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 WinSemi's Resolve Webcast Conference for the fourth quarter of 2022. My name is Zhou Shen, Spokesman and Associate Vice President of Finance in WinSemi. Joining me today on today's call are Our CEO Kyle Chen and our General Manager of Corporate Administration Steve Chen Today's call is organized into three sections First of all our CEO Kyle will comment on the company's results for fourth quarter of 2022 and provide the brief guidance for the first quarter of 2023 Secondly I will go through the financials in details, and Kyle will have the industry outlook to share with you. After that, we will open to the floor for Q&A. Please freely submit your questions in the input box on the webcast window throughout the conference. Before we begin, I would like to draw your attention to the State Department notice on page one of the presentation slide. 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 this forward-looking statement going forward. Now, let me hand over the call to Mr. Kyle Chen, our CEO in Winsand.

Joe, thank you. And welcome everyone to join the Wins investors call today. In the first quarter of 2022, Given the continuous inventory adjustment in the global entry smartphone market WinSemi's consolidated revenue was $3.53 billion which was down 10% quarter-on-quarter and 51% year-on-year as previously expected Due to the decline in the demand, our capacity utilization rate further declined to 30%. However, as our product needs improved slightly from the previous quarter and expenses were under well control, our growth margin was 22.1%. and operation margin was 0.5%. On the other hand, our net profit was impacted by the non-operating losses including the coin exchange and the disposal of the plans by our subsidiary to adjust its operating scale. And therefore, the EPS for the fourth quarter was minus 4.22 NT dollars For the full year of 2022 our revenue was 18.33 billion NT dollars which was 30% down year on year and EPS the whole year was 4.21 NT dollars Looking at the programming in the fourth quarter which we see received a few large orders from the cellular PA also and the Wi-Fi PA as well at the end of the 2022. But volume is not continued. We also see that the cellular PA revenues still have the largest sequential decline among all product categories. 3D sensing revenue also declined from the previous half-season quarter, which was traditionally strong first season with new product launch. Although the infrastructure revenue was also slightly below the previous quarter, it has surpassed the failure period and become the largest revenue contributor in the quarter. Wi-Fi revenue also increased slightly but not too big Driven by some customers' inventory restocking In respect to the year 2022 the war between Russia and Ukraine was still ongoing China experienced a surge in COVID infections across the country after strictly epidemic control was lifted and the trade tension between the U.S. and China was intensified. These have disrupted the global supply chain. And meanwhile, inflation also impacts the end customer demand. Comparing with 2022 to previous year, 2021, in terms of product mischange, consumer-related applications, including the cellular PA, Wi-Fi PA, and 3D sensing, all experienced varying degrees of decline, given some of the macro environment. Comparatively, the non-consumer applications related infrastructure segment increased slightly from the previous year. And here I would like to say some good news is that Getty Nitride, our product, sorry, our founding service revenue, which was highly related to the 5G infrastructure, has performed particularly well. So, looking ahead to the new year, which will still facing the pressure of economic weakness and the inventory adjustment in the short term. The supply and demand are expected to gradually return to normal as the global pandemic was released. Cold restrictions are lifted and the global economy reopened and the inflation gradually gets under control. So in the coming years, we are still very optimistic about the long-term development of the compound semiconductors. 5G smartphone penetration is expected to further increase and drive the demand for 5G infrastructure. Wi-Fi spec upgrade will be gradually adopted by the routers and the smartphones Wi-Fi 6E expected to become popular and the developing of the Wi-Fi 7 is expected to officially started Leveraging all our experience on 3D sensing in the past few years we have actually worked with clients on automotive applications including both in-vehicle sensing and out-of-vehicle ADAS system as well as V2X and OTA which use our existing wireless communication technology All of these related applications no matter in conventional vehicles or electrical vehicles are getting closer and closer to us In order to meet this trend, we have been actively working on the development of the related new technology, including the theaters. Here I would like to emphasize the theaters. These theaters help our PA customers to strengthen their product competitiveness, which we will really start to provide Customer Theater Foundry Service together with our existing product, that's PA, to further increase customers' sickness. So, amid of the headwind last year and also the first half, we have never relaxed the commitment to ESG. In 2022, we were ranked in the top five among the Taipei Exchange-based companies in the corporate governance evaluation survey by the TWSE for the eight consecutive years and we were selected to join the Daozhong SI World Index for the third year. It is encouraging for us to be including this index again. Along with our global leading companies, and it's also have the driving force for us to keep improving. Looking ahead for the first quarter of the 2023 due to the continuous soft demand and the impact of the traditional off-season of the smartphone our revenue this quarter revenue is expected to decline around the high 20s quarter on quarter and the growth margin will be about low change level. So right now, I turn the call back to Joe.

Okay. Thank you for our CEOs and management comments. It's my pleasure to present our financial results for the fourth quarter of 2022. And you also can refer our presentation slide. And please read it over for the safe harbor notice in page two. And now we have started to talk about revenue and the margin trend, starting from page four. In Q4-22, the revenue was 3.5 billion NT. QOQ was down 10% and YOY down around 51%. And due to the three Qs, one up factor no longer exists. And also in Q4, we have a better product mix and also expense well controlled. So our growth margin increased by around 6.1 percentage points, become 22.1%. And operating margins also increased by 5.6 percentage points to 0.5%. And now please flip to the next page, page 5. Let's talk about earnings. Our Q422 was a net loss of 177 million NT. QOQ was down 172% and YOY was down 110%. And so, therefore, the EPA is coming at the negative 0.22 NT dollars. If it was impacted by the non-operating laws, the majority was the foreign exchange laws. And secondly, the disposal of the plant and property by our subsidiary to adjust its operating scale. And please click to the next page in page six. we discussed about what a change in our product mix in the Q4. In the Q4, because of experiencing the continual inventory adjustment in the Android smartphone market. So, the value of the EA is still weak, and the percentage went down to between 25 and 30% from 30 to 35% last quarter. On the contrary, although the infrastructure also decreased about single digits, but the percentage went up to between 35 and 40% from 30 to 35% in Q3. And as our CEO mentioned it, some of the Wi-Fi customers are restocking into all. So although the Wi-Fi has a single digit growth, but still within the same range of the percentage, which is between five and 10%. And the In the article, including three things and others, it decreased a similar level of the total revenue. It remained the same percentage of around 26% in Q4. And so, please click to the next page in page seven. Page 7 talks about Q123 guidance. I think our CEO already mentioned that, so I'm going to repeat again. We expect Q123 revenue to decline around high 20s QOQ. We also expect the Q123 gross margin to be around the level of losses. Okay, then We can quickly go over the financial statement, starting from income statement in page 9. For Q4, the income statement, before we begin, I want to remind everybody this is under the unordered basis. The actual results are based on the CCA's report. 204.22, the net revenue was $3,527,000,000 NT. QOQ was down around 10% and YOY down around 51%. The gross profit was $781,000,000. QOQ was up 25% and YOY down 73%. Gross margin was 2.1%, which has improved about 6.1 percentage points from last quarter. Operating expense was 762 million NT. The operating expense ratio was similar level, around 22%. Operating income was 19,000 NT. 19 million NT dollars CO2 was up 109% and YOY was down around 99% so therefore the operating margin become 0.5% and the CO2 was improving around 5.6 percentage points and the number of items was lost around 168 million NT the details will be in page 11 and the income tax was negative 145 million NT and income tax expense was 28 million NT therefore the net loss was 177 million NT. So the net margin become negative 5.0%. And the EPS for the Q4 was negative 0.22 NT dollars. Therefore the ROE which is return on equity was the negative 1%. CQ4's approximate utilization rate was 30%, which went down from 40% last quarter. The depreciation expense a little bit less than last quarter, which is 1017 million NT. And the top part for CQ4 was 916 million NT. And this is, those are the Q4 financial income statements. And please click to the next page in page 10. The accumulated whole year 2022, the net revenue was 18,330,000,000 NT. The YOY was down around 30%. The gross profit was 4,720,000 NT and the gross margin was 25.8%. And the operating expense was 3,238,000 NT. So the operating expense ratio for the whole year becomes 18%. Operating income was 4,000,000 NT. 1482 million NT and operating margin become 8.1 percentage point The number of items was again 327 NT The income before income tax was 1809 million NT so The income tax expense for the 2022 all year was $411 million. So therefore, the net income for the whole year was $1,398 million. The net margin becomes 7.6%. So therefore, the ETF for the 2022 all year was $4.21. So therefore, the ROE, which is return on equity for the whole year, was 95%. And the utilization rate accumulated for year 2022 was 50%, which is going down from 90% of 2021. The depreciation expense is 4164 million NT, which is a single digit increase from last year. And the car parts for the whole year was lower than our original expectation. which is $7,124,000,000. And since this is already 2023, I would like to share with the investor that for the 2023, depreciation expense and the car tax expectation, for depreciation expense for the whole year 2023, we expect to be increased about single digits, which is less than 10%. And the top part for the 2023 whole year should be around 4 billion NT plus and minus, which is mainly the existing fast equipment and machine and equipment maintenance and the replacement. And then secondly, we'll continue to complete the first building for our new fab construction in Taoshong, Taiwan, Taoshong Science Park in Taoshong. And this is for the whole year 2022, the income statement. The non-off item in page 11 and the major item other than we already mentioned it earlier, foreign exchange loss and the loss on disposal of property and trends. Another one will be the gain on our ETP buyback in Q4. Okay, that's the non-off item. And finally, the balances in page 12. As to the 2022 December 31st, I just pick up a couple major items. Cash and the cash equivalent was 10,380,000,000. So the total assets was $68,982,000,000. And the total liabilities was $33,936,000,000. And the common stock remained the same as last quarter. So the total equities become $35,047,000,000. So therefore the full value per share was $78.28 NT The major index like a current ratio was 276% and the death ratio with the total liability over total after was 49% pretty close to last quarter Okay, this is my report. Thank you. I'm going to turn the call back over to our CEO for industry outlook. I think that's the most important thing. for this quarter's earnings call and conference. Okay, thank you.