Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Third Quarter of 2019 Ended March 31, 2019

Alpha and Omega Semiconductor Limited (“AOS”) (NASDAQ: AOSL), today
reported financial results for the fiscal third quarter of 2019 ended
March 31, 2019.

The results for the fiscal third quarter of 2019 ended March 31, 2019
were as follows:

The non-GAAP financial measures in the schedule above and under the
section “Financial Results for Fiscal Q3 Ended March 31, 2019” below
exclude the effect of share-based compensation expenses and
pre-production costs relating to the Chongqing Joint Venture in each of
the periods presented, as well as production ramp up costs for the
quarter ended March 31, 2019 and December 31, 2018. A detailed
reconciliation of GAAP and non-GAAP financial measures is included at
the end of this press release.

Financial Results for Fiscal Q3 Ended March 31, 2019

• Revenue was $109.1 million, a decrease of 5.1% quarter-over-quarter
  and an increase of 6.0% from the same quarter last year. The
  quarter-over-quarter decrease was mainly due to the impact of worse
  than expected PC CPU shortage.
• GAAP gross margin was 23.5%. Non-GAAP gross margin was 27.0%, a
  decrease of 220 basis points quarter-over-quarter and an increase of
  20 basis points year-over-year. The quarter-over-quarter decrease was
  primarily due to the lower factory utilization of back-end operations
  largely attributable to the decrease in revenue and the Lunar New Year
  holiday.
• GAAP operating expenses were $29.4 million. Non-GAAP operating
  expenses were $23.2 million, a decrease of $1.9 million
  quarter-over-quarter and an increase of $1.5 million from the same
  quarter last year. The quarter-over-quarter decrease was primarily due
  to the lower variable compensation accruals and fluctuation of
  engineering expenses.
• GAAP operating loss was $3.7 million. Non-GAAP operating income was
  $6.3 million as compared to $8.5 million for the prior quarter and
  $5.9 million for the same quarter last year.
• GAAP loss per share attributable to AOS was $0.06. Non-GAAP earnings
  per share attributable to AOS was $0.22 compared to $0.30 for the
  prior quarter and $0.23 for the same quarter a year ago.
• Consolidated cash flow used in operating activities was $7.9 million,
  compared to $7.6 million in the same quarter a year ago. Operating
  cash flow generated by AOS alone was $9.5 million, compared to $0.7
  million in the same quarter a year ago.
• The Company closed the quarter with $139.1 million of cash and cash
  equivalents, including $48.2 million cash balance at the Chongqing
  Joint Venture.

“AOS demonstrated solid execution in a challenging near-term market
environment, with financial performance largely in-line with our
expectations. We posted year-over-year revenue growth for the thirteenth
straight quarter while prudently managing our operating expenses.
Although the CPU shortage is expected to cause a temporary slowdown in
our Computing business in the first half of calendar 2019, we believe a
recovery of CPU supply will be a tailwind for us in the second half,”
stated Dr. Mike Chang, chairman and CEO of the company.

“Our business momentum continues, as we capitalize on our multi-year,
high-value growth opportunities, including smartphone battery packs,
quick chargers and home appliances. We have started ramping production
of these product lines and expect to accelerate production ramp in the
coming quarters. To support our overall growth as well as the
anticipated rebound of the Computing business, we remain focused on
ramping up the Chongqing Joint Venture to secure much-needed capacity.
We believe we are executing the right strategy for continuing growth,
and we are committed to achieving our mid-term target of $600 million in
annual revenue by calendar year 2021.”

Business Outlook for Fiscal Q4 Ending June 30, 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 $110 million to $114 million
  as we assume the CPU shortage will continue in the June quarter.
• Gross margin is expected to be approximately 22.3% plus or minus 1%.
  Non-GAAP gross margin is expected to be approximately 27.3% plus or
  minus 1%. Non-GAAP gross margin excludes $0.5 million of estimated
  share-based compensation charge and $5.1 million of estimated
  production ramp-up costs relating to the Chongqing Joint Venture.
• Operating expenses are expected to be in the range of $30.4 million
  plus or minus $1 million. Non-GAAP operating expenses are expected to
  be in the range of $24.8 million plus or minus $1 million. Both GAAP
  and non-GAAP operating expenses include $2.8 million to $3.0 million
  of estimated expenses relating to the development of our digital power
  controller business. Non-GAAP operating expenses exclude $2.5 million
  of estimated share-based compensation charge and $3.1 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 $5.6 million. On a non-GAAP basis, excluding
  estimated production ramp-up costs and pre-production expenses, this
  item is expected to be approximately $1.2 million.

Conference Call and Webcast

AOS plans to hold an investor teleconference and live webcast to discuss
the financial results for the fiscal third quarter of 2019 ended
March 31, 2019 today, May 2, 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 management’s prepared remarks at
the investor teleconference and webcast is available prior to the call
at the Company’s investor relations website.

Forward-Looking Statements

This press release contains forward-looking statements that are based on
current expectations, estimates, forecasts and projections of future
performance based on management’s judgment, beliefs, current trends, and
anticipated product performance. These forward-looking statements
include, without limitation, statements relating to expected growth
rate, our product portfolios, projected amount of revenue, gross margin,
operating income (loss), income tax expenses, net income (loss),
noncontrolling interest, and share-based compensation expenses, non-GAAP
gross margin, non-GAAP operating expenses, tax expenses, and non-GAAP
loss attributable to noncontrolling interest, the market trend of
Computing business in 2019, anticipated annual revenue target, our
ability and strategy to develop new products including digital power
controller products, the ability to expand our sales and market share,
increase our capacity and achieve sustained growth and profitability,
the pre-production and production phases of our Chongqing Joint Venture,
the development of digital power business, partnership with global
brands, the relationship with key customers, business pipeline from
design wins, and other information under the section entitled “Business
Outlook for Fiscal Q4 Ending June 30, 2019”. Forward-looking statements
involve risks and uncertainties that may cause actual results to differ
materially from those contained in the forward-looking statements. These
factors include, but are not limited to, our ability to successfully
operate our joint venture in China; our ability to develop and succeed
in the digital power business; difficulties and challenges in executing
our diversification strategy into different market segments; new tariffs
on goods from China; ordering pattern from distributors and seasonality;
our ability to introduce or develop new and enhanced products that
achieve market acceptance; decline of PC markets; the actual product
performance in volume production; the quality and reliability of our
product, our ability to achieve design wins; the general business and
economic conditions; the state of semiconductor industry and seasonality
of our markets; our ability to maintain factory utilization at a
desirable level; and other risks as described in our SEC filings,
including our Annual Report on Form 10-K for the fiscal year ended June
30, 2018 filed on August 23, 2018. Other unknown or unpredictable
factors or underlying assumptions subsequently proving to be incorrect
could cause actual results to differ materially from those in the
forward-looking statements. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, level of activity, performance, or
achievements. You should not place undue reliance on these
forward-looking statements. All information provided in this press
release is as of today’s date, unless otherwise stated, and AOS
undertakes no duty to update such information, except as required under
applicable law.

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, pre-production expenses related to
Chongqing Joint Venture for all periods presented, and production ramp
up costs for the quarter of March 31, 2019 and December 31, 2018, as
well as income tax benefit from tax reform for the quarter ended
December 31, 2017 in this press release. 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 Chongqing Joint Venture 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, such as the joint venture pre-production
expenses. 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, Power IC products and
Digital Power. 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’s 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.

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