Earnings Call: Q4 2019

Feb 12, 2020

Welcome to e Memory 2019 4th Quarter Webcast Conference. Today with us, we have Chairman, Doctor. Charles Shee, President, Doctor. Rixin, Vice President of Business Development And Spokesman, Mr. Michael Holmes, Director Xin Chen, Director of Finance Deputy Ms. Theresa Kuo. Today's meeting will be hosted by Chairman, Doctor. Xi, and operation results will be reported by President, Doctor. Rick Shen. Following management's prepared remarks, there will be a question and answer session. Please feel free to submit your question in an input box on the webcast window throughout the conference. As a reminder, This conference is being recorded and a webcast replay will be available for 3 hours after the conference is finished. Please visit www.inmemory.com. Tw under the Investor Relations section. As usual, before we begin, We would like to remind everyone that today's presentation may contain forward looking statements that are subject to risk factors associated with Semiconductor And IT Business. Please refer to the cautionary statement as shown on page 3 of today's presentation. Now, I would like to turn the call over to EMEA's Chairman, Doctor. Chau Street. Doctor Xi, please go ahead. Yeah. Thank you. Good afternoon, everyone. We just released our January revenue, new high in terms of US dollar. This confirmed our growth momentum regime and the multiyear growth cycle has begun. Driven by a new application such as ISP, networking, multimedia, and the DRAM. Our existing DDI and the display driver and power management IC business also show strong growth as higher ASP, such as OLED, increasing content, such as digital power and market share gains. In addition, we begin to design various security IP is based on our new path for the application in IoT AI autonomous driving, blockchain and 5G, which will soon become our next growth engine. Now I will invite our president, Rick Chang, to report our operation result of Q4 and the outlook for the future. At the end, we will address the concern of the coronavirus epidemic. Oh, good afternoon. Thank you for attending EMEA's 2019 fourth quarter investor conference call. In today's presentation, I would like to report our operational results of Q4 and then a full year results for 2019. Followed by the status update of our technologies and future outlook. First, I would like to recall our 2019 Q4 results. Our Q4 revenue was 3 $62,000,000, an increase of 7.5% sequentially and a decrease of 11% year over year. The operating expenses of the Q4 was 202 $1,000,000, up 2.5% sequentially and down 9.1% year over year. Q44 operating income increased by 14.6 percent sequentially and decreased by 13.4% year over year. The operating margin of Q4 was 44 0.1% with EPS 1.74 dollars and ROE at 30.2%. The full year revenue of 2019 was RMB1.41 billion a decline of decreased by 1.9% while the operating margin decreased by 1.5% EPS decreased by 10.2 percent to $7.3.20. And ROE down by 0.7 percentage point to 31.6%. In the following section, I will break down the revenue contribution by licensing and the ROADI. Licensing from Q4 accounted for 32 percent of the revenue, up 11.8% sequentially. And down 7% year over year. Realty contributed 68% of total revenue increased by 5.6% sequentially, but decreased by 12.8% year over year. The full year revenue of 2019 declined 4.5% year over year. With both licensing and the ROAD decreasing by 4.3% and the 4.6% respectively. If we break down revenue by technologies, the results are as follows: Nobile was accounted for 27.5 percent of the total licensing revenue of the quarter. Decreased by 12.1% compared to the previous quarter, but up 7.8% year over year. It's rolling accounted for 57.6 percent of total loading decreased 6.8% sequentially and a 20.7% year over year. NeoFuse was accounted for 56.7 percent of total licensing revenue of the quarter. Up 36.9% sequentially and 9.4% year over year. This row did increase by 49% sequentially and 15.8% year over year because of increasing production from advanced nodes. The royalty of new fields contributed 28.4 percent of total royalty. Our new technology, new path has not contributed to loyalty yet, but has contributed 3% of total licensing revenue, with the ongoing engagement with leading customers we expect more significant contribution from Newpark this year. For new EE and the new MTP, licensing revenue decreased by 27.7%. Sequentially, and 56.8% year over year. Diluted from MTP decreased by 28.4% sequentially but decreased by 17.6% year over year. In the full year of 2019, Niobi contributed 26.9% licensing and 75.4% relative and down 14.8% and the 10% year over year. For NIOfields, for licensing and royalty has an increase of 26.4% and 50.7% year over year. Neo E and the MTP is licensing that ROAD decreased by 44% and 43.3%. This is because of the focus of MTP is in collaboration with leading customers for automotive applications and the engagement period is relatively low In addition to that, our MTP team are working with partners on developing MRN, IRAP and AI memory. If we break down royalty by 8 inches 12 inches wafers, Eng wafers, which accounted for 70% of ROAD increased by 10.4% sequentially, but decreased by 9.3% year over year. Realty from 12 inches wafers contributed 30 percent of the ROAD decreased by 4.2% sequentially and a 20% year over year. This sequential decline is due to DDL customers' inventory adjustments. For the full year of 2019, the contribution of RODIFO 12 inches wafers was 30.7% a decrease of 10.9% year over year. 8 inches wafers contribute to 69.3 percent of the ROAD down 1.5% year over year. There are a total of 98 product tables in Q4 last year. We will provide more information in the management report later today. Next, I would like to address our future outlook For licensing revenue, we expect new fields and new path to continue growing due to increasing advanced technology platform and more comprehensive path related IP portfolios. For royalty revenues, loading from BDI, we increased due to higher penetration rates of OLED TDDI by existing customers and the new customers. PMIC will continue to grow as the content increase in 5G and the higher ASPs migrating into advanced process notes. New applications like multimedia related products such as DTV, set top ups, surveillance, ISP and the DRAM will continue to grow our royalty revenue. For new application development, NewPath was designed into leading customer's products for IoT applications. Path RT, the IP of new path based root of trust was adopted by customers for AI application already. In addition to ISP, new fields will also be used in CRS products to provide highly intelligent image recognition applications Security platform was on already has customer adoption. Contribution from this development mentioned above will be seen this year. For new technology development, In addition to 5 nanometer technology platform, I run on security IP cooperation which we mentioned in previous quarter, we are developing 6 nanometer and 5 nanometer plots. And IP technology with leading foundry partners. For security IP, after the completion of POPTLNG. That is a new POP based within the number generator. And the POP R team. That is the new POP based root of trust. We are working with foundry partners to develop a new path into embedded fresh platform. In addition, new path based IoT security solutions, security elements and how will your security module IPs are under development. We are developing path based hardware security open platform. By integrating OTP, MTP, OTP path, security function IPs, encryption algorithms and IPs to provide total security solutions for AIoT and the 5G applications. Lastly, regarding the new Corona virus epidemic, we see very limited impacts on daily operation. All our employees are based in Taiwan. And all R and D cooperation with customers are through conference call, not impacted by travel registration. This concludes my presentation. Thank you. Thank you, Doctor. Shen. We now begin the question and and you will answer Keith. Now we're going to collect questions and we'll reply you in a minute. Please hold on. Please submit your questions in the input box on your webcast window and you will enter a queue. We're going to collect questions and we'll reply you in a minute. Please hold on. On the webcast window, and you will enter a queue. We are going to collect questions and we'll reply you in a minute. Please hold on. As there are no further questions, we now begin closing comments. Doctor. Shee, please proceed. Okay, as a company with a wide range of technology platforms, we are confident that our continuous development of technology platforms and innovation in Silicon IT will continue to bring more values to customers and industries. Particularly in the 5G era, security become a must for many applications. We have expanded our OTP in the past to create new security IPs for securing the AROT devices. Which will become our new growth curve. Thus, we are very confident about our long term growth. Thank you very much for coming to this quarter's investor conference. Thank you. Thank you ladies and gentlemen for joining us today. A webcast replay will be available within 3 hours after the conference is finished. You may now disconnect. Goodbye and have a good day.