Parade Technologies, Ltd. (4966) Earnings Call Transcript & Summary

Welcome, everyone, to Parade Technologies Limited's 2025 Third Quarter Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang will present 2025 third quarter financial results first. [Operator Instructions] [Foreign Language]. After the presentation, there will be a question-and-answer session in English by CEO, Dr. Jack Zhao; and Vice President of Finance, Mr. Kuowei Wu. And we also will remain last 15 minutes for the attendees who would like to ask questions in Chinese. Please follow the instructions given at the time if you would like to ask a question. [Foreign Language] I now would like to introduce Mr. Yo-Ming Chang, Investor Relations of Parade Technologies. Mr. Chang, please begin.

Thanks Jack. Welcome, everyone, to Parade Technologies 2025 Q3 Webcast Investor Conference. Parade Technologies third quarter 2025 consolidated revenue was USD 146.14 million and net income was USD 27.24 million. It's both basic and fully diluted after-tax earnings per share were USD 0.35 and USD 0.35 respectively. This result, compared to consolidated revenue USD 136.25 million and net income of USD 23.58 million or USD 0.30 and USD 0.30 per basic and fully diluted share in the year ago quarter. In U.S. dollars, the third quarter revenue increased 9.47% sequentially and it was up 7.26% year-over-year. The gross profit in the third quarter of 2025 was USD 62.11 million, an increase of 7.93% from the previous quarter and an increase of 7.91% compared to the same quarter of last year. On September 3, 2025, Parade introduced the availability of 4 new PCIe Gen 6 linear redrivers for server, storage and high-performance AI scale-up data center cabling solutions. With industry-leading linearity, the PCIe Gen 6 revenue or redrivers provides profound Equalization (EQ) up to 18dB while upgrading from a single supply. The PS8594, PS8598 and PS8596 devices utilize Parade speed migration path methodology matching the Intel PCIe 6 standard for map for easier high-speed routing and evaluation between PCIe retimers and the Parade linear redrivers. Fully compatible with all previous PCIe specifications, the PS859X series is an excellent choice for motherboard, backplane, AIC and the cable applications. On September 17, 2025, Parade announced the availability of the PS8780 USB4 version 2 Gen 4, Thunderbolt 5, DP 2.1 autumn directional linear redriver for active cable and the notebook PC workstation system applications. It is pin compatible with the PS8778 USB4 Gen 3, Thunderbolt 4, DP 2.1 auto-moder directional linear redriver. The PS8780 supports USB 4 version 2 up to Gen 4x2 or 2x 40 gigabits per second symmetric and 120 gigabits per second asymmetric modes. Thunderbolt 5, 2x 41.25 gigabits per second and the DP 2.1 Auto-Mode USB R20 link rates. It implements USB4, USB 3.2 and DP 2.1a power management, including DP 2.1a advanced link power management. Its low power design and the modern standby support greatly extend battery life for mobile devices and minimize power consumption for active cables. PS8780 comes in a very small package idea for cables or space constrained designs. Based on the current business outlook, Parade is providing the following guidance for the fourth quarter of 2025. Revenue is between USD 123.5 million to USD 136.5 million. Gross margin is between 42% to 46%. Operating expense is between USD 33 million to USD 36 million. [Foreign Language] It is my presentation for the 2025 Q3 financial results. Now, I transfer to CEO Dr. Jack Zhao to answer your questions. Jason, you may begin.

Yes, thank you, Yo-Ming. Ladies and gentlemen, we will now begin the English question and answer session. [Operator Instructions] Thank you, first one, we'll have Al Wang, HSBC for questions.

Can you hear me? This is Al Wang, from HSBC. So, my first question is, I'm curious about the product mix in third quarter and the outlook for the next quarter.

In the Q3 2025, the DisplayPort or those TCON-related, we call the DP product was about 40%. Our high-speed product, we call the PS product was a little below the 50%. And our TC or our soft driver product line was lower than 10% and our TT or stand-alone touch product was lower than 5%. And in the coming quarter, this Q4 quarter, and we don't see percentage or variation that much and the product line probably more or less in the percentage in the similar situation. Only one may have a higher percentage will be the TT because we start to shipping or deploy our TT device, which we consider as in the category of TT segment. And I think we already introduced to the investment community, we have integrated the TCON driver and touch together we call the TT device. And those devices were mass production in the Q4 and will belong to the TT category.

It's very clear. I have a follow-up question regarding, since we have the TCON for the standard-plus clients. So, I'm just curious if there's any opportunities to provide chip solution to this standard-plus client going forward?

Yes. We are designing the TCON type of advanced TCON product for Standard-plus customer and as we are talking now. And we continue receiving more so-called IFQ IFR for many products including high-speed type of product as well. So, we are pretty busy to working with the customer to provide more device and more technology and more opportunity, more the variation of products.

Next one, Daniel Yen, Morgan Stanley.

So, my first question will be regarding your near-term outlook. For your 4Q, based on your guidance, on a U.S. dollar basis, you are looking at revenue to be down around 10% quarter-to-quarter. So, if I look at the number comparing to last year, that also means your year-over-year is in decline. So, I'm wondering what's the major driver for the 4Q relatively the weakness. Do you see any segment or any particular clients like Standard-plus or standard clients driving the weakness? Or it's just the overall industry inventory digestion? Yes. So, the first question is maybe regarding the very short term your guidance.

Okay. Thank you for the question. But I wasn't sure that the year-over-year Q4 compared with last year will be declined. And so that's the first thing I would like to correct. Yes, based on the guidance, it's not necessarily it will be declined, okay? And on the Q4, the PC and notebook compared to Q3, there are 2 factors. One is seasonality is kind of reduced in the Q4 versus Q3. The second one, I think we start to see from the September, we start to see the weakness on demand from the DHL. And we thought it could be likely the customer might have more inventory due to the tariff in the previous quarters. Now they are doing the inventory control, inventory correction. That's the 2 factors we think is happening in the Q4. Other than that, I don't see any pattern or any design loss and something else, okay?

Got it, Jack. So again, Jack, I think every time you can give us some view beyond just 1 quarter. So, at this time, I want to consult your opinion again. Looking beyond the 2025, let's say, 1Q 2026, do you think this time the customer will start to restock again in 1Q '26? Or it's still too long? It's still way far away for you to comment this. Just I want to consult your opinion.

I think I'm not sure how I answer this question. I think that we read many of the research report as you do. And in general, 2026, the notebook PC continue our growth, but in the lower single-digit percentage as we read. And however, for our own product, and we continue to see our strength on the USB4 retimer. And for 2 factors, one is a new platform will start to ship in. Another is notebook adoption, more USB4 retimers instead of 2 port, may have 3 port or those kind of situations. And we have our TT device openly just said and has huge wide rate adoption, and that will benefit our 2026. And third one will our USB hub and gain a lot of traction on the market. So, the 2026 for Parade, we may continue growth. And relative to the small growth, the PC and notebook shipment in unit, we probably will have growth which will be higher than that.

I see. It's very clear. Yes, from me, the second question will be regarding some of your new, potential new business opportunities. So since we have all, I think we have PCIe, we have USB4, we also can provide some of the legacy SATA interface. All of these are already CVCON proven with our foundry partners. So I'm just wondering, Jack, can you give us some idea, is there any new TAM we can try to address. Now we are still mainly in the notebook, but how about desktop? Is there any new opportunities? And how should we think about the TAM and also the ramp-up timing?

It has been our, the strategy for about a few years. And I think I had a talk before. We call it ASIC-like opportunity. What that means ASIC-like is we work with the customer; customer define a chip spec for their own application. We use our high-speed IP and others to design a chip according to their specification. And we own the product, we own and sell to that specific customers. And that has been our strategy because as you realize, we have many high-speed service and so on and so forth and that has been proven in the marketplace, those are pretty good value for many customers. So we do have multiple applications with multiple Tier 1 customers. And so yes, for the, a lot of engineering resource, particularly in 2026, a high percentage of our engineering resource will work on those products and work on those opportunities. And typically, those demand a much higher speed for different category of applications. So, I think that's our new strategy. And so far, we feel it worked out pretty well because those end customers are Tier 1 and business or sort of visibility are much better, but the chips are much bigger. So those are the things as a new opportunity. And we think in the next few years, might become our big segment for our business. And that strategy has been developed or developing for a few years because we have proven our high-speed service or IOs and high-speed IPs in the deep submicron, for example, 12-nanometer, 6-nanometer, so on and so forth. So, we spend a couple, I mean, one or more to test out those to prove those IPs. And now we are doing real product with real opportunity with a few of our customers, and we think we may be able to do more. And that's where we are. And our engineering team, large percentage of the engineering team next year will focus on those opportunities.

Got it. So, if I may follow up, from your point of view, this kind of ASIC-like business, do you think you are targeting a very similar gross margin profile versus the corporate average now or since you are putting more engineering resource, then you require higher return. So just wondering what will be your strategy on how do you think about the profitability target for the ASIC-like businesses?

If you look at what do we do with the standard-plus customer and it's a very similar model on the business side, right? And they put us back there we design the chip. So we have been doing this arguably more than 10 years or almost 15 years, but it was just for the standard-plus customers. And now we just expand but expand a different category of customer and more towards using the high speed. And in fact, the multiple companies are interested. In terms of the gross margin, we should, yes, there's not much change at least from this, from the world we view and from the business engagement and yes, I don't see any difference, or any margin where if it changes, it would be better.

Next one, Rung Hu, UBS.

My first question is regarding PC market development. NVIDIA and Intel have announced closer collaboration in September. I wonder if there will be any potential impact on Parade Technologies' business and product development. That will be my first question.

Which announced, could you repeat again? I missed the first portion.

NVIDIA and Intel's collaboration.

Okay. Okay. I would think the NVIDIA and Intel cooperation are good, right? Because I thought, I don't know the detail, but I would think the Intel make NVLink and also the software side. That's what I think that will make Intel in the data center a lot more powerful. This thing seems we look at a positive because the market will demand more high-speed device and ultra-high-speed device. And those are positive for Parade in general. But those are indirect. I don't see any direct relationship there.

Got it. So my second question will be regarding your latest development in auto business. Wonder if you could share with us more about this business opportunity.

We're doing quite, I think 2025 versus 2024, our revenue in the automotive grew significantly. I look at it on the revenue side, very high percentage there and mainly associated with the EV car in the U.S. and also some of them in Germany and in China. We're continue designing our, with this particular customer, our high-speed converter for display and our so-called display hub for the infotainment and USB box for the automotive and as well as those connect to our display solution. And we just got the first ever the eDP-based TT device for automotive and the customer actually get very excited. So we expect 2026, the automotive will grow further. And yes, those are the; automotive as a whole, the revenue comes up slowly, but pretty steady. So we're looking forward to more the automotive revenue creation there.

Next one, Vivian Yang, Nomura.

So just a follow-up on the auto business. Can you tell us like how much of auto is like a percentage of your revenue currently? And do you have any target for longer term?

I don't know exactly, but at this moment, it's still kind of single digit. And it will grow more meaningful in the next few years, which means over 10% type of thing. So yes, we are still take all the opportunities and design with customers. The only thing is auto guy qualification typically take a longer time than the PC and notebook. But we do have a pipeline in place for our solutions.

Okay. And my second question is regarding the guidance. I think you provide a standard gross margin range. Just wondering, do you see any impact from rising or OSAT cost? And also for the OpEx range, it seems to be $1 million higher. Can you provide more details on that?

The OSAT price increase still remain manageable. Only thing is more few impacts was gold and some of packaging related to gold and gold increased quite significantly. On the other side, the general foundry wafer price are dropping or at least not increasing. So, net-net, the operation cost we do not expect much of operation cost increase. And that's the current view. And of course, we have to look forward for the 2026 and we try to see anything. And I understand what you more referred to as BT substrate shortage. And we use BT substrate, but we don't use that many. Many of our product is QFN based. So that's, I'll try to explain also the CSP based, basically, you don't have a package.

Next question, Lucas Liu, from KGI.

Okay. So the fourth quarter is like shaping up to be a year-end low season. How do preliminary view next year's first quarter? Will it still be a low season? And in which quarter do you expect the next round of customers pulling inventory restocking?

I only can comment based on the normal, the seasonality. I think that's what we observed. And I think Q1 probably still is okay, Q2 is slightly higher, but Q3 is much stronger. That the Q4 is a little bit lower and those kind of seasonality. But overall, 2026, our modeling is based on unit growth of notebook, which is within the low percentage globally. So however, we pay more attention to our own growth on the strength of our current product line, new product and the new introduction device. So we understand the market, the demand in terms of unit, it's on a lower percentage, but we have to, in that environment, we have still grow based on our new technology device and also the new direction as the other analysts asked that we have a new strategy. We'll start to gain some time to go. Of course, the longer time, we will gain much bigger as we can see.

And can you share now a ranking of current pricing pressure across your product line and which one face the greatest pressure and which are relatively lighter?

Certainly, the panel solution, the traditional panel solution, which is source driver plus TCON are most priced product and really due to the many China start-ups and come out of those source driver device, right? Those are the, as we talked many times. To us, we effectively have the solution which we do integrate the driver, source driver TCON and touch chip integrated. And after many years of hard working and development and those devices are into the production, and we are very, very busy to bring in many models for many OEMs. So next year, on that segment, we will have a massive deployment with the good revenue associated with those. And those devices are new and competitor has not come in. So those are the areas we are in and include the TT device, the integrated TCON and source driver. And we, on those cutting through the area of source driver plus TCON and very traditional, the architecture, yes, those price pressures are high. We still participate in those lowest segment, but it's less compared with many years ago.

And I will have some follow-on questions for the standard plus customer, especially on its high-speed interface product side. What can we see this customer's high-speed interface products growing moving into next year? Is there any new products or new opportunities we are having?

We have pointed out previously, we have many discussions going on and IFQ going on and to do the device on the high-speed side. But those devices are pretty big, development take at least a year to do it. And also, I said our engineering team next year, high percentage engineering team will work on ASIC-like opportunities and the development.

And my last question, I'll focus more on the data center cabling ACC that you mentioned your plans around this segment. As we enter this quarter, are there any new developments you can share with us and your outlook and thoughts on next year's maybe shipment volume and revenue contribution for this business?

Yes. ACC cable is new to Parade, but since we acquired S7 last year, right? So -- but we continue marketing or shipping the ACC solution to end customer. Those for the cable to -- I think that's the 3-meter cable for the data center. And we are developed and qualified for both, for majority for the 224 gigabit per second and the ACC solutions. And we are also participating in the bidding for those ACC cables. And, but we are still learning, we are still new, right? So those are the new business for us. And we do put quite many resource on the silicon germanium side for those cabling opportunities. And because the data center investment, as you know, is go crazy and you may get more inquiry, more the people looking for the solutions. And so it's, activity is pretty high, but I have to acknowledge it's the new business for us.

Next one, Michael Xu Yang Da.

There are many investors and also analysts ask about the next year, I just want to follow up about, is there any huge product mix change in the next year or you just will continue to sustain this year, like also the display and also high-speed interface and source driver will maintain this kind of product mix.

As I pointed out in the opening the first question, you expect next year, the high-speed product PS percentage will continue going up. And your TT, which we assigned our new TTD, which is TCON source driver and touch integrator to that category. So you will see the TT category next year will increase. So if you are 100%, then you will know that the TT or TC area, the source driver will continue to reduce. And it's because your architecture change, your integrated solution, right? You don't have many stand-alone anymore. So as that same concept, your DP TCON will also, the number also will reduce because you have huge amount, you go to the TTD area because your device represent 3 devices there. So that's what I tried to point out. You will see obvious PS will increase and the TT will increase.

Next one, Mike Yang, Bank of America.

Okay. Congratulations on the new product launch. So I have a follow-up on the data center and service side. Is there any target share or initial outlook that you can share regarding to the revenue contribution in terms of the percentage or absolute term in 2026? That's my first question.

On the data center side, we continue, as we continue shipping our ACC cable for the data center customer. We are engaged with the customer with PCIe Gen6 redriver opportunities. And we also engaged a similar opportunity into the data center with our, the retimer that we had before. And those are continued there. Probably more, the newer opportunity is on the ACC cable side. So I think the second PCIe Gen6 redriver.

Got it. And my next follow-up will be on the, I think some other person also asked about the NVIDIA and Intel collaboration previously. So I think it's not just on the data center side, but also on the PC side that for the Intel-powered device, we can also have the GPU coming from NVIDIA. So I think following that, I just want to make sure, is there any change? Or is there any kind of forecast that you could imagine in the next few years because I think this will also kind of having some impact on your USB-related business.

At least I don't see the coming year or year after on the USB4 retimer side. And as I had said, the USB4 retimer next year will continue to grow and grew pretty big in terms of percentage. The real driver is that there is one new platform will go to the market and that has been delayed, but will go to the market. And on that platform, the USB4 retimer is using our solution. And also, those notebook has multiple 2 or 3 are typical to use the USB4 retimer. And the year after, we have a new opportunity and a big outside the PC notebook guy adopt our USB4 retimer and that will be started in the late 2026 or 2027. It is a huge number of shipment to come. So, for us USB4 retimer for 2026, 2027 and the number will continue to grow. And I think after the 2027, there will be USB4 V2, which is 80 gigabit per second. And we have bee, have that device in our lab for a while already. And we are engaged with the Tier 1 system customer for those solutions. So by beyond 2027, it's the USB4 V2.2 or 80 gigabit per second solutions. And as we said many times, we are not just do the USB4, we are doing USB4 end-to-end solution, which means we will have USB4 hub, host controller, so as the MUX, the MUX redriver. So, we are serving all the way to the monitor to everywhere. That's what we are line up our resource. And those are the stand-alone, those are the sort of we provide device. It's already in our, either introduced to the customer or going to introduce to the customer. So, I don't really see the Intel those things will really impact our USB4. I don't see those. Yes. I think it's fair to say, if you go ask the customer on today's USB4 retimer, many OEM customers will tell you, yes, Parade device is probably better than the Intel. If Intel allow us to design all the OEMs will ship it to us. I don't worry that much at all.

The next one, Jamie Wey, KGI.

Thank you. For phone products, I know that you don't have phone products yet, but I'm wondering if we are going to see foldable, because it's a larger panel, right? If we are going to see that, you can potentially penetrate into foldable devices.

I don't want to comment on those things. I don't know more than you do, okay? The only thing I know, we serve for our customer, multiple IFQ for TCON devices and are very busy on it. Those, as I explained before, those businesses, it looks like the ASIC-like business. They define the spec, we implement with our IPs, right? We are very busy on those fronts. I don't know those foldable, not foldable, or I don't want to comment on those.

Okay. I see. For the ASIC-like revenue stats, I think it takes time to cook. If we can have some color stats in next year or to 2027, 2028, how much do you expect to grow in terms of percentage of revenue?

If our ASIC-like strategy carries on successfully, as we said, we put a huge resource into it. The 2027, 2028, the growth was quite much higher than our previous years. It's just because those projects are big, and we invest significantly. Those projects are big.

I see. I think in previous years, you probably grow like 20, 30% at most, 30% at most. If we implement that strategy well, then it's easy to see that 27% - 28%, that we can grow higher than 30%.

I don't want to comment. Don't give a number. I think it's a little bit far away. I don't want to, yes.

That's okay, it will be high.

Very high. We spent last year and a lot of time this year to develop the IPs for high speed in the deep, the FinFET, the submicron technology. We are careful about those to make a product for tier-one customers. That strategy at this moment works quite well. We got multiple opportunities. I would think we are very busy to do this.

Yes, that's good. How many can we know that how many customers, tier-one customers that you are working with?

Multiple customers. If I would have a resource, I could take them more. I'm kind of, yes. We limit our resource. We kind of just hold on now. We cannot take more of those opportunities.

Okay. My last question is, when do you think that, I think maybe in 3 months or 6 months, when is the milestone that we can check with you that if you implement that?

I think you have a half-year, 6, 9 months later. We have a much better visibility. Yes. We'll have a much better visibility. Yes, our strategy being we communicate with the investment community that we need to really realize our IP value. To realize our IP value, you have 2 ways to do it. One is you do standalone product, and as we did it many, and one is you use in your piece, go do some big trips and the market yourself. That works reasonably well at this moment.

Thank you. Next one, Bruce Liu, Goldman Sachs. Go ahead, please.

Hi, can you hear me? I want to follow up with the ASIC-like business as well. I mean, can you tell us the business model you did with your customer? Is that different with the same thing for, you know, other companies when they talk about the ASIC business? They have certain collaboration with the customer, i.e., customer provides certain IP or designs some kind of chips. That's what I try to distinguish with ASIC, right?

Typically, when we say ASIC, the concept was your customer provides you ITO code. Customer designed the chip. You just implement the Nickle that you make a product, right? The ASIC-like, we more like what we did or has been for with our standard-plus, which means they only give you a spec and work together to do form the product. Many is based on our own IP. It is because of the value of our own IP. We don't license from anybody anything, right? We implement this. We sell marketing that product, sell to their customer for very specific, very clear according to their needs. So it's.

I mean, Jack, from our perspective, we have so many different kinds of companies, right? From Broadcom, Avago, their ASIC profitability is very different with, you know, MediaTek, LG, or Marvell, right? It's different value proposition. What I'm trying to do with your ASIC is you would deliver at least better than your corporate average margin or higher than the corporate average margin, you know.

I don't see the margin. Just so I answer, it will be better than the previous question was whether it will impact our margin. No, it won't. It will be getting better.

How much better?

I don't want to comment at this moment. Yes, until you see it. Because the issue is your assumption now versus when you the product deliver, there are multiple years there, right? One or 2 years there, right? The cost structure is very different.

Yes, you get paid by what you do, right? If you only do, like, service or you only do, like, a place and route, if you do the complete design, the range can be from [indiscernible].

Our value is not just price. Our value is price.

I understand, but the value from Marvell is like, from Broadcom, it's 70%, 80%.

It can be very different. Of course, Broadcom has its own way to, yes, because of the size, right? I wouldn't say we can do 70% or 80%, but we will be at least better than our current corporate margin. Okay. I hope I answered your question, but those are the new strategy, new direction. As I explained a few times, we are trying to value our own high-speed to make it more valuable and create more. To me, it's more important to create a large-sized revenue to grow.

Yes. Thank you, Jack. In the interest of time, we will now begin the Chinese question and answer session.