Alpha and Omega Semiconductor Reports Financial Results for the

Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Second Quarter of 2020 Ended December 31, 2019

Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a basis consistent with U.S. GAAP, we disclose certain non-GAAP financial measures for our historical performance, including non-GAAP gross profit, gross margin, operating income (loss), net loss attributable to noncontrolling interest, net income (loss) and diluted earnings per share ("EPS"). These supplemental measures exclude share-based compensation expenses and production ramp up costs for all periods presented, as well pre-production expenses related to the JV Company for the three and six months ended December 31, 2018. We also disclose certain non-GAAP financial measures in our guidance for the next quarter, including non-GAAP gross margin, operating expenses and loss attributable to noncontrolling interest. These forecast supplemental measures exclude estimated pre-production expenses and production ramp-up costs relating to our JV Company and estimated share-based compensation expenses. We believe that these historical and forecast non-GAAP financial measures can provide useful information to both management and investors by excluding certain items and expenses that are not indicative of our core operating results or do not reflect our normal business operations. In addition, our management uses non-GAAP measures to compare our performance relative to forecasts and to benchmark our performance externally against competitors. Our use of non-GAAP financial measures has certain limitations in that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP net income (loss) or non-GAAP operating expenses, do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for the limitation of our non-GAAP presentation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP measures both in the text in this press release and in the tables attached hereto. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

About Alpha and Omega Semiconductor

Alpha and Omega Semiconductor Limited, or AOS, is a designer, developer and global supplier of a broad range of power semiconductors, including a wide portfolio of Power MOSFET, IGBT, IPM, TVS, HVIC, GaN/SiC, Power IC and Digital Power products. AOS has developed extensive intellectual property and technical knowledge that encompasses the latest advancements in the power semiconductor industry, which enables us to introduce innovative products to address the increasingly complex power requirements of advanced electronics. AOS differentiates itself by integrating its Discrete and IC semiconductor process technology, product design, and advanced packaging know-how to develop high performance power management solutions. AOS’ portfolio of products targets high-volume applications, including portable computers, flat-panel TVs, LED lighting, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers, and telecommunications equipment. For more information, please visit www.aosmd.com.

The following unaudited consolidated financial statements are prepared in accordance with U.S. GAAP.

Alpha and Omega Semiconductor Limited
Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)

	Three Months Ended									Six Months Ended
	December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018

Revenue	$	117,860		$	117,802		$	114,925		$	235,662		$	229,997
Cost of goods sold	93,454			90,870			85,423			184,324			167,884
Gross profit	24,406			26,932			29,502			51,338			62,113
Gross margin	20.7		%	22.9		%	25.7		%	21.8		%	27.0		%

Operating expenses:
Research and development	12,147			12,368			12,600			24,515			23,984
Selling, general and administrative	15,629			15,185			20,104			30,814			40,456
Total operating expenses	27,776			27,553			32,704			55,329			64,440
Operating loss	(3,370		)	(621		)	(3,202		)	(3,991		)	(2,327		)

Interest expense and other income (loss), net	(635		)	(827		)	(1,632		)	(1,462		)	(2,860		)
Loss before income taxes	(4,005		)	(1,448		)	(4,834		)	(5,453		)	(5,187		)

Income tax expense	568			410			701			978			1,261
Net loss including noncontrolling interest	(4,573		)	(1,858		)	(5,535		)	(6,431		)	(6,448		)
Net loss attributable to noncontrolling interest	(3,568		)	(2,867		)	(3,990		)	(6,435		)	(7,319		)
Net income (loss) attributable to Alpha and Omega Semiconductor Limited	$	(1,005	)	$	1,009		$	(1,545	)	$	4		$	871

Net income (loss) per common share attributable to Alpha and Omega Semiconductor Limited
Basic	$	(0.04	)	$	0.04		$	(0.06	)	$	0.00		$	0.04
Diluted	$	(0.04	)	$	0.04		$	(0.06	)	$	0.00		$	0.04

Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share
Basic	24,701			24,538			23,887			24,620			23,865
Diluted	24,701			25,130			23,887			25,362			24,513

Alpha and Omega Semiconductor Limited
Condensed Consolidated Balance Sheets
(in thousands, except par value per share)
(unaudited)
	December 31, 2019			June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	107,249		$	121,893
Restricted cash	2,216			364
Accounts receivable, net	33,872			24,296
Inventories	117,591			111,643
Other current assets	34,395			37,102
Total current assets	295,323			295,298
Property, plant and equipment, net	416,055			409,737
Operating lease right-of-use assets, net	18,667			—
Intangible assets, net	16,826			16,882
Deferred income tax assets	4,766			4,822
Restricted cash - long-term	2,001			2,038
Other long-term assets	9,502			10,617
Total assets	$	763,140		$	739,394
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	89,741		$	94,384
Accrued liabilities	52,694			44,075
Income taxes payable	1,967			1,541
Short-term debt	21,029			26,609
Finance lease liabilities	15,438			11,355
Operating lease liabilities	3,282			—
Total current liabilities	184,151			177,964
Long-term debt	76,309			59,380
Income taxes payable - long-term	1,020			993
Deferred income tax liabilities	263			466
Finance lease liabilities - long-term	34,878			43,381
Operating lease liabilities - long-term	15,559			—
Other long-term liabilities	10,810			13,921
Total liabilities	322,990			296,105
Equity:
Preferred shares, par value $0.002 per share:
Authorized: 10,000 shares; issued and outstanding: none at December 31, 2019 and June 30, 2019	—			—
Common shares, par value $0.002 per share:
Authorized: 100,000 shares; issued and outstanding: 31,420 shares and 24,776 shares, respectively at December 31, 2019 and 31,163 shares and 24,517 shares, respectively at June 30, 2019	63			62
Treasury shares at cost, 6,644 shares at December 31, 2019 and 6,646 shares at June 30, 2019	(66,227		)	(66,240		)
Additional paid-in capital	240,797			234,410
Accumulated other comprehensive loss	(4,239		)	(2,693		)
Retained earnings	125,476			125,485
Total Alpha and Omega Semiconductor Limited shareholder's equity	295,870			291,024
Noncontrolling interest	144,280			152,265
Total equity	440,150			443,289
Total liabilities and equity	$	763,140		$	739,394

Supplemental disclosures of financial information:
(in thousands)

	As of December 31, 2019							As of June 30, 2019
	AOS		CQJV			Consolidated		AOS		CQJV			Consolidated
Cash and cash equivalents	$	86,194	$	21,056		$	107,249	$	100,733	$	21,160		$	121,893
Bank borrowings liabilities	$	36,878	$	111,614	*	$	148,492	$	41,048	$	99,865	*	$	140,913
Inventory	$	90,010	$	27,581		$	117,591	$	93,852	$	17,791		$	111,643
Property, plant and equipment, net	$	155,215	$	260,840		$	416,055	$	148,497	$	261,240		$	409,737
Total assets	$	369,429	$	393,711		$	763,140	$	375,004	$	364,390		$	739,394
Total equity	$	338,073	$	102,077		$	440,150	$	325,240	$	118,049		$	443,289
* AOS is not a guarantor of CQJV's (Chongqing Joint Venture) debts.

	Three Months Ended December 31, 2019								Three Months Ended September 30, 2019										Three Months Ended December 31, 2018
	AOS		CQJV				Consolidated		AOS			CQJV				Consolidated			AOS		CQJV				Consolidated
Net cash provided by (used in) operating activities	$	12,470	$	(3,532	)		$	8.938	$	(4,225	)	$	2,998			$	(1,227	)	$	22,149	$	(9,055	)		$	13,094
Purchase of property and equipment, net of government grant	$	12,062	$	3,307			$	15,309	$	8,292		$	7,506			$	15,798		$	8,002	$	8,451			$	16,453
EBITDAS	$	12,538	$	(2,214	)	**	$	13,892	$	13,813		$	(2,208	)	**	$	14,472		$	15,662	$	(6,135	)	**	$	13,517
** CQJV EBITDAS includes amounts attributable to noncontrolling interest.

Alpha and Omega Semiconductor Limited
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)

	Three Months Ended									Six Months Ended
	December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018

GAAP gross profit	$	24,406		$	26,932		$	29,502		$	51,338		$	62,113
Share-based compensation	404			436			541			840			1,038
Production ramp up costs related to joint venture	8,486			5,991			3,516			14,477			4,633
Non-GAAP gross profit	$	33,296		$	33,359		$	33,559		$	66,655		$	67,784
Non-GAAP gross margin as a % of revenue	28.3		%	28.3		%	29.2		%	28.3		%	29.5		%

GAAP operating loss	$	(3,370	)	$	(621	)	$	(3,202	)	$	(3,991	)	$	(2,327	)
Share-based compensation	2,487			2,369			4,418			4,856			7,547
Pre-production expenses related to joint venture	—			—			3,734			—			8,361
Production ramp up costs related to joint venture	8,486			5,991			3,516			14,477			4,633
Non-GAAP operating income	$	7,603		$	7,739		$	8,466		$	15,342		$	18,214
Non-GAAP operating margin as a % of revenue	6.5		%	6.6		%	7.4		%	6.5		%	7.9		%

GAAP net income (loss) attributable to AOS	$	(1,005	)	$	1,009		$	(1,545	)	$	4		$	871
Share-based compensation	2,487			2,369			4,418			4,856			7,547
Pre-production expenses related to joint venture	(25		)	49			2,458			24			5,120
Production ramp up costs related to joint venture	4,319			3,049			1,912			7,368			2,494
Non-GAAP net income attributable to AOS	$	5,776		$	6,476		$	7,243		$	12,252		$	16,032
Non-GAAP net margin attributable to AOS as a % of revenue	4.9		%	5.5		%	6.3		%	5.2		%	7.0		%

GAAP net income (loss) attributable to AOS	$	(1,005	)	$	1,009		$	(1,545	)	$	4		$	871
Share-based compensation	2,487			2,369			4,418			4,856			7,547
Amortization and depreciation	10,850			10,904			8,279			21,754			16,149
Interest expense (income), net	992			(220		)	1,664			772			3,088
Income tax expense	568			410			701			978			1,261
EBITDAS	$	13,892		$	14,472		$	13,517		$	28,364		$	28,916

GAAP diluted net income (loss) per share attributable to AOS	$	(0.04	)	$	0.04		$	(0.06	)	$	0.00		$	0.04
Share-based compensation	0.10			0.10			0.18			0.19			0.31
Pre-production expenses related to joint venture	—			—			0.10			—			0.21
Production ramp up costs related to joint venture	0.17			0.12			0.08			0.29			0.09
Non-GAAP diluted net income per share attributable to AOS	$	0.23		$	0.26		$	0.30		$	0.48		$	0.65


Shares used to compute GAAP diluted net income per share	24,701			25,130			23,887			25,362			24,513
Shares used to compute Non-GAAP diluted net income per share	25,594			25,130			24,432			25,362			24,513

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