Parade Technologies, Ltd. (4966) Q4 FY2025 Earnings Call Transcript & Summary

Welcome, everyone, to Parade Technologies Limited's 2025 Fourth Quarter Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang, will present 2025 fourth quarter and fiscal year 2025 financial results first. [Operator Instructions]. 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. [Operator Instructions] [Foreign Language]. And now I would like to introduce Mr. Yo-Ming Chang, Investor Relations of Parade Technologies. Mr. Chang, please begin. [Foreign Language].

Thanks, Jason. Welcome, everyone, to Parade Technologies 2025 Q4 Webcast Investor Conference. Parade Technologies fourth quarter 2025 consolidated revenue was USD 125.22 million and net income was USD 17.53 million. Its both basic and fully diluted after-tax earnings per share were USD 0.22 and USD 0.22, respectively. This readout compared to consolidated revenue USD 127.41 million and net income of USD 21.30 million or USD 0.27 and USD 0.27 per basic and fully diluted share in the year ago quarter. In U.S. dollars, the fourth quarter revenue decreased 14.32% sequentially and was down 1.72% year-over-year. The gross profit in the fourth quarter of 2025 was USD 52.63 million, a decrease of 15.27% from the previous quarter and a decrease of 2.11% compared to the same quarter of last year. For the fiscal year 2025, the consolidated revenue was USD 531.09 million, representing an increase of 5% from USD 505.81 million in the prior year. Gross profit was USD 226.01 million and operating income was USD 87.20 million. Net income was USD 87.75 million or USD 1.11 per basic share and USD 1.10 per fully diluted share that compared with net income of USD 80.68 million or USD 1.01 per basic share and USD 1.01 per fully diluted share in the prior year. On November 11, 2025, Parade introduced the TC1316V, the world's first fully integrated AEC-Q100 qualified embedded Display Port Touch with Tcon Embedded Driver. This new device targets next-generation automotive cockpit LCD displays requiring higher resolution and higher refresh rates. The TC1316V combines Parade's broad portfolio of patented touchscreen technology and market proven eDP Tcon, in-cell and high-speed signal technology to provide excellent picture quality and responsive touch performance. The TC1316V leverage Parade's TrueTouch patented technology and design expertise built on the experience of shipping over 1 billion touch devices and proven in-cell performance from the consumer notebook market. The device delivers superior EMI suppression, low power consumption and advanced signal processing algorithms to ensure reliable and responsive touch for the automotive cabin. Based on the current business outlook, Parade is providing the following guidance for the first quarter of 2026. Revenue is between USD 119.75 million to USD 132.25 million. Gross margin is between 40% to 44%. Operating expense is between USD 33 million to USD 36 million. [Foreign Language] This is my presentation for the 2025 Q4 and the year 2025 financial results. Now I transfer to CEO, Dr. Jack Zhao, to answer your questions. Jason, you may begin.

[Operator Instructions] Now first, we'll have Mike Yang of Bank of America.

So my first question is kind of housekeeping. Could you give us the updated breakdown of the product in fourth quarter in the 4 segments?

Okay. Thank you. In the Q4, the PS product line was below 50%. Our DP product line was around 40%. Our TC, which is source driver and TT with touch include our TTED device both were above 5%.

That's very clear. And my second question is regarding to the end market outlook on the TC, especially the notebook. Could you give us some update or highlight regarding to the visibility, especially into second half this year? And also, how should we think about the gross margin outlook for Parade for this year?

Yes. So I think there are many -- the information around in our industry. Really, we heard the DRAM and flash memory are on the shortage side. And so I think the question came from is whether those will impact the Noble shipment. During the PS show, we had an opportunity or myself had an opportunity to talk to the major OEMs. I think the Tier 1 OEMs in terms of their forecast seems remain similar or not much change, but they do recognize that the DRAM or NAND device might price increase, but they don't see they will have a shortage. So that's the -- based on what we discussed with the major OEMs, and that's what we got the information. And then recently, we did see the major OEMs would like to source-in the device early to have inventory. So once they have a DRAM or memory available to them, they just build the system. So that's pretty much what we heard or observed from the current market situation. And we certainly hope as we move to the second half, the situation may change or may improve. And after all, the notebook or the TC are essential for productivity improvement. So that's what we currently as we discuss with our customers.

Next one, Jerry Su, UBS.

First question is still regarding the outlook for this year. I think Jack has touched a little bit about notebook outlook. But can you give us some more detail about the growth potential for both DP and also PS product line in 2026? That's the first question. And the second question, I want to check with you how you're thinking about on the gross margin because I think you have revised down the gross margin bracket by about 2 percentage points. Can you give us some more details about this? Is this going to be the gross margin range for the next couple of quarters? Or what are the reasons behind it?

Okay. Thank you for the first question. Overall, the market -- and we still remain think the market in this year, our total number of notebook shipment should remain similar as of 2025. That's what we -- baseline we think. For our device, we have continued to grow our high-speed PS product line. And we see the momentum from this year from the start from Q1 to each quarter, our high-speed device will increase. That's driven by the more adoption of high-speed USB4 retimer, our USB4 hub and as well as other the high-speed device. In addition, we recently -- we had last year introduced our TT device for panel for notebook adoption rate or the momentum is pretty high going to the Q1 and each quarter for volume shipment. So those will become another driving force for our revenue growth each quarter in 2026. So even though the overall the notebook, the number or PC, the number may remain similar as 2025, we think we will continue growth really based on our high-speed device and as well as our TTED and TED adoption rate increase in 2026 and pretty significant. So in terms of gross margin on your second question, and we are taking into consideration the industry-wide OSAT and assembly cost and testing cost increase as we observed currently. So we take into consideration of this. I think we will remain or probably improve as quarter-to-quarter and to see whether the gross margin can continue to improve. But we think that we would not have any more significant change at this moment. So that's basically reflect taking into consideration of industry-wise the OSAT and assembly and testing cost increase.

Okay. And then my follow-up question is on the ASIC-like business. Can you give us some more update about the progress of ASIC-like business? When should we expect to see some revenue contribution? And then your confidence level on these customers will roll out these ASIC-like products?

Yes. As we shared with the -- previously, our ASIC-like strategy has been progressing well. And our teams are busy on the execution since those ASIC-like chips are pretty big, and we have both on the display side and on the high-speed side. And those are using FinFET and using the digital Micron and so using our high-speed IPs. And we expect by the later of 2027 or maybe 2027, and I think depending on the schedule of customer deliver on to the market, we expect we'll start to see the revenue contributions. So we are very busy on the execution of those projects. And we have a large team focused on those projects and work with customers very closely and engineering hand-to-hand and very closely to execute those projects.

All right. So you're saying that 2027, we might see some revenue contribution.

We should. We should see. So we have -- as I explained, we have multiple projects. So we should see -- surely see the revenue contribution there.

Next question, Lucas Liu, KGI.

Jack, can you hear me?

Yes.

Okay. My first question is regarding to the short-term revenue guidance and demand. And the midpoint of the first quarter revenue guidance suggests revenue will remain roughly flat quarter-over-quarter. Could you share with us which product lines are seeing stronger demand in the first quarter and which are trending towards a sequential decline?

Our strong point is the Q1 coming quarter is our high-speed device. So as our demand on our TTE device those are pretty large contributions. And some of our customers or major customers are doing the -- historically in the Q1 doing some inventory adjustment. And we have been known for a long, long time. So yes, we think that overall, they were back to their forecast to the -- what they forecast given to us. So that's expected. So it was not surprised at all.

Got it. And so what -- how does the product mix for the first quarter for the segment will look like compared to that of the fourth quarter?

I don't have -- frankly, I don't have that number yet. But as I described, we will see the peers might have a higher -- a couple of percentage higher on the -- in terms of our mix. And surely, our TT, which carry our TTE device will have a few points above the current quarters -- the last quarters.

Got it. Very clear. And my second question is regarding to the standard plus customer in the ASIC-like business. So regarding our standard plus client, we have strong cooperation in signal ICs and some high-speed interface chips. Could you share details on the further collaborations regarding ASIC-like high-speed interface chip with this client? And are there specific trends that could lead to further revenue gains from the standard plus clients?

We have been working with our standard plus customer in every front, right? So on the display, on the high speed and on every front there. And yes, we continue to work very closely on the display side. You can -- we have a few projects on the display side in the execution now. And we continue to foresee we may have more there. On the high-speed side, and we are not necessarily only work with our standard plus customer, even though previously, we already work on something and the project has been in the production already. And there are new customers and the chip are relative -- on the high-speed side are relatively big. And so the -- and also multiple chips are working on. So that's as much as I can share with you, we're using our high-speed, the IPs, which is most important or high-speed proven IPs and will be executed on digital Micron, the FinFET technology. So yes, that's as much as I can share with you.

Okay. Very clear. And my last question is regarding automotive revenue and the market outlook. So could management share the approximate automotive revenue for last year? And with the overall automotive market remaining quite modest this year, what is your outlook for the automotive revenue? And additionally, are there any developments in automotive products that you can share, such as like winning new customers or launching new products?

Yes. Our automotive, especially high-speed automotive on those high-speed converter and our DP 2.0 hub, we won quite -- in the last quarter on 2024, quite a few of major customers. with the very high brand, the Europe large volume customers, so as towards the China EV side. So our converted device and especially the DP hub are doing quite well in the field. I think I understand our DP hub and the automotive grade DP hub device can support multiple panels at the same time and you can swap. So those high-speed devices you come in 10 gig and you can spread many of the lower speed to go out. So that's pretty unique. And so we have multiple wins in the last quarter. And our -- we continue to see those high-speed device start to MP more in the quarter-to-quarters. And we also just announced our first ever the eDP, the TTED automotive device, we call the TC1316V, in law for panel to do the qualification for automotive application. So we put together a total solution for the display so as those USB box, what do they call -- and yes, we are pretty optimistic for the automotive, the revenue generation. I think this year, we might have a few percent in our revenue or more and that depends on the customer where, how they introduce their car into the market, right? So yes, we have the U.S., the #1, the EV car. We're in the #1 China EV car. We are in the #1 luxury, the high volume, the Europe car on those the DP hub, yes. So that are quite many there. So -- but the automotive -- the only thing automotive is the design cycle long and took time to the market, but a few guys is already in the shipment.

Next one, Jamie Wey, KGI.

I have 2 questions. The first one is for this year display product because I think a lot seems that it will provide growth for next year. But this year, you faced the consumer products challenge -- shipment challenge on DRAM issue. So I'm wondering if -- what kind of product trend do you see that you may benefit from this trend rather than suffer because for the TD panel, is that offering cost competitive solutions that people -- I mean, customers may want to adopt more, and that's why you are confident that this year can still grow. Does that make sense?

Yes. The TTE device for the panel are unique. If you integrate the source driver Tcon and Touch together. And we are doing so well not only you have a finger touch stylus. So customer likes a lot. So the previous -- the current we are shipping on the relative high-end so-called LTPS panel, right? So we expect...

Low temperature.

So-called low temperature... [Audio Gap] Because USB adoption rate increase will continue going up. And more importantly, not only the LTPS panel we will go to the oxide amorphous panels as well. Those TTE device not only support the lower border, the narrow border, but also support same panel. So people talk about a lot of narrow border, right? And yes, seeing that for panel has become another factor. You probably can only achieve this using the TTED to achieve it. You look at those panels, you can achieve 1.20 millimeter panel. So for industrial design, those are very attractive. That's why we see not only one OEM, multiple OEM jump on to those areas.

Is that easy for your peers to duplicate similar solution?

What? Again?

Is that easy for competitors to duplicate this kind of similar solution?

Yes, that's the beauty of TTED because you have touch there is a further --somewhere, you have a significant difference the behavior will be very different. So yes, I think it's a lot more harder to penetrate compared with Tcon plus driver type of thing or plus on-cell panel, right? So yes, really...

Actually moving to more and more...

You will see once hardware will be cut a lot. I don't see why people need on-cell anymore. The cost of everything is much lower on the in-cell. Because we were -- we are in the LTPS, the panel itself, we have a solution breakthrough to go into the oxide, going to that. So those will be cross-border change.

Okay. I see. And my second question is about ASIC-like. I think last call, I asked the same question. And I think I got a sense that the projects that you are working on are multiple projects, multiple customers. And if some of them come true, then it will provide probably the strongest growth ever, I mean, compared with the historical still -- is that still the case for you? Or are you more confident that after 3 months, are you more confident that your ASIC-like will grow meaningfully from next year?

In the previous one we talked, we are in the phase we are talking or planning for project. Now we are in the phase with customer forecast, we are in the execution with a clear schedule with clear -- a lot more details on the projects. Yes, I think if we all -- we hope both parties put together, want to make us successful, yes, the revenue will be significant.

I see. And seems that share price reflects this kind of -- I mean, the positives, do you consider to share buyback to show that your confident?

Our Board -- today, our Board meeting, I think it might be announced -- I don't know whether announced or announced yet. And we will to have doing the share buyback as we do and we will shares to return the cash back to our investors.

I see. That's great. And for the last one, that for ASIC-like, I think you start with consumer-related devices. Is that possible that you will expand to like server or even AI related probably mid- to long-term?

We're always chasing that, right? We're always chasing that part of our strategy to chasing this to AI related. And we are doing the share with the investor community, we are doing those PCIe for storage using our retimer and redriver, we have a few design win case. And those are the data center type of storage. And so we are -- those design wins are there. And we're also working on those cable solutions with the PCIe cable or Ethernet cable. And those are our silicon germanium device. So those we are doing especially storage, we work with a few of customers on those storage solutions.

So you already penetrate into server storage?

Yes, some server storage and utilize.

Like that you see.

Yes. And those kind of things, yes.

I see. How many percentage that -- probably very low now, but I think about high growth.

We have not really counted those in because the design cycle is a little bit long. And also those customers have not really shared with our -- what is the potential volume and those kind of things. It's unlike the ASIC-like device because you negotiate very heavily on both parties and those are just design wins.

I see. Does that start now this year for the storage?

I already confirmed design win, I don't know when they start to...

Next question. Daniel Yen, Morgan Stanley.

My first question is still regarding the ASIC-like business. Jack, you just talked about right now, we are moving into the execution phase. Can I ask your view on your market share, especially on the high-speed interface related projects. So you talk about there are multiple projects. But I'm just wondering, based on your view, how big are the 10? And how would you expect your share in the next 3 years? Yes. So that would be my first question.

Frankly, I can only -- based on the customer in the negotiation give us a forecast, right, because those projects will invest heavily. I think, very heavily. The customer or our partner give us the forecast. And we did our investigation as well. We think those forecasts represent the major shares. And those forecasts are correct. So that's why those are part of in the agreement. So that's as much as I really don't know more than -- so like you probably know more than what the shares what it is. I only can talk based on what we knew, what we sign on, what the customer give us a forecast. I hope that answers your question. I hope it answer your question. We also did our investigation as the best we could do.

Got it. Sir, I think it's already very clear. So my second question is still regarding the gross margins. Just can I ask you, is there KGD in Tcon and controller because you talk about OSAT testing. I'm just wondering, for example, OLED Tcon is there KGD or is there any of your products involving the KGD you need to buy the memory from DRAM and what are the impacts?

No, no, no. We don't buy DRAM. That's good. We -- those DRAM, the purchase is long gone, okay? I got it. We did not -- we don't have this one anymore, okay? And otherwise, it will be horrible, right? So no, it's that EOL many years ago. Yes, you are correct. A few years ago, we did have, but now we don't buy the DRAM for those -- the Tcon. It's integrated together and the memory we integrate together. But what you said on the margin, it's mainly, it's not -- it's mainly on the -- it's not particularly on the Tcon. It's mainly on the OSAT, the price, the adjustment. And yes, so you probably heard quite a lot. We take into consideration this. It's not a particular product or particular something. And we hope we would overdone. But I think for us, it is prudent to take into consideration.

So just one follow-up from me. Just can I start your opinion because 5 years ago when there was COVID, we also had foundry cost hike, material cost hike, logistic cost hike. But a lot of the cost hike at that time can be passed through to the customers or even with some like -- but this time, what's the difference? And what will be your view? Is there any chance we can still negotiate the pricing with our customers because most of the costs, as you mentioned, are going up.

This came pretty sudden, I would think, okay? Yes, we're well to negotiate with some of our customers on those one and hopefully, all rational to take into consideration. We understand the situation and the market because our OEM also had to many pressure there. Yes. So some of our parts particular and we will -- we already refer to thought our customers those increase there. And yes, that will probably have to take into consider how do we negotiate with the customer on those price increase. So that's the unfortunate. This time is -- even we got through last time, this time is a lot more quicker than that.

If there's no further English questions at the moment, we will now begin the Chinese question-and-answer session. [Foreign Language] [Operator Instructions] [Foreign Language] [indiscernible].

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[Foreign Language] Goldman Sachs, Bruce Lu.

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Okay. Thank you, everybody.