Win Semiconductors Corp

Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to Winsami's Resolve webcast conference for the third quarter of 2025. My name is Joe Chen, the spokesman and associate vice president of finance in Winsami. 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 resolve for Q3 and provide brief guidance for Q4-25. Secondly, I will go through the financials in detail. After that, we will open to the floor for Q&A. Please freely submit your question 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. 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. Steve Chen, the General Manager of WinSemi.

Thank you, Joe, and welcome everyone. WinSemi conducts are consolidated revenues for the third quarter of 2025, reaching only $4.49 billion, representing a 19% increase quarter-on-quarter and a 3% increase year-on-year, slightly better than expected and making a return to both crucial and annual growth. The standalone growth margin for the quarter-on-quarter 29.1%, up 6.2% from the previous quarter, while the consolidated gross margin was 26.9%, up 8.4%. This improvement was mainly driven by higher wafer output, that capacity acceleration from 45% to 50%. A slightly more favorable product mix and 0.6% point contributed from valuation game on share of a China-based customer held by a consolidated subsidiary. As a result, after three consecutive quarters of operating goods, we returned to profitable with an operating margin of 8.6%. Net income as a parent company was NT$1.07 billion. A third quarter is traditionally a strong season for U.S. flagship smartphone launches. and customers' build-up activity proceeded as printed. With the market expectation for stronger than expected sales, cellular PA shipment continued to grow following Q2, while Wi-Fi PA also sustained its momentum with two consecutive quarters of the growth. The strongest sequential growth came from the optical business. mainly because the smartphone 3D sensing ramp up is concentrated in Q3. Even infrastructure business originally expected to remain flat from the previous quarter host a double-digit growth. As a result, all product segments host sequential growth in Q3. As the year drove to a close, A review of the business performance showed that the significant fluctuation in the smartphone market in recent years has stemmed mainly from political factors. In China's low-end smartphone market, government subsidies and price competition has accelerated the localization of the value of PS price check. Fortunately, we continue to maintain performance advantage and need to high-end enjoy an iOS market. The Wi-Fi business benefits from the transition to Wi-Fi 7, with key customers' market share rebounding sharply, resulting in an annual Wi-Fi revenue significantly exceeding last year. Meanwhile, WIN has allocate more resources to the high-margin infrastructure segment, leveraging our GANIN-R9 and GANIN-9 tri-phase millimeter wave expertise to deepen our presence in the high-frequency and the high-power application. This effort has led to tangible results in low-Earth orbit, which is LEO Aerospace and the AI Data Center and the optical driver IC. As the revenue grows steadily, this year, infrastructure revenue has already surpassed last year's level and is now approaching that of the cellular PA, becoming a key pillar supporting both revenue and profitable. In the optical business, which has long relied on smartphone 3D sensing applications, The impact of the customer multiple source strategy has gradually declined and has been stabilized. Nevertheless, optical revenue has remained around the meeting percentage of the total revenue. Thanks to growing contribution from the AI data center applications and the LiDAR used in automotive and robotic sensing, which are expected to become WIIN's third growth engine in the coming years. On the operations side, WIIN has strictly controlled capital expenditure, managing the depreciation, and optimized asset utilization, and maintained positive operating cash flow with visible improvement quarter by quarter. With the outlook of 2025 Q4, with the continuous pull-in momentum for the newly launched smartphone, consolidated revenue is expected to grow in the low single digits. And the consolidated margin is forecast to maintain in the high 20s level. Thank you. I will turn the call back to Joe.

Okay. Okay, it's my pleasure to present our financial results for the third quarter of 2025. Please refer our presentation slides. From the very beginning of the slides, you may see the safe harbor notice. Please read it over and pay attention. And then, In page three, we show you that our ESG achievement and several awards, and then we update it to the most recent item by item. And now, we start over from the page five. And page five, we discuss about the revenue, which is top line and margin. In Q3, 25, our consolidated revenue was $4,488 million, and QOQ was up 19%, and then YOY also up 3%. And as you guys probably know that The Q1 is our traditional high season for the new flagship smartphone launch from the U.S. brand. And we have several different customers who are also in this supply chain, including the cellular PA and Wi-Fi PA, 3D sensing, proximity sensor, et cetera. And then because of the high season in Q1, so we see most of the customer and most of the product, it's recorded QOQ growth in this quarter. Even the infrastructure originally we expect in Q3 probably only but I think because of the strong AI data center demand and some other point to point. demand, so making the infrastructure also grows for double digits. And the gross margin for Q3, we see significant improvement, mainly driven by several factors. First of all, the capacity utilization increased to 60 percent from 45% last quarter. And secondly, the product mix also slightly better and more favorable to the gross margin compared to the last quarter. And the third one, the The share price increase of a list of Chinese customers, which is held by our consolidated subsidiary, which contributes our gross margin approximately around 0.6 percentage point. Therefore, making the individual gross margin going up to 29.1%, which is from 22.9% last quarter. And consolidated gross margin also going up to 26.9% from 18.5% last quarter, which is increased about 8.4 percentage points. and also making the consolidated operating profit margin to 8.6% from negative 3.1% last quarter, which is improved about 11.7 percentage point. So because of the several factor As I explained it, so making no matter the gross margin, operating margin, it's all have a significant improvement. And so therefore, please refer to the page six. So therefore, after the three consecutive quarter of business downturn and the operating loss, will return to the growth momentum in Q3 and the better of revenue and growth margin improvement with the stable operating expense. So net income attributable to the parent company become total around 1070 million NT dollars in Q3 compared to a net loss in Q2. And also EPS for Q3 become $2.25 NT compared to Q3. negative 0.99 in Q2. And, okay, then please flip to the page six, seven, I'm sorry. Page seven talked about our product mix. Things that the product mix is one of the major factor to making our growth margin improve. So, you can take a look on the Q3's product mix in the very beginning you probably will find out it looks very similar to the Q2 but actually remember the Q3 revenue QOQ was up around 19% which means even The cellular Wi-Fi infrastructure is all in the same range compared Q3 to Q2. It means it's still actually all having around a double-digit growth. Don't mention that the others, which is a majority is optical, improved from 13% to 16%. This is the most significant growth factor in our product mix, QOQ in Q3. If you ask me then what is the second largest growth, I will tell you that's Wi-Fi. Okay, and then after the product mix, then we Please flip to next page in page eight. We discussed about the guidance for Q4. Steve has mentioned that in his management comment, and I'll just repeat again. We expect Q4 25 consolidated revenue to increase about low single digit QOQ. and we also expect Q4 consolidated gross margin to be around the level of high 20. And if you further would like to know about the full product mix, what it looks like in Q4, then I will show you that. I think most of the product mix including cellular, Wi-Fi, infrastructure, optical, will be very similar to Q3. Maybe cellular and the infrastructure have the opportunity to be slightly up a little bit. Okay, then this is the guidance. The next page, we're going to discuss about our financial statement, including income statement and balance sheet. And we can quickly go through the Q3 income statement on page 10. Q3-25. Okay, first of all, before we begin, I would like to remind everybody that all of the figures is under the unordered basis. The actual results are based on the CPA's report. The net revenue for Q3 is $4,488 million NT. and then QOQ was up 19% and YOY up 3%. The gross profit is 1205 million NT and the gross margin become 26.9% compared to last quarter was up around 8.4 percentage point. Operating expense very close to the level of last quarter, it was 820 million. And therefore, the operating, the OP ratio was 18%, and operating income become 385 million, and then operating margin was 8.6%. which is compared to last quarter improved around 11.7 percentage points. The non-op item is positive income around $511 million NT. The detail will be discussed in page 12. Income before income tax was $897 million. And income tax expense was $213 million. So therefore, the net income was $683 million. The net margin become 15.2%. The profit attributable to the parent company is 1070 million NT, therefore the EPS becomes 2.52 NT. So the ROE, which is return on equity, was 11%, and approximately utilization rate is 60%, up from 45 last quarter. And depreciation expense, $936 million. QOQ was down around 10%. You can see the trend is gradually, quarter on quarter, going down. And the car parks, it's $936 3 million NT. And so this is the Q3 of income statement. And next page will show you the accumulator Q1 to Q3 income statement. The net revenue was $11,844,000 NT. The YOY was negative 14%. and the gross profit $2,502 million and the gross margin was 21.1%. Now the operating expense ratio is about 21% so therefore the operating income was $50 million NT and operating margin around 0.4%. The non-op item was again about $235 million. And the income, before income tax was $285 million and then income tax expense $155 million. Later for the next income become $130 million until net margin 1.1%. and accumulated three quarter. The net profit attributable to the parent company was $665 million. So EPS for the first three quarter was $1.57 NT. And the return on equity was 2% for the third quarter. for the first three quarter, the utilization rate average is 50%. For the first three quarter depreciation, expense become 30 hundred and 80 million NT. Compared to the same period last year, it went down around 11%. So it's approached the end of the year. We make an estimation for the whole year to provide to the investor. We find out the whole year of 25, YOY probably, well, the depreciation expense will be around between 13 to 14% lower than the 2024. The cutbacks for the first three quarter was 1320 million NT dollars. That's income statement for the first three quarter. Okay, then the Please flip to the next page, in page 12, discuss about non-op items. Okay, the non-op item, the total was net around 511 million NT. Major items, for example, like foreign exchange, again, 189 million NT. Financial costs, which is interest expense, $181 million. And another major two items, for example, like the gain on disposal of property, plans, and equipment, is what? $1,942 million, which is, as you guys know, that... we sold our fab located on the Southern Taiwan Science Park to the ASE, and this is the gain on disposal, the plant and the facility, which is only the shell, not mass production yet. This is the gain on the disposal of the property. And another one is impairment logs, which is 1,642,000,000. This item, it's a company reported to the shareholder at the 2025 AGN. The company is implementing a downsizing of our farming business in China. And so this figure is the asset impairment by the CPA to refresh the current scale of the operation at several China funding facilities. Okay, and then please click to the next page, page 13. It's about discuss about the balance sheet. The balance sheet, they are September 30th, 25. We still have the cash and the cash equivalent around $5,837,000,000. And see the total assets, $57,828,000, which is it went down from $61,132,000,000 last quarter. The major reason is because we sold the Alpha 30 in southern Taiwan science park to ASE, so therefore the next property and the planned equipment become $21,738,000,000. It went down from last quarter. And because of that, we also, we use the proceeds to pay out part of our interest-bearing debt. Therefore, our total liability went down to $7,867,000,000 from last quarter $23,800,000,000 NT and also making the debt ratio went down to 31% from 39% last quarter. The total equity was $39,961,000,000, which is significant, also significant growth from last quarter, and also reflected our book value per share going up from $86.17 cents NT to 93 dollar and 12 cents NT in the September 30th. So the finally the key index which is the current the debt ratio I mentioned that is 31% and the current ratio also improved to 255% which is making our financial status very healthy. Okay, that's pretty much what I have. Okay, and we now begin our Q&A section, and please submit your question in the input box on the web chat window right now. Thank you. Okay, there's a question asking about the gross margin looks like for Q3 it's surprisingly better. And I think the major reason that we already explained it, it's because First of all, the utilization rate is much better than last quarter, and also the product mix. And because if you take a look for the product mix, you can see that as we mentioned it on the management comment, we We kind of keep the market share for the mid-end and the high-end Android phone and also the iOS phone market. and because of that, without the low-end market, which is damaged the gross margin, will keep the better business on hand. And then on the same time, infrastructure is having a better performance, which is high-margin business. And then also on the same time, Q3 is exactly the high season for 3D sensing business, which is also enjoy the better margin. So several reasons from the gross margin, I mean, our product mix and utilization rate So, therefore, making the margin, gross margin is a lot better than Q2. That's most of the reasons because of that. Finally, and the minor impact is because of our China customers stock. stock price volatility held by our consolidated subsidiary contribute 0.6 percentage point, which is actually, that is minor. The major reason still, the product mix and the utilization rate are better. Thank you.

Corp Corp Corp Corp Corp Corp Corp Corp to like one billion. Yeah, I think, yeah, even we don't increase more capacity, yeah, but we just mentioned for the manager comment, actually, recently year, because of the smartphone market has some structure change, actually, we put more resources to increasing capacity more diversified revenues, such as the optical communication and other optical laser products, and even we have more high frequency, like LEO or GEO, or all kinds of aero or defense, these kinds of new applications. I think those all need some, a little different new equipment compared to original gaming R9, product for the PA especially for the cellular so it's mainly reflect some new investment for some new technology project and I think for the 2025 the whole year CapEx still can maintain our original forecasting around 1 to 2 billion in this kind of range for the capex whole year. Thank you.

Okay, there's a question from investor asking about... Our depreciation expense and also the operating expense, it looks going forward to a good direction and would like to know more color about that. First of all, the reason the depreciation expense, you see that things, the recent couple quarters, The trend is gradually going down. It's because since we stopped doing the major CARPACs and also most of the major CARPACs have happened in the past several years. It's gradually the depreciation and amortization, it's gradually the time, the period is to the end of going down. by the schedule, so see the depreciation no longer going down again, going up again, sorry. And so the trend will keep going down for the following quarters. And operating expense, if you follow WinSemi long enough, you probably In the past, for a long time, our operating expense guidance always give you some kind of percentage linked to our revenue. But since in the past two, three years, downtown, and then now we well control, operating expense especially except the R&D the rest of it we all manage well so you can see that in the recent couple quarters it's all in a very small range around 800 million between 800 and $810 million and $820 million, which this kind of range. And then hopefully we will keep the same going forward. Okay, this is our explanation. Thank you.

Okay, I think we just, I think all the market has read the news that the top two IBM companies, Skyworks and Covo, just announced to be merged in the future. And due to this print, they will be reducing a lot of operating costs and I think it definitely will become a very big change for the whole gaming outside market but for WinSemi we think that to provide WinSemi a better chance in the future because of First, these two companies are Wynn's existing customers since more than 10 years ago and they are still keeping business with Wynn Semi every year. Even sometimes they may be one of our top 10 customers. Like we see, like we discussed in the previous conference, actually start from this year, actually we, or last year, actually we already see these two companies have more engagement with Winsami. That means, actually, Winsami's technology really can compete with the internal technology, and everybody knows Winsami is the foundry that's still keeping a very big energy for R&D developing, and keeping to upgrade our technology, no matter for the cellular, Wi-Fi, and even the infrastructure or the satellite aerospace so I think after the merge that company will cover all the microwave technology and frequency and that's very the same like Winsami technology roadmap so I think for now actually the project that collaborate with collaborate with Winsami should We don't see any kind of change. And also in the future, I think, because WinSemi right now is the only foundry qualified for the Tier 1 iOS company. And those companies, those... Business is still a lot of proportion related to that. So if they want to become a Fed-like company, I think definitely WinSemi could have a better chance to have a better foundry business in the future. Thank you.

Okay, the time is 4.20 p.m. right now and there is no further question in the slot. Now we thank you. We're going to thank you for your participation and then we'll finish the call and then thank you again for participate for the WinSemi conference and there will be a webcast replay within hours. Please visit www.winfundry.com under the investor relations section. You may now disconnect and thank you again and goodbye.