Financial Results for Fiscal Q2 Ended December 31, 2018

• Revenue was $114.9 million, an increase of 10.6% from the same quarter last year driven by continuous gains in market share of our products.
• Gross margin stayed healthy. GAAP gross margin was 25.7%, as compared to 27.0% from the same quarter last year, as we were ramping up production at Chongqing Joint Venture. Non-GAAP gross margin was 29.2%, an increase of 180 basis point year-over-year as we continued to migrate to higher margin products.
• Operating expenses increase reflected costs relating to the build-up of our digital power controller team and higher level of its R&D activities. GAAP operating expenses were $32.7 million. Non-GAAP operating expenses were $25.1 million, up 18% year-over-year.
• GAAP operating loss was $3.2 million. Non-GAAP operating income was $8.5 million, a 17.0% growth year-over-year led by higher revenue and better gross margin.
• GAAP loss per share attributable to AOS was $0.06. Non-GAAP earnings per share attributable to AOS was $0.30 compared to $0.32 in the same quarter a year ago.
• Consolidated operating cash flow was $13.1 million, compared to $9.6 million in the same quarter a year ago. Operating cash flow generated by AOS alone was $22.1 million, compared to $12.2 million in the same quarter a year ago.
• The Company closed the quarter with $146.6 million of cash and cash equivalents, including $53.0 million cash balance at the Chongqing Joint Venture.

“We are pleased with our strong execution on business results as well as our customer expansion. We achieved a year-over-year revenue increase of 10.6% representing the twelfth consecutive quarter of growth. Furthermore, we continued to generate healthy operating cash flow, which is funding our key growth initiatives,” stated Dr. Mike Chang, chairman and CEO of the company.

“Despite current uncertainty in the overall semiconductor market, we are very encouraged by our solid business pipeline driven by continuous design wins with new and existing customers. We remain committed to our near-term growth initiatives while relentlessly pushing ahead with our long-term business plans.”

Business Outlook for Fiscal Q3 Ending March 31, 2019

The following statements are based on management's current expectations. These statements are forward-looking, and actual results may differ materially. AOS undertakes no obligation to update these statements.

• Revenue is expected to be in the range of $109 million to $113 million.
• Gross margin is expected to be approximately 25.2% plus or minus 1%. Non-GAAP gross margin is expected to be approximately 28.5% plus or minus 1%. Non-GAAP gross margin excludes $0.5 million of estimated share-based compensation charge and $3.2 million of estimated production ramp-up costs relating to the Chongqing Joint Venture.
• Operating expenses are expected to be in the range of $32.3 million plus or minus $1 million. Non-GAAP operating expenses are expected to be in the range of $25.2 million plus or minus $1 million. Both GAAP and non-GAAP operating expenses include $3.1 million to $3.3 million of estimated expenses relating to the development of our digital power controller business. Non-GAAP operating expenses exclude $2.7 million of estimated share-based compensation charge and $4.4 million of estimated pre-production expenses relating to the Chongqing Joint Venture.
• Tax expenses are expected to be in the range of $0.5 million to $0.7 million.
• Chongqing Joint Venture’s loss attributable to noncontrolling interest is expected to be around $4.8 million. On a non-GAAP basis, excluding estimated production ramp-up costs and pre-production expenses, this item is expected to be approximately $0.6 million.

Conference Call and Webcast

AOS plans to hold an investor teleconference and live webcast to discuss the financial results for the fiscal second quarter of 2019 ended December 31, 2018 today, February 6, 2019 at 2:00 p.m. PT / 5:00 p.m. ET. To participate in the live call, analysts and investors should dial 866-393-4306 (or 734-385-2616 if outside the U.S.). To access the live webcast and the subsequent replay of the conference call, which will be available for seven days after the live call, go to the "Events & Presentations" section of the company's investor relations website, http://investor.aosmd.com . In addition, a copy of the script of prepared remarks by CEO and CFO at the investor teleconference and webcast is available prior to the call at the Company’s investor relations website.