Good afternoon, welcome to the AAC Technologies 2023 full-year results announcement conference. My name is Wang Jingqing, and first of all, I'd like to extend my sincere thanks for your attention to AAC. Next, please allow me to introduce the management. They are Mr. Benjamin Pan, Executive Director and Chief Executive Officer of AAC Technologies, and Mr. Kevin Pan, Executive Vice President of AAC Tech, and Mr. Dan Guo, Chief Financial Officer of AAC Tech, and Mr. Jack Duan, CEO of AAC Optics, Mr. Shi Ting, Vice President of Strategy of AAC Technologies. Thanks to management's attendance. Today's meeting includes two parts, starting with my presentation on AAC 2023 full-year financial performance, and this will be followed by an open management Q&A session. You are welcome to communicate with the management and ask your questions by pressing the raise hand button or typing a message in the Zoom chat box, or by contacting our IR team. You may remain the hand-raising status to remind the host. Please introduce your organization and name before questions. We also have a simultaneous interpreting channel today. Please click the interpretation button if you need. Thank you. Next, let's take a look at the results. In the second half of 2023, the group achieved a revenue of RMB 11.2 billion, flat year-on-year and up 21.5% half-year on half-year, with the gross profit margin of 19.2%, up 1.4 percentage points year-on-year and 5.1 percentage points H- on -H. This is marking the beginning of an inflection point. Improvements in GP margin was mainly due to the recovery in demand for mid- to high-end models. Net profit was CNY 519 million, an increase of 25.2%. For the full year of 2023, the group's revenue amounted to CNY 20.42 billion, a slight decrease of 1% year-on-year. The revenue for precision mechanics and optics business increased significantly. GP margin was 16.9%. Net profit was CNY 740 million, down 9.9% year-on-year. In 2023, the group adhered to its prudent financial management on CapEx and operating expenses. Operating cash flow amounted to CNY 4.63 billion, and the CapEx amount to CNY 1.38 billion, down 25.4%. The free cash flow amounted to CNY 3.81 billion, the highest level since the group's listing. Also the net gearing ratio was 5.1%. Trade receivables turnover days decreased from 109 days to 80 days, and this lays a good foundation for the group's future growth and innovation. Next, we'd like to share with you the performance by business segments. Acoustics. In the second half of 2023, the group's acoustics business revenue was CNY 4.18 billion, down 11.5% year-on-year, but up 25.7% half on half. The GP margin was 30.7%, and this is mainly benefiting from the significant trend of scale and the specification upgrading of mainstream customers. The acoustics business achieved a revenue of the full year of CNY 7.5 billion, a year-on-year decrease of 15.4%, and a GP margin of 28.4%, a slight decrease of an increase of 0.30%. In 2023, the group actively cooperated with the customer's technological innovation layout, and constantly deepened close cooperation with the customers. Also the SLS Master speaker shipment volume in 2023 exceeded 10 million pieces. Optics. In the second half of last year, the group's optical business achieved a revenue of CNY 1.86 billion, an increase of 36% year-on-year and 4.8% Q-on-Q, benefiting from the continuous improvement in product mix and a slowdown in the competition in the industry. The GP margin was 9.2%, up 20.5 percentage points, an improvement of 7.5 percentage points Q-on-Q. We also recorded the revenue of the optics of CNY 3.63 billion, an increase of 12.7%. The annual shipments of plastic lenses, including self-supplied lenses, will be about 660 million, up 20% year-on-year, and 360 million pieces of 5P and above were shipped throughout the year. The WLG production yield is significantly improved, and this has led to a steady increase in production capacity. The group had shipped nearly 8 million hybrid lenses in total, and this efficiency of mobile phone aspheric glass lenses has laid a solid foundation for more customers to choose. The next focus is on the EMD and PM consolidated segments. In the second half of 2023, thanks to more high-end flagship smartphone and folding device using the group's motors and metal casing. This year, the revenue of the consolidated segment increased by 13.3% year-on-year to CNY 8.25 billion, and mainly due to the increase in the proportion of revenue from precision mechanics. The group's overall shipment volume of X-axis haptics motor grew by 13.3% year-on-year, thanks to the group's strength in start-stop speed, vibration frequencies, and conversion efficiencies. The revenue increased by more than 30% in PM year-on-year, and its shipment volume and ASP both achieved double-digit growth. Last but not least, let's focus on the sensors and semiconductors. In the second half of 2023, benefited from the marginal recovery of the smartphone market and also our continuous improvement in the penetration rate and Android customers. The revenue was about CNY 531 million and down 31.7% year-on-year and 75% half-year on half-year. The gross profit margin was 15.7%. The revenue of sensor and semiconductor business was CNY 1.03 billion, down 18.4% year-on-year, mainly due to the weak demand for consumer electronics. We have our production bases for MEMS in Nanning, Shenzhen, and Malaysia, aiming to create a perfect layout of domestic and foreign collaborations. The cumulative shipment for three consecutive years is close to CNY 3 billion, and AI technology enables high-performance microphones and its growth momentum. I'd like to talk about development of the group's business. Its related products are widely used in Xiaomi 14, and also with its high-end and its SLS Master speakers was largely improved. We have this shipment volume increased in the X-axis haptics motors, and the hinges is about 14%. We also uphold in the smartphone market experience and in these different models. We like in the Xiaomi 14, Redmi K70, Honor Digital Series, and Samsung Galaxies. Our company continues to bring customers better acoustics, optics, and voice experience. Also, Acoustics Solutions International B.V. announcement, we have already completed its acquisition. And this is also represented. The PSS has become the indirect subsidiary of the group with 80% equity, and its financial performance has been integrated into the overall performance of the group in the middle and late February. The addition of PSS will not only greatly enrich the group's product portfolio but also rapidly improve the group's global service capability. The PSS, it's a company with over 15 years. Its revenue in 2022 is about EUR 460 million, and the group will provide innovative high-quality audio and acoustic system solutions. At the same time, we will also effectively expand our business capability in all key business. On the client side, PSS supplied to the world's leading OEM car companies. Its customers cover overseas and domestic leading middle and high-end car brands, and they recently released M9 and Mega models on all PSS exclusive solutions. Next, let's introduce the product portfolio of PSS. It's including the loudspeaker product, high, mid, and low-frequency loudspeakers. They are not only for automotive customers but also for some of the world's high-end consumer electronic brands. In other acoustic fields, including box acoustics and 3D headrest solutions, are all unique innovations of PSS. We also have this system AVAS. The third is the tactical system based on sensors. PSS has already mass-produced and realized fixed points, and everyone will gradually see its mainstream models and really experience the perfect combination of acoustics and optics. PSS has the perfect global R&D and production layout. Its founding headquarters is located in Belgium and in Mexico, and also. Thanks for your attention to my introduction, and now we can start the Q&A session. If you need to ask your questions, please press raise hand button in the Zoom. Let's welcome the first question. The first question is from Huang Tianqing, CICC. Thank you. Thank you for management's time. My name is Huang Tianqing from CICC. I have two questions. My first question. And we have already seen the AI development trend, and our big clients, it's North American, also mentioned their cooperation with AI to improve and expand the business. And acoustics is a very important window, so whether AI brings about the innovation to our acoustics business or any change in our structure of acoustics business. Thank you. Thank you for your question. I'd like to answer the question. We are also paying a close attention to the AI influence. We think the first influence will be in our microphone products. And many Android customers talking about this noise-related function. For example, in the 64 and 65 microphones demand is strong in the market, and we have our proprietary chips to produce this kind of microphones. And we think in the future, the introduction of AI will trigger the upgrade of an Android system and Android clients. Starting from the second half of 2024, there will be the upgrade of some specifications in the Android market. This momentum will continue in 2024. Of course, some flagship smartphones will be introduced first. In 2025, the size can reach about 500 million, and this will be introduced to more models. From 64-70 dB products are matured in our company, and this will also cause an upgrade of the other microphones because there are only one or two companies that can do these microphones. In terms of speaker, AI will bring a lot of higher-quality performance. So the high-quality and high-quality performance speakers, including the master series, will be strengthened. In 2023, we have already made breakthroughs over 10 million. In 2024, we will strengthen its penetration in the market. The potential upgrade brought about by the AI is very great. In AI, we insist on the innovation, and this innovation must be in line with the demand of our customers. We still need to pursue the higher-level customer experience upgrade. Thank you. My second question is about optics. In the second half of last year, we see this turning point. You also talked about the competition landscape change. What's your outlook and what's your price strategy of the optics business this year? We also see the Shenzhen big clients return trigger the change of these optics industry upgrade. I'd like to know the outlook and future development of our optics business. I will answer your question. Actually, you have two questions, and the first one is about the positioning and also our pricing. For us, our pricing system is stable and prudent. Last year, we talked a lot about this prudent pricing strategy, and we don't make any changes this year. Our purpose and target is to improve our customer experience and the mid and high-end market share. We want to gain more market share. So we have already observed this pricing strategy results last year. For some products with less potential in the market share, we want to be very aggressive in that regard. Our pricing strategy is still steady and prudent. This is for your first question. With regard to your second question, we won't have any comments on the specific brands or products. But our efforts will be on the mid and high-end market shares. If some clients' products are in line with our strategy, and we will have more resources and more attention to this customer, of course, we will combine our capabilities and exert our efforts to achieve the good results. We don't comment on the specific products and companies. You also mentioned the competition landscape of optics. From my point of view, including some companies in Taiwan and in mainland, and our views are the same. The richest competition landscape has already passed. In the first half of 2023, this kind of landscape was passed. From the replacement from 6P to 7P, and the price tends to be more stabilized. We won't see any great potential of the price hike. So if you want to have a large price hike, you need to be focused on the G+P or higher-end products. The GP margin by the end of last year was positive. For the first quarter, the GP margin, the GP is also positive. This is mainly due to the 6P's shipment volume increase. We will also see about 8 million G+P, and about 3 million is about 1G + 6P. So this is an improvement. The worst time of the competition in optics has already passed with the upgrade of 6P and 7P and G+P. We are confident to phase this competition, and it will include our shipment as well as the production capacity. Apart from the big companies, the smaller companies will feel harder to enter the industry. So this is the basic landscape in the smartphone market. Thank you. Very clear. I hope that you will achieve a better performance this year. That's all for me. Thank you. Thank you, management's answers. The next is from Liu Ling, Guosen Securities overseas. Good afternoon. My name is Liu Ling. First off, I'd like to congratulate on your results. I have two questions. The first one is about SLS Master-level products have already exceeded 10 million. So my first question is about the unit price. The Master series this year made the breakthroughs of 10 million in 2023. In 2024, this will be introduced to the mid models of our customers. So at present, we think these Master series can be doubled. The growth rate is about 100%. The penetration rate is dependent on the middle models, demand on the upgrade of the acoustics performance. We think this will be split up by the AI's development. We also have our combo. Apart from the Master series, we have the high-performance-to-price ratio products. This kind of products will be expanded this year. We will increase our investment on this regard. Many customers, they will upgrade their acoustics devices to louder and combo products. This year, combo can reach about over 10 million and X-axis haptics. Also the speakers will be combined in a unified device and to create 1 + 1. The value will be over two. We can provide high performance-to-price products to our customers. So this will increase our ASP. It's within 5%-10%. Some low-end products, they will become more competitive and the high-end are the SLS. From 2023, we embarked this kind of introduction. We will continue these breakthroughs in 2024. The penetration will be continued in 2025-2026. So acoustics has entered an upward trend because of the scale and specification upgrade. We provide very good products with a competitive price to our customers. This won't increase customers' cost. Very clear. Thank you. In addition, in the results, we see this PM growth is fast. What's the outlook? Yes, precision mechanics this year or in 2023 has recorded sound growth. This was related to the market development, of course, with our layout and the plan of our business strategy. We're seeing some high-end products and titanium products. We are deepening our cooperation with the big clients in China. Also some products returned to the Android market. This also improved our business performance. By leveraging our production capacity, our GP margin returned to a sound level. In the future, clients will pursue the high-quality products. Titanium alloy is effective. But in the future, they will still optimize the overall performance. Hinges in 2023 was very successful from the first client, the foldable model from Honor Rongyao. We made breakthroughs. Hinges in 2023's shipment was 700,000. Actually, this kind of product needs frequent testings and high-level precision. So hinges is a breakthrough in the PM segment in AAC. In the future, we will continue to promote this product and to obtain more market share. The second is about the VCs. In 2023, the growth of VCs is satisfactory. We also see the outlook of VCs because the AI's development, the computing power will cause some heating problems in cell phones. The VCs' products, like the stainless steel VCs or the bronze VCs, and will provide solutions to this heating problem in cell phones from the production use and the technology investment, and as well as innovation, laid a solid foundation for the VCs' development. In 2024, we foresee a double-digit growth in VCs. So in the overall VC segment, we are very optimistic. This is due to the recovery of the market. We also see our previous plan in the VCs. Very clear. Thank you. Next question is Alex Lin from BOCI. Please go ahead. I'm from BOC. My name is Alex. So the first question is about PSS. And in February, they have already calculated in the balance sheet. So do you have any guidance to their revenue and growth? In terms of the guidance, yes. And in February, we made an announcement. We have completed an 18% transaction. And we will do the first consolidated balance sheet report this year. We estimated the top line is about CNY 3.5 billion in the next one or two years. And this kind of momentum will be steady. The GP margin is over 20%. So the contribution to our net profits this year is about CNY 200 million. Thank you. Very clear. My second question is about PSS, the second batch of the equity. So in the announcement, and this will be decided in the EBITDA in the financial report of 2025. So I want to know the details. So how do you evaluate the 12% of the equity? Do you have any other strategies? And what kinds of collaboration models in the PSS? Yes. So, because this is about the sensitive information and confidential information. So we didn't make a detailed disclosure. And this is about because the financial report is in the March year-end in 2025. And we have close communication on the business and also on their collaborations. So the transaction structures can support the two sides' future business development. We have our shared and a common goal to achieve in the future. Yes. We have completed 80% equity acquisition. But AAC's management on PSS has already started. And we have already helped them in business as well as customers. And in terms of their products, we love the speakers and the microphone. And we started our collaboration with them. And in Chinese customers, specifically the NEV and OEMs, we deepened our collaboration with the PSS. It has already been started. And we empower and help the PSS. So you also talk about these valuation adjustments. And also there's a kind of exchange terms. But we don't have this specific terms. Thank you. And next question is from Yang Sheng, Guoyuan International. [Foreign language]. I'd like to congratulate on your breakthroughs in the business and the results. I have two questions. The first question is about cell phones. We see the Samsung S24 and AI cell phones. They also set the estimation of the annual sales. So what's your outlook of the cell phone sales in 2024 with the influence of AI? As mentioned before, we think AI will bring a lot of information and innovation on cell phones, including the software applications and hardware. Also some of the haptics, like the microphones and loudspeakers. AI will be used in the optical scenarios. Those scenarios need those products. After development and the chips heating problem, this focus in the market. So this will be in line with our strategy of VCs. Our VC products can provide solutions. In addition, like Oppo and also other companies like Apple, and they will have their AI plans. But what's the evolution of the AI technology? And how they are combined with the cell phone software and hardware and all these kinds of changes will be more clear in 2024 and in 2025. So this year in 2024, we will see some upgrades. And the obvious functional change or specific change of AI in cell phones will be in 2025. Of course, the iteration of AI is speedy. Therefore, we need to pay close attention to the development of AI. Overall speaking, we are optimistic towards the markets. But at the same time, we still hold a prudent attitude towards its development. Thank you. My second question is about the competitive landscape. And you talk about the improvement in the competition. So what's your outlook of the GP margin and the revenue? So I'd like to have a breakdown of the traditional business and the outlook with PSS. Thank you. The chairman and CEO also talk about the cell phone or smartphone shipments this year. We are prudent to its assessment. At the same time, you also see the second half of last year, our results experienced an upward trend. The external environment is positive. We think the top line of AAC is 10%-15%. PSS, the net revenue is about CNY 3.5 billion. But consolidation is from March. So AAC + PSS, year-on-year revenue can reach 20%-30% growth. In terms of GP margin in the second half, as mentioned by the segments in acoustics, optics or PM, and motors, and the growth are all obvious. So we think the GP margin this year will return to about 20%, which is a healthy level. This kind of growth is based on our development of all segments and expansion of our business. All the segments can be recorded as a very positive development trend. Thank you. Thank you. That's all for me. Thank you, management, for your answers and the questions. The next question is from the chat box. And what's the outlook of the results? And what's the outlook of the investment ranking? We can see the Moody's ranking. I'd like to answer the question. We have a close communication with the Moody's ranking system. And they're concerned about our cash flow and their control of the CapEx and our leverage ratio after the acquisition of PSS. The ratio target is relatively high. We still have the space. And the total debt and EBITDA ratio is 3.8x. And by the end of 2023, the leverage ratio is about 2.45x. So there's a big gap. After the completion in February, we have very good cash inflow. We have efficient control in CapEx of CNY 1.38 billion and 25% down year-on-year. This year, we will continue to do the CapEx control. This will be within CNY 1.4 billion-CNY 1.5 billion. Operation cash flow will help us leverage ratio because the acquisition cash capital, most of the capital is from our cell phone capitals. So in the interim, after the consolidation of PSS, the leverage ratio will be about 2.6-2.7x. So all the indicators are positive. Next question, I'd like to invite Huaxi Securities, Mr. Hu Yuzhou. Please go ahead. I have two questions. The first question is about lenses. The GP margin in January was positive. We can see the positive GP margin for the full year. So what's your outlook in your optics business? And when will it become positive this year? According to the demand and our plan, we think in the second half of the year, and this will break even. In the operation, our operation cash flow will improve our production yields. In the high-end products, we continue to make progress. For example, last year, in Q4, the 6P is accounted for a certain percentage. It has already improved to 20%. The 5P + 6P accounts for 60%. Nowadays, it is amounted to about 70%. So the overall ASP and also the product structure are improved. This improved our GP margin. In addition, the optical modules. Last year, we see a little loss-making in the GP margin. It's become profit-making this year. With the improvement of the modules, we also improved our GP margin in this regard. The volume last year is CNY 10 million per month. This year, we have achieved about CNY 13 million per month. The CapEx this year was effectively controlled. So in H2, we think this will turn positive. My second question is also about optics. What's your inventory level of the lenses? And what's the outlook of the shipment volume? The inventory turnover is about two to 2.5 months. And it has been continuously improved. And yet, the inventory is over 2.5 months. And last year, it's over 140 days, the inventory turnover. And nowadays, it is about 80 days. The optics inventory level is maintained at a good level. It's lower than the average inventory level of the group. So your second question is about the outlook of the shipments, right? Yes. So the lenses volume will be around CNY 600 million-CNY 700 million. But the proportion, the mix of the 5P + 6P will be over 10%. In terms of modules, last year, every month is 10 million pieces per month. And this year, we think the monthly growth is about 10%-12%. Actually, we are not pursuing the volume. Our focus is on the structure. And this year, we can produce more high-end modules like the OS modules or the 200 million pixels modules. And this is more strategic for us. Thank you. Thank you for your questions. Next is the question from Liu Mengran. Please go ahead. [Foreign language]WLG production yields has been significantly improved. So what's your plan of the WLG and its shipment volume? [Foreign language]. Yeah. You have to mute yourself. Thank you. Mr. Pan also mentioned about the WLG hybrids shipment volume. If 1G 6P accounted for the biggest percentage, it's about over 90%. This is the very high-level products. In Xiaomi Mix and other series, we introduced the WLG lenses. Its performance has already been testified. This year, in terms of WLG, with the upgrade of our equipment devices and our production capacity has been significantly improved. This single-module production capacity has improved by seven times. At the same time, the precision and the production yield have largely been improved. So this laid a very solid foundation for us to be the suppliers to the high-end clients. Non-G+P lenses, we also see the positive or the upward trend. For example, we can use this WLG and the periscope. [Foreign language] this is very good performance and also used in different image and also image mirrored. Because it has a good performance in dispersion. In addition, in VR and AR, and application, we can also introduce the products to this field. So with this production capacity and technology improvement, this application can be expanded. And it has a wide application area. It can also supplement the GMO lenses. So this is a faster-growth market. WLG has its own feature: high performance and mass production and relatively competitive cost. So this has already been recognized by our customers. And the customers showed the big interest on this regard. So we have confidence in the growth of the WLG. Thank you. Thank you, Liu Mengran's question. And the next question is from Guosen Securities. Also, AAC has its own automotive acoustic business. And what's the future plan with the collaboration with PSS? Thank you for your question. So before PSS, AAC has its plan in the automotive products. And related products. In the future, PSS will also be merged. The traditional AAC team will focus more on the algorithm and software and loudspeakers products. To provide better service to our automotive customers. [Foreign language]. I'll make a supplement here. Yes. So in terms of the acoustics application on the automotives, we want to provide a complete solution or turnkey solution to our customers. We have the PSS has its traditional loudspeakers and its innovative speakers. So it has an AVAS and the horn-related products. They have a lot of innovations. We think they have the leading position in the market. In the automotive acoustics and loudspeakers, this will be led by PSS. But apart from the speakers, the loudspeaker and its algorithm is also important. So if it has a 500-speaker combination, and it will have another matching 500 loudspeakers and algorithm in the vehicle. So AAC will shed more light on the algorithm and the product development and the loudspeakers size. And its mass production will start in 2024 as well as its delivery. So after the PSS, the overall plan and strategy will be more complete. And deepen collaboration within the progress. And we also help PSS to collaborate with the carmakers and also help their products to penetrate in the Chinese market. Thank you, management's answers. Our time is constrained. This concludes our Q&A. So I'd like to invite our management to make a summary of our conference today. Mr. Pan, please. And from 2021, and we use McKinsey to do the transformation. And you also see the big change in management. In the second half of 2023 and also the outlook of 2024, I'm happy to see the transformation has already brought about our own capability in each production line. In 2023, we have the good results on each production line. So this is due to the efforts of Kevin. When he is leading the team, I saw the results. I'm happy with the results. After the years of the transformation, I also like to extend my sincere thanks to our investors for your patience and the time. With your support, we have the opportunity for the structural transformation of our company. In the future, and after the acquisition of PSS, I'm very confident in our results' growth in the future. Thank you, Mr. Pan. Thank you for your share. This concludes our AAC Technologies 2023 full-year results announcement. The roadshow materials will be uploaded to the official website. If you have more questions, please feel free to contact us. Thank you for your attention to AAC Technologies. Thank you. Thank you. See you.