Dear media friends, welcome to LITEON Technology's 2025 Q1 Physical Earnings Conference. In addition to the Q1 results, we also hope that you will better understand LITEON's strategies and deployments after many operational adjustments and transformations in recent years to face uncertainties in the macro environment. Our meeting will begin when everyone is seated. The senior executives present today include President Anson Chiu and our CFO, K.T. Lim . The agenda consists of three parts. I'll first explain the financial results and performance of Q1 2025. Next, President Anson will explain the outlook and growth strategy. The Q&A session is open for questions and further explanations by Anson and K.T.
For those who are here for the first time, this page provides an introduction to the three major business segments, which are optoelectronics, including optoelectronic semiconductors, auto electronics, and our cloud and AIoT used in data centers, servers, 5G networking equipment, AI, IoT, etc. The third one is ITC, applied in laptops, workstations, desktop computers, and game consoles. LITEON's Q1 revenue was TWD 36.4 billion, GP TWD 8.2 billion, with a rate of 22.6%. OP TWD 3.7 billion, with a rate of 10.1%. OpEx TWD 4.5 billion, with a rate of 12.5%. OIOE TWD 990 million. Net profit after tax TWD 3.46 billion. EPS TWD 1.5180. Overall, in Q1, revenue went up 27% YoY.
All the three segments achieved YoY growth, driving the overall revenue back to the YoY growth track. GP went up 41% YoY due to the growing share of high-value businesses, continued optimization of efficiency, and close collaboration with the supply chain. GPM went up 2.3 PPS YoY a nd 1.3 PPS QoQ . OP went up 65% YoY due to growing revenue scale. OPM went up 2.3 PPS YoY and 1 percentage point QoQ . OpEx went up 26% YoY . Its rate went down by 0.1 PPS YoY , in which R&D investment accounted for 5.6% of revenue, with the amount increasing nearly 20% YoY . Cloud computing, optoelectronics, 5G, and new businesses accounted for a larger share in R&D.
OIOE TWD 990 million, up TWD 100 million YoY . Net profit after tax TWD 3.46 billion. EPS TWD 1.51, up 45% YoY . Now, let's take a look at our three major segments. In Q1, optoelectronics and cloud and AIoT combined accounted for 62% of revenue, which is up 4% YoY . Our OP went up 65% YoY, in which cloud and AIoT revenue was TWD 15.6 billion, accounting for 43% and up 55% YoY, mainly due to the growing shipments of new generation, high-end cloud-powered products, including power supply and power storing equipment. OP was TWD 2.1 billion, up 2.2x YoY. Optoelectronics revenue was TWD 6.9 billion, accounting for 19% and up 5% YoY. The core applications of infrared in optoelectronics semiconductors continued to go up. OP TWD 480 million, up 59% YoY.
In terms of ITC, the revenue was TWD 13.9 billion, accounting for 38% and up 15% YoY, in which shipments of IT high-end power, low-orbit satellite power, and smart input devices grew YoY. The OP was TWD 1.1 billion, which keeps going up annually. Now, let's look at our balance sheet. In QoQ terms, accounts receivable in Q1 went up TWD 4.9 billion due to revenue increase. Inventory went up TWD 2 billion YoY. In current liabilities, short-term loan went up TWD 8.9 billion. Accounts payable went up TWD 7.2 billion YoY. Accounts receivable and inventory days went down by five and eight days, respectively. Our CCC cash cycle improved by 11 days YoY, reflecting improved working capital management. Quick ratio and current ratio were 1.26 and 1.53, respectively, which are relatively stable. Net cash TWD 73.7 billion. This will prepare and improve business performance in the future, as well as investment and growth in core businesses.
BVPS TWD 39, up 8% YoY, indicating that our intrinsic value continues to improve. Since 2021, we have strategically increased high-value businesses while reducing non-core businesses and eliminating the weak in the product mix. In Q1 2025, our GPM went up to 22.6% and our OPM went up to 10.1%. Operation optimization-wise, we developed high-value businesses towards system integration. The share of optoelectronics and cloud and AIoT in total revenue has increased to 62% in Q1, compared with 50% in 2021. The growing share of high-end businesses has led to overall profit margin growth. Now, let's take a look at the overview of Q1 2025. Revenue TWD 36.4 billion, up 27% YoY. All the three segments achieved YoY growth. OP 22.6%, OPM 10.1%, both up 2.3 PPS YoY, due to the growing share of high-value businesses, continued optimization of efficiency, and close collaboration with the supply chain.
R&D accounted for 5.6% of revenue in Q1, up nearly 20% YoY, focusing on cloud, optoelectronics, 5G, and new businesses. Net profit after tax TWD 3.46 billion, EPS TWD 1.51, up 45% YoY. In terms of core businesses, thanks to the smooth shipments of new generation AI server power supplies, cloud computing products, and power management systems, cloud and AIoT achieved YoY growth of more than 50%. The share of high-end products in ITC has increased. As for the core applications of infrared light, in optoelectronics semiconductors continued to improve, with revenue going up nearly 10% YoY. With shipments of low-orbit satellite power supplies and smart input devices grew, with revenue going up nearly 20% YoY. We plan to buy back 130,000 treasury shares from April 10 to June 9. As of yesterday, April 29, 12,135 shares have been repurchased to reflect LITEON's core values and safeguard shareholders' interests.
The regular shareholders' meeting will be held on May 20. This concludes the financial report for Q1. Now, President Anson will explain the company's outlook and growth strategy. Thank you for your attention.
All right, thank you, Julia. And thank you to all of the investors and our friends from the media who are attending this earnings conference. I know there are many such conferences today, so our PR department asked me to give you a thank you. I know that, or rather you all know that we are in a different location today. As Julia said, we have usually held our earnings conferences at our international conference hall in our headquarters. However, the conference hall is currently undergoing a remodeling in the hopes of providing a better experience for you all when you attend future events. That is why we are holding our conference here today.
Of course, this also ties in to my main topic today, which is that the world is always changing. Nothing stays the same forever. Of course, we would like it if our earnings conference is at the same place as in our headquarters every single quarter. That is impossible. The same applies to the global economy looking ahead to the second quarter. Of course, you're all probably very concerned about the possible impacts of the tariff policy of the United States. That will be my first topic today. I've actually discussed this issue with many of our important customers, as well as our colleagues and our friends in the industry. We've discussed this issue, and I can say that most of them are in agreement that there is no answer. There are no certain answers regarding how the policy might change the world.
Of course, we know that these policies might not be changing every day, but they're definitely changing every week. How these changes will impact us is something that we can simulate using certain assumptions. These simulations might become out of date immediately if the policies end up changing. Even if I have answers for you now, if you ask me again next week, the answers might be different as well. That's one thing I would like to make clear to all of you today because I'm anticipating a lot of questions about tariffs. I first have to say that our answers will depend on the final form of these tariff policies, which remain uncertain now. What we can do internally is to do our jobs, do our best at what we can do. For the external environment, we can't do anything about it, so we can only wait and respond.
What can we do to respond to this external environment? The tariff policy is not aimed at a certain country or a certain company. We are all living in the same world under the same policy. We have to think and look for a good position and a good opportunity in the face of these changes. We have to think about what we can do to create better opportunities for our company and for our investors. The first priority for us will be to strengthen our manufacturing around the world. If tariffs are inevitable, we will need to build up a more resilient supply chain. This supply chain will not just involve us and our customers, but also our suppliers as well. We have to help our suppliers work with us to build a more localized and comprehensive regional supply chain. I think that's a very important priority for us.
Second, the biggest impact of tariffs will be on our costs. Of course, we would like to lower our costs through design. We would also want to improve the technology and the value of our products. Over the past few years, our company has been transitioning toward being a provider of systemic solutions. If our products can further improve in value, then we will have an edge over our competitors. Third, we can also think beyond our own products and look beyond our own product line and think about our supply chain. What can we do to improve the competitiveness of our suppliers? That's also an important order of business for us. Back when our manufacturing was concentrated in one place, the management costs were relatively low.
If we need to spread out our manufacturing, then we need to worry about whether our suppliers are capable of following us around the world. In addition to focusing on us, our own products, our own manufacturing, one important thing will be to help our suppliers to become more competitive and build up their manufacturing across the world in order for us to become more flexible in terms of production capacity to serve our customers and become good partners to our customers. These are the things we can do to respond to the uncertainty of the tariffs. Of course, any increase in costs must also be evaluated from the perspective of our clients. We are going to help our customers become more competitive as well and optimize our costs across our entire supply chain in response to the possible impact of the tariffs.
That is an overview of what we're going to do to respond to the tariffs. If you have any questions, you can also ask them during the Q&A. Today, we would also like to take an opportunity to look back on our participation at MWC and GTC. We have two videos for you to talk about some of our highlights at these two events. All right, two short videos. In the first video, we showed that at MWC, LITEON worked with eight different partners across telecommunications, software, testing, and research to showcase our collaborations in 5G, O-RAN, AI, and smart monitoring. There were many diverse, innovative applications. LITEON will continue to strengthen our hardware-software integration for Internet communications so that we could meet customer and partner needs in key Internet infrastructure.
The second video was about our presence at GTC, where we showcased our solution designed for NVIDIA GB200 and GB300 NVL72 systems. The solutions integrated power supplies, racks, and liquid cooling system solutions to help our cloud clients accelerate the integration of their new generation AI server racks and provide high-performance, low-energy consumption data centers in response to the growing need for high-end computing. Also, in response to the higher power draw needed, we showcased our new generation rack integrated solutions developed with NVIDIA, as well as our newest AI-RAN solutions. We have become an important partner for NVIDIA in the AI aerial ecosystem. We have also achieved end-to-end commercial development in AI-RAN , showing our technological capabilities and market influence in 5G solutions, as well as providing more diverse applications in AI. This has allowed us to give our clients more value and higher performance solutions.
Also, this May, LITEON will participate in COMPUTEX for the first time in several years, where we are going to showcase our green data centers and our AI-RAN integrated solutions. We look forward to you all joining us at our booth in COMPUTEX. Finally, you are probably also curious about our outlook for the coming year in the face of tariffs and other uncertainties. Of course, it's difficult to get visibility on future trends. Regardless, I can offer our outlook for the second quarter, which is that we are confident that all three of our core businesses will continue to achieve quarter- over- quarter, as well as year- over- year growth in the second quarter. Much of this will be driven by our cloud computing power supply management systems. Our shipment momentum for the first quarter was extremely strong. As Julia said, revenues grew by over 50%.
What we're seeing for the rest of the year is that the growth momentum will be maintained. For cloud computing, our shipments will continue to grow, particularly year- over- year. This will be very certain. As for optoelectronics, we will also achieve at least year-over-yea r growth, particularly in high-end photocouplers, as well as with the recovery of the market in new energy and industrial controls. The mini-LED solutions are now being seen in many high-end mobile phones, as well as gaming phones and handhelds. Mini-LEDs will be an important driver of growth in optoelectronics and semiconductors. As for our IT business, we are also continuing to move toward higher-end power supply products. The share of high-end power supply will grow higher and higher. In the first quarter, we saw growth in low-orbit satellites, as well as the launch of a new gaming console customer.
All of these have helped drive growth in IT to reach single-digit growth. To sum up, despite the uncertainties in the external environment, I think currently, if we look at our customers and our market, we can still be quite positive and optimistic about this coming year. That concludes my presentation. If you have any questions, we also welcome them in the Q&A session. Thank you for attending our earnings conference, and we wish you a good rest of the day. Thank you.
Thank you, Anson. Now, we move on to the Q&A session, and we will provide more explanations.
Hello managers, I'm from (Inaudible) Investment Trust. I want to ask you, last time you mentioned your thoughts about BBUs and also your expansion plans in North America for expansion plans in general. After one quarter, could you update us on your expansion plans?
The first question is about BBUs, which is a new power application. This has brought to us a lot of growth. As I mentioned, the growth situation hasn't changed. We have been active in expanding our factories. Last time I told you that we plan to expand in mainland China, Kaohsiung, and Plano . However, due to tariffs policy, our expansion plan in mainland China will move back to Taiwan. Taiwan will play an important role in our expansion, and Plano also has an expansion plan. The situation is still very tight.
Our capacity cannot satisfy customer needs, especially in Q2. We think that the capacity will only be enough in Q3. By then, we will be able to satisfy customer needs. If you look at the full year, our total shipments will still lag behind customer expectations. We continue to work with our suppliers because some of the equipment has very long delivery times. We work with them to shorten the delivery times so that we can materialize the capacity and satisfy customer needs. To answer your question, yes, we have had some adjustments, but the overall plan hasn't changed.
A follow-up question. In Vietnam, in terms of your yield rate in your Vietnamese factories, you are still doing fine-tuning. I want to ask you about the yield rate in terms of power shell.
Thank you for this question. This allows me to explain the situation in Vietnam. In terms of the yield rate in Vietnam, after Q1, we can clearly see that the yield rate has improved significantly. In Vietnam, the focus right now is on our networking products. Starting from last year, we also started to move our ITC products to Vietnam. ITC products are also important. The power shell product that you mentioned is a high-class and complex product that we manufacture. The expansion is in Kaohsiung, Taiwan, in order not to have an impact on Vietnam for now. The good news is that both for networking products and ITC products, the yield rate in Vietnam has significantly improved over the last two quarters. If this can continue, I believe that in Q3, we can start to move some cloud computing products to Vietnam. By doing so, we don't want to have an immediate impact on the yield rate in Vietnam. This is our consideration.
Hello, Anson. I want to ask you a question about tariffs. If you ship components to customers' global hubs, and then customers themselves move them to their ODM factories, for example, in Mexico, then these components are listed as customers' inventory, right?
In order to avoid tariffs risks. From our perspective, we haven't been impacted too much by tariffs for now because, as you mentioned, we make components and modules that are shipped to system companies, and then they are assembled there and then shipped to the United States. Our products are parts and components in a system. We don't directly face the tariffs ourselves. We do have some optoelectronics products that are directly shipped to the United States. For them, we try to adjust prices due to tariffs, but they account for less than 2% of the overall optoelectronics revenue.
In terms of accessories, some of them are also shipped to the U.S. , but the share is very, very small. Right now, our customers cover those tariffs for us. That's the situation.
Hello managers, I'm from [Namura]. I have one question. Recently, the NTD has appreciated very fast. How do you do your currency hedging?
A strong NTD in the second half of the year, we will see this issue more. We have always done hedging both for the USD and for the RMB. We don't want to take due, but we do all the necessary short-term currency hedging. We don't really see much of an impact coming from this issue.
Understood. My second question, we know that the future is full of uncertainties. Previously, in every earnings conference, you talked about your expansion plans in the U.S. Could you tell us about the general situation in the U.S.? What are the expansion plans? How much money is spent?
Originally, in the expansion plan in the U.S., before the tariffs policy, we started evaluations and we started to do it. Two years ago, in Plano, we started to have one production line for chargers and one for power shells in Plano, United States. This is also to answer a previous question. Because of BBU products in North America, we added two production lines for BBU, but they are still not enough. Therefore, we continue to consider two more lines. Most importantly, you asked about the overall investment. Now, with six production lines, with such investment, in addition to such investment, in the past, we rent this factory once every five years. We have started to evaluate a piece of land nearby, which is 4x as large as the current factory. If we can strike a deal, then very soon we will have to decide whether or not to purchase this piece of land in order to establish our important production base in the U.S.
As you know, initially, the capital investment is quite significant, at least TWD 2 billion-TWD 3 billion in the beginning. As we expand capacity, we will need to spend money for equipment and other things. That's roughly the situation. The most important information is for you to know that we, in the future, will have a plan to have our own production base in Plano. That's our own investment.
All right. There is also a capacity expansion for BBUs in Kaohsiung and two additional lines in the U.S. Are they all for the third quarter?
No, actually, some of them will be complete by the second quarter. I talked about the third quarter because we need the capacity expansion in the third quarter in order to meet the requirements, the needs of our customers.
Okay, understood. I would like to ask about AI server power supply. It seems that the current mainstream is 5.5 kW . What about the next generation? Some say 6 kW or 7 kW and some say 10 kW. What about you?
I think for the time being, the mainstream will still be at 5.5 kW . As for the next generation, I understand that there has been development in 8 kW or 10 kW power supplies. I do not believe they will be mainstream because I think the clients will continue to stay at 5.5 kW because they've discovered that higher kilowatts like 8 kW or 10 kW are more difficult and their cost is higher. In addition, I would also like to say that although the PSU is 5.5 kW and will stay there, the power shelf will go up from 33 kW to 72 kW. That will still happen because the power supply for a single machine and the power shelf power supply, they're different. If we look from the perspective of the data center as a whole, the power will be going up. The power shelf will be going up from 33 kW to 72 kW.
Understood. Finally, when it comes to BBUs, you've always had one dominant customer. When will we see a second or third customer join in with more meaningful orders?
Actually, we already have a second customer, and we will start shipments to that second customer this year.
Understood. Is this tied or is this separate from the customer demand for the third quarter?
We're still talking about BBUs. It's the same product lines. We need to meet the customer needs for this particular product line. It doesn't matter if it's one or two customers. The need is still there.
Hello. I have a few questions. The first is a simpler question. You said that the impact of tariffs will mostly be on a small number of optoelectronics products that are shipped directly to the U.S., and you mentioned 2%. Is the 2% a share of the optoelectronics business or overall revenue?
It's just optoelectronics.
Okay. You are covering the tariffs.
Yes, of course, the tariffs have impacted us in terms of these products. We've decided to do some price adjustments.
Price adjustments to lower the amount of tariffs being levied?
Yes.
This is the most direct impact. My second question is that we've talked a lot about BBUs, but can I ask, can you give a number for the share of BBUs? Because it's under cloud computing. Can we get a share, a number for the share?
As a share of cloud computing, BBUs in the first quarter accounted for over 10% of the revenue for cloud computing.
You also talked about how the cloud computing and AIoT business saw very high revenue growth, over 50%. Most of this is concentrated on cloud. You also mentioned your outlook for the second quarter, where you said that the shipment momentum will continue to grow. Does this mean that YoY growth will continue to be at this double-digit level?
Yes.
What about visibility for the second half?
Actually, the visibility for the second half will be quite high for this segment. We've talked with our customers, and the visibility is clear until the end of the year. We do worry a little bit because, as some of you said, if we have the capacity, might they drop the orders? That's something we're worried about too. We're cautious, and we have confirmed several times with our customers. What I can also say is that the demand for cloud is from CSPs. They are less affected by market factors. You probably understand that CSPs are building out their infrastructure based on their own plans. As long as they follow the plans, the orders will be there. It will be less affected by the usual business cycle. That's something that's more for the consumer segment. For CSPs, they've already made the capital expenditures.
They've already decided on how many data centers they want to build. These are existing plans. We've talked to them, and they are confident that they will be following these plans. They will be making these capital expenditures. They will be building these data centers. Once we've built out our capacity, they have also made a commitment to us. They will be fulfilling, doing their best to fulfill this capacity as well. We are quite confident for the rest of the year.
Talking about production capacity, what is your outlook for YoY growth for the entire year?
For cloud YoY growth, we foresee no problems with reaching 50% growth.
Another minor question. What is the share of AI in your overall revenue? Last year, it was 7%- 8%, and you mentioned 14%- 15%.
It will probably be higher than 15%. Is it because of overall revenue declining? No, overall revenue will continue to grow this year. Much of this growth will actually be driven by cloud. Not all of the growth, but most of the growth will be driven by cloud. Since cloud is growing faster than the others, the share will be growing. If we just look at cloud, the share will be very high, or rather, the growth rate will be very high. If we look at overall revenue, it will not grow quite as high, quite as quickly as cloud.
Okay, cloud will exceed 15%. What will the share of BBU be? You mentioned over 10% for the first quarter. What about the entire year?
For the entire year, I think BBU will probably be about 7% or 8%.
As a share of overall revenue?
Yes. 7%- 8% of overall revenue.
Understood. Thank you.
Hello, I'm from (Inaudible). I want to ask you about your tax rate. Is there any change? Thank you.
As you can see on the slide, because of maximum taxation, it went up slightly to 26%. According to our global taxation plans, this year it will go up slightly, but it will not be as high as in Q1. In principle, it will be roughly the same, slightly more than last year.
We can answer one more question.
Hi, Julia. Sorry, I have two questions. First of all, I want to ask you, in Q1, your profit margin was very, very good, especially if we look at different sectors. Cloud and opto YoY growth was very good. In addition to product mix improvement, are there other factors that contributed to Q1's good performance? For example, in terms of materials, cost, some legacy things, or exchange mint. If you want to quantify the product mix contribution to your profit margin, what is the mix roughly for Q2 and YoY?
Thank you for this question. First of all, in terms of product mix, as you can see on the slide, in Q1, all the three segments had significant YoY growth, and the growing BUs had higher margins. As Anson mentioned, cloud grew the fastest, and cloud drives the new generation AI power management systems, including power supply and energy, which is BBU. Their margin is relatively higher, and the growth is faster. This is, as a result, the OT of the cloud and AIoT segment doubled. Also, invisible light in optoelectronics, the core applications, and also mini-LEDs, which is a new product for visible light. The profit margin has always been better than the segment itself. In Q1, it returned to positive growth.
This is why the OT in this segment also went up significantly. IT has lower margin numbers. In recent years, there have been important transformations. For example, the higher share of high-end products, about 40% come from higher-end products. This is an important thing in this segment. Second, it's called IT, but it has been diversifying going towards non-IT, for example, LEO, low-orbit satellite power and industrial power supply. More diversified development. This is why the margin has improved. This is another reason. We are a manufacturing company, so the utilization rate plays also an important role for GP margin. As you said, our Q1 revenue went up by 27%. We benefit from operating still and shipment growth. The margin structure and utilization rate can improve as a result.
As Anson has always mentioned, we want to increase the share of higher-end products and want to reduce the non-core and weaker products in our portfolio.
Let me add something here. I've always said that the company's structure and robustness has changed. What's the difference between now and the past? Your question is more about how we drive down our costs and how we optimize our costs. In fact, in the past few years, we have been doing things to enhance value. It's true for all the three major segments. We don't just think about revenue and getting more orders. For each segment and each business, we try to go towards higher-end products. This is the first main reason. Second, in terms of our portfolio, as we told you, 4-3-3, do you remember? ITC accounting for 40%, the other two segments 60%.
In Q1, ITC already accounted for 38%, and the other two segments about 62%. We have already achieved the goal that we set up. Third, in addition to what we mentioned, revenue growth and shipment growth, someone else just asked about this question. In the past two years, we have faced some frustrations in Vietnam due to a steeper learning curve. In Q4 last year and in Q1 this year, we have returned to a normal level. As a result, in Q1 this year, the improvement was 0.9% YoY, which means that in the gross profit margin of 2.2%, 0.9 percentage points come from manufacturing cost improvement. There is no single factor. There are many factors together that contribute to this 2.2% growth of GPM .
Thank you. My second question is this. In Q1, your GPM and OPM are actually at the level of high seasons. In previous years, your margins were lower in low seasons. If you can already achieve this level in Q1, how do you look at the future? Your high-end products, AI products continue to grow. If you can already achieve this level in Q1 in a low season, how do you look at the high seasons in Q2, Q3, and Q4? Will it be even better? Will they be even better or about the same as in Q1?
The impact of tariffs is uncertain. If we exclude this uncertainty for now, your understanding about LITEON is correct. In Q1, it is usually the lowest season. Q1 or Q2 is slightly better. Q3 is the peak, and Q4 goes down slightly.
If you look at Q4 last year, the QoQ growth last year, Q4 was better than Q3. Q1 this year went down 5% QoQ, but Q1 went up 27% YoY because we have reduced our non-core businesses. The lean transformation was completed in Q3 last year, right? If there are no significant external factors, if we maintain this tempo, as I said previously, we remain confident about the company's growth and outlook this year. Thank you.
Sorry, I would like to follow up on one final question. Your definition of BBU, when you talk about BBU numbers, I understand that the BBUs are shipped together with the PSU as a bundle. When you talk about BBU numbers, is it only BBUs, or are the PSUs counted along with it as well? When you talk about BBU accounting for 7%- 8% of overall sales, does this include the bundled PSUs?
It's the whole bundle because the BBU and PSU are shipped together. When you talk about the revenue, it's the whole thing. Yes, because it's one system shipped to our customer. When you calculate the revenue, it's the whole thing? Yes, it's the BBU plus PSU.
Okay, thank you.
All right. Thank you for coming to today's earnings conference. This will conclude our session today. All relevant information will be on our official website. Thank you.
Okay, thank you and have a good rest of your day.