Good afternoon and welcome to the E Ink Fourth Quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. Today's conference is being recorded. The WebEx replay will be available on E Ink's website after today's conference. Joining me today are CFO Lloyd Chen and Finance Center Senior Director Patrick Chang. Now, let me turn over to Lloyd. Thank you, Winnie. Before we start, I would like to share some information being included in our cover page. In the past quarter, E Ink's achievements in sustainability were recognized in its continued inclusion in DJSI, securing our position in both DJSI World and DJSI Emerging Markets, and also the S&P Global Sustainability Yearbook 2024. We're going to talk more later. In addition to those indices I just mentioned, we have taken significant steps towards environmental sustainability by joining the Task Force on Nature-Related Financial Disclosures, TNFD. This initiative was an early adopter. Basically, this move highlights our commitment to contributing to the global efforts against climate change and biodiversity loss. Beyond this, E Ink is deeply involved in various initiatives at ecosystem restoration and sustainability. We definitely will also talk more later. All right, thanks, Paige. Before we officially start, let's take a few seconds at the safe harbor statement. All right, thanks, Paige. I think right after CES exhibition, we received quite a few inquiries. They asked why there's no BMW concept cars being showcased this year. Actually, we have been working with BMW continuously. So let's take a quick look at the video clip first, and then I'm going to talk more about the new project that we have been working with BMW. Okay. So this is BMW i5 Flow NOSTOKANA. Basically, it's all about the combination of innovation, creativity, and design between E Ink and BMW. We have been working together, basically, to help drive rapid color-changing innovation and adoption. Way back in 2022, BMW iX Flow featuring E Ink had the ability to switch from black to white at the push of a button. Then the black-and-white concept evolved in 2023 into the first multicolor automobile implementation of E Ink's Prism 3 technology with BMW i Vision Dee. With respect to the original design, this one, the BMW i5 Flow NOSTOKANA, has been outfitted with 1,349 segments that can be individually controlled, enabling even more colors and pattern designs. So that's about the BMW i5 Flow NOSTOKANA art car. All right, thanks, Paige. So talking about the financials, 2023 whole year, sales revenue was around TWD 27.1 billion, and the non-operating income was TWD 2.54 billion. Basically, the worldwide decline was mainly due to the color technology transitions, more investment on R&D and key talents, as well as a decrease in royalty income. However, the net income for 2023 was still historically second-best. So for the operating profit, relatively lower year-over-year operating profit, but still the historically second-best. So once again, the worldwide decline was mainly due to the color technology transition, more investment in R&D and key talents. So once again, the net income's still also historically second-best. For the total assets, that was around TWD 74.0 billion versus TWD 65.1 billion in 2022. The year-over-year increase of TWD 9.4 billion, about a 13% worldwide increase. Total assets increased from operating and financial investments. The continued profitability of the company basically led to an inflow of the cash from operations, resulting in an increase in cash financial investment and net asset value per share. For the cash flow, the cash position was around TWD 9.7 billion by end of last year. We basically utilized cash flow from operation and investment and further to the financial investments and also, of course, to the CapEx on e-paper production line. The total financial assets plus cash was increased to around TWD 48.9 billion by end of last year. For the dividend payout, let me start with the EPS. EPS last year was 6.85 TWD. The dividend distribution is going to be 4.5 TWD per share. From the value perspective, same. Last year, but the payout ratio is going to be increased from 50% to 66%. Once again, I think right after the earnings conference last quarter last year, we had the third quarter earnings conference. There are still lots of inquiries about our long-term growth. I would like to spend a few minutes to talk about this. If we look back at our financial performance for the past five years, basically driven by COVID-19 economic impact and global ESG initiating, since 2020, the demand for e-paper has experienced rapid growth. Due to the e-paper capacity shortage and uncertainty in the supply chain during the pandemic, our clients, such as those vendors or system integrators, they proactively stocked up, leading to our sales revenue exceeding expectations in 2022. However, in 2023, the color technology transition, as I mentioned earlier, has extended the transition period, causing a bit of a slowdown in business growth. But if we look back over the past years, the sales revenue increased modestly from TWD 13.6 billion in 2019, as you can see from the trend chart, to TWD 15.5 billion, then jumped to TWD 20 billion, and further exceeded expectations, reaching TWD 30 billion. That's for the sales revenue. For the upper-end profit, starting at TWD 600 million in 2019 and grew to TWD 1.8 billion, and then jumped to TWD 3 billion and exceeded expectations, again reaching TWD 9.2 billion. We've already established a track record. So comparing 2023 to 2022, indeed, there was some deceleration in business growth, but we still anticipate a continuous growth driven by new retail solutions, color consumer products, and even large-sized color signages. Every quarter, basically, we share with you some external recognition and some of the sustainable activity we have undertaken. Recently, we have received multiple awards. As you can see from the screen, BTGB, Best Taiwan Global Brand, we were ranked 21st with a brand value of $101 million. And also our e-paper products have won multiple awards from, for example, Taiwan Excellence and also from Hsinchu Science Park innovative products. And also there's another recognition award. It's called Taiwan Best-in-Class 100. Basically, it's all about the foreign investors' recognition. And we were being selected as the 16th among top 100 foreign institutional investors in Taiwan. Basically, it is a recognition of our acknowledgment by the foreign investors. We believe biodiversity conservation is getting more and more important. So we have actively engaged in a series of environmental protection activities. So as you can see from the screen, in 2023, last year, from group perspective, we achieved 36% renewable energy use globally, but for our local US site, already reaching 100% renewable energy use. And also our Yangzhou site, Yangzhou factory, recently obtained ISO 50001 Energy Management Systems Certification. And also we have conducted one of the most important activities by collaborating with our ecosystem partner, e-READ for the Future. We also successfully conducted that project last year. Also, we worked with Kaohsiung Municipal Min-Sheng Hospital. There's a project named as Protection for Flying Elephants. Basically, we helped that hospital to implement a paperless digital record system, basically aimed at alleviating the burden of the medical care. So for those nurses, they can spend their valuable time on the most important medical tasks. And also support for the Taiwan Environmental Information Association, we also organized the first nature conservation season to promote environmental protection. Okay? And more recognition from the sustainability. Basically, as you can see from the screen, the most prestigious enterprise top 10 and also the sustainability report under this category, we won the platinum award. And also multiple awards such as climate leader, sustainable supply chain, social engagement, enterprise well-being, and also growth through the innovation. And last but not least, as I mentioned earlier, we are a member of Dow Jones Sustainability Indices, DJSI World and Emerging Markets. To be extended from the DJSI to S&P Global, we even secured our place among the top 5% of enterprises within the electronic equipment, instruments, and the components industry ITC, boasting an impressive score of 89 points. The Sustainability Yearbook basically evaluates over 9,400 large corporations across 62 global industries, selecting only 759 leading companies based on their sustainability performance. We are one of them. Looking at the CDP results, CDP is the abbreviation of Carbon Disclosure Project. We have participated. This is the second year. Basically, our rating was improved to A- leadership grade from the previous B management grade. We definitely believe there's a room for improvement, so we definitely will work harder to get a better rating. Also for another initiative, it's called Water Security Management. This is the first year our participation. The result was B management grade. Definitely, there's a room for improvement, so we will endeavor to improve our water security management. From the environmental protection perspective, we definitely care for nature. We support the environmental promotes green life in a variety of ways by cooperating with internal employees and external green organizations. As you can see from the screen, we participated in several important activities. One of them, basically, there's a quite famous ecological farm. It's called Alibang locally in Taiwan. We basically help to restore the habitat. We also provide the volunteer service with the Nature Valley Trust to remove some invasive species. Internally, we also hosted the Green Life Family Day to mitigate the plastic use and the environmental pollution. And last but not least, we have also become one of the early adopters on the task force on nature-related financial disclosure, TNFD, so joining the ranks of 320 companies and organizations worldwide. Basically, beyond sustainability reports, that's something we already prepared and published. We're going to integrate TCFD and TNFD framework by their framework according to the disclosure. What I'm trying to say is the disclosure framework from TCFD and TNFD, we definitely will disclose more financial information. Through those disclosures, we definitely can enhance the transparency, helping existing investors and even the potential investors in better evaluating and understanding our sustainability performance. So that is my sharing for this quarter. We can move to the Q&A session. We are now in the Q&A session. At this time, we will open up for questions. To ask a question, please press raise your hand icon on the sidebar. When we take your question, please remember to unmute yourself. You can also ask questions through text in the question box on the sidebar. Our first question is coming from Jerry Tyson from JP Morgan. Your line is open. Hi, Jerry. Hi. Thank you. Thank you, Lloyd. Just a couple of questions. First of all, can you tell me for the e-reader, do you expect a growth year? And if that's the case, is it mainly driven by unit or content? And then I have a couple of other questions. Yeah, please. Yeah. Jerry, basically, for the CE business, both in reader and notes, we believe we are expecting growth this year. But whether it's going to be driven by how do I say? I mean, to what extent it will be growing, I think it's a bit hard to say because one of the drivers is going to be our color technology. So some of our vendors, they are working on their new product. So we're going to have a better picture when their product hits the market. So in principle, what I can tell is we are expecting a growth, but to what extent, we still need some time to observe. So coming back to your question, in terms of the units, I think it is hard to share at this moment. Yeah. No problem. Yeah. My second question is related to ESL. I think their revenue was down on a YOY basis last year. But if I look at it from the end market perspective, it still grew in 2023. Based on the SI's guidance, I think looking like the 2024 will be another year of strong growth. In other words, in terms of end market, the 2024 should be a lot bigger versus 2022, which is a high year for you guys. Is it possible that ESL could challenge the 2022 revenue scale or even bigger for this year? Yeah. Jerry, I mean, that could be possible. But what we are working on and what we are working with our partner in our ecosystem is how to smooth out the inventory issues. And we try our best to work with them to resolve the issue by end of this quarter. So without the stocking issue, without the burden from the old inventory, definitely, we can move to the new chapter. So whether our performance is going to be over 2022 or not, it's hard to say at this moment. But once again, I think for 2024, ESL, basically, we are expecting year-over-year growth if we compare with 2023. So 2022, of course, we received the forecast. We have good visibility. But I think it's still a bit early to comment the comparison between 2024 and 2022. So let me hold my comment at this moment. Yeah. But. Sure. No problem. Yeah. I think maybe my last question is sort of a follow-up to what you just mentioned. You talk about sounds like your customer may be trying to if I read it correctly, your customer is trying to resolve some, say, legacy product issue, i.e., the three-cutter. And then do you see any kind of risk that maybe he had to share some of the burden financially? Or is something maybe you're helping them out, but you don't really have to fork out some money to help them to do that? No. We are not really granting the financial support to them. But what the collaboration and cooperation, I'm just referring to basically, it's from the technical perspective. Yeah. I see. Thank you. Thank you for okay. Thank you so much. I'll get back to the queue. Yeah. All right. Thank you. Our next question is coming from Derrick Yang from Morgan Stanley. Hi, Derrick. Hi. Hi, Lloyd. Thanks for taking my question. I got two. So the first one is regarding your margin. Could you give us some color or guidance regarding your gross margin and operating margin outlook in 2024? Can we use 2023 as a reference plus some operating leverage? So that's my first question. The second question is that during the management call, you mentioned that your H5 production line is going to be wider in dimension versus the existing H1 to H4. Could you give us some more specific number about the percentage as well, how much bigger or how much wider H5 is versus H4, and also how much wider is H6 versus H5? Thank you. That's my two questions. Right. So Derrick, first question about the gross profit margin. Historically, the gross profit margin last year, that was around 53%-54%. So one of the key components that decides the level of the gross profit margin is the product mix. So it's a bit hard to say how the product mix is going to be in 2024 because on the one hand, we are confident in our color technology CE. On the other, if the stocking issue will be gone by end of this quarter and our ESL business starts growing again, so either scenario basically will be helpful to our gross profit margin. So it's hard to say what level of the gross profit margin is going to be for 2024. But I think the guidance we have given previously was, I think, 50% or slightly above should be able to maintain in 2024. But once again, I still suggest you guys don't look at our gross profit margin too much. What we really want to achieve is the long-term growth. So we really want to open up the e-paper market share. So that's why from ESL, a product ASP perspective, we want to provide more competitive price to the system integrators. For the CE business, I think one hour before, we just had the earnings conference in Mandarin. Johnson talked about for our color CE product and the pricing also going to be very competitive. So that could affect our short-term gross profit margin a bit. But by checking up the sales revenue and our gross profit dollar automatically will also go up. So I don't know if I answered your question. What I'm trying to say is for the gross profit margin, 50%, slightly above for 2024, we should be able to maintain. But our main focus is still how to provide more competitive pricing in order to open up e-paper market share. That's our long-term goal. Right. Derrick, you. Yeah. And the second question is H5, right? Yes. H5. And what provider is that? Yeah. So for the H5, yes. We endeavor to get it down by end of this year. Hopefully, we can start the mass production first quarter next year. And the size of the equipment, indeed, bigger than the production for H1 to H4. But from a capacity perspective, the more we manufacture, the better yield we're going to be. So it's hard to say how much more it can be increased. But in general, I think 1.5 times or even higher depends on the yield. Depends on how experienced we can be from the mass production perspective. But I think 1.5 to 2 times, that's something you can consider. Yeah. Thank you. Let's put H5, right? How about H6? Is it even bigger than H5? That could be bigger. But let me hold my comments on the H6 because we do have a plan. We already shared the plan. We try to get that ready by end of next year. Hopefully, we can start the mass production from 2026. But everything is under preparation. So the capacity, H6, would be bigger than H5. But to what extent, let me hold my comments on that. Yeah. Because there's still some moving parts along with that. Sure. Sure. And maybe one small follow-up question on the margin side. You say that longer term, you think 50% or above gross margin is satisfactory to E Ink. And when you look at 2023, the full year was 53.3. Would you consider that as a so-called acceptable level? Derek, come again. Come again, your question. You mentioned something about the gross profit margin, 53 for 2023, right? Yeah. Yeah. Because you say that 50% or slightly above is a target gross margin for E Ink in the mid to long term. And my question is that if you look at 2023, your gross margin was 53.3. So is that a level that fits into your criteria of acceptable level? Yes or no because 53 for 2023, that's based on the product mix, 50% for CE, 50% for ESL. So as I just explained, I don't know what the product mix is going to be for this year and even going forward. And especially, we stay very positive about the outdoor signage. So if potentially, the outdoor signage or even signage business kicks in, it has more portion in our product mix, that could decrease our gross profit margin. However, our gross profit dollar might be increased accordingly. So it's all about the combination of the product mix and how much volume it can be increased and those benefits being generated from the operational efficiency it can be. So it's kind of hard to say. But I think if you want to build your model, I think just take my guidance, 50% or slightly above to build your model. Yeah. So that's something I can provide at this moment. Yeah. Okay. Thank you. That's very helpful. Thank you, Lloyd. Okay. No problem. Yeah. I do see a few questions online. Let me take a quick look. Right. There's a question about our Guanyin factory construction. So for that construction project, yes. Basically, more likely will be started second half of this year. Yeah. So that's for the Guanyin construction. Right. And there's a question about the anticipated first launch of E Ink cars. I think it's more relevant to the BMW. For that one, I think it's hard to say because there's still the regulation issues. But for the branders, they have a lot of initiatives and creative ideas how to mitigate the impact from the regulation. So we do see the positive momentum from that perspective. But it's really hard to comment when it will be happening. But once again, what we can do so far is, for example, for the cars and even for the mobile phone cases, they will all be using our Prism technologies. So what we can do is we're going to enhance our Prism technology and widely promote to more potential customers. So basically, that's going to be very helpful to our Prism business in a way. Yeah. There's a question about more meetings with the investors. That one is noted. Yeah. We definitely will take into consideration and try to arrange more meetings with investors and join more forums. We see Jerry from J.P. from J.P. Morgan has another question. Your line is open. Sure. Thank you. Hi, Jerry. Yeah. Thank you. Yeah. So I think to follow the previous question on the H5, when it starts to contribute in early next year, do you expect it will be the main product will be for the larger size or the ESL? That's my first question. And also, my second question is also regarding the larger size outdoor signage, which is if it's the applications used in kind of an outdoor situation, is the E Ink technology suitable for given the temperature, the impact? Could be many different other factors that is it based on your knowledge, is it E Ink or e-paper technology is suitable for this kind of outdoor usage? Yeah. That's my two questions. Right. For your first question, how early next year is it going to be for the H5 production? I think according to our plan, basically, we'll try to get everything ready by end of this year and start the mass production early first quarter next year. But whether we will start with the outdoor signage first or ESL, I think it's hard to say at this moment. It so depends on our production plan because I'm sure our manufacturing team will work out the best production plan for the H5, yeah, at the most competitive cost. And for your second question, what was it? Sure. My second question is that how suitable it is for the E Ink, yeah, for the e-paper technology to be used in outdoor. Right. Right. I mean, of course, there's always the room for the improvements. But we believe we are it should be reasonably okay for the outdoor signage already. Yeah. It so depends on the spec from the customer. But so far, there's a lot of positive discussion with our outdoor signage customers. So yeah, we believe our technology is a suitable technology for outdoor signage. But it all depends on what kind of spec they are asking eventually. We are still in the process of the technical discussion with our customers. Great. Thank you so much. Yes. We do see two more online questions. The first one is, what do you think the risks in 2024? And what is our comment on current inventory level at the system integrators level? So for the risks, let me put it this way. Since we believe the stocking issue will soon be resolved by end of first quarter, so what we are expecting now is basically growth. So for those for color product and even other color C products, how soon we can meet our expected yield, that's going to be important. So those risks is how soon we can be there. So we have been working that, and we are confident toward that. So I think in the near term, if I can be very shortsighted, I think that's risks I can think of. Of course, the macro uncertainty and all that, we have very robust hedging policies. So FX risks, that's something we should be able to mitigate. And for the inventory level, those inventory at E Ink, we believe is quite healthy. As you can see, the trend of the inventory year-over-year has been decreasing. And also, the inventory level in terms of the ESL with our module assembler and even the system integrators, I believe they have been digesting quite well. Yeah. Right. There's another question about the Chinese education sectors relating to our CE products. Yeah. We do see a big potential for the China education market since our device is eye-friendly. And also, it's quite learning concentration. What I'm trying to say is one of our key features is we are not very suitable to play the video. So from that perspective, if using our devices, the learners, the students, the kids can be more concentrated on learning. Yeah. So we do see a very big potential on the Chinese education sectors. Let me further elaborate. Where is that coming from? I think for the digital learning, especially in Europe and the United States, they already use, for example, iPad, Chromebook, and MacBook for the digital learning. But the students, they still need a conventional textbook and pen along with the LCD devices. Why? Because they need conventional textbooks, so they also need a conventional pen to practice the math questions and also highlight the important notes on it. What we are thinking about is we never want to replace those LCD devices. What we really want to replace is a conventional textbook and those pens. Our devices can go very well with the LCD devices as a digital learning package. From that perspective, it's quite helpful for the growth of the CE market, especially in China. We don't see further questions coming in. Thank you very much. We will conclude today's conference. Thank you for your participation. See you next quarter. See you next quarter. Thank you very much. Bye-bye.