Parade Technologies, Ltd. ($4966)

Welcome, everyone to Fourth Quarter Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang, will present 2026 Q1 financial results first. [Operator Instructions] After the presentation, there will be a Q&A session in English by CEO, Dr. Jack Zhao, Vice President of Finance Mr. Kuowei Wu. And we also will reserve the last 15 minutes for 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. [Foreign Language].

Welcome, everyone, to Parade Technologies 2026 Q1 Webcast Investor Conference. Parade Technologies first quarter 2026 consolidated revenue was USD 126.14 million, and the net income was USD 16.73 million. It's both basic and a fully diluted after-tax earnings per share were USD 0.21 and USD 0.21, respectively. These results compared to consolidated revenue USD 126.23 million and a net income of USD 20.19 million, or USD 0.25 and USD 0.25 per basic and fully diluted share in the year ago quarter. . In U.S. dollars, the first quarter revenue increased 0.74% sequentially and was down 0.7% year-over-year. The gross profit in the first quarter of 2026 was USD 50.83 million, a decrease of 3.41% from the previous quarter and a decrease of 5.38% compared to the same quarter of last year. On February 10, 2026, Parade announced the production availability of the TC 3408 and the TC 3410 devices. The industry's first single-chip touch with Tcon embedded driver solution for the WUXGA resolution mainstream notebook market. This delivered extremely narrow panel borders and the Tcon PCB form factors to enable thin notebook designs at a cost in price points. TC3408 and the TC3410 incorporated the latest power saving features of EDP 1.5 for unmatched large power performance at up to 120 hertz display with best rate. The device combined progress portfolio of patent touch screen technology and market-proven DPT car in-cell and high-speed signal technology to provide excellent picture quality and responsive touch performance. On February 12, 2026, Parade announced the sampling availability of the TC3410 AS device, the industry's first single-chip touch with Tcon embedded driver solution with integrated active status support for WUXGA resolution, that this new device drastically reduced the silicon hardware sensor cost and the largest capacity associated with adding a capability to exceeding touchscreen panels. The TC3410 AS device combined pervasportfolio of patent touch screen technology and market proven EDBT card in-cell and high seat signal technology to provide excellent picture quality at 120 hertz display with responsive 240-hertz performance. On March 4, 2026, Parade introduced the availability of 2 new core channel drivers to support both 224 gigabits per second and 112 gigabits per second Ethernet applications for server, storage and high-performance AI scale up data center cable use, with industry-leading in reality and the best possible crude delay, particularly when there is the line rate adjustment. The PS-9524 PS-9514 Ethernet enadriver provide programmable EQ Boost up to 25 Tb, 22Tb while operating from a single 3.3. Key parameters for the HPC AI data center include low power and low latency, making the time table more problematic, which is a small form factor and low power consumption. The PS-9524, PS-9514 are optimized to feed existing metal shares of various form factors without the need for the additional heating. The advanced linearity allows data centers to extend cable distance versus single cables to reduce routing and system server capacity. On April 2, 2026, Parade announced the availability of PS86-51B, DP2.18HBR-3122 MST controller for automotive assessors and video display design [indiscernible] EDP expansion. It has to progress DP-MST hub solutions, which include PS88BT, DP2.18UHbR20124 MST hub controller already on the market. The PS-8631B is complied with base display port 2.18 and the EDP 1.0 specifications up to HBR3 or 8.1 gigabits per second per lens line rate up to 4 lens. It is AEC-Q100 Grade 2 available minus 40 to 105degrees Celsius ambient temperature qualified for automotive applications. Based on the current business outlook, Parade is providing the following guidance for the second quarter of 2026. Revenue is between USD 127 million to USD 141 million. Gross margin is between 4% to 44%. Operating expense is between USD 33 million to USD 36 million. [Foreign Language] It is my presentation for the 2026 Q1 financial results. Now I transfer to CEO, Dr. Zhao to answer your questions. Wanshi, you may begin.

Yes. Thank you, Yo-Ming, and ladies and gentlemen, we will begin our Q&A session in English. [Operator Instructions] The first one to ask questions, Mike Yang, Bank of America Merrill Lynch.

Can you hear me?

Yes, I can hear you.

Jack and also Kuowei and Yo-Ming. So my first question is kind of housekeeping. Could you also break down the third quarter revenue of that business?

Okay. Thank you. In the past Q1, our display port DP was slightly above 30%. our PS or high-speed category was up 50%, the TC or soft driver was below 10% and the TT include our tTED was close to 10%. .

And the second one is about the PC market outlook. Do we have an update regarding to maybe this year or year-on-year growth or decline?

Yes. I think since the coming new year, and it has been reported as a factor memory price increased dramatically, that does cause the trouble to PC and notebook area, as the increase of memory cost system price increase in many research report also had updates. We also check with our OEM customers and is getting a lot more the kind of lower focus on what it was. We see the lower forecast in 2026 compare what we had last Q4 when we do our planning work. So yes, the 2026, we will see PC and notebook, the unit shipment decreased due to the memory -- primary memory increase and also due to the war in the Middle East cost depressed the demand side.

Got it. And then my follow-up question is on the gross margin side. It looks like when compared with last quarter, fourth quarter, the product mix improves, but it's not so much on the gross margin side in the first quarter. So I'm just wondering, is there any kind of impact coming from the with like already? Or can we attribute this to the -- more to the competition?

It's mainly to increase of cost rather than the competition. And it's not -- I think in the Q1, the margin, as we forecast in the Q4, the cost increase really came from the [indiscernible] side and the packaging and final test. And if we are in the industry and the current situation from the Taiwan offset and increase a lot of price and another once, not twice some of them many times. So yes, we're facing the challenge, the environment to manage the manufacturing costs. And yes, we gradually also in the Q1 to see fab side, especially the foundry from the China side. And -- but we did not use them many of the China side. So the Fab increase is that, to us, might not that significant at this moment. But the back-end OSAT did increase quite a lot. So that's the why would we had the forecast margin increase. Yes, that's the current operational environment.

And maybe my last question is about the forward outlook on the gross margin. It seems that there could also be some foundries joining the price hike going forward from the second quarter or second half? How should we expect about your pricing adjustment on the product? And then also, how should we think of the gross margin impact in the upcoming quarters?

So as our manufacturing cost increase and we been forced to adjust our product price. We did do a selective product since we have some of our products has embedded fresh there. So in the Q1, we did -- in the later of Q1, we did increase some of select product price and moving forward, and as our competitor are already adjust their price or increase their price. We also consider to have a selective product which forced our manufacturing, the cost increase to do adjustment. So we provide the guidance, so we traded this gross margin guidance very seriously. And hopefully, as the product mix getting better with our new price the Q3, Q4 might -- can slightly improve. That's what we expect. But the whole dynamic really is going to see the manufacturing side increase and how much we're also doing diversify our -- the back end to the offset side to the other regions, which may provide a more stable price environment -- so that's what we are current thinking and whether we are current, the operation towards those direction. And we also implemented a few our own measures to improve our gross margin, those are gradually will come into effect.

Next one to ask questions, Jamie Wey from KGI.

Can you hear me?

Yes. Perfect.

I would like to know about -- I think the first 1 is asset-light projects. How is your confidence level now? I think I remember second half last year, you say that 6 month later, we will know better than, how do you think about that? And do you still think that visibility for those projects into next year still, I mean, improving?

Yes. For the wealth implemented multiple ASIC-like projects, and in fact, we are very busy on those big projects, and most of our engineering resources are designated to those areas. Some of big projects will take almost 100 engineers to do. We are very busy to do those projects, and we hope -- and so far, actually, the project is moving smoothly in terms of milestone in terms of the design milestone achieved. So yes, it looks good, and we hope that we are on time to taper out and deliver to customers afterwards, and that will be our major contribution to our 2027 revenue.

If I remember right, that I think you mentioned that maybe next year revenue with this ASIC like multiple projects can maybe back to pre-COVID level?

Those will be -- after [indiscernible] because those are deep Micron parts of [indiscernible] sometimes and hopefully, later the second half, it will be worthy contributed to our the top line and the bottom line.

Second half next year?

Yes. Mostly, that's what we -- yes, let's look at it and by that time I will report.

Okay. And the second thing is Spectra7. I think you also mentioned that I think you are developing some driver that customers will not necessarily use DSP that will consume more power. Can you share with us that how is the progress for this project after you acquired Spectra7 equipment? And also, how can we see the contribution for those optical budgets?

You may have gone through our announcement, which have 2 products, 9514, 9524, one is the silicon Germania the high-speed driver and achieved the speed at the 112 gigabit per second. Another device achieved 224 gig per second. Those both came in with Spectra7, but we -- as Parade, we brought into the production stage. So doing the qualification, so on and so forth. We are -- both products are engaged with data center cable designer kind, which typical you can imagine for 1.60 and those used 224 gigabit per second chip and the 112 gig or 800 gigabit per second cables, those redrawal capable based on the cable guy told us as well as the data center guy told us, it's useful for 2-meter, 3-meter application versus the 5 meters. So yes, we have designed multiple design going on with those cables.

I see. So I think your customers are transfer module maker customers, and they will -- they buy this product driver product from you and then they will purchase maybe later on their own and...

Those are the copper -- for copper application, right?

Copper cable, okay.

Copper application for the copper cables. Yes.

Okay. So if it's copper then, I think shortage issue will be less and then probably we can expect some contribution maybe sometime second half this year?

We hope so. Yes, we are doing the qualification with the customers. And I hope those will be the -- yes. Let's see the project continue growing, yes.

I see. So is it BPO or it's just outside...

Those are just the cable.

Just cable. Okay. I see. Okay. And also my last question is CPU. I think we experienced some CPU shortage mainly on the server side and maybe some impact on consumer application. Do you also see that? And if that is the case, then maybe customers want to buy more from Qualcomm and then maybe buy more USB retirement from you?

We've heard that both Intel they have certain -- the few has a -- CPU has a shortage, right? So maybe they are located the silicon resource to the AI -- the CPUs or GPUs. Yes. It's not large scale, I would think. But we do see some of the shift to the Qualcomm. Yes, it does, but not large scale, I would think. And yes, hopefully, this situation might improve, that was the first quarter we heard something, but I'm not that sure the -- how big is the scale because the end market demand due to the DRAM and due to the rash increase is the major thing to depress the demand from the PC and notebook. And those one probably less pronounced. And we do see -- yes, we heard some of the models converted to the Qualcomm, yes.

Next one to ask question, Jerry Su from UBS.

Maybe circling back to the second quarter outlook. I think the Yo-Ming already pointed the revenue guidance range, but can we have some more comments about the outlook for each product line, compared with Q1?

Compared with Q1, our SME in the announcement, our 2 TT and those are -- will be significant increase in the Q2 and the Q1 require many under production. Q2 will ship a lot more and the other area might be the PS parts will continue to kind of uptrade even though the Overall, the notebook demand will not be as good as we had thought, but still spare parts continue doing well. We also will ship, Q2 will ship some parts outside the PC and notebook side. For example, the automotive, we ship more and yes, those are the 2 themes.

Okay. Then probably also want to understand the outlook into the second half? Because I think Jeff, you previously mentioned that the notebook demand or PC seems to be softer than what you have previously expected. So how much risk relief do you have into the second half of year? How should we think the revenue outlook for second half comparing with the first half?

I would think that the -- in terms of our pereceiving for the second half, it's healthy and meet our expectation in terms of seasonality. The -- even though the 202 and the large picture of PC demand may not be as good as we had a wish, but we do think the second half swill be better than the first half and for our own business. And we continue putting some segment outside the PC area will contribute -- start to contribute to 2026. And -- and on the late of 2026, we even have some redrawal parts designed to the data center, the storage side, we will start shipping. Those were helped on the later of 2026.

Okay. I see. So speaking of the data center related products, I think previous on the investor ask around the business from Spectra7. I think if I hear correctly that currently you are shipping for cables. But can you give us some idea about what per opportunity once the transit method move from copper into optical. For example, in the CPO, these product lines, what's Parade opportunity and potential revenue can be coming from?

Those optical things to Parade is a longer-term thing for us. And we are currently more focused on the -- in terms of revenue, the opportunity is more on the copper cable and there are 2 areas in driving the cable as we reported and discussed our Ethernet cable. And it's relatively easy to understand. There are another category on the data center and now is getting hit up. Those are the PCI Gen 6 active cables and really address the issue that the PCB board with the hybrid, high-speed PCB is getting a lot more expensive. And in some case, PCB in the shortage. So the customer may data center, the demand to use bleo high-speed signal and the rest of them just use and PCP can use more lower-grade PCB. So that's another -- the area we're working on with multiple customers with our PCI Gen 6 driver there. And yes, that's what we are working on to One is both Ethernet or is the PCI gen 6 or later on gen 7, those kind of cables.

Okay. I see. So for optical, this is more like several years out on today? Can we -- or it's more like 2027, 2028, we should start to see once the copper moves to optical, you will have some exposure there as well?

Yes, that's the -- a little bit longer term, I think.

Very longer term, I see. Got it. Maybe my last question before going back to the queue is that for the ASIC business, can you give us a little bit more color like what kind of categories, your own products, you're entering into? Is it more display-related or high-speed like hub host or timer or what kind of project you are working with the customer?

I would think those are the high-speed system solution. It's not really display -- okay. Let me- a few of related display. And major one for us, a new category is a system-level high-speed system level chip. It's not retirement.

Next one to ask your question, Vivian Yang from Nomura.

Can you hear me clearly?

Yes, please go ahead.

My first question is a follow-up to your pricing adjustment. Could we know more details about like for which segment or what kind of application are you going to adjust your price? And also, are we only passing through the in site cost? Or is there any markup for us to see gross margin improvement opportunity? And also what customers' feedback on this activity?

We broadly choose the selective parts, but adjustment is more targeted whatever we have pores embedded. So that's successfully customer did not have much of a complaint either because people know the fresh devices were up a lot. The Q2 adjustment or upcoming adjustment will be target pretty broad-based. And not everyone but product broad-based, and our sales team work with our customers together to present to let customers understand we've been forced to do those adjustments and because of cost, increased significantly. And certainly, we hope and pretty much our gross margin is a lagging factor is the manufacturing cost increase. And so that we hope those adjustment price will help us to improve our gross margin and make our business financially sustainable.

And my second question is regarding the shortage. So other than CPU, do we see any other components or facing shortage?

I think on the shortage on the manufacturing side, I would think you heard a lot of substrate shortage glass, substrate shortage, right? Then in the manufacturing side, you will hear the lead frame has a long lead time and you may have a test capacity shortage. In terms of components and side the memory, fresh CPU, I think those are the industry focus. It's the last for the other components, but I would think the IC supply like us, most of them all suffer from the cost increase.

And my third question is regarding your standup customers. So we all know that there are growing demand for example of some specific of Mac for like applications like open cloud. So do we see increases in demand for this part?

I think the -- yes, we have a device there for the -- as what you said the open cloud, the certain uptick in you do see the market there the purchase lead time getting very long. So yes, the -- all the extra parts I'm not sure how long could sustain those upticks, right. Besides, they have a cycle new product cycle and induce low-priced Macbook euro, and we have a device on the panel side. So those are benefit from the uptick of that business. . But one thing I do want the emphasis, those open cloud, the phenomenon really indicate AI may going to the edge to the consumer space. And it happened not to be the Apple mini, may other device or the linux related machine will also act for those applications. So as far as the edge goes, the AR goes per edge we hope will be benefit. And I do hear that more and more start to AR influencer goes to the edge.

Right now we have Daniel Yen from Morgan Stanley.

I have a question on the automotive end market. Previously indicated the auto revenue could represent a few presentation of revenue this year. So my question is whether there's an update to that expected contribution? And how do you see the outlook of the auto in the market in 2026?

Actually, the auto, we're doing relatively good, and we had an announcement that we go through the 8561V and which already in MP as we announced, we're in the ship MP volume now and multiple customers were using this DP hub because you have multiple panel in automotive and those DP hub become very convenient. And we continue shipping to the multiple automaker, like whatever the EV car in the U.S. and the top EV car in China using our device and pretty high volume. And yes, we are optimistic for the 2026, especially second half, we probably will see more auto revenue. However, the units also revenue not at the PC type thing, but it's help for our -- when the PC -- the demand is not as good as we wish the automotive come up may help us to -- for the overall revenues.

Next one to ask question, Jerry Su, UBS.

Just want to follow up on Jack's previous comment about -- in the second quarter or later this year, you will see a contribution from tTED. Could you give us some more color about the current adoption of these products and also the competitive landscape? What makes these integrated social from Parade that can intend out and then taking more market share or high penetration from the industry?

The first of all, the solution itself is very attractive because the lower the cost and lower the -- make the panel, the border thinner and the panel itself thinner, especially the tTED, which has a significant software integration and firmware integration. And for ourselves instant touch, we have a lot of unique IPs. And so far, on the tTED, we have not seen any competition close to us as we build the OEM customers, the panel customers, they love the solution a lot. . We continue to expand those tTED to the more general the so-called oxide and amorphous solution. So you will see our market share will continue to grow. At this moment, for 2026, based on the shipment we have on the ownership we have, probably we're getting close to the 10% of those kind of levels with the PTE together, yes, are very close. I think I would think very close to 10%. Hopefully, the next year, you will exceed go quickly above that. So we hope and we introduced a whole product line spectrum. And you will see the more announcement and we engage with the customers and the cost integrated with the discrete or the Tcon traditional console driver plus tech that's not compressing. So we -- on that front, we worked very well, especially tTED, and it's amazing, and we also can support with states and really to the customer there's no much increase at all. They can use the panel for whatever the purpose, you can touch, you can do it without touch, you can do with state support. So really help them to manage, so the major customers adopt very quickly.

Okay. And then I just also want to follow up on the question about the margin as well as the operating expense. So for the margin -- the second quarter gross margin, I think I think you provided a 40% to 44% range. But I just want to get the feeling that given the cost increase and then you are negotiating with your customer, are you able to fully pass through those costs and maintaining the same margin? How should we think about the gross margin for second quarter, is it going to be similar to 1Q or they should be the upside?

I think this is very dynamic, right? That's the -- you understand that we hopefully the manufacturing side will not probably at this stage was stop, right? Although we are lagging from the manufacturing, the increase. And so were adjustment talk to customer, customer needed the probably will take for that period of time. I would think that by the probably won meaningful to see our strategy. And that's the -- but our guidance our guidance, we definitely will hit the guidance. .

Okay. That's helpful. And on the operating expense, I think Q2 got a similar range, but for second half or further out in 2027, as you have a lot of different new projects or business continue to grow, how should we think about the longer-term operating expense?

I would think the operating expense, we will be very cautious. And that's the -- because our major business on the PC side, it was not as we had thinking. So we'll be cautioned. But on the second half on our other business outside the PC side, especially moving forward to the 2027, hopefully, those will make a contribution more towards the -- our both top and the bottom line.

Got it. So maybe last question regarding the standard customer. I think you have mentioned about the better demand for some of the products this year. But are you seeing any other new opportunities in this customer into next year or so is particularly the reason to have some management change.

Yes, that management change is just very recent I'm not seeing -- just like the U.S. revenues, right? The -- we have executed multiple projects with them. And in fact, in the -- just Q1, we another project, pretty big project there, and we are in the execution. We hope and that's -- you earn the project, your IP earn the project. And certainly, we are very close to them. We know each other very well. And yes, I would think that your IP, your engineering capability, makes it different. And that's where you could win the projects. So the relationship to help the proven kind of record help and -- but very important your IP is very important.

Can you give a little bit more color on this? As you mentioned, on the project in Q1, is this for something that is already, the part is already out there? Or is it something new or you're just -- you're getting to a certain new category or providing a new chip.

I don't want to get into those. I just -- yes, we have...

So when should we expect revenue contribution from this new project, this year or maybe next year?

The those big projects always will take more than a year to execute.

That has been the Q&A session in English, and we will begin our Q&A session in Chinese. [Foreign Language]

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Thank you very much.