far-eastone.com.tw. Welcome to Far Easton Third Quarter 2026 Investor Conference Call. Joining us today are our President Chi and CFO Sharon. They will both join us. for the Q&A session after presentation. Before we begin, I would like to remind everyone to please review the safe harbor statement on the first page of presentation. And, uh, thank you. And, and now let me hand it over to President Chi. Okay, thank you, Gary. Yeah, good afternoon everyone. Thank you for joining. So Far Easton has had a good 3rd quarter. As you can see, all key financial metrics have exceeded our board guidance for the 3rd quarter. And also grew, um, YOY positively. Um, and the total revenue comes to $29.76 billion for the 3rd quarter. And the EBITDA has exceeded $10 billion. Margin-wise, it's 33.9% compared to our guidance, is a little bit less. And this is due to we have done really, really well in the merchant that sells. So that kind of dilutes the margin a little bit, but it's just for the mix of the revenue. And our operating income does stand out. So if you look at it, it's $4.95 billion and the margin is 16.66%. It's an improvement from the 3rd quarter last year. And also the YOY is 18.3%, and the net income is $3.67 billion. And our EPS for this quarter comes to $1.02. Versus our guidance for 0.97. So if we look at the YOY growth on the right, there are 2 columns for your reference. The first part is just the pure YOY, and last year, as you know, we did not have merged FETC yet, but then starting this year, So FETC becomes part of our subsidiaries. And so on the right-hand side, the restated column is actually to include ETC's FETC's revenue information in the comparison for the base. And as a result, our YOY after the restated, it's 8.8%. It is still better than our original target of 3.5%. And in the net income, there's no impact there. So it is still a 6.6% year-over-year growth. Okay. All right. And for the next slide, so you can see this is the sustained growth momentum there. And then for the $29.76 billion for the revenue, that is a record third— for the third quarter, record high for the third quarter in our history. And then it is also the 24th consecutive quarter of the year that we have shown the YOY growth. And then of course the drivers are the typical— we continue to do the upgrades, 5G upgrades very well. And in fact, in September it's on the iPhone launch date, we actually have exceeded 50% of penetration for our postpaid customers. And then also the handset and merchandise, as I mentioned, is earlier, and also our ICT project delivery all drove growth together. And then for the EBITDA, it is $10.09 billion. It is also a record high for the third quarter. And then the third quarter operating income rose 18.3%. That is also very good. And we continue to improve our margin across all business segments, including the the back office as well, our efficiency and all that. And in terms of the net income, it is a 21-year third quarter high and the EPS is 1.02. Okay, and then also it is 16 consecutive quarters of a year-over-year growth. All right, and for the cumulative year-to-date, for the 3 quarters combined together, as you see, it's a very solid result, and our total revenue already is $86.23 billion versus our full-year guidance, that is $117.48 billion. And our EBITDA comes to $30.32 billion and our EPS is at $3.16. So we are confident that we should meet our guidance this year. As, as the strong results so far. All right. Okay, and some financial metrics for your information. So the net debt has declined or continued to decline, and our net debt to EBITDA continued to improve. It's now down to 1.05, and then the free cash flow remains very healthy, and as of 3rd quarter 2026, it is $20.63 billion. As for the cash-based CapEx, we are now at 5.44. We expect to fall slightly below our annual guidance, which is $9.6 billion. This has to do with the network assessments and then testing and all that. We are trying everything we could. But then we probably will still fall a little bit just below the guidance. Okay. Okay, so as I mentioned earlier, our revenue growth is really broad-based, so in several major areas. First of all, for the mobile and essential service, this continued 4G to 5G migration has been very smooth. And then so we didn't really do any, like spend extra money to promote or push, but then this has been a very steady migration or uplift for us. And then the enterprise customer expansion in the mobile area also has done very well recently. And then we continue to manage our churn. It is now down to the 0.7%. Okay. And then also we have been working on our various digital services, including in the entertainment area. And it is 26% YOY improvement. And also for our fraud prevention service, and it has also grown 48%. YOY. And our insurance agency service continued to expand and then is looking at a double digit. So this is already beyond the device insurance. It's more than that. So this continuous growth in this insurance agency area as well. And our merchandise, in addition to the sustained 5G upgrades in the premium device, then there is a strong demand, although iPhone only happened, I think, mid-September. We already see, you know, some of this demand coming. And for the 3rd quarter, it only captures a little bit of that. But overall, we did see a very good demand. And then also the sales in the merchandise area actually is better than our guidance. And that is also why margin-wise it actually comes down a little bit than our expected from the BOD guidance. Okay. And then We also have done online merge offline, some of these new innovation implementation, and that has done very well. And then that also helped this merchandise sales as well. Okay. And for ICT, overall our revenue grew 21%. This continues to be Far EasTone's growth engine. And then this is driven by cloud business. And it's up by 37%. And also smart city and the IoT area also see a lot of demand and then a lot of on-time deliveries. And then it is a 41% growth YOY. And also our subsidiaries, including the ones we acquired recently, they also increased their contribution. As well. Some highlights for our mobile business. So overall, the mobile service alone, the revenue growth is 3.0% YOY. And then the postpaid 5G penetration, as I mentioned, it already surpassed 50%. And then the mobile postpaid ARPU has come to 736. Still leading the industry, leading our peers. And then for the postpaid churn rate, it continues to hit our record low for us. So overall, this says a lot about our service quality and our ability to retain customers and create values. Okay, that's driving our growth. And some business highlights are combined in one kind of slide for you. And then so in addition to our mobile leadership, that is in terms of 5G penetration and all that, and also the best-in-class economics in terms of our ARPU. We also see that the segment-oriented plans that we started kind of deploying is definitely gaining traction. So the Golden Time subscription has jumped 85% more quarter over quarter. And the Useful Companions, compared to that month before, has increased 44%. Okay. And also our fraud protection area, we continue want to stress on the network needs to be reliable and then dependable. So we are taking the fraud protection business very seriously. And then so in addition to our own Guardian network revenue that has grown 48%, but then also we have just installed risk call alerts. feature that for all of our, you know, 8 million users for free. And then since we turned this feature on just about a month ago, has been already 4 million alerts sent out in the first month. Okay? And this is to protect our users, you know, from accidentally accept or answer a call that is actually a fraudulent call. So this is to protect them. And then in the digital engagement area, it is continuing to grow. Our Mobile Circle, it is our digital platform, digital reach platform, already is generating 10 million referrals every month. And then that is like a 34% growth year over year. And Friday Video for the paid users, that also has shown a double-digit growth. That's a 14%. And the Taste Taiwan application we deployed in like a May area, in the May timeframe, has already reached almost 500,000 registered users. That is within 5 months of its launch. Okay. On the enterprise and government side, so we show the strong ICT growth momentum. And then for the first 3 quarters project delivery revenue is at 21% YOY, but then also the new contract, the new contract wins that we have got. is a 71% growth compared to the same period last year. And then so we are very busy in the smart city area. So very busy rollout in these areas for the smart infrastructure deployed. And then with the AI-enabled systems, management systems, and for several local governments. And then also the digital transformation that is really boosted or reinforced by this interest and desire or demand for AI adoption. So we are seeing this growth across government in a high-tech context. companies that, that is helping us drive the recurring service revenue in this area. And our smart healthcare expansion, this is more than our telemedicine platform. We have also continued to deepen our penetration in the medical centers. And also the cloud kits that we actually developed in-house and then already has reached 200 clinics. Okay. And then for the telecom-based SI, there has been a high demand driven by this demand for resilient infrastructure and from both enterprise and public sector clients. So these are giving us a lot of demand there. And then also we see this trend continues at this moment. Okay. And we received some major honors that we can share with you. So the first one on the list is the MSCI ESG giving us the AAA rating. And this is the second year for us, and then this is really reinforcing our commitment to sustainability and also our leadership in this area. And also for the 2026 Taiwan CME 100 Foreign Investors Top Pick. So that is for us also second time in a row. And then we also received for the FET Cloud, although it is just kind of deploying, and then as I mentioned, to 200 clinics already, but then we are very proud to already receive a bronze medal. in the smart healthcare at the 2026 National Healthcare Quality Award. This means a lot to us because this is a totally homegrown development work. And then I'm very happy for my team. And then also we won this, the best collaboration brand and creator at this 2026 YouTube Works Awards. And this is for the 3 videos that we actually work with opinion leaders or influencers on, you know, kind of demonstrate our FET network. quality and performance. And then the background are all those like a beautiful railroad, you know, like routes. And they got a lot of attention. Some of the users called in and they thought we are promoting for Thai Railway. But it was a very good series. There are 3 of them. So we won this award for that. And our Friday video continued to win this 2026, you know, best-reviewed online award. I think this is the 4th time in a year, in a row now. Okay, and also FET as a service company, we already won this Taiwan Service Industry Survey Gold Award for the 15 consecutive years, and this is the only one company, and then the record is unbreakable so far. So we have to kind of hope for a while and hopefully encourage more service companies. And this is like for them, but this is definitely an honor for us. Okay. And then comes to like, this is almost the end of the year now. So we will continue to focus to scale our growth in the consumer essential service area, the digital services, and also for those ICT projects. And we want to deliver them on time and with quality. And also for the AI service delivery that we see, we already have a long pipeline, but then we want to expand our capacity and then so we can monetize and convert those. Quickly, and then, then we will finish this year strong. Okay, with that, I conclude my presentation and ready for your questions. Thank you. Yes, thank you, President Chee. And ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star key and number 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it's your turn to speak, please press star key and 2 to cancel the question. Thank you. First question, we'll have Ranjan Sharma of J.P. Morgan. Go ahead, please. Hi, good evening, management. Uh, thank you for the call. Uh, 2 questions from my side, please. First is, if I look at the 4th quarter numbers, the net income growth of 7% is slower than other growth in revenues. or operating income. Can you help us understand why that's the case? And the second question is, of course, you're seeing pretty strong growth in Uh, in the top line, are there any like lumpy project-based revenues in there, or it's all recurring revenues? Thank you. Um, I'm sorry, I was checking your number for the first question, so I missed your second question. Would you repeat that please for me? The second question. Yes, our second question is like, uh, you have pretty strong growth in your revenues at 13%. Uh, Is it all recurring revenues, or do you also have, uh, lumpy project revenues which might be non-recurring? Okay, the 13%, where was that? Where were you referring to that you see the 13%? I was trying to just match up your numbers here. Uh, you're talking about the wireless? Slide 3. Oh, okay. Yes, yes. Sure, sure, sure. So while we are on it, let me answer that first. Yeah, so, um, for overall, like our portfolio, right? So more than half of it is like recurring revenue because most of that is like our mobile service, and that by nature it is a subscription base. And even our digital services, most of them, if not all of them, are also subscription-based. So that already tells you at least 50— more than 50% is like that. Okay, and then for the ICT, although they are all kind of like a project base, but for every ICT project, you know, that is completed, there is, you know, some of them there will be like a maintenance after a year of a warranty, and then there are the maintenance, you know, so those will become like recurring. And then those are also the kind of a buffer we are trying to build with all these ICT deployed. So every time we deploy a project, and with the common, you know, solutions that we have built internally, we at the same time are creating these cushions from these ongoing maintenance that will be required after each project. So there is that. And also our fixed service, you know, our fixed network, those are also subscription-based. So really it's the merchandise about 30% and some of the ICT as the first-time one-time only. And then those are like, you know, one-time only. But then I'll say probably more than 60%, more than 60% easily, 60, 65% at least, those are recurring. Okay, did I answer your question? The second question, right? Yes, okay. Okay, and I think your first question was comparing the YOY between the revenue and my operating income? Oh yes, so I was asking you, the net— your net income growth is lower than operating profit growth or the revenues growth? If you can help us understand why that is. Oh, okay. Well, so that reflects some of the upside of our core business, right? So some of the investments. Yeah. Special operating income. Net income. Net income. In terms of YOY, yeah, yeah, non-operating, you know, factors, and some of them reflect the investment and also Yeah, right. So purely investment related. And also the base, you know, the smaller, so the fluctuation in terms of percentage, the sensitivity is different. Yeah. Okay, maybe if I can have a quick follow-up. Sure. The free cash flow profile. of the business, how, how does the first 9 months compare versus, uh, the previous 9 months? Is it fair to look at like 20.65 versus 19.16? Right. That means our ability to generate cash is even stronger than last year. Yes, absolutely. And, and so is your ability to pay dividends as well. Yeah, yes, yes. Yes, okay, thank you. Okay, sure. If you would like to ask a question, please press star key and number 1 on your keypad. Thank you. While you're— we are waiting, I can take some of the questions from the web. So the first one was asking, you know, the strong momentum in the first 3 quarters. Would I expect the same thing in 4th quarter? Yes. And also I expect quite a bit of the ICT projects that will be delivered before the end of 4th quarter. So I actually expect quite a bit. Yes. Okay, the second question is about AIDC. Well, so We are evaluating it, but then it's not because my peers are doing it. I'm evaluating it from where I see the demand may be. And also, we, you know, like our group, conglomerate Far EasTone Group, and there are also some of these related— or actually, there should be— there are some synergies that we are looking at, and then that that is also a factor for us to consider. Even we haven't really had anything formally as an AIDC per se that we kicked off. But then for our existing, the newest IDC building in Ban Chau, we are actually already expanding 2 more floors to be— and one of them is going to be for the high-performance computing related. So, and then whether or not we will invest in the brand new AIDC, that is something we are evaluating. As a reminder for dial-in participants, if you would like to ask a question, please press star key and number 1 on your keypad. Thank you. Do we usually do that or we just didn't do it this time? I forgot. So I think for the year over year for the ICT contract, Yeah, for last year, it's about 24% gross. Just to check. Okay, yeah, I'm sure you just come from the ICT project. Yeah. Okay, all right. Okay, no more questions from the web? From the folks on the phone? I think the third question also, we kind of answered it previously, is talking about asking about ICT revenue, how much is recurring. And how much is the project base? And how about the gross margin percentage, roughly? Hi, and they were talking about the balance sheet. Do we Ladies and gentlemen, we are now in question and answer session. If you would like to ask a question, please press star 1 on your keypad. Thank you. Yeah, so there were like 6 questions already that we answered. But then if you have, you know, even after the call, you can always contact Gary and Amy for more insight. You know, that you may want to get. So that's okay, and we welcome that. results conference and the unique quarter. Thank you very much. Thank you. Then if there are no more questions at the moment, I'll pass the call back to Mr. Gary Lai. And Gary, please proceed. Thank you. Okay, thank you everyone to attend our 3rd quarter Thank you. And ladies and gentlemen, we thank you for your participation in Far EasTone's conference. There will be a webcast replay within an hour. Please visit www.fareastone.com.tw under the Investor Relations section. You may now disconnect. Thank you again. Goodbye.