Good day, ladies and gentlemen and welcome to Alpha and Omega Semiconductors’ Fiscal Q3 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later we will be conducting a question-and-answer session, instructions will follow at that time. As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to our host So Yeon Jeong. You may begin.

Thank you. Good afternoon, everyone, and welcome to the Alpha and Omega Semiconductor’s conference call for fiscal 2016 third quarter financial results. 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, May 4, 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 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 third fiscal quarter financial results.

Thank you, So-Yeon. Good afternoon and thank you for joining us. To begin, I will discuss financial results for the quarter. Then I’ll turn the call over to Mike, our CEO, who will review the business highlights and I will follow-up with our guidance for the next quarter. Finally, we’ll reserve time for questions-and-answers. Revenue for the March quarter was $83.0 million, an increase of 4.0% quarter-over-quarter and an increase of 7.9% over the same quarter last year. Our new products continue to show growing momentum during our typical lower season. In terms of product mix, MOSFET revenue was $63.5 million, up 6.9% quarter-over-quarter, and up 7.2% over the same quarter last year. Power IC revenue was $16.3 million, down 0.9% quarter-over-quarter and up 18.5% over the same quarter last year. Service revenue was $3.2 million, as compared to $4.0 million for the prior quarter and the same quarter last year. Next, I would like to provide the segment mix report. Before I do that, I should inform you that we have improved our segment tracking system during the quarter to better reflect our evolving business. This change does not affect our overall revenue, gross margin, operating margin or net margin. In the past, we classified revenue segment by customers based on the core business they are in. Our customers have diversified their business into new applications therefore we enhanced our tracking system using both part numbers and customers based on product applications. This more clearly delineates our revenue between the segments. To facilitate the quarter-over-quarter comparison, I will also provide the December quarter’s segment mix based on the new tracking system. The March quarter’s Computing segment represented 36.4% of the total revenue, Consumer 27.1%, Power Supply and Industrial 21.9%, Consumers – Communications 10.5%, Service 3.9%, and others 0.2%. Under the new segment tracking system, the December quarter’s mix, segment mix would be: Computing 36.5%, Consumer 26.0%, Power Supply and Industrial 21.5%, Communications 10.9%, and Service 5.1%. Gross margin was 19.7% for the March quarter, as compared to 18.8% in the prior quarter and 16.6% for the same quarter last year. The increase in gross margin quarter-over-quarter was mainly driven by the new product contribution and higher factory utilization. Operating expenses for the quarter were $16.4 million, compared to $15.6 million for the prior quarter and $16.1 million for the same quarter last year. The higher operating expenses quarter-over-quarter were primarily due to the higher R&D expenses. Also, the December quarter’s operating expenses were lower than normal due to the office shutdown and more vacation taken by employees during the December quarter holiday season. Income tax expense was $1.2 million for the quarter, compared to $1.0 million for the prior quarter and $0.7 million for the same quarter last year. Net loss for the quarter was approximately $1.3 million or $0.06 loss per share, as compared to $0.07 loss per share for the prior quarter and $0.16 loss per share for the same quarter last year. Net loss in the March quarter included $1.2 million share-based compensation charge as compared to $1.1 million in the prior quarter and $0.9 million for the same quarter last year. It also included $0.2 million expenses related to our joint venture agreement signed in the March quarter. Non GAAP EPS was breakeven for the March quarter, compared to breakeven for the prior quarter and $0.12 loss per share for the same quarter last year. Cash flow from operations was $2.0 million for the March quarter, compared to $16.8 million for the prior quarter and $3.0 million for the same quarter last year. EBITDAS for the March quarter was $8.1 million compared to $7.8 million for the prior quarter and $4.3 million for the same quarter last year. Moving on to the balance sheet. We completed the March quarter with cash and cash equivalents balance of $78.9 million, as compared to $81.9 million at the end of last quarter and $112.9 million a year ago. During the quarter, we repurchased approximately 0.2 million shares for a total amount of $1.8 million. Net trade receivables were $32.0 million, as compared to $26.1 million at the end of last quarter and $31.1 million for the same quarter last year. Day Sales Outstanding for the quarter was 39 days compared to 36 days in the prior quarter. Net inventory was $67.9 million at the quarter-end, up from $61.1 million for last quarter and from $66.3 million for the prior year. Average days in inventory were 87 days for the quarter compared to 85 days in the prior quarter. Net Property, Plant and Equipment balance was $112.5 million, as compared to $112.1 million last quarter and $115.8 million for the prior year. Capital expenditures were $3.2 million for the quarter. Our expectation for fiscal year 2016 capital expenditure is around $20 million. On March 29, 2016 we executed a definitive agreement with two strategic investment funds owned by the authority of Chongqing, China to form a joint venture for a new power semiconductor packaging/testing and wafer fabrication facility in Chongqing. We own 51% and the Chongqing funds own 49% of the equity interest of the joint venture. The financial results of the joint venture are expected to be consolidated with the company’s financial statements. The first phase of the construction, which is for packaging, is expected to complete in the second half of 2017. Then, we will gradually relocate assembly and test equipment that we contributed from our Shanghai factories, while establishing Shanghai facility as a center of supply chain management, technology development and high-value product manufacturing. The second phase of the construction for the 12-inch fab is expected to start later, depending on the conditions and various business factors. We expect the joint venture to provide significant cost savings for us as well as drive meaningful improvements in working capital and capital expenditures for us. With that, now I would like to turn the call over to our CEO, Dr. Mike Chang, who will provide the business highlights for the quarter. Mike.

Thank you, Yifan! AOS delivered strong execution in the March quarter. The revenue came in at the high end of our guidance range and the gross margin and the bottom line exceeded the stated expectations. Our diversified product portfolio enabled us to deliver solid and stable performance amid the prevailing challenges in the PC market, resulting in counter-seasonal growth. AOS is off to a good start in the final phase of the recovery plan with unwavering focus on accelerating diversification and returning to profitability. In the past few quarters, we successfully secured critical design ins and wins in multiple key accounts with our differentiated new products. The business pipeline continues to grow, which sets the stage for meaningful expansion of revenue opportunities. Along with the revenue growth, we expect to achieve profitability derived from the leverage in AOS business model. Concurrently, we are creating new competitive advantages for sustainable long-term growth beyond recovery. As an example, we reached an important milestone in our strategic roadmap by forming a joint venture with Chongqing. The joint venture is designed to bring together the technological and operational capability of AOS in power semiconductor with the capital resources and regional infrastructure support of the Chongqing authority. We are excited about the prospect of further diversifying the product offerings and improving our access to customers in China where our business is growing. Now turning to our business segments review, as Yifan mentioned earlier, we made some improvement to the segment tracking system to better reflect our evolving business. First, Computing segment, it represented 36.4% of the total revenue, and was up 3.6% quarter-over-quarter against the sharp decline in PC demand in the March quarter. AOS is well positioned to capture the momentum in the forthcoming Skylake ramp and we continue to expand our market share and BOM content. We expect to maintain, if not improve, our established PC position against weak PC market. Second, Consumer segment, the revenue marked 27.1% of the total. It increased by 8.5% sequentially. The growth was attributable mainly to the sizable product ramp with major TV customers for their high-end TVs. The leading OEMs with whom we have been strongly positioned are aggressively ramping up their high-end TV production, and AOS is successfully supporting their needs with highly efficient products and relentless dedication. We continue to strive to replicate the success with more customers in the consumer segment. Third, Power Supply and Industrial segment. It was 21.9% of the total revenue. Our Power Supply and Industrial business turned in its fourth consecutive quarter of sequential growth, posting 6% increase in revenue during the March quarter. The business traction from new products for quick charger applications remains intact. In addition, we saw some incremental revenue across various industrial applications. We are encouraged by the prospects and progress we are making in this business segment. Finally, Communications segment. The revenue was 10.5% of the total, and was up 0.5% sequentially despite the low seasonality. We are steadily growing our footprint in key smartphone applications such as battery management accounts, paving the way for the ramp in the June quarter. We believe that our products provide a compelling advantage and are gaining traction. Even though this segment represents a relatively small business today, it has the potential to become an important contributor to revenues and earnings in the future. We expect this incremental new business to continue to contribute to our growth. In summary, we are making good progress in diversifying our business and creating new competitive edge for long-term success. I am pleased that the improved operating performance for the March quarter is evidence that our growth strategies and executions are beginning to bear fruit. Looking ahead, we expect to continue to create healthy demand by introducing differentiated products and by expanding the customer penetration. While our recovery is still tender, we remain keenly focused on driving a more solid turnaround with full strength to achieve revenue growth and profitability. Now let’s turn it over to Yifan our CFO for the June quarter guidance. Yifan.

Thank you, Mike. As we look forward to the fourth quarter of fiscal year 2016, we expect our June quarter’s revenue to be in the range of $87 million to $91 million. GAAP gross margin is expected to be approximately 20% plus or minus 1%. GAAP operating expenses are expected to be in the range of $15.8 million to $17.8 million. Tax expenses are expected to be about $1.0 million to $1.2 million. Our share-based compensation should range from $1.1 million to $1.3 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 Instructions] Our first question comes from Christopher Longiaru with Sidoti. Your line is open.

Hey guys, thanks for taking my question. Congratulations on the revenue.

Thank you.

I just want to know kind of what – I mean the operating expense lines jumped around a bit, so can you give us kind of long-term expectation for how OpEx is going to look?

Okay, sure. Sure, Chris. Operating expenses for the March quarter compared to the December quarter increased. I guess, there are two attributes, one is the, our R&D expenses did have more R&D activities in the March quarter. These R&D expenses tend to fluctuate from quarter-to-quarter, depends on the new product roll out, and the tape out and other things. Another factor is in the December quarter, overall our operating expenses were relatively lower than the normal level, because it was during the holiday season, we had an office shut down during the week and in between the Christmas and New Year and also generally during the holiday seasons and Thanksgiving, Christmas. Our employees took more vacations during those periods of time. So I mean those two factors and I would say contributed to the higher operating expenses for the March quarter. I was thinking, going forward, you can use March quarter as a baseline and then adjust for the seasonal some operating expenses and also the variable compensation fees and if we perform better we would have more variable compensation for employees.

But in just in terms – thanks. And hi Mike

Sorry about it. I just wanted to make a little comment, because you mentioned about long-term trend right.

Yes.

Our business and our growth, is really, basically in the R&D. So as our business expands and our revenue grows the R&D will have to increase to support. And of course marketing should also increase a little bit, but we would never be linear to the growth. Okay that’s where the efficiency comes from. The G&A probably maintained about similar except for discontinuation, yes. So I won’t give you the longer term picture.

Okay got it. And just in terms of are you managing the R&D expense increase as a percentage of revenue growth are you expecting it as kind of just a baseline percentage? And if either of one those is true, can you kind of us an idea of what that number is?

It won’t be percentage equal to the – it would be whatever needed to grow. But it should be shorter than and should be less than the percentage of revenue growth.

Got it, okay.

Efficiency comes from yes…

Where was the majority of the increased R&D spend was that more in the Consumer segment and the Computing segment, is that type of some of the new design wins on the TV side. Can you give us a little bit of a reap here [ph] into kind of where that spend came from?

This is a critical question up here. This also shows the beauty of our R&D. Even though we have – okay, four different segments right, from the Computing, Consumer, Communications and Industrial but a technology and not a commonology [ph]. So when we invest one area, most of the time the four segments will get benefited. So that’s quite a beauty – there’s a strong synergy and a commonology [ph] in there.

Does the R&D kind of pop up a little bit though, as you design some new products like I know that you’ve had some new TV customers, it sounds like some of your existing large TV customer that you have done business with for a long time had some new products ramping up. Does R&D kind of move up as those products ramp? Is that part of what the March quarterly number…

In a way, yes, okay the R&D move up is there, but there’s a new product there, so you do a new math, new [indiscernible] those kind of things, yes.

Okay.

To support the customers, yes.

And how much of the increase in content for PC is – how much of that contribute to your June guide?

I think most important PC actually we are in the vertical position, okay, so the increase mostly in the quick charger and PCM which is a miss communication and in some high voltage area.

Okay. And I will jump out with that, thank you guys.

Thank you.

Okay, thank you.

Our next question comes from the line of Tore Svanberg with Stifel. The line is open, sir.

It is hi, this is Evan Wang calling in for Tore. Thank you for taking my questions. My first question is about your seasonality. I know that your business evolving, you’re diversifying into more end markets. What might your second half calendar 2016 look like, compared to historical seasonality?

Well, Evan at this point, and I mean from the second half of the year, we’ve only given the guidance on the next quarter. For the overall, I can comment on the segments that we are in, in general. Like in the Computing area, for the overall this year, year-over-year we would expect and still like PC where volume will continue to decline in high single-digit to low double-digit range. You heard in the couple of quarters ago, Intel’s in the comments and their view of PC market also. And then – but on the other hand for us we have couple of benefits on two things: one is the BOM content increased from the Skylake. Along with the Skylake in the ramp and we would expect to benefit for our Computing segment revenue and another things and we continue to gain some shares, so that’s also reflected in our March quarter’s performance in the Computing area. So as you know, I mean the March quarter PC volume dropped quite a bit anywhere around 15% quarter-over-quarter but our real computing business actually grew 3% to 4%. So that was then the result from the combination of Skylake and BOM content gain share gain. So right now because of the Skylake ramp and we continue to expect Skylake to ramp into June quarters and September quarters and even maybe to the December quarters as well. Our June quarters and I would say our computing area probably will do better than the seasonality, normal seasonality. For the consumer area and I mean that’s where that areas that we are targeting to. For the overall the major business in that area is TV. We have very strong position there with some major OEMs in Korea. And then last couple quarters we got into other Japanese TV OEM customers. So right now we’re still kind of trading into further kind of ramp into those customers and other new customers, so that’s where we want to grow. The Communications area is the one like in the – what Mike just had commented on, we are expecting some product particle ramp from our customers so in the June quarter. So it will continue to grow in that area. Power Supply and Industrial area quick charger is a major growth point. But on the other hand, we also saw some various industrial applications gain here and there, so that’s kind of in a broadened range, but hard to pinpoint one at this point, but quite a bit applications where we gained some traction.

Well that’s an excellent color, thank you very much for the detailed response. Turning to your financials, now that your revenue is hitting $90 million at the high-end of your guidance, do you see gross margin starting to move towards your target range and how fast do you think you can move that? And I guess maybe even what kind of range are you looking say for over the next 12 months to 18 months?

Well, again I mean for the next 12 months to 18 months that’s kind of long range guidance. But then I can comment it on with some colors. Gross margin, yes we are expecting gross margin will continue to improve. But I want to emphasize and you won’t be like a hockey stick and so it’s going to be gradual soon. And then right now in the last quarter, in the March quarter, the improvement in gross margin quarter-over-quarter primarily contributed by the product mix and higher factory utilizations. So I would expect the next quarter or two, then we will continue to see some contributions from those two areas, as well.

Okay, great. And then following the previous caller’s question about your OpEx, do you see again over the longer term, do you see your R&D expenses going up a little faster than SG&A or at the same pace? How should I look at it, how should I be modeling?

We look at R&D and SG&A as a dollar a month basis. Right now the company started or again we do need to invest in those R&D areas and sales marketing areas, so that to support our growth. So we have to invest first and then we’ll see the fruits and revenues and later on. So I would expect that and again you can model out and from our baseline and then with some incremental expenses, factor in.

Okay. Okay great. I just have a couple questions about your joint venture if I may.

Sure.

You mentioned before that you’d be moving your equipment and so forth and starting to wrap up on the first phase in the second half of the 2017. Was that fiscal 2017 or calendar 2017?

Calendar, calendar, sorry, calendar. Yes.

Callander.

Yes.

Okay I just want to make sure.

Yes

And then you talked about may be having improved access to customer maybe the benefit from the joint venture. What kind of – would you be keeping track of some sort of metric that can help us to follow along, your progress there?

Primarily for those customers and – first of all, our China business has been growing nicely, I mean throughout last couple years. For example, in the prior year, our China business was about like one-fourth of our total revenue. Now it got to a point about a one-third of our total revenue. Plus our revenue is growing. So, well those are joint-ventured. One of the benefits in the joint venture, we are expecting to bring to us is to help us open doors to some of those state-owned enterprises and then primarily in the Consumer, Industrial and Communication areas. So I would expect and if we – you can watch and if we didn’t – if our revenues in those areas started growing and then grow from China I would say yes that’s probably one of the indicatory [ph] you can watch.

Okay, that’s fair. Well congratulations on a big quarter and the guide. Thank you.

Okay, well thank you.

Thank you, Evans.

[Operator Instructions] There are no other questions in the queue. I will now like to turn the call over to the Company.

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.

Yes, thank you.