E Ink Holdings Inc. ($8069)

Good day, everyone, and welcome to E Ink Fourth Quarter 2025 Earnings Call. [Operator Instructions] After the presentation, the webex replay will be available on E Ink's website after the conference. Joining us today are CFO, Lloyd Chen; and Finance Center Senior Director, Patrick Chang. With that, I'll turn the call over to Lloyd.

Good day, everyone. Welcome to E Ink's 2025 Fourth Quarter Earnings Conference Call. Before we start, I would like to briefly share a few applications. Examples of ePaper shown on the cover page. Basically, we joined ISE Integrated System Europe. We can see on the ePaper gradually rapidly expanding in the digital Signage and retail display market. So this year's exhibition, more than 30 ecosystem partners showcased a wide range of ePaper applications. We prepare a video clip later, so we can see more information in that video clip. All right. Next page. All right. So we take a few moments to look at the safe harbor statement. All right. Next page. So let's look at some key highlights in P&L. So for the full year '25, the consolidated sales revenue amounted to TWD 36.1 billion, representing 12% year-over-year increase. Operating profit reached TWD 10.67 billion, up 40% year-over-year growth. And the net income totaled TWD 10.5 billion with associated EPS of TWD 9.14. The sales revenue for '25 was the second highest in the company's history. But both operating profit and net income reached record highs with net income surpassing the TWD 10 billion level. Next page. So driven by sales revenue growth in '25, operating profit increased up to TWD 10.7 billion with operating margin maintained at nearly 30%. Next page. So on the asset side, total assets increased from TWD 91.2 billion to TWD 107.2 billion, representing the year-over-year increase of TWD 16 billion year-over-year growth, about 18%. The net asset value per share reached TWD 59.6. Next page. As for the cash flow, in '25, both cash position and the pure cash position and financial assets continue to increase, reaching a total of TWD 70.4 billion, up by TWD 11 billion compared with the end of last year. The company continues to maintain strong profitability and healthy cash flow. With ample capital resources, we will allocate funds appropriately in line with operational plans to support sustainable growth. okay? And for dividend, the EPS, as I mentioned earlier, is TWD 9.14. So once again, marking the highest in the company's history. The dividend distribution will be TWD 5.9 per share and with a payout ratio of 65%. And the next few pages, we would like to share E Ink. strategic value within AI infrastructures. I think AI has been -- it's no longer a race for computing power. It's also a race for energy efficiency. As AI continues to advance rapidly, energy demand is becoming one of the most critical challenge in facing the global technology industry. Market research indicates that electricity demand from AI-related computing and infrastructure is growing at an approximately 15% CAGR annually. So AI is expected to add about 469 terawatt hour of global electricity demand by 2030 compared with 2025. And amazingly equivalent to Germany's annual power consumption. In the commercial electricity cost terms, that would translate into more than USD 70 billion. So across the AI value chain, display devices, the interface that interacts more directly and frequently with people have long been overlooked from an energy efficiency perspective. So as AI digital services continue to scale, display devices are no longer just tools for presenting information, they are increasingly become an important part of the energy infrastructure that support AI operations. As power demand from AI keeps rising, improving the energy efficiency of endpoint display is one of the most direct and cost-effective ways to reduce overall energy burden. So we would like to say with our ultra-low power consumption, ePaper display can definitely help unlock more energy resources for AI computing and digital services. That is in strategic value within the AI ecosystems. And having said that, the AI needs computing power, computing power needs energy. So I think fundamentally, transforming display technology definitely will be the key way to release that energy. Display are critical because display systems are one of the largest fixed electricity loads in public space today. So I think for those who are familiar with us or maybe you are not familiar with us, our technology basically ePaper uses by stable display architecture, meaning power is only consumed when the image changes. So for large-format applications, the conventional LCD Signage display operating 14 hours per day consumes approximately 283 watt hour per day based on the average power usage of 30- to 80-inch display. But our ePaper display consumes only about 2.53 watt hour per day. So if I convert into the percentage, basically reducing display-related energy consumption by approximately 99.9%. That's a huge saving. So on an annual basis, each ePaper display can save around 759,000 watt hour of electricity. So if approximately 680 million ePaper display were deployed. In other words, if we can replace those LCD and LED display, the total electricity saving could offset the number I just mentioned, 469 terawatt hour of additional electricity demand expected from AI between now and 2030. So I just mentioned equivalent to the whole year on Germany's annual electricity consumptions. Next page. So if I express differently in different ways from a carbon reduction perspective, the electricity demand associated with AI I just mentioned, the energy saving impact mentioned above is equivalent to reducing approximately 223 million tons of CO2 emissions, which is comparable to removing 48 million cars from the road for 1 year or you may say, equivalent to carbon absorption capacity of 3.7 billion trees. So again, E Ink will continue to expand ePaper application in smart retail transportation information system, enterprise digitalization and smart city solutions while working closely with global ecosystem partner to further enhance the energy saving value of ePaper in the AI era. So to sum up, AI needs power. We E Ink saves power. Okay. So we would like to bring you more some marketing information. So diversified and innovative application continue to be an important foundation for our long-term growth. So this quarter, we have seen our partners continue to introduce more color products, while application scenarios further expanded, supporting the ongoing extension of the ePaper ecosystem. So as you can see from the screen in the eReader and eNote segments, leading brands, including BOOX, Bigme, Hanvo, iFLYTEK, iReader, Kindle, Readmoo, reMarkable and [indiscernible], you name it, have launched new products powered by the latest generation of ePaper technology, further increasing the adoption of ePaper applications. At the same time, ePaper is gradually expanding into the new device categories such as Ledger's hardware wallet and Reetle's ePaper smartphone case. This product launches reflect how ePaper applications are gradually expanding beyond you may say, traditional reading devices into a broader range of end user categories, which over the longer term also supports the continued expansion of ePaper ecosystem across different application scenarios. And I think this page show different user application and even the new application through different categories. So on the top left, we partnered with Simple Mart Retail and M2COMM. They are local Taiwanese retailer and Taiwan local SI to establish Taiwan first smart retail media network. Basically, this is the experience store centered on color ePaper at Hsinchu Market. And also our partner, Aura, they launched the Ink ePaper photo frame in U.S. and also InkJoy PickPac and Japanese partner Design Incorporated have also introduced color ePaper photo frames. And right in the middle, there is electric guitar brand, it's called Cream Guitar, has introduced the world's first electric guitar featuring our PRISM technologies, color changing technologies. This model is called DaVinci. And we also work with a Japanese partner, Oricom, together with Tokyo Metropolitan Bureau of Transportation launched the sustainability-focused media platform. They call it Tokyo Sustainable Board, as you can see from the image on the right-hand side from the screen. Okay. I think I just talked about the ISE, the exhibition we joined and more than 30 of our partners also showcased the variety of the Signage products. And we also joined NRF, another exhibition in the States, a National Retail Federation. So from the screen, the upper left image shows a 32-inch ePaper smart Signage solution jointly launched by Samsung and Bish Creative. And the image right in the center, that's our Spectra 6 technology, basically, that including Sharp, the branded A-Series professional displays and also 75-inch large-format ePaper display panel, which can be used for immersive retail media, promotional messaging and digital shelf communications. So we also prepare a video clip for your review. It's about those -- the new product being showcased at ISE. Please take a look. Please wait for it to show up. [Presentation]

All right. So the following page, I'm going to talk about the ESG. So CDP is one of the most important international organizations evaluating company's environmental management and capabilities. We received a AA list in CDP's climate change and water security assessments. Basically, this recognition not only demonstrates our concrete actions and strong commitment to addressing climate change and protecting water resources, but also reflects our outstanding performance in sustainability. And also in the S&P Global Corporate Sustainability Assessment, CSA, we achieved an outstanding 93 points, ranking highest in the global electronic equipment, instruments and components industry for the second consecutive year. This score basically 1 point higher than the previous year, continue to set a new industry record. As a result, we were recognized among the top 1% of the companies worldwide in 2026 Sustainability Yearbook, reflecting our strong commitment to sustainable development. And one of our most important activities, eRead for the Future. This program, we have doing it for 9 years already. We came to Miaoli locally in Taiwan, where we partnered with 21 ecosystem partners to provide color ePaper and reading resources to local schools. Basically, this program promotes digital reading, reduces educational gaps and supports long-term learning opportunities for students. And we also were named a sustainability leading company in the manufacturing category by Ministry of Labor, acknowledging our focus on workplace safety. And locally in Taiwan, there's annual Taiwan global brands that's the name of the world. So we will be ranked #20 among the best Taiwan global brands with the brand value -- dollar value of USD 132 million with the year-over-year growth of 26%. This recognition reflects the growing visibility of the ePaper ecosystem and our continuous innovation. And I think as you can see from the screen, we received multiple recognitions at the Taiwan Corporate Sustainability Awards. So I will not go into the details. Next page. So last but not least, in the past, we primarily exhibited at Touch Taiwan. But this year, we will not be there. So we will be shifting our focus to Computex. And the ePaper technology has been developing for many years with a growing range of color display innovations. So through the Computex platform with a strong international visibility. So we hope to attract more global buyers and partners together with our ecosystem partners, we will showcase comprehensive total solutions for ePaper application at that exhibition. So if you happen to be Taiwan or if you really like our technology, you may consider to come to Taiwan early June. So we will be showcasing the latest and greatest technology together with our ecosystem partners from 2nd to 5th of June. And our booth will be located on D0101, okay? So we sincerely welcome everyone to visit and explore the exhibition with us. All right. Thank you. So we can move forward to the Q&A session.

[Operator Instructions]

We received a few questions online. The first one is the outlook of this year. I think in last quarter, we provided the guidance about the 2026 outlook. I believe our guidance remains the same. So we believe and we are expecting year-over-year growth compared with 2025. And we even believe the next year, '27 will be better than this year. And for second quarter this year, I think we have the earnings conference in Mandarin, I think, 1 hour ago, one of the questions being raised, what will be happening to the second quarter. And our guidance is, I think the second quarter last year was the record high due to a lot of pins. So this quarter -- this second quarter, we believe we may not be able to beat the second quarter last year. But I think it will still be the second best historically. So second quarter this year, we believe still will be quite good, even it will be second best. I mean last year's second quarter due to the pooling that was historically high. But second quarter this year remained to be quite good. And for first quarter this year, we believe we will be the year-over-year growth compared with the first quarter last year, okay? And the second half remains to be seen. But for the whole year, we believe it will be better than last year. Okay. And I'm just reading those questions. Are there questions online? I think one question is about the -- our sixth flight in Hsinchu, but our ninth flight globally. So H6, I think the time line is we basically will move in the equipment by end of this year, but it will start ramping up next year. So we may need a quarter or 2 to get everything ready. So that's sort of the time line for H6. And one question is about the '27 outlook. What makes we think the '27 will be better than '26, why we are so optimistic. I think -- let me put it in this way. One of our strategy is to bring the color technology to the new products and new application. So from CE perspective, even under the macro uncertainty, we still -- it still show a year-over-year growth. So we believe with the color technology, we can still trigger further growth on CE. Of course, how soon it will go, I think it's a bit tied up with the macro uncertainty, but we still believe it will grow it. And for ESL, we believe digitalization and automation basically will be the trend for ESL. So from that perspective, we believe we are expecting organic growth on the ESL. So from that perspective, the year-over-year growth, that's something we are expecting on ESL. And for Signage, also digitalization and automation seems to be the trend for the outdoor Signage. So given those factors I just mentioned, that makes us to conclude the further growth in the following 2 years. And one of the question is relevant to the Signage gross profit margin. For Signage, I think the business model to begin with still based on the module because even we have a limited module capacity, but we still have one production line for Signage module. So at the beginning, we will be running the module business. So I think CE is also running the module business. So you should know the gross profit margin. But once that particular Signage production line is fully utilized, we will shift our business model from module to material. So the basically gross profit margin then will be similar to the material business we are having now. So that's sort of the flavor I can provide on the Signage gross profit margin. And I think one question is about the demand for ESL. So as mentioned earlier, digitalization and automation definitely will be the trend for the retailers. So I think you should be quite aware that Walmart project is still ongoing, and it will be carried forward to next year. I don't know when it will be ended next year, but we have a lot of trial and POC with other retailers. So -- and nothing really committed, but since I also mentioned we are -- we believe the ESL business is on the organic growth mode. So the trend for ESL growth is still quite intact from our perspective. And that also make us to conclude the ESL business will still be growing in the following 2 to 3 years. There's one question about -- yes, another question about the H6. The question goes like this. Given the fourth quarter softness, the company has a plan to defer H6 spending. I think I just answered that question. The plan remains the same. For H6, the equipment will be moving this year, and we will start ramping up. It may take a quarter or 2. So the plan remains the same. Let me elaborate a bit about the softness on fourth quarter last year. I think due to the pooling in first half, last year. So that affect or that lead to the softness in the fourth quarter. And also for CE, for ESL, that basically is relatively low season for these 2 business segments because for ESL, they will not adopt the new technology during the, for example, Christmas. And for CE, for example, they always built the inventory before the Christmas, which is third quarter. So due to the pooling happened in the first half last year and also the seasonality, as I mentioned, that basically led to the softness in fourth quarter. But the demand for ESL is still intact, as I mentioned earlier. And CE, it's a bit relevant to the macro uncertainty, but we still believe it will be growing this year and even next year. There's a question about the H5 ramps. Are there any structural issues that could limit build improvement reaching management target? Can we share more detail on what the operational bottlenecks might be related to clarity. The H5 reps so far so good. I have to admit it took relatively longer than we thought for the reps because it's large format. We use a bigger size of the equipment. And this is the first time we manufacture large-sized ePaper. But so far, so good, yes. Yes. I believe, yes, I pretty much answered all the questions. Okay. So thank you for your participation. Yes.

So this concludes our Q&A session. Thank you for your time to follow our call, and see you next quarter.

Yes. Thank you very much. Bye-bye.