Win Semiconductors Corp

The Investor Conference is about to begin. Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to Winsani's Reserve Wealth Cash Conference for the first quarter of 2022. My name is Zhou Zhen, a spokesman and Associate Vice President of Finance in Winsani. Joining me on today's call is Steve Chen, the General Manager of Corporate Administration. Today's call is organized into three sections. First of all, Steve will comment on the company's results and provide guidance for the second quarter of 2022. Secondly, I will go to the financials in details. After that, we will open to the floor for Q&A. Please freely submit your questions in the info box on the webcast window throughout the conference. Before we begin, I would like to draw your attention to the State Harbor notice on page one of the presentation slides Please note that this presentation contains forward-looking statements. These statements are based on our current expectations. Actual results may differ materially from our expectations, and the company undertakes no obligation to update these forward-looking statements going forward. Now, let me hand over the call to Mr. Steve Chen, General Manager of WinSemi.

Thank you Joe, and welcome everyone. After a rate of high revenue in the fourth quarter of last year, we experienced a traditional slow season and inventory adjustment in the smartphone industry in the first quarter of 2022. Our revenue was $5.6 billion in the quarter, a decline of 22% quarter-on-quarter and 7% year-on-year. Although the program did not change from the previous quarter, our growth margin and operating margin declined to 30.6% and 16.4%, respectively. as our capacity utilization rate declined from 100% in the previous quarter to 70% this quarter. EPS for the first quarter was $20, $2.08. Looking at the product mix in the first quarter, for 3D sensing, after the peak season of the new product, preparation in the third quarter and fourth quarter of last year. The demand for 3D sensing through the low season has expanded, and this product segment had the highest quarter-on-quarter decline. Cellular TAs, which had high exposure in China smartphones, and Wi-Fi TAs were both negative impacts. by high inventory level at the end of customer. So the revenues declined from the previous high level. Lastly, the higher margin infrastructure and the satellite-related shipment did not decline as much as smartphone-related applications. While the industry has recently faced some headwinds, which result in low demand and visibility in the near term. Our view on the need to long-term growth of momentum of the industry remains unchanged. Especially we expect the increasing potential of 5G in smartphone and the development of the 5G infrastructure including low Earth orbit satellites and evolution of the Wi-Fi 6E to the Wi-Fi 7. and another increasing contribution for the optical devices and optical sensing business will continue to thrive long-term demand. As a result, our plan for the new Luzu Fair in the South Taiwan Science Park in Kaohsiung to enter mass production in two to three year plan remain unchanged. While the near-term capacity expansion through the bottleneck will be dynamically adjudged to meet the industry change. Looking ahead to the second quarter of 2022, due to the continued inventory adjustment at China platform, our revenue is expected to decline five single digits than the previous quarter. and the growth margin will be between the level of high 20 and low 30. I will turn the call back over to Joe. Thank you. Okay.

It's my pleasure to present our financial results for the first quarter of 2022. Please refer the presentation slides starting from the page 4. Before that, remember to read over for the page 2 that they have been noted. In page 4, we talk about revenue and margin. The Q1 of 2022 After being through the Q4, the rate of high revenue last year, and the Q1, we entering the traditional low season and also experiencing the smartphone market inventory correction. Therefore, the Q1 revenue was become $5.6 billion, and the QOQ was down 22%, and the YOY down 7%. Since the product looks similar compared to last quarter but the capacity utilization rate is declining from 100% in last Q4 to the 70% in the Q1 2022 and so therefore the Q1 close margin was declining by 9.9 percentage points and become the 30.6% of the growth margin. And also the operating margin declined by 11.5 percentage points to 16.4%. And please flip to the next page in page five, talk about earnings. The Q1 net profit was 786 million NT dollars. The QOQ down about 53% and YOY down about 28%. The ETF in this quarter coming at $2.08. compared to $4.19 NT in Q4 of 2021. And we talk about program mix in the page six. You probably found out the Q1 program mix looks very similar to the truthful except others which means the optical business. The optical business is dropping from 16% to 14% and Steve mentioned it in his management comments That's it. We've been through the new product launch period in last Q3 and Q4. And as expected, Q1 becomes the low season for this sector. and also as a management comment to talk about, we've been experiencing smartphone market inventory correction, especially in China, and that's why the cellular and also the Wi-Fi business has been suffered On the same time, the infrastructure also dropping, but still maintain about between 20 and 25% of range, which is better than the standard of this thing. And free to next page, in page seven, we talk about Q2's guidance. In Q2, due to the continual inventory adjustment at China's smartphone market, so we expect that Q2 revenue to decline high single-digit QOQ. And therefore, we also expect that Q2's growth margin will be between the level of high 20s and the low 30s. That's Q2 guidance. And so we can quickly go through the financial statement starting from income statement in page nine. The Q1 The Q1 2022, the net revenue was $5,597 million NT, and QOQ was down 22%, and YOY down 7%. And the gross profit was $1,714 million NT, and the QOQ was down 41%, and YOY was down 15%. and the gross margin becomes 30.6% and the circumstances of the utilization rate around 70% in this quarter and compared to last quarter, last quarter was 40.5% and the utilization is 100. and compared to a quarter ago, I'm sorry, a year ago, in Q1 2021, the gross margin was 33.5% and under the utilization rate of 80%. Operating expense becomes 798 million NT Operating OPAX ratio was 14%, which is in line with a year ago Operating income was 916 million NT dollars was down 54% and YOY was down 23%. And the operating margin was 16.4%. And then the non-op item was a positive, it's a positive 75 million USD. And then we can discuss it later in page 10. And the income before income tax was $991 million. And the income tax expense was $205 million. Therefore, the net income becomes $786 million NT. And the QOQ was down 53%, and the YOY was down 828%. And so the net margin becomes 14% and the EPS was $2.08 NT dollars. So the return on the earnings, the The ROE has become 10% in this quarter. And depreciation expense is about 1,258 million NT. And the top part in this quarter was 1,320 million NT. So this is a Q1. In next page, in page 10, the number of items, the total was, it contained 700, I'm sorry, 75 million M2. There are two items that probably were highlighted and discussed. The first one is, We have a portfolio exchange gain for $339 million NT and another one was a loss. The item was gain on financial assets, liabilities at fair value through profit or loss. That was a loss at $279 million. In this item, the major one was the ECB evaluation loss for $346 million. That's because the convertible bond is evaluated based on our wind framing stock price. from the end of Q1 compared to end of Q4 last year and that was based on the accounting principle and there is an evaluation now about $346 million and that's the item for this one. Okay, then we can talk about the balance sheet in page 11. The total assets was $74 billion and $73 million. And the current liability was $11,036,000,000 That's the current liability And so the total liability was $39,177,000,000 The reason why I mentioned the current liability, that's because on the March, the whole meeting has approved the dividend payout for $8,000 per share. And therefore, there is a dividend The amount of the dividend payable is included in the current liability which is removed from the total equity. So the total equity becomes 34,896,000,000 MT and the full value per share also are going down to $77.22 from $82.41 last quarter. And also because of that, the current ratio going down to 210% from last quarter of 367%. And also on the same time, the same ratio Going up for 3% becomes 53%. Okay, that's our balance sheet for Q1. Okay, that's my report. Thank you. And I will turn the call back to our CEO. And now we can begin the Q&A. and please submit your question in the input box on the website window. Thank you.