Welcome to Ennostar's 2025 Q1 Financial Results Conference. Before the meeting starts, all lines are being placed on mute. After the presentations by the management team, there will be a question-and-answer session. Now, I would like to hand over the mic to Mr. Damon Tzeng, IR Officer of Ennostar.
Good afternoon. I am Damon from the IR Department of Ennostar. On behalf of the company, I would like to welcome you to participate in our Q1 Financial Results Conference. I'm joined by four executives: Paul Peng, Chairman of Ennostar; Terry Tang, Chairman of Epistar; Patrick Fan, Chairman of Lextar; and Jerry Liu, Ennostar's CFO.
The agenda of today is as follows. First of all, our CFO will go over our 2025 Q1 results, and Chairman Paul Peng will have an opening remark. Afterwards, Patrick and Terry will speak on the company's outlook. After that, we will take questions online. So that was our agenda for today. I would like to remind you that all forward-looking statements contain risks and uncertainties. Please spend some time to read the safe harbor notice on slide number two. Jerry, please.
Ladies and gentlemen, good afternoon. I'm Jerry. I would like to go over our 2025 Q1 financial results. During the quarter, Ennostar's revenue grew steadily as we further advanced into TV backlighting, automotive, and sensing applications, and benefited from early poolings as customers hurried to get ahead of the tariffs. Our Q1 net revenue came in at TWD 5.632 billion, up by 2.3% quarter-over-quarter and flat year-over-year. Although the OP margin was - 8.5%, it improved 4.5% compared with the previous quarter. The improvement was mainly driven by higher TV backlight, automotive, and sensing revenue in Q1, as well as increased loading rates. Therefore, the Q1 loss decreased significantly quarter-over-quarter. The net profit margin was negative 7.8%, with a loss per share of TWD 0.60. Revenue by application. Let's look at the bar chart representing Q1.
Despite the slightly weaker demand for displays and special lighting in Q1 due to the Lunar New Year holidays and seasonal factors, the overall revenue of TV backlight, automotive, and sensing applications grew driven by early purchases in anticipation of tariffs. Premier applications, including automotive, sensing, and professional lighting, gained one percentage point as a share of our revenue in Q1. Next slide. Balance sheet. In Q1, the group had TWD 13.6 billion in cash and cash equivalents. After deducting bank loans, our net cash stood at TWD 12.1 billion, reflecting a strong cash position. Inventories increased by TWD 400 million quarter-over-quarter mainly due to early product manufacturing ahead of the planned integration. Next slide. Despite an operating loss in Q1, we generated cash inflows from operating activities. CapEx in Q1 was TWD 375 million, and equity equipment TWD 281 million. In addition, investment-related cash outflows were largely due to routine bank loan payments. This concludes my presentation for our Q1 results. Next, Paul will go over the Q1 review, rather, and share projections for Q2.
Ladies and gentlemen, good afternoon. In the Q1, some customers accelerated their purchases amid tariff concerns, helping us to achieve a net revenue of TWD 5.6 billion. The performance was relatively strong for Q1, which is usually a slower season. Despite a net profit loss of TWD 442 million through our efforts, such as growing high-value-added products such as automotive and smart sensing, as well as effective cost control, our loss has been decreasing quarter by quarter. Meanwhile, our net cash remained at TWD 12 billion. The strong cash position offers us sufficient resources to manage shifts in U.S. tariffs and the New Taiwan dollar exchange rate since April. Our inventories increased slightly quarter-over-quarter which will be the key focus of our attention from now. Overall, the company's financial structure remains healthy and stable.
Looking ahead to the second quarter, tariffs and forex uncertainties continue to impact our operating results. As we mainly produce parts and components, direct shipments to the U.S. make up a very small percentage of our exports. The company is also monitoring market dynamics and working closely with customers to respond to any changes. We have hedged a significant portion of our forex positions, so the risk exposure is very low. Therefore, the financial impact remains within a manageable range. However, the sharp surge in the New Taiwan dollar has created upward pressure on our costs. We will control costs more rigorously and promote the development of a strategic light asset model and high-value-added products with a sound financial structure. We will also accelerate the development of key applications such as new generation AI optical communications and automotive light sources to create more long-term value for shareholders. Thank you.
Thank you, Paul. Next, to go over Ennostar's business outlook for Q2, rather, Terry will focus on advanced display, sensing, special lighting, and displays, and Patrick will focus on automotive and backlighting. Next, we would like to have Terry to speak first.
Good afternoon, ladies and gentlemen. I'm Terry from Epistar. I will explain the business outlook for the sensing, special lighting, and display businesses. First of all, regarding sensing, we expect Q2 revenue to grow quarter-over-quarter due to rising demand for notebook facial recognition and smart wearable products. However, for the entire year, due to uncertainty in consumer electronics demand caused by U.S. tariffs, we expect limited market growth in smart wearable devices and notebook applications.
As a result, we are actively expanding the use of sensing products in industrial automation. In addition, the development of new wearable applications, including biosensing devices for blood sugar, water content, or body temperature measurement, is expected to drive the next wave of growth in sensing. The special lighting business is entering its traditional peak season, so we estimate double-digit quarter-over-quarter revenue growth for Q2. However, for the full year, due to demand uncertainty caused by the U.S. tariff policy, we are more conservative about full-year revenue projections. In terms of displays, since Q1 is traditionally a slower season, Q2 revenue is expected to grow quarter-over-quarter. For the full year, we remain optimistic about the demand in the small pixel pitch display market, anticipating full-year revenue growth in the single digits.
In terms of advanced displays, microLED products will be gradually introduced into end applications this year, supported by the mass production of transparent displays and wearable devices, which are expected to contribute to this year's revenue. At the same time, we are also actively cooperating with international customers on sample reviews, hoping to expand our customer base, drive economies of scale, and further reduce costs. We can also expect the automotive microLED applications to increase in volume next year. Overall, microLED's contribution to our 2025 revenue will still be limited. However, it is expected to make a bigger contribution to the revenue growth of the display business in the next two years. This concludes my talk on the business outlook for the sensing, special lighting, and display businesses. Thank you.
Okay, thanks, Terry. Next, Patrick will go over automotive and backlight business outlook.
Ladies and gentlemen, good afternoon. I'm Patrick. I would like to first talk about our automotive business. As Jerry mentioned, amid U.S.-China trade tensions and the uncertain global economic conditions, some automobile OEMs are shifting their orders from the Chinese supply chain to Taiwan, thus benefiting our group. Plus, early customer poolings led to early revenue generation. As remarked last quarter, we anticipated double-digit growth in Q1 compared to Q4 last year. Our automotive revenue grew by 4% between Q1 and Q4, increasing its revenue share from 20%- 22%. Looking ahead at Q2, it is undeniable that the reciprocal tariffs continue to have a significant impact, leaving automakers burdened with uncertainties. However, the group's strong relationship with the automotive supply chain enables us to monitor evolving dynamics and adjust timely to the needs of automobile OEMs. Demand in Q2 is very strong at the moment.
We are currently engaged in several projects. In particular, our automotive backlight production capacity in mainland China was originally slated for qualification at the year-end, and it was expected to generate revenue in 2026. As new developments progress, there will be significant demand for samples by year-end, contributing to revenue. While it is not mass production yet, revenue generation will start. Due to the demand for the samples, we will complete the first sample line first. Originally, we anticipated meaningful revenue generation starting in 2027, but we are now bringing forward the timeline to 2026. Additionally, we have begun building the second production line, aiming for completion by year-end. The detailed plan has yet to be further mapped out. The automotive lighting and automotive production lines in Taiwan will be completed as scheduled in June.
The customer's audit schedule has been moved up earlier than expected, with the audit of this line set for August. We won a contract for smart taillight displays in April, which was a significant morale boost for the team. We will also work with the customer to implement the VDA 6.3 European vehicle standard system and improve quality so as to expand opportunities for other vehicle applications, so there was an update on the automotive business. In terms of backlight, we posted growth in Q1 too. As Terry mentioned, there was significant growth in TV backlights, up by 9% compared to Q4. The TV segment saw stronger growth, boosted by the expansion of Chinese TV brands globally and the substantial growth of Japanese brands. However, the IT segment is impacted by ongoing tariff policies and trade tensions. Despite early customer poolings, demand is relatively weak.
We also explained last quarter that we hope to meet material demand after the Lunar New Year, and we also made preparations in advance, which was indeed reflected in the Q1 revenue. We will adopt a more cautious approach to material planning in Q2 and Q3 in response to evolving global market dynamics. Meanwhile, adoption by Korean customers in the IT segment has progressed smoothly, and we anticipate additional revenue contributions in the second half of the year. Although IT growth is below expectations, new revenue contributions are anticipated. For Q2, we anticipate quarter-over-quarter growth in the high single digits. This concludes my remark. Thank you.
Okay, thank you, Patrick. We will address a question previously received before moving on to take more questions online. The question is, what is the impact of fluctuations in the USD NT dollar exchange rate on your profit margin?
Based on Ennostar's current revenue and cost structure, a 1% movement in the USD exchange rate has an approximately 0.4% impact on our profit margin.
Ladies and gentlemen, this concludes our results conference for this quarter. If you have any other questions, please feel free to contact us at the IR Department of Ennostar. Thank you.
You may disconnect now.