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

Welcome, everyone, to Parade Technologies Limited's 2026 Second Quarter Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang, will present 2026 second quarter 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. -- 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 2026 Q2 Webcast Investor Conference. Parade Technologies' second quarter 2026 consolidated revenue was USD 134.48 million, and the net income was USD 18.78 million. Both basic and fully diluted after-tax earnings per share were USD 0.24 and USD 0.24, respectively. These results compared to consolidated revenue USD 133.5 million and net income of USD 22.79 million or USD 0.29 and USD 0.29 per basic and fully diluted share in the year ago quarter. In U.S. dollars, the second quarter revenue increased 6.61% sequentially and was up 0.73% year-over-year. The gross profit in the second quarter of 2026 was USD 54.06 million, an increase of 6.35% from the previous quarter and a decrease of 6.06% compared to the same quarter of last year. Based on the current business outlook, Parade is providing the following guidance for the third quarter of 2026. Revenue is between USD 139 million to USD 153 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 2026 Q2 financial results. Now I transfer to CEO, Dr. Zhao, to answer your questions. Jason, you may begin.

Thank you. [Operator Instructions] Our first question will be coming from Jerry Su of UBS.

Just first question, probably just a little housekeeping. Can you give us a breakdown for the second quarter revenue mix?

Okay. Thank you, everyone. For the second quarter, the DP -- I'm not sure you heard my -- Jerry, you heard my answer?

No, I think it was -- I didn't hear anything.

So the DP was 30%. PS, our high speed is about 45%. TC, our source driver, slightly above 10%, TT not include our TTED device is slightly below 15%.

Okay. Got it. And then based on your third quarter guidance, it seems like that you're suggesting a little bit stronger than expected demand for PC and notebook market, but I think that is a little bit different from the general industry view. Can you give us a little bit color on the PC notebook demand outlook or maybe elaborate a little bit about the revenue outlook for each of the categories into the third quarter?

Yes. As in the last conference call, I mentioned that our TTED device, which is integrated the TCON [indiscernible] touch together for notebook panel will have a good growth in the Q2. So it did happen and actually grew faster than what I had expected. So you see that our TT, which includes that device now close to 15%. So we had over 10%. Now it's about close to 15%. So that definitely reflect into the new market, which we win a lot of models and ship quite a lot of device. And that's really the story for Q2 and we are -- the TT segment is stronger than what we had planned.

Okay. So into the third quarter, should we still think that TT is going to be the main driver or DP or high-speed also going to see sequential growth?

Into the Q3, Q3 is traditional notebook PC hot season, and we continue to see this year has similar seasonality even though customers worry about the memory price increase, so on and so forth. In our specific case, our TT, which include our the TTED device will continue to grow in the Q3, the percentage also will increase. So that's kind of more specific theme, which the new device take a lot of -- over a lot of the notebook panel segment. So this we're happy to see because simply, the notebook panel just one device. And for Parade itself, we increased silicon content now has a touch integrated to our device and not only support the normal touch and also support the active stylus. The interesting thing is the notebook panel with touch function attach rate increase quarter-by-quarter in the general market. So we enjoy those kind of trends with our device, which is quite complicated and without competition so far.

Okay. Very clear. Then a follow-up question on this year's outlook. I think previously, Jack or Yo-Ming has expecting that this year revenue probably can see mid-single digit or 10% growth year-over-year. I'm just wondering now you have provided third quarter guidance. And then 4Q, probably you should have some idea. So how should we think about the revenue outlook for this year based on the current forecast?

Yes, we had a more positive view in terms of our business. And that was early this year. At that time, the DRAM, the price impact is not that significant. Now we saw a lot of our customers being impacted because of high price of the DRAM and storage and which really suppressed the demand side. You particularly see the gaming side of notebook demand decreased a lot. We will looking forward to see the -- so far, the Q3, the trend is good, but we're waiting for the Q4, whether we can make a few percentage increase versus last year. That definitely, that's what we hope. And so that continue the Q3 and Q4. And Q4 so far, the [ PO ] receiving looks good and -- but we don't want to commit too early.

Okay. Got it. Fair enough. And then last question, I'll go back in the queue. Just for the ASIC-like business, can you provide some update, particularly maybe a little bit more detail on time line or when will you start tape-out mass production? Because I think the customer you are targeting probably has its own schedule for like the second half 2027 launch. So I'm just wondering based on your current time line, are you confident that you can meet your customers' product launch schedule? And how should we think about the revenue contribution as well as gross margin?

I think we are progressing well. It's a complicated device, and we have 2 devices there, and it's pretty complicated device and a big device. And the project and we put a lot of R&D resources into it. The project progressed well, and we did a lot of system design and with our customers together to early look at the performance and the software capability and the system level testing. So even on the FPGA side, we're already doing this. We are looking forward on time to tape out our chip. And as we shared sometime later of this quarter, the first chip will tape out and continue second chip will be quickly taped out as well. And we think those chips will contribute to our revenue in the late of 2027 as we shared last quarter conference call. And during the quarter, we have a more talk engaged with [ executive ] of our customers. And I think the confidence level is getting higher. And so -- and by working with the engineering team of our customer. And yes, so hopefully, we think we tape out, we will have a more clear picture and especially when chip come back, how healthy the chip is. But those are -- we're certainly looking forward.

Next one, Tiffany Yeh, Morgan Stanley.

So my first question, I just want to ask about your second quarter margin. I think it came a little bit shy of street estimates. May I ask the impact on this? Is it because of the material price hike or impact from the foundry side? Yes. And I have a follow-up.

Yes. Thank you very much for the notice on those gross margin. And I think as we shared last quarter, especially the OSAT price increase and caught us suddenly. And the OSAT, the back-end side is not only increased once, has been increased multiple times. And as we are and we are addressing those, the cost increase and by 2 direction is share communicated with our customers and like to have shared some cost increase with our customers to reflect the product price increase. And so as for ourselves, we have to looking for more cost efficient, cheap the OSAT price to make our gross margin -- improve our gross margin. So we work on both sides, very hard to try to recover our gross margin as we have been doing and hopefully, the next few quarters, we can see the improvement.

Got it. So on the pricing adjustment side, when do you expect this to take effect? Next year or maybe in fourth quarter?

We -- some of the parts we are segment by segment to do it. And some of the parts already in place, price already reflect in place. And some of them are in this quarter, we are talking to customers. So it's segment by segment going and selective product to adjusting. And certainly, your OEM customer will not be happy, but you have a good communication with them to reflect what the current situation, I think they all understand. And yes, it's a negotiation, but most of them willing to take some price adjustment, yes.

Got it. May I ask the magnitude of this price hike? Is it like 10%, 20% or even higher? Because as you mentioned, we see several times of price hike from our suppliers, YTD, yes.

Yes. The OSAT price increase is like what you said and is widely reported and published by the media on the cost increase. And for us, we are working with our customers to reflect those increase. And yes, it's different product have a different increase, but it has to be executed and some of them are quite meaningful for the -- to reflect our cost increase.

Got it. One more follow-up from me. So do you expect second quarter gross margin to be the trough of the year?

Only what I would say yes, it's kind of -- hopefully, this kind of bottom there and that certainly is our hope. We will move up as we go and because at the beginning of quarter, we didn't realize that [indiscernible] change is so big. And so as now we know, and we are doing multiple sites to address these issues.

Got it. And my second question, I just want to follow up on the standard customers that their demand is quite strong. And do you have a preliminary outlook for the demand for into 2027?

I think they are pretty healthy, right? The demand remains pretty good, I think. And based on the forecast they give us so-called the long-term forecast, I think 2027 will be the reasonable year. And we all develop multiple chips with them. And some of them will start production late 2027 or 2028. And so they will make a contribution to us. For them, I think the business is a lot more predictable than compared with others because the impact to them seems -- the DRAM impact to them seems not as big as other customers.

Got it. My final question, sorry. So what's your view on the PC shipment into 2027?

That is a good question. And I had a chat with the OEM industry leaders. And I think the -- 2026 has been caused by the DRAM price increase and suppressed the demand side. And if AI still remains the big theme for the high tech or the company. And AI demands more computing power and notebook PC remains as a fundamental needs for the productivity and for our daily life. With the subdue of 2026 shipment, I think people now, it's a big drop. And we think that 2027, we have a hope and to be better than 2026 to grow. And fundamentally, it's a demand more better, the notebook and those AI -- age calculation might need a more powerful one there. And hopefully, there are another segment might be interested just like you have edge computing [ small ] computing the box. So it's getting popular as well. So those are the things added together and we keep our view positive for the 2027.

Congrats on the great third quarter revenue guidance.

Next question, Carol Juan, HSBC.

So I have 2 follow-up. So just one for the ASIC. Can I -- could you share some details on the potential ASP and the margin that the ASIC products facing margin probably better than the current product line?

I think the single device price portfolio is high, right? We're talking about $10, $20, those kind of range. And gross margin, we are in check with our corporate gross margin. And however, those are the assumptions, the current yield thing. If yield have improvement, we might have to do better. So that's available there. And if yield not doing as good as we calculated, so it might is not as good as the corporate margin, but it should be in the neighborhood of our corporate margin. And that's what I can share with you.

Okay. Sorry, I just joined a little late, so it might be already discussed, but just want to know more about how fast the ASIC-like contribution or tape-out will be.

We said that it will be the late of 2027 on the revenue contribution side. And the project is moving forward and doing well. And we are exciting is really we had working together with our customer system together with our emulation system, their emulation system and doing the software adjustment. So to make sure we already -- once chip come back and everything is ready, yes, it's a big chip. We have 2 chips to go. So we're all exciting why we work very, very hard.

Got it. Very clear. So I also have a follow-up on the data center related. So first of all, you've been discussing about the PCIe or [ ACC ] cable. So could you give us some updates on any changes in updating design wins in the data center-related product line?

Yes. During the Q2, we have been using the -- our acquisition, the asset, which is we have the silicon germanium cable driver and for 112 gig and 224 gig and a particular 224 gig, our customer made 800 gigabit per second Ethernet cable so as 1.6T Ethernet cable. We're using that cable, participate product test in New Hampshire, in U.S. New Hampshire. We set a big team over there and doing the system level testing. And the result looks pretty good and surprised that's the first time we participated and the device looks good. So those for the ACC cable for data center on those Ethernet, we're talking about 3, 4, 5 meters, those cables. On the PCIe Gen 6 side and those -- the cable using what was predeveloped and PCIe solution. Those cables are working with the server side for the data center and one of the leading server guy needs those cables, and we're working pretty close. Those are a little bit shorter cable, but still they will need those cable for the system performance. So those are the 2 fronts we work those cases and we share with you guys. And ACC cable on the data center looks pretty promising because the performance are decent and a lot of cable already been built. And so hopefully, we continue to see whether those will convert to our revenue.

Okay. And my last question will be about the product mix change. So there was an increase in the integrated digital solution revenue contribution in second quarter this year. And just wondering how about the product mix in the second half? Are you still seeing the rising contribution of faster growth from the integrated display solution over high-speed in second half? And how will that impact the margin trend into -- by the end of the year?

You expect to see our -- the integrated solution will continue growth at least the second half and 2027 because we have multiple new devices will come out to address the more broader market. And we are doing very well on those. So those revenue unit shipment will grow pretty quickly. And we are happy on this because we invest many years. In terms of gross margin on those segments, and we are -- you also expect we're getting to the -- close to our corporate margin. So as device getting mature and the yield getting better. And the PS remain is our big focus. And we continue to see our high-speed PS product line will grow. But percentage-wise will be different because this embedded integrated solution, the [ dollar ] turn big and the unit shipment getting bigger and the percentage will grow very quickly. So it looks like your peers got surprised. It's not really -- it's really another side may increase quickly.

Next one, Mike Yang, Bank of America.

Yes. So my first question is kind of a follow-up for the fourth quarter outlook. Previously, you mentioned that hopefully, fourth quarter revenue should still grow by several percentage points on a year-on-year basis. So I'm just wondering, does that follow the seasonality? Or is there any other factors, including the memory price to have some impact on your fourth quarter outlook so far?

I think it will follow largely the seasonality. But particularly, we have tTED device, which we a lot of model will continue shipping units and that's additional. Notebook business has been surprised for a couple of quarters. And hopefully, Q4 will have some improvement. And we had experienced not only the memory price increase, we had a shortage of CPU, if you remember, in the Q2 and early Q1. Right now, I think CPU from AMD or Intel, you don't hear anymore. And besides the NVIDIA, the Qualcomm all joining to that segment. And we keep our view positive and hope. And yes, later Q3, the NVIDIA, the system will start to the shipping, right? That's a lot of people pay a lot of hope on this. Let's see how they go.

Okay. That's very clear. And my second question is regarding to the foundry price hike. I mean, heading into second half this year and even 2027, is that the case that you are seeing so far? I mean, previously, we were kind of suffer from the offset, the package price or cost. But now looking ahead to your gross margin outlook and also maybe the guidance, does this kind of foundry price hike already being reflected?