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 WinSany's Resolve Webcast Conference for the second quarter of 2023. My name is Jochen, the spokesman and associate vice president of finance in WinSany. Joining me today On today's call is Steve Chen, our 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 third quarter 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 safe harbor notice on page one of the presentation slide. Please note that this presentation contains forward-looking statements. and 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. Keith Chang, General Manager of Winsane.

Thank you, Joe, and welcome, everyone. After a traditional off-season in the first quarter of 2023, our revenue for the second quarter reached $3.9 billion, an increase of 38% quarter-on-quarter, and a decrease of 26% year-on-year. Benefiting from the recovery in capacity utilization, our gross margin increased to 20.1%, from 11.4% in the first quarter. And operating margin also significantly improved to negative 4.3% from negative 20.8% in the first quarter. Net loss was $276 million and EPS was negative 0.27 in ND data for the second quarter, indicating the losses have narrowed sharply and compared to the previous quarter. While the global smartphone human in the first half of the year is estimated to decline year by year, We observed that our revenue has resumed growth momentum in the second quarter with an increasing number of rush orders from Chinese smartphone PA customers. In addition, in response to the demand for new high-end smartphones in the second half of the year, related customers have started preparing for inventory, driving materials, screened growth in both cellular and Wi-Fi PA in the second quarter. This has been a key factor in rising the capacity variation rate of our FAB back to 40%. Furthermore, infrastructure revenue also delivered double-digit sequential growth, while optical was the only segment that declined quarter-on-quarter. As of today, The war and the trade tensions arising from these political conflicts continue impacting us, and the economic downturn caused by inflation has weakened the customers' purchasing power. The hardest-hit industries have been the rapidly evolving smartphone markets, and this has also affected the profits of related infrastructures development. Until recently, we have finally seen some signal of recovery in the smartphone market. However, it's still too early to conclude that the inventory adjustment has hit the end of the user level, which has been ongoing for over a year and was nearly completion. We think, as always, the best found returner to our customers. Despite of the challenging economic conditions and the selfish demands, our strategy during this period has been consistent. We continue to invest in research and development, work very closely with our customers and understand their need to enhance their competition. Our goal is to assist our customer in pricing opportunities upon the demand recovery maintain their and our market position and survive and thrive during these challenging times together. Looking ahead to the third quarter of 2023 our revenue is expected to grow by no single digit than the previous quarter and The growth margin will be around the level of meeting. I will turn the call back to Joe. Thank you. Okay.

It's our pleasure to present our financial results for the second quarter of 2023. Please refer our presentation slide. Remember to read it over the page 2 of the State Harbor Notice. And now we started from the page 4. Page 4, we're going to talk about the revenue and the margin. The second quarter of 23 revenue was $3.9 billion NT, and the QOQ was up 38%, and the YOR was down 26%. and the Q2 benefit from the capacity utilization recover back to 40% and also a little bit help from the product mix. Therefore, the gross margin increased to 20.1% from 11.4% last quarter. and operating margin was significantly increased to negative 4.3% from negative 20.8% last quarter. And please switch to the page five. I was talking about the earnings. And with the The order recovery for our customer and therefore the losses have been narrowed down in Q2 and the net loss in Q2 was $276 million and QOQ improved about 42%. And the EPS in Q2 was negative $0.23. And compared to Q1, nearly almost negative $1. And now we take a look from the product mix in page six. As Steve mentioned in his comment, remember Q2, Q2 revenue was up around 38%. And the major momentum, the first release is for Wi-Fi 15. The product mix in Wi-Fi in Q2 was between 15 and 20%. and then compared to last quarter, it's only five to 10%. That's mainly due to the US premium phone launching the new generation of the smartphone in second half and some related customer already ran up the demand. On the same time, the second major momentum coming from federal GA. The major momentum is from China. We can see that the China market has been downturned for a long time, over a year. We do see some large orders from China customers and the momentum is still coming and even stronger. and another momentum also for cellular is also related to U.S. premium phones, second half new model. Of course, different customers for the U.S. premium phone, maybe the startup ran out on a different timing and then but it looks like the Wi-Fi customer already ran out earlier and then so the peak maybe is closing and but the federal customer is still convenient. And the third one for the Q2, the infrastructure customer. Infrastructure in Q2 was between 25 and 30%. And then although the percentage is lower than Q1, but it's already better than our expectation and the QOQ for infrastructure also increased about double digits. The only segment in our program that decreased is the optical business. In Q2, optical business are roughly around 18%. Okay, that's for programming. And now, please flip to the page seven, talk about Q3 guidance. As I mentioned, there's some of, for the third quarter, supposedly, it's a US T1 smartphone, Q2 to Q3 China Cellular Customer Monitors Feel Strong So Q3 sees that the cellular CA will be the stronger factor for the performance. Unfortunately, the Y5 infrastructure and the optical maybe is not as strong as the Q3. So therefore, the Q3 guidance The revenue is going to increase about low single-digit CO2. And the growth margin, because of what I mentioned earlier, the cellular pH is a major growth factor. So because of a problem, the growth margin will be around the level of the mid-chain. The Q3 guidance, And now we can quickly take a look for the financial. First of all, I'll flip to the page nine, talk about income statement for Q2. The consolidated income statement for Q2 First of all, I still want to remind everybody that the figures, everything I'm going to say will be based on the unordered basis. The actual results should be based on the CTA report later on. For Q2, net revenue was $3,944 million CO2 was up 38% and ROI was down 26% the gross profit was $791 million and the gross margin for CO2 was 20.1% increased from 11.4% last quarter and then as In last hour's earnings call, the Chinese already have investors asking about our subsidiary The main impact of some of the growth margins, I would like to share with you that our subsidiaries, the investment company holding the listed company like Vanship, this kind of company, their market price volatility impact the growth margin, I mean, it's 1.4 percentage point, means it contributes a 1.4 percentage point. So it means that the Q2 growth margin supposed to be heightened, if we is true, the venture data contribution. And the operating expense is $961 million NT. And operating expense ratio was 24%. And actually the RMT is already 13%. compared to the revenues. The operating loss was 170 million NT, and therefore the operating margin was a negative 4.3%, and it improved from negative 20.8% last quarter. The number of items was lost at 191 million NT. I will explain that later in page 11. The loss before tax was negative 362 million NT. And there is a tax benefit around 86 million NT, therefore the net loss was 276 NT dollars. And the net loss was improved about 42% compared to net loss about 469 NT dollars. 79 million in Q1. And the net margin was a negative 7%. Compared to last quarter was a negative 16.7%. The ETS for Q2 was negative 0.23 NT dollars. Last quarter was a negative So the return on equity for Q2 was negative 1%. Last quarter was negative 5%. And approximately utilization rate for Q2 was 40%, which is increased from 20% last quarter. The depreciation expense was $1,172,000,000 and the car tax was $540,000,000. It's not so different from last quarter. And accumulated the first half income statement $352,000,000. The first half of 2023, the net revenue was $6,803 million. The YOY was down around 38%. And the gross profit was $1,117 million, and the gross margin was 16.4%. The operating expense was $1,800. 1882 million therefore the operating ratio first half was negative 28% and the operating loss for the first half was 765 million NT and the operating margin was negative 11.2% The number of items or accumulators of the Q1 and Q2 was 152 million NT. And then at the same, we will discuss this later in page 11. The loss before tax was 917 million NT. And there was a tax found up at 163. So, therefore, the net loss for the first half was $755 million. So, the net margin was negative 11.1%, and the EPS for the first half was $1.18. The first half return on equity was negative 3% and approximately assimilated utilization rate was 30%. And the depreciation expense for the first half was $2,204.49 million NT. And the car parts for the first half was $10 1076 mail amounting. And if we review what the depreciation expense and the contact guidance we provide in the early of this year, I think we're still in line with the guidance about the depreciation will increase not higher than 10% worldwide. That's still in line, our view. And the car parts for the whole year of 2023 will be four billion NT, plus and minus one billion. That's also in line. We also still remain the same view. consolidated income statement for the third half. Now we flip to page 11. The page 11 number of items. I think the major two items is the foreign exchange lost about 650 million NT and the gain on ECB buyback for the gain of $540 million. I think we should put it together to discuss. First of all, we implemented the ECB buyback in Q2 and we have a gain because of the bond. We purchased the bond and for the 540 million countries. But at the same time, because we buy back a fixed, this is the NT dollar length ECB, which just means the foreign exchange of dollar NT is fixed. So, therefore, when we doing the ECB buyback, there will create some kind of foreign exchange loss. So, 650 million loss. At 650, there are 50% coming from ECB buyback. Another 50% is due to U.S. Standard Appreciation in Q2 and the evaluation, we have the foreign currency debt outstanding and the evaluation loss. put it all together, so it's 650 forage exchange loss. But if we consider the ECB buyback, the gain, and the loss, the forage exchange loss coming from the ECB buyback all together actually still gain more than 100, Again, the offset of the city still gains between 1 and 200 million NT. So, yeah, that's a number of items. And finally, the last one will be the balance sheet. The balance sheet in page 12, well, See that, again, because of the ECB buyback, so our cash, and the cash equivalent is reducing from last quarter to June 30th, we still have a cash around $7 billion and $64 billion. And the total assets was 65 billion something and as you see that the outstanding ECB in Q2 was around 4 billion refused. from the large series, the ECB outstanding is around 10.5 billion NT, and the June series is 6.2 billion NT, that's reducing the bond variable around 4 billion, more than 4 billion. Therefore, we see that the liability also reducing about 4 billion. And as to the common stock, remember the same, the total equity is 34 billion and 64 million NT. And so therefore, the full value for sure become 76 billion NT. $1.61 and so as to significantly reduce our debt so the debt ratio become 48% reduced from 51% last quarter and the last one would be our current ratio is 92% okay this is this is a balance sheet so Okay, now we, thank you very much, and now we can begin the Q&A, and please submit your questions and input on the web chat window. Now, thank you. Okay, there is a question asking about Q4's visibility and also would like to know the progress on silicon carbide. First of all, I think our visibility is still not reaching the Q4 yet. We still quarter by quarter watching the backlog and also customers order and so far we still not even reaching the full Q3 but I think we already can provide the Q3 guidance, but not Q4 yet. As to the GDM Nitride and Silicon Carbide, actually, for this technology, it's already become our major technology for our infrastructure business. There are many customers develop or even already mass production with us and then we also provide different kind of Corp Corp Corp Corp Corp is one of the important technology in our infrastructure portfolio. But it's not the only one, of course. We still have a lot of products in the order from customers for Gideon Moss and I, like Kingham Technology for L&A, for example. We're doing even better. So therefore, yes, Corp Corp Corp Corp macro environment and economic issues. So, but we still are confident on the, again, on silicon carbide, because for longer term customers, the infrastructure customers, they like this technology. And with the 5G ongoing, it's replacing the LG Mars, technology is very significant so we still look forward to it.