Win Semiconductors Corp

Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to WinSemi's Resolve White Hat Conference for the first quarter of 2023. My name is Joe Chen, the President and the Associate Vice President of Finance in WinSemi. Joining me today on today's call is Steve Chen, 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 brief guidance for the second quarter of 2023. Secondly, I will go through the financials in detail. 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 Public Notice on page 1 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 obligations to update the 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. In the first quarter of 2023, given the traditional of season effect and the continual inventory adjustment of the smartphone industry, WinSemi's concern at the revenue was 2.9 billion NT dollars and down 19% quarter-on-quarter and down 49% year-on-year. Although the first quarter revenue was better than our previous expectations, our growth margin and operating margin declined to 11% and negative 21%. Capacity utilization rates further declined to 20%. Net growth for the first quarter was 479 million NT dollars and EPS was negative 0.95 NT dollars. Look at the products in the first quarter. Revenue for all product segments is declined by 20-30% quarter-on-quarter, mainly due to the oxygen effect and weakened consumer demand. While the progress of the smartphone inventory's destructing remains unclear, we have received rush orders from multiple Android customers since the game was launched, and we have also seen gradually orders recover from customers retiring as a result, we believe that customers' inventories are moving towards a healthier level. Here to this day, the war between Russia and Ukraine is still ongoing, and the pressure of the global recession is still impacting the world. Amid many near-term uncertainties, we maintain our strategy of partially extending capacity but Activity Investing in R&D As our view on the long-term growth momentum of the industry remains unchanged, several international customers have not only adopted our latest generation HPC technology for 5G mobile communication, but also actively work with us on the qualification of the next generation HPC projects Meanwhile, in order to meet customers' needs of the integrated component, we provide filters for low, mid, and high frequency applications. And we have developed gain-on-silicon carbide technology and gain-out-by-linon key-hand process to fulfill the demand of any needed way for the 5G infrastructure. In addition, many customers are collaborating to developing optical applications with short-wave infrared and long-wave lasers. And those technologies could also be applied to the automotive LIDAR. These are our current R&D focuses. Looking ahead to the second quarter of 2023, Our revenue is expected to grow by low 30 quarter-on-quarter, and the growth margin will be around the level of meetings. I will turn the call back to Joe. Thank you.

Okay. I would like to present our financial results for the first quarter of 2023. Please refer the presentation slide. Remember to take a look for the page 2, the State Harbor Notice. And then starting from page 4, the revenue and the margin claim. Our Q123 revenue was 2.9 billion NT dollars QOQ was down 19% and YOY was down 49% The growth margin for Q1 was become 11.4% which is declined by 10.8 percentage points and operating margin was become negative 20.8% which has declined about 21.4 percentage points. The decline was mainly caused by a decline in capacity utilization rate and in this quarter it's further down to in Q1 it's down to 20% of the utilization rate from 30% of last quarter. In earnings, please The Q123 net loss was 479 million NT dollars, which is the loss was increased about 198% in 2002. The EPS become negative 0.95 NT dollars compared to last quarter, I mean Q4 of 22 was negative 0.95 NT dollars. 0.18 NT dollars. And please click to the next page in page six. Page six we calculate for the programming. In this quarter Q1 of 2023, The most of the product in product mix has a different level of slow down. And for example, the infrastructure due to the macro economy and making the weaker in demand. So the infrastructure was going, also going down used to be more stable. The rest of the product in the product mix Most of them are related to the smart home market, which is suffering by the traditional low season in Q1. And next page, in page 7, we're going to talk about the Q2 guidance. I think Chief has mentioned it and I'm going to repeat it again. We expect Q2 of 2023 the revenue to increase about low 30 QOQ. And we also expect Q2 of 2023 the growth margin will be around the level of 15. And now We can quickly talk about the income statement for the comprehensive income statement for this quarter Q1 of 23. Before we begin, I still have to remind everybody that this is under the unordered basis and the actual results should be based on the TPA report. In Q1-23, the net revenue was $2,860,000,000. The QOQ was down 19% and the YY was down 49%. The gross profit was $326,000,000. Therefore, the gross margin was 11.4%. and the operating expense was 921 million NT and due to we have more capacity and more resources to support the R&D activity and then so a lot of customers use it and also internally have more targets on the of R&D activity. Operating expense goes up to 921. The operating expense ratio becomes 32% and because the utilization rate going down since last year, quarter by quarter, and we used to be provides the OP ratio guidance about maybe 13 to 15%, that kind of label, if the utilization rate is over like 50 or 70%, but is no longer applicable because of this kind of low utilization rate. So we expect that based on the past experience, of course, the operating expense keeps going up with the company scale and the price. And so the operating expense pretty much in the range between 8 billion and 9 billion NT in this kind of range to be reasonable. The operating loss was 595 million NT. The operating margin was negative 20.8%. And there is a number of items with the gain on 39 million NT the detail in the page 10 for your own reference. The income, a loss before the income tax was a loss around $556 million. And there is an income tax benefit of $77 million. Therefore, the net loss becomes $479 million. and the net market become negative 16.7% the ETS in this quarter was negative 0.95 NT dollars and the return on equity in Q1 was a negative 5% due to the land loss. The proximity utilization rate in this quarter was 20%, which is down from 30% of last quarter. The depreciation expense in this quarter was 1077 million yuan. The contract in Q1 was $536,000,000. That's for Q1, the income payment. And the page 10, the amount of items are listed for your own reference. And the page 11, the consolidated balance sheet, Okay, I'm gonna highlight a couple major items. First of all, the total asset was 59,115,000 NT. And the total liability was 35,026,000,000 NT. And the total equity was 3,489,000,000 NT. And in between, compared last quarter, I mean, compared day after December 31st and March 31st, something like the bond payable, which is our ECB, the outstanding ECB, because the ECB investor in Q1 of 2024, they have a put option. So in Q1 of 2023, our CPA has reclassified this item into the current liability. to reflect the put option for the investor in the Q1 of 2024. Therefore, the current ratio was significant and go down to 96%. That's what happened. And the The debt ratio remained around 50% up and down, which is in Q1, it's around 51%. And last quarter was 49%. It's pretty much close. And finally, the common stock remained the same, $4,239 million. And the book value per share was $76 Q&A section. Please submit your questions in the info box on the webcast window now. Okay, well, there is a question which is in our Mandarin section has several investors asking and we have explained about the revenue contribution there is a 7% coming from our 100% owned investment, which is holding the offshore listed company. And due to the evaluation gain, so it contributes the revenue around 7%. That's why the QOQ went down to 19%, but originally when we announced a monthly revenue, it went down around 24%, something like that, or 25%, something like that. And there is a difference around 7%. I remember the investment company holding the majority was the share of one of our China customers here which is IPO last year and so the Evaluation Gain Evaluation Gain Evaluation Gain Evaluation Gain 5% from the existing 11.4%. That's something in the last section of a mentoring section of earnings call of several investors have seen and I would like to highlight it in the very beginning.