Good afternoon, and welcome to E Ink second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the presentation, there will be a Q&A 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 Lloyd Chen, CFO, and Finance Center Senior Director, Patrick Chung. Now, I would like to turn the call over to Lloyd. Thank you, Winnie. Good day, everyone. Welcome to 2024 second quarter investor conference. Before we start, you may just take a look at our, you know, cover page for the second quarter. We'd like to share something behind the cover page. We believe that digital signage is becoming a significant trend in various advertising applications. You know, display mainly playing a crucial role. So, what we are showing here is shot on A2 ePoster featuring E Ink Spectra 6 being showcased in Touch Taiwan this year. So we believe, you know, the color display, not only for outdoor signage, but also, you know, for the retail signage gonna become a trend going forward. Okay. All right, next page. Before we start, let's just spend a few seconds on the safe harbor statement. All right, next page. The sales revenue for first half was around TWD 13.3 billion, and non-operating income was around TWD 1.7 billion. As we mentioned previously, even in the first session, I mean, Mandarin session, basically, the YoY decline was due to the first half inventory correction digestion. But since the inventory correction has been ended by second quarter, we believe. We believe that the growing momentum is gonna be, you know, back in normal manner from third quarter. All right. Operating profit. As I mentioned earlier, the year-over-year decline, mainly due to, you know, product mix, less ESL, associated with, inventory digestion correction, and also, you know, increased operating expenses, caused by, R&D and key talents. All right, next page. The asset side. Total assets was around TWD 85.6 billion versus TWD 69.1 billion second quarter last year. Year-over-year increase was around TWD 16.5 billion. Basically, total assets have doubled in four years. Okay, next page. For cash flow in second quarter on both net cash and financial assets basically increased, totaling around TWD 55.7 billion. Year-over-year increased TWD 6.8 billion. Basically, we continued on CapEx preparation to support future growth. Okay. We continue basically advance our green color technology. In first half this year, we have won several awards in recognition of our continued innovative achievements in color ePaper, energy saving, and power saving technologies. Those awards include, as you can see from the screen, the most important one, you know, Taiwan Highest Innovation Recognition, the sixth Presidential Innovation Award for technology development. Also, our Spectra 6 Plus color ePaper display has won the Excellence Product Gold Panel Awards. And also same thing, Spectra 6 full color reflective display has won the Display of the Year Award at the SID Display Week. Next page. As I mentioned just now, we continue to advance our color technology. We have made significant progress in full color and large size ePaper technologies. Basically, we are transitioning from black and white to color, and being applied to different segments such as e-reader, e-note, retail, IoT, and et cetera. I'm gonna talk about more in the next few pages. All right. Our mission and vision basically is to get, hopefully, E Ink ePaper everywhere. We aim to change the world through ePaper technology. Of course, we need to work closely with our ecosystem partners to create low carbon and green smart city. As you can see from the screen, we try our best, you know, from outdoor transportation and then logistics, factory, reading, writing, education, retail, mobile and wearable, hospital, medical, architecture, environmental. Okay, so we try, you know, very hard to make services smart and green. Next page. We are creating a smart and environmentally friendly world, 'cause we believe the environmental sustainability and corporate profitability are equally important. So, basically, three major elements in our ESG actions. For example, less energy consumption, less carbon emission, less light pollution through our ePaper technology, as well as the ePaper products. Next page. As I mentioned earlier, we are not only, you know, focused on R&D and manufacture of ePaper material film, but also actively, you know, better build the ePaper ecosystem through the collaboration with our, you know, ecosystem partners. Next page. Every quarter, we would like to share some recognitions we've received recently. The first one, we collaborate with Hsinchu City Government to engage in ecological restoration efforts at Xiangshan Wetlands. Utilizing the low energy consumption and low carbon emission of ePaper to contribute to the environmental protection and biodiversity conservation. Also, you know, we participated in the 2024 21 Days of Green event, organized by the Taiwan Environmental Information Association and Greenvin es. E Ink also one of the company that achieved the 1.5 degrees Celsius temperature control target in CommonWealth Magazine. That's one of the very famous magazine in Taiwan, you know, Temperature Rising Index for Pathways. That's the name of the event. And we were also awarded by also one of one of the famous magazine called Global Views ESG Corporate Sustainability Award for Excellence, and recognizing our remarkable accomplishment in advancing ESG sustainabilities. For example, we achieved 36% of you know renewable energy use ahead of our planned schedule, and attained net zero carbon emissions. All right, next page. Last but not least, we have basically consistently dedicated in ESG actions, such as, you know, energy conservation, carbon reduction, and environmental sustainability. These efforts have received recognition and support. Basically, the following outlines our initiative from three perspectives. The first one is rating and indexes. As you can see from the screen, we are also the member of, you know, DJSI World, and also the DJSI Emerging Markets. We also got quite nice score in, you know, S&P Global. Also, you know, we are also one of the MSCI ESG Universal Indexes. Locally in Taiwan, we have been, you know, keeping top 5% for three consecutive years under one of the most important Taiwan Corporate Governance Evaluation. So that's for rating and indexes. And we also actively, you know, join some initiative relevant to the climate changes. For example, participation in the Business Ambition for 1.5 degrees C initiative, RE100, EP100. You know, basically, we want to align our internal climate structure with those, you know, external climate-related structure to improve our, you know, climate-related ESG actions. And also, last but not least, awards. We have basically, you know, attended different competition awards and try... On the one hand, we try to know where our weaknesses are, because through those competitions or awards, they always, you know, we always get the feedback, so we know where we can improve. But by doing so, we also get more exposure of E Ink Group, so we can attract more talents, you know, through those awards. So, basically, once again, we have constantly dedicated ourselves to those ESG actions and try to improve and enhance our sustainability. But once again, sustainability and profitability, basically inside E Ink Group, they are equally important. We will keep it up. And basically, this is my presentation for second quarter, so we can move to the Q&A session. We now proceed with 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 top. We noticed a few questions online. The first one is from Patrick, Ashmore. The question is about the guidance on the second half outlook for ESL and eReader, and also associated gross profit margin. Well, as I mentioned earlier, let me talk about the ESL first. The inventory correction has been ended by second quarter, so we basically are expecting the growth from the ESL. So, the general guidance for the sales revenue overall, the third quarter sales revenue basically will be better than second quarter. That apply the same to the fourth quarter. So fourth quarter's sales revenue will be better than third quarter. So that's the guidance for sales revenue in general. However, if you are talking about the year-over-year, for example, ESL growth, we believe since, you know, the first half, there was some business hiccup in terms of the inventory correction for ESL. So, we don't really expect a YoY improvement for ESL. But, for CE, consumer electronics, since some of our branded customers, they already launched the Kaleido devices, and the market feedback we heard quite positive. So we believe, from CE perspective, in terms of the year-over-year growth, that that's something can be expected. In terms of the gross profit margin... So the first half was below 50% in the Mandarin session, in investor conference being held one hour ago. One of the question was, can we keep 50% gross profit margin for the whole year? I mean, it is hard to say at this moment, since CE has been growing and ESL started growing from second half. So it is kind of hard to say which will get a stronger growing momentum. But so it's very hard for me to comment whether, you know, the whole year, the gross profit margin, can we stay around 50. But basically, 50% in the long run, that's something can be expected. So that's my comment for the first questions. All right. Let's take the question from Samir. One second. Yes, thank you. I had a couple of questions. If I can first start with ESL in the U.S. Could you give us a little bit of sense on how ready are your systems integrator partners, as well as the supply chain, to try and get the U.S. opportunity as a focus over the next, say, 12-24 months? That's my first question, please. All right. Hi, hi, Samir. Good question. But normally we don't comment too much about our SI customers, but I can give you a bit flavor. I think one of the biggest retailer in the States, they already started the business with our SI customers. So, that's basically it's ongoing. And for this big project, we believe it probably needs 2-3 years to get everything done. So with this sort of, you know, growing momentum, we believe maybe the rest of the retailers. Of course, they will wait and see at the beginning, but I believe through those, you know, successful cases, that can be seen going forward. We stay very bullish about the ESL business in the American market. That's why, basic- So sorry- Yeah. One, as you said, maybe you can't comment much on the clients, but just to give us a sense of comparison, you had decent success in the European markets. Right. Is this customer or the set of customers in the U.S. very different from your experience in Europe? Do you have to customize? Are your working capital requirements going to be very different? Will you require additional significant capital expenditure and resources? So just to give a sense, as to what should we expect relative to maybe the trend that you had in Europe. That would be quite helpful. Right. Yeah, once again, good question. I think that the key for those retailers is the ROI payback period. And one of the reasons that, you know, for those SI, they can be successfully implemented ESL, because the ROI and payback was relatively shorter, was around 1.5 year to 2 years. And the feedback we got from the system integrator for those American retailers, roughly slightly longer from 2 years to 2.5 years. So from the payback perspective, that's the difference we identified so far. You may ask further why there's a 6-month payback difference? Because one of the key advantage by using ESL is to save the labor cost. We believe the labor cost in Europe is relatively higher, so that makes the difference. I think in Europe some of the bigger players, they started and then some smaller players, they follow. I personally believe the similar situation can be applied to the American market, since one of the biggest retailer, they already adopted ESL. I believe the rest of the players, of course, as I mentioned earlier, they wait and see at the beginning, but for those successful cases or experience that can be seen soon. I believe, you know, they would consider to follow. Yeah. Then from our company perspective, in terms of product specifications, do you need to change or modify or customize anything? Or given your experience in doing what you have done with the European customers, it's almost a similar product, and therefore, no incremental resources required from our side. That varies from SI to SI. But basically, what I can tell you is, with our latest generation of ESL, latest generation of the ePaper for ESL, it can be, you know, for both American customers and American retailers and also European retailers. From the technology perspective, it doesn't make a big difference, you know? And of course, from the system integrator perspective, they use different communication system. They use different software and all that. But from ePaper perspective, that pretty much the same. Yeah. With the U.S.-China relationship's always a question mark, do you anticipate us having to do anything different in terms of manufacturing capabilities? Do we need to- Yeah, that- manufacturing outside of China, to satisfy maybe if the large customers goes big scale, will we be able to accommodate the requirements given the issues- Right. that we face? Right. Yeah, good, good question. Geographical risk is always a concern, I mean, for us, and also from system integrators' perspective. So, of course, we manufacture module for our customers, but on top of that, we still have another eight module partners, you know, external one. So, of course, they have a very good, you know, manufacturing capability in China. But they also, you know, already built quite a few manufacturing capacity outside China. So they try to mitigate the geographical risks, as you just mentioned. And same thing for the EMS partner that those, you know, SI using at this moment. They try and build the EMS capability and capacity outside China. So, that could be a concern, but that shouldn't be an issue, yeah, because our partners even include ourselves is aware of the potential risk in terms of the geographical risks. Right. Maybe just moving a little bit to the different product. You've been quite positive and optimistic about the media sector over a long term as your technology for color paper really gets better and the size increases. Could you just give us a sense as to how you see that development of the sector? Are you selecting one customer to start off? Are you going with the geography? Are you looking at, say, transport or medical? Or how would you define your strategy, and what are the, the milestones that we should expect over the next, say, 12, 18, 24 months in a market that holds a lot of potential? Right. So basically, from the... I I think let me just try to answer your question from different perspective. For example, for CE business, we work with the branders. And for ESL, we work with the system integrators. But for the signage, we try to work with our end customers and also the system integrators and even our module partners. So through different partners, we try to open up more market for signage, because I think your question is highly relevant to the potential signage business. So through different partner, we believe we increase more chances to broaden the signage market. So that that's the first thing. The second one is, geographically, of course, Europe, even, the North America could be one of the biggest market. Why? Because, same thing for the outdoor signage. The reason they want to switch from the conventional static bigger size conventional signage or, you know, LCD, LED, that sort of signage using digital solution. The reason why they want to switch from that to our solution, one of the key reasons is try to save the labor cost. And of course, you know, one of our key features is basically we create no light pollution. But from labor cost perspective, you know, in Europe, in North America, their labor cost is relatively more expensive. So from that perspective, of course, we will focus on those potential markets in those two regions. However, that's from the outdoor perspective. But indoor perspective, we also work with some branders. For example, at the beginning of my presentation, we work with Sharp, you know, and also we work with Philips. And for those branders, they have their own in-house, you know, hardware and software team. So it can help us very easily to widen the market. However, we are pretty much at early stage of the signage business. We still have so much to learn. And then from the capacity perspective, because we do see the potential. So going forward, I mean, we have been you know expanding our capacity, but so we built already four additional lines in the past two years. But for another two lines we are working on and we are about to do, basically, we are using a large size of the equipment, you know. So that on the one hand, that create a more cost competitiveness for our ePaper product. And on the other, since we can you know make a bigger size of the ePaper, so that basically meet the requirement of the large size signage products. So basically, we... That's what we are thinking at this moment. Yeah. I hope I answered your questions. Yeah. Yes. Yes, you did. I want to follow up on that. My knowledge on this is quite poor, but you might have mentioned about yields in your manufacturing as you get larger size. Where are you- Right. Do you think you're stabilized, and are you now looking to optimize in terms of yield management? Samir, come again. Sorry, your, your- Sorry. -Your voice is breaking up. Yeah. Well, so my question was, as we are going from smaller size to larger and bigger sizes and also in color, given that- Right ... there is a technological upgrade in your manufacturing, are you able to generate yields of production that are, say, 80, 90+%? Or will it take time for us to achieve good yields that reduce our cost over a period of time? Right. Good question once again. Yield basically is always an issue for the manufacturer at the beginning stage of the new products, you know. But I basically have a very good faith in our manufacturing team, you know. We stay very confident about our yield. Of course, at the beginning of the ramp up or initial stage, we definitely would suffer from the yield. But that is because we don't have enough volume to manufacture. Once, you know, as the volume goes up, we have more experience. Basically, I don't think yield would be an issue for us, but of course, at the beginning stage, yield basically would be an issue, but it won't be an issue in the long run. Yeah. Right. One final question: Do you have a guidance for 2025 capital expenditure as to how much money you might spend on new capacity or new manufacturing and logistics? Right. Our general guidance, basically TWD 5-6 billion next year. Okay. Basically, same, same level. Same level for this year as well. Yeah. Thank you. TWD 5 billion-TWD 6 billion. Yeah. Thank you. You've been very generous with your time. Thank you. All right. Thank you, Samir. So, see quite a few online questions, hold on. There. Yeah. So, Patrick from Ashmore raised another question about: Have we started to engage with large advertising company on signage products already and getting pre-orders? How big will the contribution from signage be in 2025 and 2026? So, I believe most of them basically still in the sample stage and POC, proof of concept. So we haven't really got firm orders from those, you know, advertising companies. And also, we also need a bigger sized equipment for the large size signage. So basically, the first large size production line should be ready in 2026, and we need some time to ramp up. So, the possible contribution from signage, if you are talking about the big size, for example, bigger than 50%, I believe it won't be happening until 2026. But if it's below 50 inches, I think we already have some, you know, for bus stop and also for some indoor signage. Yeah, they are gradually growing. Not the massive growth, but gradually growing. Yeah. Okay, and another question. One question from William, Overlook, any guidance for D&A for from 2024 to 2026? I would suggest you go back to look at our, you know, financial statement. But the useful year for the equipment, basically, we use 5 years, you know, straight method. So you can, you may work it out by yourself. Yeah. One question from Guido, Montanaro. What has driven very strong 63% growth year-over-year in CE in Q2? Is this related to customer stocking up inventory, or does this reflect underlying demand? If so, what is driving this extremely strong demand? Yeah, Guido, I believe when we are talking about the inventory correction digestion, it's relevant to our ESL business. For the stronger CE growth, I think that should be associated with our color technology, you know, because what we got so far quite good market response on our CE color technologies, you know. So, okay. All right, so, we may answer some online question. We can take question now, yeah. Let's take the question from Jennifer from JP Morgan. Hi, hi, Jennifer. Feel free to ask questions. Hi, Jennifer, you may unmute yourself. Hi. Hi, Lloyd, can you hear me? Yes, very well. Gotcha. Thank you. I have a few questions on CE, if I may. So our CE business has been growing over 40% in first half this year. I'm just curious, like, how much of it is generated from the pricing, say, different from the colored and the black and white, and how much of it is from the unit-wise improvement? Right. I don't think I can provide a percentage for... I mean, for... I can't really break it up, you know? But, what I can comment is, we do see our color technology bring a quite strong, you know, growing momentum, yeah, to the CE growth. Yeah. Understood. I'm asking this question because I'm just curious, like, the CE quarterly revenue has grown a lot compared to the peak in, the past few years, and I'm curious, like, how many capacity can we support the demand? And, like, maybe you can, we can share, like, the current utilization level and if there is still, upside in terms of unit-wise demand. Right. Yeah, Jennifer, not to worry about our capacity for CE. Yeah. We are good, yeah, from a capacity perspective. For utilization, I would say our capacity is being healthy utilized. Yeah. I normally would, we don't really give the percentage, but I believe it is healthy utilized. Yeah. Understood. So, any another question about consumer electronics. So, 2024 may be a really strong year for consumer electronics. Do we have, like, a rough view about how, say, 2025 will be like under this high base? Do you think there's still, say, upside or at least sustainable, like more brands adopting the color technology? Or do you think 2024 may be the, say, the strongest year when most clients pull in and transition from the black and white to color technologies? Thank you. Right. Once again, a very broad question, but let me put it in this way. Allow us to have one more quarter, and then we comment about the 25 outlook. But what I can tell you is in terms of the CE, we stay very positive about the growth. Yeah. We- Understood. We stay very optimistic about the growth. Yeah. For the rest of the branders and how soon or whether are they going to adopt our color technology, we don't comment, but we believe sooner or later. That's great. Another question maybe about the signage. So we have mentioned that the larger size might have to wait till 2026 to see some, a more meaningful contribution. But, if I remember correctly, our H5 will be ready, say, by year end this year or early next year. So, I'm just curious, like, what will be happen to H5 during 2025? Right. So for H5, for those who you may not know what H5 stands for, that stands for the fifth line in our Hsinchu factory, so H5. However, that is our seventh production line globally, okay? So for H5, of course, it is designed to fit the potential big size signage business. However, it definitely can be used for ESL and CE business, you know? And if we are using the bigger size production line, that creates a more competitive cost advantage for our ePaper mother sheet. So before it can be fully utilized for signage business, of course, we can, you know, utilize that production line for other, you know, products. No problem at all. Yeah. Understood. And maybe another follow-up question, just, since our IoT business is still in the ramping up stage of the like inventory restocking or just out of the inventory digestion, I'm just curious, like, why are we still ramping up the H5, like, on schedule of our current, say, utilization for ESL isn't that high yet? Okay. Yeah, actually, Jennifer, that's a good question, but, we have a very good lesson learned two years ago. We just prepared, we thought, enough capacity for our demand. However, you know, due to the COVID, we sort of like, you know, being benefit from the COVID because that trigger the more adoption from the ESL business. So the lesson learned we got is, we didn't build the capacity more than we need. So that was the lesson learned we got. I think we always need to prepare something in advance, you know, before what we have, you know? So that's what we are doing now, you know. So, for example, H5, if on the one hand, if the large size signage business don't come that early as we expect, we still can utilize, you know, those capacity for the CE and for ESL, you know. Especially, CE business basically is, you know, growing better, I think, than you guys expected, you know? So if we don't build enough capacity, we're gonna be in trouble in terms of the capacity again, you know? So, we don't really worry if we build more capacity than we need, you know? Because we do believe the potential of the e-paper demand in the long run. And on top of that, I think E Ink group financially, we are in a very, very good shape, you know? So, we should take this opportunity to do a better preparation in terms of, you know, for the potentially bigger demand. There's... Sorry, now doing some like, CE product, outside, outside, the U.S. line? Jennifer, your voice is a bit breaking up. Come again? I'm sorry. So can you hear me now? Yeah, I can hear you now. Yeah. I'm sorry, sorry. So a follow-up on the capacity-wise, I'm just curious, are we now doing the CE outside the U.S. line already, or just that there is an option that CE can be provided also from our Hsinchu lines, like the four lines that we have expanded in advance? You mean, Yeah ... the capacity or the, the capacity for CE, can we supply? Yeah ... outside of 51, right? Capacity for, like, the IoT, the Hsinchu, like H1 to 4, is able to- Right Also support the CE capacity. And are we now doing that already? Or like that's the upside for our CE capacity? I would say they are pretty much switchable, but it may need a bit conversion. But for the new production line we are doing and we are about to do, they're gonna be 100% fully switchable. Yeah. Understood. The last question, Ken, can we have some updates on the H6, like the timeline for it to come online, and how big the size will it be compared to the current production line or even H5? Thank you. Right. We just got board approval on the H6, you know. Once again, the sixth new line in Hsinchu, but they're gonna be eighth line globally. We got the approval, and we are—it's under planning. And in terms of the capacity, compared with the H5, we still need to do a bit analysis, but probably will bigger than H5. But how big gonna be? I'll—I can't comment for the time being. Yeah. But basically, for those new production line we are working on, gonna be, you know, bigger size production line. Yeah. Understood. Very quick. Thank you. All right. Thank you. Because of the time constraint, we will take the last question from Kenny, from Nomura. Kenny, please unmute yourself and go ahead. Hi, Kenny. Thank you. Thank you, Lori. Sorry, may I squeeze a couple questions that I couldn't ask in manual session? Yeah. So I just want to follow up on CE that can I, can I confirm that in quarter two, were you under shipping the demand from your customers, or you can satisfy them immediately? Because if you are under shipping, then that means more upside for your second half CE sales growth. Yeah, Kenny, this is a tricky question. I won't answer your question directly, but I can tell you the demand is very strong. Yeah. Thank you. Okay. Yeah, thank you. And, yeah, maybe one last question is that about, regarding, large-sized products. So, it's been eight months, this year, so I'm wondering if customers, they are rushing, to place orders, to you or, all of the orders or any opportunities they are just on, like, on track. I mean, are they, are they eager to have their products, to be commercialized, faster than you expected? Yeah. You mean which, which business? Signage or large-sized products. For signage? I think it depends. Like what I mentioned earlier, we try to work with different partners for our signage business. We work with our module partner, we work with, for example, brands such as Sharp and Philips, and we also work with those, you know, OOH customers, you know? And some of them, they have a very strong desire to, you know, speed up the commercialization of the signage product. And the others, they hesitate a bit, you know? I think it varies from customer to customer. But we do see a trend that, you know, sustainability associated with, you know, low carbon emission and also, you know, how to use the automation to improve the efficiency for the display. That definitely will be the trend, you know. So I think considering ePaper technology to meet the trend, we believe that's gonna be our advantage going forward. So coming back to your question, it really varies from customer to customer. But in terms of the trend, we believe that's favorable to us, to E Ink Group, from that perspective. Yeah. Okay, thank you so much. I appreciate for the call. Thank you, Lloyd. All right, thank you. Okay, thank you for your time to follow our call today, and we will see you next quarter. Right. Due to the time constraint, we may not be able to answer all of your online question. Feel free to send your question to us, okay? We are happy to follow up. Thank you very much. Have a nice day. Thank you. Bye-bye. Bye-bye.