Good afternoon, everyone, and welcome to E Ink Holdings Inc.'s Q3 2024 earnings call. All participants are currently in the listen-only mode. Following our presentation, we'll open up for Q&A session. Today's conference is being recorded. The Webex replay will be available on E Ink Holdings Inc.'s website after the conference. Joining me today are CFO Lloyd Chen and Finance Center Senior Director Patrick Chang. With that, I'll turn over the call to Lloyd. Thank you, Winnie. Good day, everyone. Welcome to E Ink Holdings Inc.'s Q3 Investor Conference. My name is Lloyd Chen. I'm CFO of E Ink Holdings Inc. So before we start, I would like to share the message behind this quarter's cover page. Basically, this cover page shows the evolution of ePaper technology from black and white eReader to the latest color ePaper applications. Since declaring the year of color in late 2019, E Ink Holdings Inc. has focused on enhancing color technology and improving display quality. Recently, the adoption of color ePaper in eReaders and eNotes has rapidly grown, driving new energy in digital reading and note-taking. As color technology matures, we believe color ePaper will become the top choice for device upgrades, marking a new era for color ePaper. All right. And let's also take a few seconds on the Safe Harbor statement. All right, next page. Okay. I would like to share the first quarter on the financial results. Basically, the sales revenue was around TWD 22.5 billion, and the net income was around TWD 5.35 billion. While decline was mainly due to the product mix associated with three-color, four-color transition. However, the market for color e-reader and e-note has shown strong demand, driving overall revenue growth. Next page. Operating profit for the first quarter was around TWD 4.8 billion, while decline once again, as I mentioned earlier, due to the product mix associated with three-color, four-color transition. And for this year, we also spent more R&D and also to acquire the talent. So relatively higher operating expenses. However, once again, the market for color e-reader and e-note has shown strong demand, driving overall revenue growth, as I mentioned earlier. Next page. So the total assets was TWD 89.5 billion by Q3 this year versus TWD 72.4 billion Q3 last year. So the YoY increased around TWD 17.1 billion, basically driven by operational growth and relatively stable financial investments. Total assets have nearly doubled over the past four years. This growth was mainly fueled by inflow of the working capital, factory and production line expansions, and also stable financial investments resulting in increases in cash, financial investments, and also fixed assets, etc. For cash flow, by Q3, both cash position and financial assets position both increased, totaling around TWD 59.3 billion. The year-over-year increase is around TWD 10.4 billion. Bank loan debt increased in Q3 mainly due to funding needs for operational supplies, CapEx, dividends, payout, etc. Okay. So every quarter, we would like to share some market updates with you. So basically, we have been working with the brand customers of e-reader and e-note. They have both shifted towards our color ePaper technology platforms, including E Ink Gallery and E Ink Kaleido, delivering more paper-like writing and reading experience. Highlights include first thing, reMarkable, one of our brand customers, Paper Pro. They basically utilize our Gallery full-color ePaper and active stylus support. reMarkable Paper Pro basically allows for a color-rich, authentic paper-like experience in both writing and drawing, enhancing user experience. Also, Amazon, Kindle Colorsoft. Basically, we have been partnering with them for 18 years already. So we have enabled the transition from black and white e-reader to their latest color e-reader powered by our Kaleido technology. Basically, we remain committed to advancing the performance of the color ePaper technology, aiming to continuously elevate the reading and writing experience for users. Next page. And we also continue to innovate in color ePaper using our key features such as low power consumption, sunlight readability, and paper-like quality to create color ePaper signage with the E Ink Spectra and E Ink Kaleido Outdoor platforms. And for E Ink Spectra 6, our latest and greatest color technology basically offers vibrant, high-contrast colors comparable to advanced conventional color printing. This improves digital advertising efficiency and reduces the poster replacement costs. Brands like Philips, Sharp, and Samsung, they all have adopted this technology, Spectra 6. And also our Kaleido Outdoor with a wide temperature tolerance. And this technology works in various climates without costly heating or cooling systems. It's quite perfect for digital out-of-home advertising, delivering dynamic color displays with a printed poster feel. As digital advertising demand grows, ePaper signage will drive E Ink's growth with plans to expand screen sizes to meet the increasing market demand. Next page. So in the past few quarters, we have repeatedly mentioned our vision of we make services smart and green. Basically, we are trying very hard to bring innovation to different categories such as art, design, etc. And our color-changing ePaper technology, E Ink Prism, is transforming fashion, public art, interior design, and even product design. This year, we have partnered with BMW. Basically, this is the third year we will be working together on color-changing concept cars, BMW concept cars. And also we work with a global automotive interior supplier, Antolin, to enhance vehicle interiors. Mobile brand Infinix on color-changing smartphone back cover. And also one of the local Taiwanese companies is called Noise Kitchen Art for the Dynamic Wave public art decoration. This work being placed in Taipei Dome, a very big local stadium in Taipei City. Last but not least, we have also entered fashion, collaborating with Delvaux, a prestigious Belgian luxury leather goods brand on the limited edition Helios handbag series for Paris Fashion Week. This collection blends our Prism 3 technology with Delvaux high-quality luxury craftsmanship. Basically, these partnerships I just mentioned showcase how ePaper can turn static surfaces into dynamic and interactive experiences. Also in September, E Ink, we successfully secured our first green loan of TWD 3 billion, marking the first green loan in Taiwan and the Asia-Pacific region, confirmed by Moody's rating through a second-party opinion on its sustainability performance. According to Moody's assessment, we received an excellent sustainability quality score, basically SQS2, very good, and confirmed that this green loan supports our low-carbon and energy-efficient ePaper products, which align with EU Taxonomy criteria for climate change mitigation. Next page. We also continue our sustainability efforts. We received several prestigious Taiwan awards. The first one is a CommonWealth Corporate Citizenship Award, ranked fifth among large manufacturers and selected for, I mean, also selected for the Talent Sustainability Award. The second one is Taiwan Sustainability Action Awards, TSAA, two-goal awards, SDG 3, basically meeting the sustainable development goals from UN, provided paperless medical systems for the Home of Flying Elephants on this activity using our ePaper technology. And another criteria, SDG 13, reduced greenhouse gas emission by 15% and committed to RE100 by 2030. The third award is from Asia-Pacific Sustainability Action Awards, APSAA, two-goal awards, same thing, SDG 3, promoted eye health awareness for children, seniors, and also heavy digital users. The second one, SDG 4, eRead for the future, one of our most important annual activities. We donated the e-readers and e-books with our ecosystem partners to bridge the educational gap in remote areas. Last but not least, Taipei Golden Eagle Microfilm Festivals. Basically, the activity I just mentioned, the Home of Flying Elephants, we basically made a small film, and we won basically a bronze award for the sustainable microfilm. We remain committed to social and environmental sustainability with low-carbon ePaper at our core. On the last page, we'd like to share a very excellent recognition. In addition to those previously mentioned honors, we recently achieved an impressive score of 92 out of 100 in the latest S&P Corporate Sustainability Assessment, marking a new milestone for the company. The score of basically 92 represents the highest in the ITC category across three ESG pillars: environment, social, and governance. Looking forward, we remain committed to basically our vision of profitability and sustainability because these two elements are equally important at E Ink, leveraging our low-carbon energy-saving ePaper products to support the realization of the sustainable and smart lifestyles. Basically, that is my sharing for third quarter. If you have any question, feel free to ask. Let's move to the next session Q&A. We will now begin the Q&A session. To ask a question, please click the raise hand icon on the sidebar. When we take your question, please remember to unmute yourself. You may also submit questions by text in the question box on the sidebar. Question is coming from Edison from HSBC. Please go ahead. Hi. Hi. Hi, Edison. Hello. Hello. Thanks for taking my question. I think my first question is regarding. Sure. Yeah, yeah. My first question is regarding the growth rate for different segments in fourth quarter. Can we assume ESL has higher growth rate than e-reader? Since I think during the Chinese earnings conference call, we mentioned that ESL can account for higher percentage points versus third quarter. Is that a suitable assumption here? That's my first question. Thank you. Okay. Thank you, Edison. I think in the previous Mandarin session, our CEO talked about the growth for fourth quarter. Basically, I think you guys are quite aware that our inventory correction for ESL has been ended. So the growing momentum basically went back to the normal manner. So from that perspective, yeah, your assumption about the stronger growing momentum for ESL can be assumed. So basically, I kind of agree with you. But the thing is our CE business is also growing at the same time. So I think we sort of like having a stronger growing business in parallel in fourth quarter and even onwards. So I kind of agree with your statement, but I don't exactly know whether it will have a happy surprise for us or not. But anyway, a positive growing momentum has been there, yeah, in fourth quarter for these two business segments. Right, right. Thanks. I think I want to ask the same question into 2025. As Kindle Colorsoft just started to run from one of your large customers. So I think our consumer electronics can have an upside growth in 2025 as well. Besides ESL, like you mentioned, just started to rebound after inventory being digested. And I think with a larger customer to deploy in 2025, so ESL should have a growth upside momentum as well. My question is, in terms of the growth rate, which one you think have a stronger growth momentum like ESL versus consumer electronics? That's my second question. Thank you. Right. So Edison, hard to comment at this moment. But what I can comment so far is for the time being, we are confident that year-over-year growth can be expected. I'm talking about the 2025 outlook for these two business segments. But which one would go stronger? I'm afraid that I can't comment at this moment. But I think it's going to be a happy problem since these two big business segments, they are growing together. So allow us to observe for a while, and we probably can comment further in the next earnings conference call. Yes. Very clear. Thank you. My last question is regarding the margin-wise gross profit margin. I think during the Chinese call, you guys also mentioned that fourth quarter margin can back to normal level. Is that correct? If I'm wrong, correct me if you may. And I really want to know what is the normal level you were referring to. I think that's the first one. Yeah. Thank you. Right. I mean, how normal is normal? There's no clear definition. But I think most of our friends out there, they have an expectation of 50% gross profit margin minus plus around that range. So I would take that number as a reference to answer your question for the time being. I think for all the positive elements is happening in terms of the manufacturing and also operational efficiency. So I think the gross profit margin can be improved in fourth quarter. But once again, yield improvement definitely improved the gross profit margin. However, product mix, that's also affect our gross profit margin. If our module sales going quite well in the remaining two months by end of this year, that might change the level of the gross profit margin a bit. But that's a happy problem since we're going to have a higher sales revenue. That's also squeeze out more gross profit dollar. I think that's also positive for us. So whatever it goes out, I think E Ink can take the benefit out of it. Right. A quick follow-up on this one. I think you mentioned the yield issue, right? I think this year margin being diluted by some of the yield issue because of a new product launch and also unfavorable product mix as we have a stronger consumer electronics this year. So I think my next question is, how should we think about the overall margin in 2025? We know that ESL, if they account for a larger portion of the total revenue, GPM can definitely increase the quarterly. But I really want to know any other color more than these things. Let me add more color onto your questions. Basically, this year, three color technologies being released out there, Spectra, that basically for the ESL, and also Kaleido, that's for printing color technology. And basically, that is the color technology Amazon is using. And also for Gallery, one of our brand customers, reMarkable, is using. So three color technologies being released. So inevitably, we need a while to improve our yield. So coming back to your question, that did affect our gross margin a bit. But I have quite confident and also good faith toward our operational team. So it basically just a short-term issue. In the long run, it shouldn't be an issue there. And since the yield issue sooner or later will be gone, and the product mix basically will be another parameter to affect the gross profit margin. I mean, once again, it's a bit hard to say at this moment since the CE is growing, the ESL is also growing. So it's hard to say what the product mix it will be. But either scenario or both scenarios happening, I think E Ink can take the benefits because our ePaper material will be using. So from that perspective, we have less concern over the gross profit margin in the short run. We really want to aim for a gross profit dollar in the long run. We really want to open up the market share so we can make more gross profit dollar in the long run. Yes. Very clear. Thank you. I'll stop here. Thank you. All right. Thank you. Next question is coming from Fraser from Harrow Investment. Hi, Fraser. Hi. Hi. How are you? Yeah, I'm good. How are you? Yeah. Great. Thank you. It looks very exciting with all the new color products that you've launched. Just in terms of the price and the value that you get for the new color products. Right. I mean, personally, I'm quite excited to go and buy another Kindle, having owned the same one for probably 15 years. But do you think that you are charging enough? And kind of what is the value uplift from kind of per inch between a black and white ePaper display and a color one? And do you think that you are charging enough? And potentially, should your margin even be once you've got sorted the yield issues, should potentially be higher than for the black and white, given the product is so much better? Right, right. Yeah, Fraser, good question. It's always kind of the dilemma to figure out whether we are charging enough in order to win more market shares. But I think so far, we believe our pricing strategy is good because, as you can see, most of our brand customers, such as reMarkable, Amazon, and Kobo, and even PocketBook, they all adopted our color technology. Basically, Amazon is the one last missing piece of the puzzle, and they are already being on board. So we believe our pricing strategy is good and then what's the next step? The next step is going to be how we can improve our operational efficiency by reaching the higher economy of the scale. So those benefits associated with the improvement of the operational efficiency, that we can enjoy further being contributed back to our gross profit margin. So that's sort of the thing we are thinking about. I mean, aiming for a short-term gross profit margin is not our main focus. What we really want is try to open up the ePaper market share, and we will make more gross profit dollar. So that is my answer to your questions. Okay. Thank you. And just geographically, do you know where the strength in ESL is coming from at the moment or which particular? I think you've got three. There are three key partners, aren't there, that are route to marketers? Right, right. SES-imagotag, which is renamed and. Right, right, so the three major players, I think, geographically, they tended to be focused on the Europe market first, so Europe basically is still the most mature ESL market. However, the North American market is growing at this moment, so even, for example, the SES is a French company. Pricer is a Swedish company. SOLUM is a Korean company. But they all have the subsidiary in Europe and North America, so I think their priority so far is they are focusing on the North American market. However, I also noticed some of them try to explore the market in basically down under, Australia and New Zealand, so that's also a quite exciting progress from our perspective, so coming back to your question, North American market is growing. If you are talking about the Asian market, I think Korea and Japan basically still are a relatively more mature market from ESL perspective. Yeah. Okay. Thank you. And then just last one question. So on the outdoor signage or display, that's been quite a small percentage now. Do you have any insight into the difference that having one color product might make? And where do you or is it just, I guess, the product has probably just got into the hands of your distributors, which I think are usually quite small companies. So is it too early really to get any understanding of how adding color to outdoor signage, what that will do to the growth rate? Right. I think yes or no. I mean, we just started. We just started. And if I break out the signage market, I would say two major categories. The first one is indoor. And what we are really cooking now is the retail signage being installed, for example, in the supermarket or fast fashion or grocery. For that part, still relatively small. But for those companies we are working with, they are not small potatoes. We're currently working with, for example, Philips. The company behind is TPV, an electronics company in China. And also Samsung, Korean big companies, and also Sharp in Japan. So we are working with those big companies trying to explore more possibility. And most of them, they are at the proof of concept stage. But we believe something should be happening next year, I mean, 2025, since it's indoor. From indoor signage perspective, they don't really need the massive display. What I'm talking about is like 75 in or 80 in, that sort of size because currently, the maximum size we can manufacture is only up to 42 in. So there's no sort of capacity limitation in terms of the size. So it should be something happening for next year, 2025. But in terms of the meaningful contribution, that's still relatively smaller. However, for the outdoor signage, since we are building the bigger size, we are building the capacity with the bigger size of the equipment. So that capacity should be ready in 2026. So I think gradually, we can see the progress of the e-signage. But if you are talking about the meaningful sales revenue contribution, for example, with the higher single digit or the lower double digit, I think in terms of the time frame, it should be aiming after 2026. So I kind of give you a flavor of it. Yeah. That was really helpful. Thank you very much. I'll let somebody else ask. All right. Thank you, Fraser. Our next question is coming from Max from Mobius Capital. Hey. Thanks very much for taking my question. So maybe the first question would be on the FX side. Could you maybe explain a bit more in detail for me again what was driving the FX loss this quarter? And maybe in that context, how you are holding your financial investments at the moment? Max, can you come again? So your voice is a bit breaking up. Yeah. Sure, sure. On the FX losses that occurred this quarter, could you maybe explain the drivers behind that again for me? And second of all, could you also elaborate on the financial investments you are having and if they are held in U.S. dollars and how you invest the cash? Okay. Yeah. For the FX loss, actually, we don't really have the foreign exchange loss this year. But if you are talking about the year-over-year FX variance, that was because the FX gain last year basically is higher than this year, so we are talking about the year-over-year FX gain variance, so it's not really the foreign exchange loss that we are having this year. It's basically we are having less foreign exchange gain this year compared with the first three quarters last year, so that's the first thing I would like to explain. Your second question is how we utilize our cash for the investment. Basically, I'm not quite sure if you are aware of one of our subsidiaries where it's located in South Korea. It's called Hydis. And Hydis has changed from a manufacturing company to a licensing company. Hydis has been collecting lots of licensing money there. Basically, we are utilizing the cash we have there to invest in relatively stable financial assets such as bonds and also in the stock market. I think currently, we can still get a relatively okay interest income on time deposit. That's how we utilize the cash. Also, if we need the further money for the CapEx, basically, of course, we utilize the cash being generated from our operation. Also, we borrow the money from the bank. Basically, the interest rate in Taiwan is quite good. So we also arbitrage. Yeah. That's how we conduct our financial investment in a way. Okay. So just to clarify that, so all those investments are made in U.S. dollars, or do you also do them in Korean won and Taiwan dollar? It varies. It varies from region to region and varies from company to company. But I would say 50% of our 40%-50% of our investment are in U.S. dollars. The remainder basically is in local currency. Okay. Okay. Understood. And so the last question maybe on those investments, just to clarify again, so this was driving the lower FX gain than in the previous year, right? This is the reason for it. Correct. Yeah. And so why are you not investing like buying your own stock? Why are you not investing in your own company? Do you think you can make more money by investing in the stock market? Yeah. Max, there's a lot of regulation and limitation if we invest ourselves because we are a public company. I mean, if you are talking about the buyback, that's going to be the separate story. But if you are talking about we invest ourselves, I think there's a lot of restriction over it. So we don't really consider that. Yeah. Okay, and buybacks, is this something you're considering? Not at this moment because I don't think it's worthwhile to do so, even at the relatively higher stock price. But we constantly consider it, but not for the time being. Yeah. Okay. Understood. And then the last question, and then I jump back into the queue, would be on the overall margin. In the past, we saw you lowering your profit margin a bit to allow faster growth in the market and to speed up the adoption, right? Is that something you are also considering for the EPD market? You mean e-reader, e-note, right? No, no. For the large outside displays, basically. Oh, you mean outdoor signage. Yeah. Yeah. Exactly. I think how to co-create the market share with our partner is our main focus. But we don't think this action would affect our gross profit margin significantly because for signage, for e-signage, I think we are just in the very, very early stage. So when we try to sort of consider the profit sharing with our ecosystem partner, the purpose of it is trying to open up the market share. So when we achieve that scenario, we always can get the benefits in terms of the operational efficiency and all that. So I don't think it would affect our gross profit margin significantly. So not to worry about it too much. Yeah. Okay. Okay. Perfect. Thank you so much for taking all my questions. Very much appreciated. All right. All All right. Thank you, Max. The next question is coming from Guido. Hi, Guido. Hello. Can you hear me? Yes, very well. Thank you. Excellent. Hello. And nice to speak to you again. And congratulations on some very nice results. Just, I have two questions. The first piece is just on the consumer electronics side. To what extent do you think there could be a risk that you have seen or benefited from your customers stocking up in advance of product launches such as the Kindle Colorsoft, for example? So is there a risk that your very strong growth has been driven by your customers stocking up in advance of those product launches? And if so, is there a risk that 2025 sees a more challenging comparison because of the stocking up? Right. Right. Right. Yeah, Guido, I think good question. Always a concern from us whether our customer built too much safety stock in advance, especially when they try to launch a new product. That's always our concern. So we basically monitor their sales forecast and our shipment very carefully. And as far as we see, I think the level of their safety stock seems quite reasonable and healthy. So that's how we see it. So we don't really expect a risky situation for our seed business next year. So that's how we see it so far. But however, everything should be dynamic. So basically, we will monitor the situation carefully. Of course. Okay. So as you sit today, you expect growth in the CE business next year? Yes. Yeah. Okay. Yeah. Yeah. Next year, 2025 should be better than this year. Yes. Yes. Okay. And then my second question, please, is just on so obviously, Amazon with the Kindle, they went with the Kaleido technology. reMarkable went with the Gallery technology. Is your expectation that Amazon will transition to Gallery for future models of the Kindle? And if so, will that have any implications for you in terms of better pricing or better margin? Or actually, is it the same for you whether you sell Kaleido or Gallery? Once again, great question. So Guido, we can't really speak for our customer, but I definitely can give you a flavor onto your questions. So when our sales team promotes our color technology, we definitely promote the one we have on hand. So what I'm trying to say is all of our customers, they see our greatest and latest technologies, not only for Kaleido and not only for Gallery, basically for both, even Spectra. So they choose the one to match their existing application first. And there's always opportunity for them to switch around. So I really can't speak for our customer, but there would be a possibility. Yeah. Okay, but just to understand, so who knows if they will change or not, but if they do change to Gallery in time, for you, does that improve your pricing? Does it improve your margin, or is it the same whether you sell Gallery or Kaleido? It won't be the same, but it would be similar since Kaleido basically is a printing color technology. But Gallery is a full-color technology. It definitely stands in a better position. I hate to use this term, but I think Gallery basically stands in a better position than Kaleido. But Kaleido is also very good because it all depends on what application you are aiming to. So that applies that if the Gallery technology should be in a better position in terms of the pricing strategy. But once again, we really want to co-create the ePaper market with our customer and also ecosystem partners. So how to properly do the profit sharing is one thing we should consider. What I'm trying to say is even we are in a better position for higher pricing, but we always need to figure out how to do the profit sharing among our ecosystem. So don't expect that we're going to have a crazy profit margin if the customer eventually chooses the Gallery. Yeah. Understood. Okay. Thank you very much. And good luck with 2025. Thank you very much. We also noticed one of the questions from Warren Yin. Basically, his question is about, could you give us a sense of the current revenue contribution from large signage? Have shipments been in small batches, or have you already shipped in volume? So thank you for the question, Warren. Basically, the sales revenue is still relatively smaller. So that's the answer to your questions. Another online question from Hao Lu. Can the company give more color on the full-color transition progress? What's your module partner order taking for full-color ESL in Q3 and Q4? Do we already see strong full-color ESL adoption demand from retail chains? What's revenue contribution from full-color next year, 2025? Basically, the ESL shipment starting from third quarter, there are many full-colors. Of course, there are some three-color smaller shipments to support the legacy products. We, of course, support that. But mainly, the majority is for full-color. Okay. At this moment, we do not see any further questions on the line. So this concludes today's conference call. And thank you for your time to follow us, and see you next quarter. Thank you. See you.