Edited Transcript of 4966.TWO earnings conference call or presentation 13-Feb-20 6:00am GMT

Q4 2019 Parade Technologies Ltd Earnings Call

SANTA CLARA Feb 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Parade Technologies Ltd earnings conference call or presentation Thursday, February 13, 2020 at 6:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Ji Zhao

Parade Technologies, Ltd. - Co-Founder, Chairman & CEO

* Judy Wang

Parade Technologies, Ltd. - CFO

* Yo-Ming Chang;Investor Relations

================================================================================

Conference Call Participants

================================================================================

* Aaron Jeng

Nomura Securities Co. Ltd., Research Division - Lead Sector Analyst for Greater China Semiconductor Research & Head of Taiwan Equity Research

* Daniel Yen

Morgan Stanley, Research Division - Research Associate

* Jerry Su

Crédit Suisse AG, Research Division - Director

* Ruijun Huang

Fubon Securities Investment Services Co., Ltd. - Research Analyst

* Yiqun Chan

CIMB Research - Research Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Welcome everyone to Parade Technologies 2019 Fourth Quarter Webcast Investors' Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang, will present 2019 fourth quarter and fiscal year 2019 financial results first. (Operator Instructions) After the presentation, there will be a question-and-answer session in English by CEO, Dr. Jack Zhao; and CFO, Mr. Judy Wang. And we will also reserve the last 15 minutes for attendees, who would like to ask questions in Chinese. (Operator Instructions)

(foreign language)

Now I would like to introduce Mr. Yo-Ming Chang, investor relations of Parade Technologies. Mr. Chang, you may begin.

(foreign language)

--------------------------------------------------------------------------------

Yo-Ming Chang;Investor Relations, [2]

--------------------------------------------------------------------------------

Thanks, [Wang Che]. Welcome, everyone, to Parade Technologies 2019 Q4 Webcast Investor Conference. Parade Technologies fourth quarter 2019 consolidated revenue was USD 96.18 million and the net income was USD 20.72 million. It's both basic and fully diluted after-tax earnings per share were USD 0.27 and USD 0.26, respectively. These results compared to consolidated revenue USD 101.24 million and a net income of USD 22.44 million or USD 0.29 and USD 0.28 per basic and the fully dilute share in a year ago quarter.

In U.S. dollars, the fourth quarter revenue decreased 5.19% sequentially and was down 5% year-over-year. The gross profit in the fourth quarter of 2019 was USD 42.26 million, a decrease of 3% from the previous quarter and a decrease of 0.39% compared to the same quarter of last year. For the fiscal year 2019, the consolidated revenue was USD 382.05 million, representing an increase of 11.34% from USD 343.15 million in the prior year. Gross profit was USD 163.17 million and the operating income was USD 77.57 million. Net income was USD 78.74 million or USD 1.02 per basic share and USD 0.99 for full diluted share. These results compared with net income of USD 65.06 million or USD 0.85 per basic share and USD 0.81 per fully diluted share in the prior year.

Based on the term business outlook, Parade is providing the following guidance for the first quarter of 2020. Revenue is between USD 95 million to USD 105 million. Gross margin is between 41.5% to 44.5%. Operating expense is between USD 21.75 million to USD 22.75 million.

(foreign language)

It is my presentation for the 2019 Q4 and the year 2019 financial results. Now I transfer to CEO, Dr. Ji Zhao, to answer your questions.

Wang Che , you may begin.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you, Yo-Ming. We are now in our English question-and-answer session.

(Operator Instructions) The first one is from Peter Chan, CIMB.

--------------------------------------------------------------------------------

Yiqun Chan, CIMB Research - Research Director [2]

--------------------------------------------------------------------------------

Wondering, given the epidemic going on in China, now that gradually, the -- I guess, your customer gradually coming back to work, so wondering, if you have any visibility on the demand, given that a lot of the -- your sales are exposed to the discretionary spending? And during this time, I would imagine there was some impact to the discretionary spending, how -- what's your assessment on the impact on your own business? That's my first question.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [3]

--------------------------------------------------------------------------------

Okay. Thanks, everybody. And so good afternoon. This is Jack. I think, first of all, our heart is with patients in Wuhan and others who suffer from this coronavirus, and we hope that coronavirus can diminish and the people can return. So there are not more live too. And in terms of business, and we -- so far, we have not seen big difference for our panel customers. It seems they are continue production and manufacturing in the Chinese -- the holiday -- Chinese New Year holiday side, the factory is still operating.

And when you -- other factory production line start to return to work from this week, and we are still corrected data, see what other things may or may not impair us. However, what we believe, this coronavirus is a short term, temporary event, and we still remain positive for our long term -- the business outlook, and we still have a confidence for our business into long term. We have not seen any material impact in terms of our spending side. Maybe Judy can add on whether we expect any [spending side] increase. Judy?

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [4]

--------------------------------------------------------------------------------

Jack, can you repeat your question, again? I think I missed your question.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [5]

--------------------------------------------------------------------------------

The question was whether -- have we experienced any the increase degree to the -- our projection to the coronavirus.

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [6]

--------------------------------------------------------------------------------

Regarding the financial?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [7]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [8]

--------------------------------------------------------------------------------

Yes. At this moment, we would say, based on the customers' query received, we didn't see any material push out for the orders. And we have been shipping, we would say, pretty normal to our regular shipment.

--------------------------------------------------------------------------------

Yiqun Chan, CIMB Research - Research Director [9]

--------------------------------------------------------------------------------

As a follow up to that question...

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [10]

--------------------------------------------------------------------------------

Yes. Okay. Go ahead.

--------------------------------------------------------------------------------

Yiqun Chan, CIMB Research - Research Director [11]

--------------------------------------------------------------------------------

Sorry. My follow-up question, may I assume the orders that you have on hands right now, they probably were sent to you before the holidays. Since the Chinese New Year holiday started and so far the customer has not revised any orders, is that a correct assumption in general?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [12]

--------------------------------------------------------------------------------

Before the Chinese New Year, we had a pretty strong booking. We're still receiving from a customer for Q1. And we have not seen any material change in terms of PO...

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [13]

--------------------------------------------------------------------------------

Push out or cancellation.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [14]

--------------------------------------------------------------------------------

Yes. Cancellation.

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [15]

--------------------------------------------------------------------------------

We do have -- we do receive -- we still receive some new orders.

--------------------------------------------------------------------------------

Yiqun Chan, CIMB Research - Research Director [16]

--------------------------------------------------------------------------------

I see. All right. My next question would be on the PCIe express product line. What's the current contribution to the total sales mix? And what is the projected contribution to sales mix, say, by end of this year?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [17]

--------------------------------------------------------------------------------

So for PCIe Gen 4 retimer, we had a small amount for PCIe Gen 3 retimer. It's a very small amount. And the PCIe Gen 4, I think it's -- we're up to -- we have a very small amount of shipment and very low numbers.

And we engage a lot of tier 1 customer for designing -- design-win activity and for those tier 1 customers and looks pretty promising and to tie into the adoption or mass production. I don't think we give a clear calculation for estimation on 2020 year for the -- how much dollar amount contributed from the PCIe Gen 4 retimer business.

Overall, what do we see as we guided before that the PCIe Gen 4 retimer, when it comes to mature or maybe 2 or 3 years down the road, maybe also add on the future has a transition from the PCIe Gen 4 to Gen 5, the overall TAM for the retimer business should make somewhat like $200 million, the TAM. And we would like to have become a key player for this market.

--------------------------------------------------------------------------------

Yiqun Chan, CIMB Research - Research Director [18]

--------------------------------------------------------------------------------

Okay. In my own study, in the industry, it seems like the -- some customers, they may go directly to PCIe 5 because PCIe 4's introduction to the market was relatively late, and the PCIe 5 followed the PCIe 4 closely. And so the question there will be though, would the customers note the -- in your assessment, how the impact your revenue ramp up schedule, if some customers decide to skip PCIe 4 and go directly to PCIe 5?

And also in my understanding, the qualification period, since it's industrial infrastructure-related application, servers, it could take anywhere between 2 to 3 quarters. Given the (inaudible) schedule and customers' qualification, the cycle time, would it be correct to assume that PCIe 4 or 5, they may not contribute more than, say, a few percentage of sales this year at the best. Are those assumptions -- I just would like to hear your opinion on those -- on the revenue schedule, basically.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [19]

--------------------------------------------------------------------------------

Okay. And I think the PCIe Gen 4 now having deploy into the market primary as MD systems. And those systems, and we have the application in the data center neither have a rising cost and neither have a [supported] storage. And also many in the AR machine, we need to have the PCIe Gen 4 to connect multiple graphic costs and to perform superior graphic or the AR calculations. And those applications really does not matter whether it's AMD system or Intel system and really doesn't matter.

So we do see the -- either Q2 and -- since the customers start to deploy the PCIe Gen 4 rising costs and also for the storage also for the sort of AR machines. And so -- but I understand what are you try to point out is, Intel sort of delayed PCIe systems. And -- however, as we work with Intel, even the -- just as recent as this week and we continue bring up many of the other cost, which for different system application, so we still believe the PCIe Gen 4, whereas it has (inaudible), where has run a period of time. And if you notice the tier 1 storage customer, whether the -- from the Samsung, the Micron, all have a storage device already on the PCIe Gen 4. And I would think we have a good size of deployment.

Certainly, in the PCIe Gen 5, we'll be getting pretty -- people getting excited for PCIe Gen 5 as well. The reason being is, you have double the bandwidth again, right? From the 16 gigabit per second to the 32 gigabit per second as we are very busy to develop those systems or those -- the chips. However, when you double the speed, your device and all systems getting much complicated, okay? So it will take time to really -- to make the PCIe Gen 5 ready for the market. That's our view.

And just because of the complexity of the system, of the speed, we are part of a leading pack to develop the PCIe Gen 5 retimer, and we know the complexity compared with PCIe Gen 4 is another level of difference. So -- and I think the -- just like what we had said before, we are not, at this moment, can project or provide a guidance for how much revenue was generated in the 2020. But we are -- have a high confidence we're the leader in the PCIe Gen 4 retimer, and I believe we are one of the -- the many tier 1 customers favor us. And so you could put a (inaudible) there with your Gen 4 device. You are getting to another level Gen 5 because those are Gen 4 and the Gen 5, really [peer-to-peer] compatible. So it will be just the way you develop (inaudible) conveniently as far as your chip works to migrate to the Gen 5.

So that's where we are. And we are very busy to work with tier 1 customers to help them to push the running cost, storage and AR systems into the market, and we also work with whether AMD, Intel very closely. And seems people are busy to deploy those systems.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Next to ask question is Jerry Su, Crédit Suisse.

--------------------------------------------------------------------------------

Jerry Su, Crédit Suisse AG, Research Division - Director [21]

--------------------------------------------------------------------------------

First, Jack, can you elaborate a little bit more about the Q1 guidance? Obviously, the revenue things -- midpoint is up sequentially. Could you let us know which segment or which business is seeing a stronger growth or which area is still seeing a seasonal decline? Also, on gross margin, I think you have lifted the gross margin range again. Can you give us some more color about the reason behind it? And is this sustainable throughout the year? That's the first question.

Second question, more related to your full year outlook. Any color you can provide for us by each different segment?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [22]

--------------------------------------------------------------------------------

Okay. Thank you. In terms of Q1, the guidance and the -- basically, the -- what are the force and support our Q1 business. And we continue to see the strong demand, our eDP Tcon, particular 1.4 eDP Tcon bundle solution with our source driver together with the advanced notebook solutions for as the gaming solutions. And we continue to see our high-speed device -- the demand increase. Those are the things supporting our -- the current Q1 the guidance and basically eDP Tcon with a source driver. Those are bundled together so as our high-speed device. And those are the themes for the Q1.

In terms of our gross margin, and we have a better product mix. And whether the -- our high-speed device, which typical has a better gross margin, so as our eDP 1.4 device has a slightly better gross margin. And the third reason really being is the -- some of our components related to our manufacturing and the price -- our cost got our reduced and that's also in favor of our gross margin.

The third question, as it relate to the 2020, we think the 2022 [Parade] still will be a [good] year. And we're pretty positive for our -- the 2020 business outlook. The reason being, one, we had a previous discussion on our PCIe Gen 4 retimer device, and we are pretty encouraged by the test result, by the customer system bring up results. We also see -- we have a new opportunity for growing our high-speed market shares and whether the -- a few segment, the traditional segment on the USB Type-C, 3.1, 3.2, so as -- and we see more retimer driver demand. And we also see our conventional eDP Tcon may have a more -- may have more market share, and we develop a few new devices, a new road map to support those market share increase. So those are the things lead us to have a positive thinking for the growth for our 2020 business.

--------------------------------------------------------------------------------

Jerry Su, Crédit Suisse AG, Research Division - Director [23]

--------------------------------------------------------------------------------

Thank you. And then in terms of margin, just a follow up, so Q1, the guidance range increase, will this sustain into 2020? Or maybe we should even look for better or more margin increase into 2020?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [24]

--------------------------------------------------------------------------------

The -- of course, this is the current -- the Q1 guidance. And as we have the PCIe Gen 4 retimer device successfully to be -- to the mass production, we will think the gross margin, more or less, will be that kind of engine and maybe get a more support for the -- as we are selling more high-speed device. But let's see how they go, and we will provide the guidance.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

Next to ask question, Daniel Yen, Morgan Stanley.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [26]

--------------------------------------------------------------------------------

Jack, Judy and Yo-Ming, so my first question is regarding your fourth quarter result. So I wanted to check with you, what's the product mix for fourth quarter? Because your margin rate actually hit the high end of your guidance. So I want to ask, firstly, is your product mix -- could you answer that question first?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [27]

--------------------------------------------------------------------------------

Okay. So the -- our DP, and it's above 45%. Our PS, it's 35% -- a little bit above 35%. And our source driver is more than 10%. Our [TT] is lower than the 10%.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [28]

--------------------------------------------------------------------------------

Okay. Thanks. So if I look at product mix, actually, it was almost similar to the third quarter. So I would like to ask, why you could expand your margin further. Is there any particular margin increase in any particular segment -- business segment?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [29]

--------------------------------------------------------------------------------

That's what I had -- previous answer was. There's one component and component related to our products. Component costs had some reduction, and that's why it favor our gross margin.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [30]

--------------------------------------------------------------------------------

I see. So is it memory related?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [31]

--------------------------------------------------------------------------------

Yes. Something the memory related. Just remember, we use quite amount of whether the memory DRAM and whether the solution we're putting to the device or whether -- we purchased quite some memories there. Yes.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [32]

--------------------------------------------------------------------------------

I see. Yes. So second question, I will also want to touch on your revenue guidance. So as Jerry asked, you are looking at around 4% sequential growth for your revenue. And I want to ask, do you back in any potential downside from the coronavirus when you provide your revenue guidance?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [33]

--------------------------------------------------------------------------------

Okay. So let's correct the first point. We guided from USD 95 million to USD 105 million, right? So -- and certainly, we did our due diligence and did our -- the best we can reach out to our customer before we provide a guidance. However, the thing could change, but that's the -- whether you see the baking or anything that -- we'll reach out to customer, we asked and we did our due diligence. And we tried to take a conservative kind of approach to the -- our business. So that's why we provide this guidance.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [34]

--------------------------------------------------------------------------------

I see. So basically, there is some conservatism in your 1Q guidance. Am I correct?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [35]

--------------------------------------------------------------------------------

Yes. We do take -- took a conservative approach to our business as the uncertainty in Q1 is kind of -- because the coronavirus has become [more], so we took a pretty conservative approach.

--------------------------------------------------------------------------------

Daniel Yen, Morgan Stanley, Research Division - Research Associate [36]

--------------------------------------------------------------------------------

I see. So just my last question is regarding your eDP business. So when you look at your standard-plus and standard product line, so do you -- now we have this virus issue, which would impact the real end demand. However, when it comes to the panel makers, do you think -- what do you think about current inventory level on the panel supply chain? And do you see any customers trying to accumulate more inventory because of the threat of supply disruption, production disruption?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [37]

--------------------------------------------------------------------------------

All right. We reached out to customers, and I don't think we see those kind of concern at this moment. People are doing their best to bring up their current production line and try to get over the sort of long period of time of holiday. And panel customers are particular remain strong, and it's kind of a surprise to us that their demand continue there. And frankly, the last few days I was pretty shocked, and they were (inaudible) the push out. So I don't know why and how the reason there and the panel customers are pretty healthy.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

Right now we are having Aaron Jeng from Nomura.

--------------------------------------------------------------------------------

Aaron Jeng, Nomura Securities Co. Ltd., Research Division - Lead Sector Analyst for Greater China Semiconductor Research & Head of Taiwan Equity Research [39]

--------------------------------------------------------------------------------

Number one, also regarding the first quarter outlook, where you are going to see the sequential growth, in the past, you -- your first quarter was -- seasonality was a decline of somewhere 5% to 10%. So this year is pretty strong. And as Jack highlighted, in the last few days, you saw panel makers trying to deploy order rather than pushing out. So my question number one is, [since you haven't reached your EBITDA] yet, but I wonder how do you look at the second quarter outlook beyond a very strong 1Q. Should we -- because it effects on some come back up to (inaudible) 1Q, given some probably early deploying or so. Just wonder your thought.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [40]

--------------------------------------------------------------------------------

We had a -- if we look at our book in the Q4 for -- at that time for Q1 because most of the Q1 bookings, in fact, was achieved in Q4 before the Chinese New Year, the number was pretty strong. So I wouldn't read it that we win the market. We gained market share. So leading our growth and sequentially on a Q4 to Q1, and that's why we had a pretty positive view for 2020 whole year. And we feel we gained market share. I would think that the Q2 -- if you were ask me long time ago or maybe before this coronavirus, I would have -- we have -- we -- I would answer you very strongly that we should have a pretty good Q2 as well.

At this moment, I would like to wait probably a month later to answer you this. And since the thing could change quickly, and we would like to see what other things change, and so that's what we view. We try to wait to see. And -- however, if you ask me the exact booking for Q2 at this moment, it's pretty healthy.

--------------------------------------------------------------------------------

Aaron Jeng, Nomura Securities Co. Ltd., Research Division - Lead Sector Analyst for Greater China Semiconductor Research & Head of Taiwan Equity Research [41]

--------------------------------------------------------------------------------

I see. Thank you. That's impressive. So you are saying that even when we go back to, like, December last year, you already saw first quarter to see sequential growth, right? And that's before we saw this virus outbreak. Okay. And -- okay. So if we go down to your -- the reason behind your first quarter sequential growth, you highlighted 2: A, the high-speed interface; and B, the eDP Tcon integration -- integrated with source driver. So for the eDP Tcon integrated with source driver, is this the major product line out of the Tcon portfolio growing sequentially into Q1, which means that the other Tcon -- the standalone Tcon business, which is big, are still declining in first quarter. That's my one follow-up question.

And another follow-up question is, can we break down into your high-speed portfolio, which product lines are growing particularly strong into first quarter? Because we've got quite a few different product lines for high speed. So that's my 2 follow-up.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [42]

--------------------------------------------------------------------------------

Okay. So under eDP Tcon, I would like to make a little bit correction. With TED device, which is source driver and the Tcon integrated device has a high growth rate in our overall Tcon business. Beside this, the gaming platform we have also growth very quickly. And for gaming platform, you need a pretty big Tcon device. So as -- most -- quite many soft driver devices because their refresh rate is 120 hertz, and you need more source driver there. So those are the themes for us continue grow our eDP Tcon and source driver business. So that's on the panel side.

And the theme remain pretty clear. We are in a position to gain market share, and we are continuing to develop a new device we call [TT] device, which put the touch into the source driver with Tcon integrated. So that's called a TT device to support and (inaudible) as well.

Okay. So in terms of high-speed device, and that's a very traditional our business, and we had a pretty good double-digit growth for last few years. And the biggest growth momentum for -- coming to the 2020 is really the large adoption of USB Type-C 3.2 device, which is 10 gig and using our retimer and (inaudible) and so as our -- the converter device through the application of hub and dongle. So it's really -- the theme is, USB 3.2 related Type-C device. And because our -- growth area, whether in the notebook, in the Chromebook, in many applications. So those are the themes we see, and we have good growth. And certainly, we have a few devices become -- on the high-speed domain become very unique, which only Parade has it and no other people have those kind of technology. For example, the DP (inaudible) retimer and support gaming platform has a lot of demand for those devices as well. So for the -- the major theme is USB Type-C and 3.1, 3.2 related to the device.

--------------------------------------------------------------------------------

Aaron Jeng, Nomura Securities Co. Ltd., Research Division - Lead Sector Analyst for Greater China Semiconductor Research & Head of Taiwan Equity Research [43]

--------------------------------------------------------------------------------

Okay. And another follow up, if I may, is earlier you said given the coronavirus outbreak, you'd probably want to take another 1 month or so to look at -- to enter to your outlook. It's as good as you saw. Okay. And so when we -- today, when we look into second quarter, out of your multiple business lines, which product line is the one, which might exposed more to the coronavirus outbreak impact?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [44]

--------------------------------------------------------------------------------

You ask me what are the impact -- you mean most vulnerable to the coronavirus?

--------------------------------------------------------------------------------

Aaron Jeng, Nomura Securities Co. Ltd., Research Division - Lead Sector Analyst for Greater China Semiconductor Research & Head of Taiwan Equity Research [45]

--------------------------------------------------------------------------------

Yes. Maybe vulnerable or I don't know, maybe this can be up the direction, benefit or so, I do not know, but just wonder how you think about it.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [46]

--------------------------------------------------------------------------------

So far, we have not seen any significant change of our customers. But may -- if you ask me to put us -- the thesis there, I would think the business in the southern China area may have a more impact. And we have panel business and the [CSO] team in the (inaudible) area. However, they are continue doing pretty well on the manufacturing. Did not even stop anything. So that's amazing. And so I still wait to see and I want to see how the impact our business and -- for example, in a month, if you talk to me, probably you'll get a better picture of what are the impacts. We already hope that those things are minimal in the short term, and we think the business should come back strongly on in Q3 and Q4, if there is any dip.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

The next to ask question, Martina Huang, Fubon.

--------------------------------------------------------------------------------

Ruijun Huang, Fubon Securities Investment Services Co., Ltd. - Research Analyst [48]

--------------------------------------------------------------------------------

Congratulation for a strong first quarter outlook. My first question is, can we talk more on mini-LED? How do we look at the change on notebook and tablets, PC side?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [49]

--------------------------------------------------------------------------------

I think mostly people already see or enjoy our tier 1 customer XDR monitor And even though it is very expensive, $5,000 a monitor, but the technology itself is awesome, right? And many people start to realize, why don't we develop mini-LED with our customer? First, other people said that mini-LED monitor and what are different? Now people start to see the difference. And I was in the CES and explain to the people what are different? Now people realize this.

Many LED and base panel will become a popular because of the technology. The display is just so good, right? Display is just so good. And you will see more penetrated into whether the more conventional notebook tablet. So that's expected. And I expect that every panel manufacture, every panel guy, all start to develop those kind of technology.

[When you go] to the more volume in sort of more conventional platform, for the [partitioning] of those devices to support it, mini-LED could be changed. So it would not be the same as the first platform XDR people see. So we are aggressively develop those technology with our customer, and we hope very soon or some time and the customer will enjoy to see those devices on the market in a way enjoy those market. That's the best I could [explain].

--------------------------------------------------------------------------------

Ruijun Huang, Fubon Securities Investment Services Co., Ltd. - Research Analyst [50]

--------------------------------------------------------------------------------

Thank you. My second question is, we have more and more DP come online, can you give us some colors on DP product line breakdown this year?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [51]

--------------------------------------------------------------------------------

You mean the Tcon side? Or the...

--------------------------------------------------------------------------------

Ruijun Huang, Fubon Securities Investment Services Co., Ltd. - Research Analyst [52]

--------------------------------------------------------------------------------

Yes, yes, eDP Tcon.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [53]

--------------------------------------------------------------------------------

Or the high-speed side?

--------------------------------------------------------------------------------

Ruijun Huang, Fubon Securities Investment Services Co., Ltd. - Research Analyst [54]

--------------------------------------------------------------------------------

eDP Tcon.

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [55]

--------------------------------------------------------------------------------

Yes. eDP Tcon, we have traditional eDP 1.2, 1.3 eDP Tcon bundled with our source driver. And as I explained before, we develop a TV, which is a source driver Tcon-integrated device, and we're developing now [TDD], which is touch, Tcon, source driver integrated device to support (inaudible) to put a panel.

We are developing with a tier 1 customer for AMOLED at base eDP Tcon, and we have developed it before. And now people think AMOLED for notebook, for tablet could become mainstream. And we think in May possible again. So that's why we work with a tier 1 customer try again for the AMOLED eDP Tcon, and it may have continued for other device with a high-volume devices. So those are -- we are in place.

We are also develop a technology being -- will be used for -- more for LCD panel, for outside of panel, we call it, TDD device, which is a touch driver device. And so -- which basically integrate our touch and our (inaudible) to the source driver and integrate a larger to our Tcon device and base our CP 2.0 protocol to support those. So we are pretty sort of busy to develop the eDP Tcon device to try to cover all the front side to gain more market share to support our customers. And we are very busy. That's part of the reason, I want to say that we have a positive view of our 2020 and very, very busy. And in fact -- and so that's where we are, roadmap we have. And we think with those roadmap, we should win the market and gain more market share.

--------------------------------------------------------------------------------

Ruijun Huang, Fubon Securities Investment Services Co., Ltd. - Research Analyst [56]

--------------------------------------------------------------------------------

So I think we can -- if at this year, eDP Tcon (inaudible) increase?

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [57]

--------------------------------------------------------------------------------

Yes. I certainly hope so because we have developed a lot of device there.

--------------------------------------------------------------------------------

Operator [58]

--------------------------------------------------------------------------------

Ladies and gentlemen, that concludes our Q&A session in English.

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [59]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [60]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [61]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [62]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [63]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [64]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [65]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [66]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [67]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [68]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [69]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [70]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [71]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [72]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [73]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [74]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [75]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [76]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [77]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [78]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [79]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [80]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [81]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [82]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [83]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [84]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [85]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [86]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [87]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [88]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [89]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [90]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [91]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [92]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [93]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [94]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Operator [95]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [96]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [97]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [98]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [99]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [100]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [101]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [102]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [103]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [104]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [105]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [106]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [107]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [108]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [109]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [110]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [111]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [112]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [113]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [114]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [115]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [116]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [117]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [118]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [119]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [120]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [121]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [122]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [123]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [124]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [125]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Analyst, [126]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [127]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Operator [128]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Ji Zhao, Parade Technologies, Ltd. - Co-Founder, Chairman & CEO [129]

--------------------------------------------------------------------------------

Okay. Thank you, everybody.

--------------------------------------------------------------------------------

Judy Wang, Parade Technologies, Ltd. - CFO [130]

--------------------------------------------------------------------------------

Take care. Bye-bye.