Win Semiconductors Corp

Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to WinSemi's Result Webcast Conference for the third quarter of 2024. My name is Joe Sun, Spokesman and Associate Vice President of Finance in WinSemi. 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 company's results and provide brief guidance for the fourth quarter of 2024. 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 Harbor Notice on page one of the presentation slide. Please note that this presentation contains four looking statements, and these statements are based on our current expectations. The actual result may differ materially from our expectations, and the company undertakes no obligation to update its forward-looking statements going forward. Now, let me hand over the call to Mr. Steve Chen, General Manager of Winstain.

Thank you, Joe, and welcome everyone. In the third quarter of 2024, Our consolidated revenue was $4.3 billion, up 4% year-on-year, and down 12% quarter-on-quarter, which was slightly softer than our previous expectation. As the capacity utilization rate declined from 65% in the previous quarter to 50% this quarter, Our growth margin dropped from 27.2% in the previous quarter to 21.6%, and operating margin fell from 10.1% to 2.9%. Net profit attribute to the parent companies from the third quarter was $0.27 billion, which with an EPS of 0.54 in NT dollars. For the first three quarter of 2024, cumulative revenue increased by 25% year on year with an EPS of only 2.64 in NT dollars. While the third quarter is typically the traditional peak season for US-based IOS smartphones, we had previously anticipated that due to the soft demand in Chinese-enjoyed smartphone market, the third quarter this year would be below seasonality in the peak season. It now appears that The decline in the demand was greater than we previously expected, and thus cellular PA revenue had the most significant quarter-on-quarter decline in the third quarter. Wi-Fi PA revenue also declined from the previous quarter as the peak season of the inventory deposition of the new model launched in the second half of the year had passed. However, driven by the introduction of Wi-Fi 7, Wi-Fi revenue in the third quarter and the first three quarters increased by 50% and 70% year on year. Respectively, in addition, revenue of the infrastructure was better than expected in the second quarter due to customer inventory restarting and the revenue in the third quarter was also better than expected, even though it was slightly lower than the second quarter. Finally, optical revenue entailed the peak season as expected with the launch of the new iOS model, making it the best performing segment in the third quarter. The current inventory level of the smartphone customers are much healthier than the first half of last year. By the end, the market demand was fluctuating since the beginning of this year due to the factors such as political tensions and the economic downturn in China. This fluctuation continues to has the accessibility of both upstream and downstream suppliers in the supply chain. In response to the market change, in addition to maintaining our integration business, we have invested heavily in R&D, focusing on the best high-value-added product business opportunity in the coming years. Taking note of offers satellites as an example. We not only continue to developing high-power semiconductor devices for signal transmission and the reception between satellites, but also provide customers with data transmission solutions between satellites to get away. Meanwhile, to meet the further demand for AI data centers, We not only participate in industry alliance to keep open cooperation with upstream and downstream suppliers, but also collaborate with several customers to develop related optical data transmission reception and also modulation components, as well as optical driver IDs. We aim for This development to become another mid- to long-term screwdriver on top of mobile wireless communication. Looking ahead to the fourth quarter of 2024, as the demand in China's smartphone market remains weak and the peak season of Wi-Fi 7 PA inventory fields for the new model launch in the second half of this year has passed, Okay. Okay.

Okay, it's our pleasure to present our financial results for the third quarter of 2024. Please refer to the presentation slides. We, starting from page two, please read all the steps after notice, and then, starting from page four, we discussed about revenue and the margin. And the Q3 24 revenue was 4.35 billion and the QOQ down 12% and the YOY was up 4%. has been mentioned by Steve on his management comments for the Q3 revenue down the most of the sector will be the cellular and the Wi-Fi which is on the high volume the high volume business. And because of that, the high volume business went down most, so the utilization rate also went down significantly to 50% from 55% last quarter. and then making the unit cost went up dramatically and then impact the growth margin. So therefore the growth margin declined by 5.6 percentage points to become the 21.6%. And operating margin therefore also declined 7.2 percentage points to become 2.9%. And because of the cellular and the Wi-Fi, the weaker of the cellular and Wi-Fi demand in Q3, and given the lower inventory pull-in by customer and also decline the utilization rate, therefore the earnings, please take a look on the page five. The net profit attributable to the parent company was 228 million NT and therefore the Q3 EPS was $0.54 NTD. The accumulated Q1 to Q3, the EPS was $2.64. That's for the income statement from top line to the bottom line. And now, please refer to the page six we can discuss about the problem in Q3. In Q3, as we mentioned, the measure, the slowdown mainly coming from cellular and the Wi-Fi. So you see that the cellular PA The percentage was between 35 and 40%. It went down from 40 to 50% in last quarter. And the Wi-Fi, it looks like, remained on the same range, between 15 and 20. But actually, we still have the double digit of slowdown. and the infrastructure. See that the infrastructure maintained about between 25 and 30%. And actually, the QOQ only went down about low single digits, which is better than our expectation in the very beginning. The overall, we see that infrastructure has a better performance this year from last year. And finally, the optical business is 16% of the total revenue. is coming from 12% last quarter. In this quarter, optical is the only factor which is growth of the business. That's all because of the The second half, new fraction model launched the new model on time and then exactly benefits our customer, which is pretty same thing. And so that's what happened. And next page, please click to page seven. talk about our guidance for Q4. I think Steve's management comment has already mentioned it. We expect Q4 revenue to be kind about mixing QOQ. I think the reason and pretty much the same as Q3. which means that we see that the China smartphone market still remain weak and Wi-Fi, I think the Wi-Fi pool, the inventory pooling for the second half new model almost over. and so the high season, the peak season for the inventory pool for the second half new model of Wi-Fi components, I mean the Wi-Fi TA, the peak is already happened between Q2 and the Q3 and the Q4, we see that the Cygnetis are going down. This is the two major products will be weaker in Q4. On the contrary, we see the rest of the infrastructure and optical business will remain fresh in Q4, which is good. And then, however, because of revenue going down mid-teen, we expect the utilization also will impact it again. And then, so the growth margin also impacts the growth margin to be around the level of high teens. That's our view for Q4. Okay. After a couple pages of summary, then we can quickly go to the financial results, financial statement. First of all, the income statement for Q3. Before I begin, any number of figures I mentioned will be on audited basis, and the actual results should be based on The Q3 net revenue was 4348 million NT and QOQ was down 12% while YY was up 4%. And the growth profit was 938 million and the growth margin become 21.6%. and under the 50% of the utilization rate you see that the most similar utilization rate is a year ago Q3 also 50% and the growth margin is pretty close to this quarter. And operating expense is $813 million. Although this figure is lower than last quarter, however, because of QC's top line, QOQ is down 12%. So the operating ratio was a little bit higher, become 19%, and therefore the operating income was 125 million NT. So operating margin become 2.9%. And the non-op item was the non-operation income was 121 So the income before income tax was 247, and then the net income becomes 210 NT dollars. 210 million, sorry, 210 million NT dollars, and the net margin was 4.8%. The net profit attributable to the parent company becomes 228 million NT dollars. So the EPS for this quarter was 0.54 NT. And the ROE for this quarter is 2% and depreciation expense $1133 million. It was a little bit lower than last quarter. But the CapEx is $424 million, a little bit higher than last quarter. So that's the Q3 number. And now, we go to the page 10. accumulated Q1 to Q3. The net revenue was $13,754,000,000 NT and the YOY was up 25%. The gross profit $3,284,000,000 and then therefore the gross margin for the Q1 to Q3 is 23.9%. Operating ratio for the three quarters total was 18% and operating income was 810,000,000 and therefore operating margin become 5.9%. The income before income tax was 1011,000,000 for the net income for the accumulated three-quarter was 870 million. The net profit attributable to the parent company becomes 1120 million, and therefore the ETS for the first three-quarter was $2.64. And the return on equity, for the first three quarters was 4%. And the operating utilization rate was 55% average, and the depreciation expense was pretty close to the same term last year, was $3,462 million. The top half, is lower than, our expectation is also lower than the same term of last year. It becomes $1,070,000,000. Okay, this is the income statement for the first three quarters. In the next page, on page 11, It's a non-op item. I think we can leave it for your own reference. And the last page on my presentation slide will be the page chart. It's a balance sheet. At the September 30th, 2024, The cash in the cash equivalent was $5,673,000,000. The total assets was $64,209,000,000. And the total liability was $26,009,000,000. And therefore, the tax ratio, it went down 1% to become only 1%. The total equity went up to $38,200,000,000. And also the full value for share also went up to $87,029 from 86.52 last quarter. So then finally, the same ratio of 41 and the current ratio It went up from 110 to 141%. That's my part. Okay, now we can begin the Q&A. Please submit your question in the input box on the webcast window now. Thank you.