revenue was $13.8 million, down 21.8% from the prior quarter and down 21.4% from a year ago. Assembly service revenue was $1.7 million as compared to $1.6 million for the prior quarter and $3 million for the same quarter last year.Regarding the segment mix, Computing represented 44.0% of the total revenue, Consumer 18.7%, Power Supply and Industrial 20.5%, Communications 15.3% and Service 1.5%. For the fiscal year 2019, revenue was $450.9 million, up 7% year-over-year.Non-GAAP gross margin for the June quarter was 27.4%, as compared to 27.0% for the prior quarter and for the same quarter last year. The quarter-over-quarter increase in non-GAAP gross margin was mainly driven by the improved product mix. Non-GAAP gross margin excluded $0.4 million of share-based compensation charge for the June quarter, as compared to $0.5 million for the prior quarter and for the same quarter last year. Non-GAAP gross margin also excluded $2.6 million of production ramp-up costs related to the Chongqing Joint Venture for the June quarter, as compared to $3.4 million for the prior quarter. For the fiscal year 2019, non-GAAP gross margin was 28.4% as compared to 26.9% for the last fiscal year, representing an increase of 150 basis points driven mainly by the improved product mix.Non-GAAP operating expenses for the June quarter were $22.6 million, compared to $23.2 million for the prior quarter and $21.8 million for the same quarter last year. The quarter-over-quarter decrease in non-GAAP operating expenses was primarily due to the…

Thanks, Yifan, and good afternoon to everyone. Our team executed well and delivered a sound quarter. Revenue of approximately $112 million was consistent with our guidance and represents the 14th consecutive quarter of year-over-year growth. Non-GAAP earnings per share of $0.35 exceeded the high end of the implied guidance range due to effective cost controls and one-time tax adjustment. AOS core business generated healthy operating cash flow of $15 million and free cash flow of $10 million.In addition to solid financial results, we made good operational progress in the quarter. Shipments grew rapidly for our new products in mobile and home appliance applications. Meanwhile, we optimized production and inventory in order to manage the dynamics of our Computing business. We also launched several new products, including 600 volts and 700 volts alpha MOS5 Super Junction MOSFET families in 12-inch technologies from our Chongqing Joint Venture.We finished fiscal year 2019 with healthy top and bottom line growth, another record year on top of a very strong 2018. This was encouraging considering the backdrop of escalating trade tension, economic uncertainty and the CPU shortage. Our results clearly demonstrate the strength of our business strategy, operating excellence, as well as our diversified product portfolio and expanded customer base. Looking ahead, despite the challenges of current market conditions and the geopolitical environment, we are making solid progress toward our calendar 2021 target of $600 million in annual revenue.Our customer design-in pipeline is robust and design wins are strong, especially in our focus applications. This drives a healthy level of fresh bookings and solid backlog. As I mentioned on our last call, with some of the multi-year growth drivers beginning to ramp, we believe that we are well-positioned to achieve sustainable and scalable growth.Additionally, we are extending our leadership as a top-tier supplier in a broad range of applications, particularly in mobile and home appliance. We expect this ongoing diversification to further strengthen in the coming quarters as we ramp production for multiple global brand OEM customers in China, Korea and United States. With a solid foundation of customer demand, the production ramp of Chongqing JV is well-timed. In July, we initiated production at the 12-fab and we are gradually ramping according to our plan. Around this time next year, we expect to be approaching our Phase 1 target run rate.In conclusion, we continue to execute our long-term business strategy with focus and dedication. We believe the success of our new product initiatives, diversification in product portfolio and customer base, as well as disciplined and timely investment in capacity over the past several years, will further propel our growth.And 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 44.0% of our total revenue in the June quarter. Revenue was down 5.1% sequentially and up 2.3% year-over-year. As I mentioned on our last call, we prioritized our production plan for commercial PC, which received a higher allocation amid the ongoing CPU shortage. With both channel and internal inventories on hand to support our Computing customers, we were able to allocate more capacity to other high growth areas that already started ramping in the June quarter and we expect this to continue into the September quarter.Our Computing segment remains an important component of our business. As a market leader and strategic partner to leading PC OEMs and ODMs, we continue to work closely with our customers to provide innovative products and superior customer support. In the September quarter, while we anticipate strong sell-through, our sell-in revenue is expected to be down mid-single digits as we continue to manage Computing inventory.Now let's discuss the Consumer segment, which was 18.7% of total revenue in the June quarter. Revenue increased 1.3% sequentially but stayed flat year-over-year. Strong growth in home appliance offset softness in other Consumer applications in the June quarter. The new design wins we announced last quarter in home appliances with Chinese and Korean customers further ramped during the June quarter. Our home appliance customers value the reliability and energy savings that our IGBT technology offers through better efficiency, robustness and smaller size. We are encouraged by the fast adoption of our technology at global OEM customers, and we will continue to sharpen our technology to gain greater share and add more content. We are on track to increase our IGBT product line by over 40% in calendar year 2019. Looking to the September quarter, we expect a…

As we look forward to the first quarter of fiscal year 2020, we expect revenue to be between $115 million and $119 million; gross margin to be approximately 20% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 27.3% plus or minus 1%. Note that non-GAAP gross margin excludes $0.5 million of estimated share-based compensation and $8.1 million of estimated production ramp-up costs relating to the Chongqing Joint Venture, as the 12-fab starts production in July 2019. Operating expenses to be in the range of $27 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $24.6 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $2.9 million to $3.1 million of estimated expenses relating to the development of our digital power controller business. Non-GAAP operating expenses exclude an estimated share-based compensation charge of approximately $2.4 million.Tax expense to be approximately $0.5 million to $0.7 million. Loss attributable to noncontrolling interest to be around $5.4 million. On a non-GAAP basis, excluding estimated production ramp-up costs relating to the JV Company, this item is expected to be approximately $0.9 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?

[Operator Instructions]. Your first question comes from the line of Jeremy Kwan from Stifel.

Congratulations on the strong communications ramp; it's nice to see that coming on. Mike, just a question on the Counter 21, $600 million target. You mentioned something about hitting that run rate in the June 2020 quarter. Did I hear that correctly?

Yes.

And can you give us maybe more color in terms of how you see that ramping of these basically design wins that you already have -- already won and it's just a matter of ramping up the fab to meet that demand or there is some other things that needed to take place between now and then?

Jeremy, this is Yifan, I want to correct that a little bit on the comments regarding the June quarter 2020 run rate of $600 million target. What we said in our prepared remarks is, by the close to the June quarter -- 2020 June quarter, we will approach the target run rate of Chongqing Joint Venture's Phase 1 12-inch fab, so not the $600 million run rate.

On a quarterly basis where would that work out to then for the June quarter, is it -- I'm just trying to get a sense of what was meant by that?

Well, that means that we will approaching to the target run rate, so the one closing.

It's the capacity run rate.

Yes.

And that's for Phase 1?

Yes. I mean for -- your question is for 2021 calendar year, right -- that $600 million?

Yes.

That's a very good question. First of all, thank you for question. We have to prepare everything. but first we make sure our technology and new product platform is towards that direction. Of course, we need our capacity ready for that. So it's just everywhere to fulfill that goal. It's not just by one place there -- you missed one place then you'll be in trouble. So we have to look everything there from the technology, from the manufacturing, even from our marketing and sales; the whole Company is geared for that.

I guess, if we look at the JV ramp itself, can you give us a sense of where the -- it looks like that the operating cash flow is improving each quarter. Is there -- do you have an internal projection for where it might turn to break-even? I also remember you mentioning the need for maybe a working capital loan last quarter, is that something also still in the plans and how much that might be?

Yes, we are still under negotiation for working capital loans at this point, so we'll see. At this point, yes, the joint ventures do have the cash balance right now to support their ramp. In terms of cash flow break-even, when we ramp up to the Phase 1 stage, I would expect at that time we can be cash flow neutral at joint venture.

And maybe just one final question before I give up to the queue. It looks like the CapEx -- sorry, the OpEx has been pretty nicely controlled over the last few quarters. Is this -- the September quarter guidance, it's up a little bit, is that the new run rate that we can expect for fiscal '21 -- sorry, for fiscal '20?

Yes, I would think that you can use that as a reference because last couple of quarters and those OpEx kind of was maintained at a relatively lower than normal level because of the fluctuation of those in R&D expenses and other operating expenses. I mean, this thing is when we look forward to the September quarter, we expect that will run some engineering expenses up.

Jeremy, before your hang up, can I just add a little bit about your first question, because in this answers, it should be prepaid there because it's still complicated, right. But actually, on top of what we talk about the technology portfolio and [indiscernible] idea, and even more important is that the customer start to recognize AOS as a brand name. So right now our design, our engagement with the Tier 1 customer is really [indiscernible] towards the direction. So everywhere is on that direction. That's why we are confident to say that we are pushing that direction.

Your next question comes from the line of David Williams from Loop Capital.

Congrats on the solid finish to the year and the progress that is being made. First, I just wanted to see if you could maybe give us an update or maybe your thoughts on channel inventory health and if you're seeing anything concerned there. It sounds like a lot of those areas are seeing some nice digestion of the over-stock. Are you seeing that and any concerns I guess any particular areas of weakness or maybe too much inventory that remains?

Sure, David. There are quite a bit dynamics in that area, and I mean, this overall our channel inventory is healthy within our target of 2 to 3 months. I mean, this -- right now, in the June quarter or even including the quarter before, we have been optimizing our productions and internal inventory and channel inventory to manage this dynamics of Computing and smartphone business. So we manage our productions to support our customer demand. Our overall goal is to support our customer demand according to their production schedules. So there are some different customers and they have different ramping schedules so we have to manage that. Also, recent in the market conditions and trade tensions, I mean, those things complicated this whole things. There have been more pull-ins and push-outs, I mean, adjustments. So this whole things we have to manage diligently. Right now, using our inventory to support our -- portion of the customers and then a ramp in our productions to support the other -- a little bit more on other customers ramp up in the June quarter and September quarter, so it is a quite dynamic. But overall, with an additional capacity came online at our Chongqing Joint Venture, we expect our supply constraint situation gradually ease. But like what Mike said, it will take some time for customers to go through those qualifications design in -- design win and their production ramp up. So right now, we're kind of diligently managing those situations. But overall, our channel inventory is very healthy.

And I realized you guys have a little different dynamic what's really driving your business today, but if you're kind of looking out at China overall, how do you see that demand environment today and what are you hearing maybe from your customers in terms of their view is -- are they becoming more cautious, are they easing a bit? What do you think, I guess, are your customers or the order transactions as you would expect, do you think there is anything that's really being pulled-in ahead of maybe a concern for tariffs or further trade issues?

Yes, definitely. I mean, there are a lot of moving parts and dynamics in those areas. I mean, this thing is depending on which way the trade tension goes. If -- tomorrow, if there is another tweet and people may react differently. I mean, that's the situation at this point. I mean, yes, we do see some pull-ins and ahead of whatever trade tension situation and we also see some adjustment pushing-out and this is quite dynamic, I would say at this point.

And then maybe in terms of the server demand, is there anything there that you're seeing softness, weakness or maybe any progress is being made? Just any color you can give on the server side would be helpful.

I mean, you're asking regarding our digital power initiatives. So, regarding that space, we're still on track. Our next target -- and right now we're in the -- we're getting our final products out of development and we are already engaging with customers. Right now, we're treating, right now, this current year as a design-in phase. Our model all along has been to chase and target meaningful revenue in 2020 and on that regard we believe we are on track.

Just any sense on the magnitude of that revenue contribution next year?

It's $5 million to $10 million, is what we've been saying.

Let me just add a little bit. This area of the business would be normally people are very careful to design-in and it take some time to grow, but once it grow, it will be very solid because it has a lot of strong addition in this business there. So we are pretty excited about that.

Your next question comes from the line of Craig Ellis from B. Riley FBR.

It's Carlin on for Craig. Thanks for taking my question and congratulations on the good results in the quarter. I just had a quick question, and I apologize because I think I might have missed it, but regarding the Computing September quarter guidance, how has the -- obviously, tariffs have made things more dynamic, but how has the CPU supply ramp and this latest round of tariffs impacted what would be a normal seasonal ramp through the back half of the year?

What we've seen overall in the CPU situation and overall as an industry, it has been getting to ease up in terms of the shortage. We see both -- the 2 major chip makers combined are catching up their supply to the demand. So we saw that already happening in the second quarter; of course with these trade tensions and the threat of additional tariffs that had happened back in Q2 and it's happening now also in the September quarter. So there is some dynamic to that in terms of some customers that they are able to pull-in production for that, but overall and I think what we've guided is that because we have some inventory in the Computing area and we've also allocated -- we've had to allocate our capacity to support other growing business, especially in the Communications and quick charger area, we are expecting for Computing, our sell-through to be at higher than our sell-in in the September quarter.

So just to clarify what the actual guidance was for the September quarter, I mean, it was going to be down sequentially or up sequentially?

It will be down sequentially for sell-in.

And then if I could ask a follow-up. So I think last quarter, and feel free to correct me if I'm wrong, you had said that the digital power initiatives would be -- at the joint venture would be ramping kind of closer to the March quarter of last year, but now it seems as though you guys said June quarter. Did I have that wrong or did something change in the way you're thinking about how that business is ramping through this year?

First of all, digital power not in the joint venture; I mean, that's the first thing. Second thing is, regarding the joint venture's ramp up, I mean, this 12-inch fab started small mass production in July. As I said previously, we expect we ramp this fab in 12 months period or so -- I mean that's pretty much lead to same time next year. So we're targeting to get to the Phase 1 ramp up.

And one more from me and then I'll hop back in the queue. Once we get to that kind of joint venture full capacity in the June quarter, how do we expect gross margins to track towards that 30% target moving forward? Will it be kind of by the June quarter, we would expect upward pressure towards 29% and 30% because of the new product coming online or is that going to be by more end of calendar '20? Just any color you can give around how you're thinking about gross margins tracking towards the target?

First of all, what we said was we're targeting the Phase 1 12-inch fab run rate in about 12 months or so, so that would translate to September quarter of next year -- calendar year. Second thing is, what we estimate when we ramp up the Phase 1 12-inch fab, our 12-inch wafer cost on the per die basis will be on par with our 8-inch wafer cost, so that neutralize the cost and impact at that time. So our overall target model is to target 30% margin when we get to $600 million in revenue. So that's our target model in calendar year 2021.

Your next question comes from the line of Jeremy Kwan from Stifel.

Maybe just a follow-up on that previous question. So understanding that that 30% is the overall target model at $600 million, how about in terms of the progression between now and then -- from what I understand the -- as the JV ramps up, there is actually a little bit of a negative impact to gross margin and it looks like we saw a little bit of that in the September quarter. Is that 27% -- 27.3% is that kind of a baseline that it might -- where can we see gross margin trend I guess in the next 12 months as the JV ramps?

I would expect in the recent couple of quarters and it stayed in that neighborhood, 27%, 28% and I would expect gradually will get up to 28%, 29% range. So that's primarily from the new products, and all those product mix along with it. So another factor is, you know, this year and onward we will factor in ASP pressures, because this is -- right now, the market dynamic is different than last years in our space. So and you know, last year's shortage has been easing up and so right now I would build-in some modest ASP erosion.

And is that a change from maybe 3 or 6 months ago where we -- I think you mentioned ASPs kind of stabilizing versus being kind of having some uplift last year? Is the modest ASP erosion, is that a little bit of a shift there or is it something...

A little bit modest shift.

And maybe switching gears a little bit to the CapEx side of things. With the fiscal year behind us, can you give us an update on your CapEx plans both for AOS internal and then the JV for fiscal '20?

For fiscal '20, AOS side targeting like still 6% to 8% of revenue type of things. I would think right now it is more toward low-end of the range for AOS. For the JV, again, they will continue to spend some remaining portion of that Phase 1, equipment purchase payment -- the money that payment and equipment are pretty much all-in, so we'll fine-tune some production lines that we may need here and there, primarily, is the one remaining payment. So once we have that current cash plus the loans that were under negotiation, we would expect then that will be sufficient for the Phase 1 ramp up.

And one last question. In terms of the overall end market mix, you've got Communications ramping up quite strongly last quarter, it looks like it's going to be strong again this quarter. And then power supply industrials doing pretty nicely for you. Do you see an overall shift in the end market mix in 12 months, and if so, is it significant enough to shift your seasonality from, I think, right now, you guys have -- your fiscal Q2 and Q3 are a little bit on the more flattish to downish a little bit and stronger periods being fiscal Q1 and Q4. Do you see that holding true or there is -- as their JV ramps up, there are different things to consider in terms of seasonality?

I think in the short term, it probably won't change too much. In the longer term, we are moving towards diversifying our segment base. In the past we've been more Computing heavy. Of course, we will continue to invest and grow our Computing business but right now we are seeing our other segments grow faster, right now, tied to the smartphone whether it's battery protection in the Communications or quick charger in the power supply. Some of these can help to smooth out the seasonality a bit, but I think overall, we still are going to see some seasonal pattern, just like we have in the past.

In general, we also -- it is our goal to diversify our technology into other areas of gradual growth, so that's our Company strategy and policy.

Your next question comes from the line of Craig Ellis from B. Riley FBR.

Just a quick follow-up. So free cash flow in the quarter was -- for AOSL was strong and I'm just trying to think about how -- what the plans are for free cash flow kind of moving through calendar '20 and calendar '21 once Phase 1 of the joint venture ramp kind of gets more meaningfully behind you guys? How do you guys think about free cash flow usage and then also is there anything that you guys need to do to prep for Phase 2 and Phase 3 to kind of track towards the calendar '24 target financial model of $1 billion?

Overall, I mean, this fiscal year '19, AOS generated healthy free cash flows. Going forward, fiscal year 2020, I would expect we can do similar level of free cash flow depending on the cash flow needs. I would not expect it too much -- too heavy CapEx investment from AOS side now that more like maintaining and fine-tune our product mix, production lines, debottlenecking some areas. So for AOS alone, I would expect to continue to generate a healthy operating free cash flow. For the joint venture, I mean, that's the -- for them, we are a separate entity. Other than their contributions we have made, Joint Venture Company has its own capacity to borrow money; they owns a land and buildings and equipment, they can mortgage it out and then get financing from there to support their ramp. So for AOS, they are one of our major suppliers in that way. So for the joint venture, for Phase 2, 3, I mean, that when we ramp up I would say halfway through Phase 1 and the work will start and considering Phase 2. I mean, for Phase 2, I mean the incremental investment will be much less than Phase 1 because of the some infrastructures, buildings and all those things; CapEx are down. So overall we just need to purchase some equipment tools and then may be small incremental cleanroom expansions. So the requirements, we'll think about it next year sometime.

And then, I just want to hop back really quickly to the Communications segment, really strong performance. As next year comes around and 5G handsets continue to -- start to more meaningfully roll out, how would we expect -- how should we think about your content increases on the battery protection side in that business and how much was this year's kind of banner performance more customer diversification rather than kind of unit dependence, because obviously units are not having a great year. So what's the potential like upside next year to what was a really strong quarter this quarter and is shaping up to be a really strong quarter next year -- next quarter, sorry?

For us, just looking at the application first, the 5G would definitely drive a more content and with regards to battery protection, which is where we play. Right now, you can see the latest smartphones not only are they getting bigger, but especially with the 5G, it's much more demanding on power. With 5G, you have additional capability for video streaming or gaming or even virtual reality, that's very Indecipherable on the battery itself. So the need for efficient and battery protection becomes -- is very keen. And so, definitely, so on the client side, we expect to see growth. The growth that we saw this year has a lot to do with the customer expansion. We added -- as we shared with you guys, we've added the major global smartphone makers at the end of last year and this year we're beginning to enjoy that. That will continue -- we expect that to continue that going into next year on the client side. And the area of growth for us is also going to be on the infrastructure side with telecom. The 5G not only is going to benefit handsets, but all the infrastructure will have to be replaced and over the net of course of the next few years and on AOS has strong products and covering a wide variety of applications within the telecom system. This includes discrete MOSFETs that go into the DC-DC conversion as well as our digital power solutions for telecom for the front-end loads. So on AOS, we believe we have a very good opportunity to grow even further beyond just the client side, battery protection, we are moving also into the infrastructure side.

And do you know like -- do you guys have any sense on what perhaps maybe your long-term mix would be in terms of smartphones versus telecom in that end-market is? Is it going to be eventually 50-50, is it going to be 75-25, just trying to think about -- because I know it's so small right now. I mean, how that's going to ramp once you start really kind of getting that business under way?

I think going to 50-50 in the mid-term is probably about right. Obviously, the battery protection has a big head start in that market, but the digital power is something that's much more longer sustaining, it's the content going into base stations is quite large for digital power as well too. So in the longer run, I believe the digital power can catch up to the battery protection portion of the client side.

There are no further questions at this time. I turn the call back over to the management team.

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

This concludes today's conference call. You may now disconnect.