Welcome everyone to Parade Technologies Limited's 2024 Q3 Webcast Investor Conference. Investor Relations of Parade Technologies' Mr. Yo-Ming Chang will present 2024 Q3 Financial Results first. During the presentation, all lines will be placed on mute to prevent background noise, and after the presentation, there will be a question-and-answer session in English by CEO Dr. Jack Zhao and Vice President of Finance, Mr. Kuowei Wu, and we also will remain last 15 minutes for the attendees who would like to ask questions in Chinese. Please follow the instructions given at that time if you would like to ask the question. [Foreign language]. And now I would like to introduce Mr. Yo-Ming Chang, Investor Relations of Parade Technologies. Mr. Chang, please begin. [Foreign language]
Thanks, Jason. Welcome everyone to Parade Technologies 2024 Q3 Webcast Investor Conference. Parade Technologies Q3 2024 consolidated revenue was $136.25 million, and net income was $23.58 million. Basic and fully diluted after-tax earnings per share were $0.30 and $0.30 respectively. These results compared to consolidated revenue $116.96 million and net income of $19.32 million or $0.24 and $0.24 per basic and fully diluted share in the prior quarter. In U.S. dollars, Q3 revenue increased 12.72% sequentially and was up 15.49% year-over-year. Gross profit in the Q3 of 2024 was $57.95 million, an increase of 13.01% from the previous quarter and an increase of 13.24% compared to the same quarter of last year.
On August 21st, 2024, Parade announced the availability of a PS8353 DP2.1A linear redriver, facilitating DP2.1A reversible or bidirectional active cables and the DP-eDP signal conditioning for notebook, desktop PC, and the tablet designs. PS8353 supports DP2.1A and the eDP up to full length and the UHBR20 link rate. It features low power consumption and the power management, including Modern Standby and the DP2.1A advanced link power management. Its low power design minimizes power use in DP2.1A active cables and greatly extends the battery life over mobile devices. PS8353 can greatly extend the cable length for DP2.1A beyond the typical 1.2 meter or 3.9 feet limit for a passive cable without degrading the full performance. On August 27, 2024, Parade introduced the TC1312B device. It's first fully integrated AEC-Q100 Qualified Touch with T-Con embedded drivers targeting automotive cockpit displays.
The TC1312B combines Parade's core portfolio of patented touchscreen technology and the proven eSail display processing and the high-speed signal technology to provide the lowest EMI and the lowest latency touch experience for automotive displays. The TC1312B leverages Parade's TrueTouch patented technology portfolio and the design experience gained from shipping over one billion touch devices. It provides a superior EMI suppression, low power, low latency, and the fullest touch experience across the temperature extremes of the automotive cabin. The TC1312B also provides accurate touch response for a wide range of finger sizes and gloved touches across various materials and thickness. Using Active Shielding technology, TC1312B can deliver best-in-class water rejection and the wet finger tracking, perfect for reliable touch with surface condensation or even in pouring rain. In addition, the TC1312B offers the industry-only true variable refresh rate solution for automotive displays.
On September 4, 2024, Parade proudly introduced the PS9010 USB4 Dock Controller as the newest member of Parade's USB4 product family. Designed to meet the rising demand for high-speed multi-protocol connectivity, the PS9010 sets a new standard for USB4 peripheral controllers, offering unprecedented performance, versatility, and power efficiency. The PS9010 is built to optimize the user experience in modern computing environments where high bandwidth data transfers and the display connection are critical. The chip seamlessly integrates support for USB4, Thunderbolt 3, DisplayPort 2.1, and the SuperSpeed USB, ensuring compatibility with a wide range of devices and peripherals. Leveraging Parade's industry-leading USB4 PHY technology, the PS9010 is fully compliant with USB4, USB 3.2, and related USB IF specifications, as well as VESA's DisplayPort standards. Whether used in docking stations, monitors, or external peripheral devices, this cutting-edge chip ensures smooth and reliable performance across all connection types.
Additionally, the PS9010's integrated PCIe, DisplayPort, and USB 3.2 tunneling functionality provide the ultimate flexibility for complex peripheral setups. On September 4, 2024, Parade also announced the availability of PS8650 DP 2.1a MST hub controller for dock accessories, video displays, and the desktop workstation graphics cards that need . The PS8650 is compliant with VESA DP 2.1a specification. The DP 2.1a receiver supports MST and SST modes up to full length at the UHBR20 link rate and the DSC 1.2a decode and pass-through. The four DP 2.1a transmitters, each up to full length at the UHBR20 link rate, are capable of MST and SST modes. Single video link rate conversion, including DP 2.1 MST to DP 1.4 MST conversion, and the DSC decode and compressed video pass-through. PS8650 represents the best-in-class power performance solution on the market, with its low power design greatly reducing system power consumption.
It complements Parade PS9010 USB4 dock controllers and the PS8839 USB-C retimer De-Mux with the DP 2.1a port expansion for dock solutions. PS8650 expands Parade DP 2.1a product portfolio over DP 2.1a retimer, redriver, and retimer modes, as well as USB retimer modes and De-Mux, USB4 retimers, and the USB4 dock controller with DP 2.1 auto mode, providing end-to-end proven solutions. On October 10, 2024, Parade announced a series of new eDP T-Con devices developed for high-performance PC gaming applications. DP826 enables resolution support up to WUXGA 360 Hz. DP827 enables resolution support up to WQXGA 240 Hz. The DP828 enables resolution support up to UHD 144 Hz. The DP828 supports UHD displays up to 144 Hz refresh rate and a derivative part number DP828A supports 2.8K and 3K displays up to 180 Hz refresh rate.
It supports GPU brand-specific variants, including [inaudible] linked between Adaptive Sync , AMD FreeSync Premium Pro, FreeSync Replay, and [inaudible] , as well as NVIDIA G-SYNC and Dynamic Display Switching. It supports 30-bit input and global dimming for DisplayHDR 400 performance. The DP828 provides full eDP 1.5 functionality, including Panel Replay, which is the preferred function to use for Panel Self Refresh, Early Transport, and other advanced features. It accepts up to full link on the eDP interface with link rate up to 8.1 gigabits per second.
The DP826 and the DP827 provide an identical feature set, but with higher refresh rate and lower display resolution applications. Based on the current business outlook, Parade is providing the following guidance for the Q4 of 2024. Revenue is between $121 million-$134 million. Gross margin is between 42%-46%. [Foreign language] It is my presentation for the 2024 Q3 financial results. Now I transfer to CEO Jack Zhao to answer your questions. Jason, you may begin.
Thank you, Yo-Ming. Ladies and gentlemen, we will now begin our English question and answer session. If you wish to ask a question, please press Star 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Should you wish to cancel your question, you may press Star 2. Thank you. Now please press Star 1 on your keypad if you would like to ask the question. Thank you. And our first question will be coming from Mike Yoon, Bank of America. Go ahead, please.
Thanks, management, for taking my question. So my first question will be kind of housekeeping. Could you update the Q3 revenue breakdown by business to us? Thank you.
Okay, thanks. In the Q3, DP is above 40%. Our high-speed PS product is about 45%. And TC, our source driver, is about 10%. And our TT, or TrueTouch, is less than 5%.
Okay, thank you, Jack. And then I would like to know further on the new product cooking schedule, especially on the server and data center side. Can you update us on the PCIe Gen 6 redriver? What's the expected timeline that we should be looking for into 2025 and 2026? Thank you.
We have been developing both PCIe redriver and the retimer on the Gen 6 level. And we have a PCIe Gen 6 redriver in our lab. In fact, we just received the product a few days ago, which has 16 channels, eight channels, and four channels. So three of the products we received at the same time. So the parts look pretty good and promising. So we still are bringing up those PCIe Gen 6. And then we'll work with the customer to do the verification. And recently, we see more and more customers becoming more interested in the PCIe Gen 6 redriver because of lower power and lower cost. And we continue to develop the PCIe Gen 6 retimer, but it will take a longer time for the retimer development.
Thank you, Yo-Ming. Thank you, Jack. That's very clear. And then my last question will be on the panel solution side. I think previously you mentioned that there is a tougher competition on the general notebook business. So I'm wondering if that is the case, and then because you basically give the same gross margin guidance for Q4. So just like to know whether there is a change regarding to the competition landscape or dynamic on the general notebook side.
Thank you. Yeah, thanks. I think in general, after the COVID, the competition on panel side is getting, especially notebook competition, the panel side solution getting more higher than before the COVID time. And the notebook panel on the high end start to transition more towards the gaming, towards the AMOLED. And that's what you heard. We announced the gaming solution. And we also work with the Tier 1 panel guy and continue for the AMOLED, the development solutions. On the competition, mainly on the low end and on the full HD or HD level.
And our position is more towards the high end and the integrated solution, which we had said, the TDDI or touch-enabled TDDI and those solutions. And recently, we saw more OEM and panel vendor getting interested in the touch-enabled integrated panel solutions. So we are ready for people to use those solutions for the notebook. While the competition is high, we remain positive for those high end and notebook panel price for integration panel price. And we think we can strive to make a difference for customers.
Okay, that's very clear and insightful. Thank you, Jack, Kuowei, and Yo-Ming. I think that's pretty much my question for now. I'll go back to the queue.
Thank you. Thank you. Next one, Bruce Lu, Goldman Sachs. Go ahead, please.
Hi, thank you for taking my question. Yo-Ming.
Yes.
Okay, so I'm happy to see that there's some progress on the redriver market. My understanding of the redriver ASPs is a lot lower, but the penetration might be higher than the retimer for the server. Can you tell us what kind of addressable market you would expect from the redriver market and server, and what's the competitive landscape in the space, but I think it's more crowded in the redriver market than the retimer market. Is that the right understanding?
It depends on which generation, right? If you go to the PCIe Gen 6 on the higher speed and the earlier solution provider, the better. And as the addressable price, and you have on the cost application for SSD or even for the in-car, and as well as a lot of cable application and high demand on the redriver side for two or three meters. And recently, actually, we have engaged with cable guys. And those are for data center application.
The reason we see the redriver attractive is really the customer comes to us to ask such a solution because the retimer, while the performance is good, but retimer has issues with the higher power, high cost, and almost every board to the different system you have to tune. So it's a burden for customers to use. That's where we are to develop both solutions. And we are pin-to-pin compatible for the 16 channels. So we are open for customers to choose which one to use. And so that's our strategy at this moment. But again, what is the. Thank you. But what is the addressable market size for the redriver market for the data center? Is it like 100 million, a couple of hundred million? I would think a couple of hundred million type of market size or maybe include a cable. Those are the size.
Okay. So the second question I got is that in addition to the redriver or retimer market in the data center, is there any other new addressable market or new product you are working on, which can be a potential revenue growth driver for the company?
As we present on the high-speed side, we are providing a large portfolio, the high-speed solution for the general electronics or general PC, the consumer electronics market. And recently, the USB4 started to become dominant. And with a much higher speed of 20 gigabits per second, or we'll go to the 40 gigabits per second on the USB 4.2. We just announced, as Yo-Ming read through, we have a USB4 hub. And with this device, we provide end-to-end the USB4 solution, whether you are transmitter with your redriver, retimer, and receiver side, and with PD and coupling with our MST, the DP 2.1 hub together.
Those have become a pretty powerful complete solution for USB4. And we're looking forward to speed upgrade to the 40 gigabits per second. We think those are the will make the business continue growth in our high-speed area. And it has been before as we are presenting all the tracking data for the high-speed segment. Just a quick follow-up. When do you expect the USB4 to surpass the prior product in terms of revenue contribution in your high-speed interface? If our USB4 retimer and for the 2024, look at the single product, our USB4 retimer alone provides the highest single product revenue for our entire high-speed product. And that portion will continue to increase significantly in the 2025. So that's the magnitude we're talking about.
Thank you. Thank you. Next one, Daniel Yen, Morgan Stanley. Go ahead, please.
Hello. Hi. Good. So maybe the first part, more focusing on the near term. I recall in the last earnings, I know it's still early, but when we ask about the very preliminary outlook for 4Q, it looks like 4Q maybe overall could be a little bit flattish if I'm not mistaken. Now, based on our guidance, 4Q implies revenue to decline high single digit quarter to quarter. So my first question is wondering what's changed in the past three months. Is it because of the weaker overall PC demand or any product line that we are seeing maybe weaker outlook? Or maybe we can get an update on your 4Q business growth between different product lines. So that will be my first question, mainly on the near-term 4Q revenue side.
I think you have a good observation. First of all, in general, the PC notebook demand in the Q4 is lower than what we had expected. And I think has been reported in the research report. People had thought the overall 2024 might be reached the unit notebook growth exceeded 5%. And in the end, might only reach about 3% as I talked to the industry, the research guys. And I think Q4 sort of reflected that one of this kind of market demand situation.
In particular, more on your second question for the product line side, we continue to see our high-speed PS product line, even in the Q4, are pretty encouraging or promising and has not been seen any weakness. The weakness more related to, as I described before, the panel related. And it seems panel demand is reduced or, as we said, the competition is getting high. So that's what we see. Otherwise, the high-speed side looks good. And in general, the panel side is weak.
I see. If assuming the high-speed interface remains promising, as Jack, you mentioned, do you think given the better product portfolio into 4Q, maybe our gross margin can show some recovery or some improvement into 4Q? Just because usually, I think our high-speed product line bears higher margin. So just a quick follow-up.
At this moment, I still would like to, based on the guidance and for the guidance range, and we have to look at to see the gross margin is complicated, not only the product mix and as well as other factors will factor in. So at this moment, I will still point out to our guidance we just provided. Sure. Thanks, Jack. If I may, can I just follow up one thing? When you refer to the competition within the panel solution, I think we are mainly referring to the driver IC segment, or we are also referring to the T-Con segment. I just want to clarify. So DP or even the driver IC segment, which one we are referring to more? The price side is more on the driver side.
On the driver side, however, as low-end panel solutions become mature, and especially eDP 1.2, and price becomes the dominant factor, especially in the China panel vendor price, so those are impact both on the TCON so as the driver side, and that's what I refer to, but driver is more dominant, but TCON still also impacted, and that's the panel, the current status, and so yeah, that's what we observed.
I see. Jack, so given we mentioned about maybe this year, the PC demand is weaker than expected. Do you think given the inventory digestion in 4Q, maybe 1Q next year, we can see a better seasonality? I know it's still a little bit early, but you are always have some visibility, so I just want to consult you. How do you think about 1Q next year?
Based on our order book, and Q1 looks stronger than normal seasonality. I think one factor might play is China stimulus package. And this time, China stimulus package goes through the channel. So all the way go to the system vendor side, take a little bit longer time, so like one quarter delay. So you clearly see the Q1, the order is getting stronger than normal seasonality. And another thing I hope industry starts to get excited is AI PC, AI notebook.
And we continue to see more high-end assistant got introduced. And we are pretty lucky or pretty strong associated with all of the AI platform except Intel on the USB4 retimer. The rest of the AI significant player or platform all using our or reference our USB4 retimer. So we're getting excited for the AI machine applications. Those systems, when the size is getting bigger, using our chip from two to four on the one notebook under those retimers. So that is one of the things getting us excited. We think by the next year, Q1, Q2, there will have more such systems introduced to the market.
I see. Thanks, Jack. That's exactly what I want to ask about USB4 retimer opportunities. So if I may follow up on your commentary on multiple platform design win except for Intel, can I ask if I think about more like maybe in the next one to two years? I know Intel right now have their own retimer solutions. But how do you think about the potential order win, even in the Intel platform? Do you think it's possible? How do you think about the product roadmap between your USB4 retimer and Intel's? Basically, I just want to understand whether or not our USB4 retimer timeline can also expand to the major CPU platform. So yeah, that's something I try to figure out. Yeah. Thanks, Jack.
Okay. Our retimer with Intel is pretty compatible with support, full with support USB4. Our OEMs have been pushing Intel to allow our chip to be on their system. It's a continued effort. So far, Intel still want to bundle sell their CPU together. We see, as we heard, we just visited Intel's site, and they have started to. I'm not that sure, probably in some systems may well start to evaluate because of the OEM push. However, majority of our sales or our wins are based on the other platform, whether AMD, whether Qualcomm, whether upcoming NVIDIA's. And those are our core strengths. And those are our product, the customers like our products.
And frankly, we helped many of those OEMs to pass rigorous CTS test and a functional CTS test. And our customer is pretty happy with the service we provide and the strength of our product. So yeah, Intel is the one thing they decided to continue to use their own retimer. And that's unfortunate, but OEM are pushing very hard. And we hope we will see some light. If we see some light, I will report to you. We did a visit to Intel, the Indian site, and to communicate with them and to compare notes and so on and so forth.
Yeah. I see. I see. Very clear. Thanks a lot, Jack.
I'll be back in the queue. Thank you. Next one, Wong at HSBC. Go ahead, please.
Hi, Jack. And Yo-Ming, can you hear me?
Yes.
So the first question is I'd like to ask, is there a demand for retimer in the GB200? And what place is it located? Is it in the compute tray or the switch tray?
Say that again on the USB4 retimer?
Sorry. Is there a demand for retimer in the GB200 AI server? And where is it located?
Oh, okay. Those are not our market. Those are the NVIDIA decided. And as I understand, the NVIDIA, the newer one, the design has been architecture changed. And we are not in those systems. Okay. So may I follow up? What I mentioned, what I mentioned the NVIDIA is upcoming NVIDIA AI notebook platform. I just clarify it.
Oh, okay. So, is there any new AI server clients? And?
We have some AI server clients, yes. But not in the big scale.
Oh, okay. Can I follow up on the expected mass production timing for the AI server client?
We are currently shipping some, but it's a small scale. Yes. We are currently shipping some. Yes.
Okay. Thank you. That's very clear. I'll get back to the queue.
Thank you. No, just again, for the investor community, what I mentioned, NVIDIA is upcoming AI notebook platform. And people getting excited because the platform has very high NPU performance. And I was told there will be a big announcement in the CES show. Okay.
Thank you, Jack. And next one, James Yeh, KGI. Go ahead, please.
Hi, Jack and Yo-Ming. I think I have two questions. The first one is about the Thunderbolt product.
I think last year, markets have been talking about your market share in Thunderbolt project. And I remember that was because when customers move into AMOLED, maybe they will use their own design. And I'm wondering, what do you think about the situation now? And are you confident that your market share will at least be now or can even improve in the future?
I think what you had mentioned was in the iPad Pro, the panel and part of the Samsung AMOLED panel using their own TCON. That's what you referred to, I believe. And we now clearly know we ship with LGD AMOLED iPad totally. And we ship to Samsung on the 12, the biggest 12.9, the iPad as well, AMOLED TCON. Samsung has their own TCON for the small one. The Samsung, yes. And this situation now we can change. And even maybe our customer may not be able to change. And our customer did help us a lot to let us to get into the 12.9-inch iPad as well. So yeah, they're not able to probably know more if Samsung could be interested in whether you use the AMOLED.
Okay. Okay. The second one was I think you already covered this about some of the markets like newer markets to get more competitive in terms of pricing. And I'm wondering what kind of strategy that you think to tackle with Samsung that you consider to expand more business like Gen 6 servers or high-speed product to more customers? Is that basically your Thunderbolt model to more customers?
That's one of our strategies will be on the high-end panel. It will be more Thunderbolt-like to reach Tier 1 customers. And we got the opportunity to do this. And we think that. And so on and so forth. That's our strategy.
Okay. Thank you. Thank you.
We're now in question and answer session. If you would like to ask the question, please press star one on your telephone keypad. Thank you. And next question, Aaron Jeng. Go ahead, please.
Hello. Thanks for taking my question. I will actually check your voice and check Jame's voice for breaking up. So I wonder if you can hear me well.
Sorry, I cannot hear clearly.
And yeah. It's the same from my end. So there seems to be a system issue that is happening now. So I don't know how to proceed because you can't hear me well.
I'm sorry. By any chance, would you please try to re-dial with another device? The quality is pretty poor. Sorry to say that.
I will go back to the queue because I couldn't hear the guideline very well. So. It looks like his line has a problem. Exactly. We will take the next one then. And next caller, Jason Chang, CLSA. Go ahead, please.
Hello. Can you hear me?
Yes. Very clear.
Okay. Good. Thank you for taking my questions. I just want to know that whether you have any catalysts or drivers for next year's for your DP and the high-speed segments. Can we expect that there's more design wins or spot migration with higher contents or ASP for DP or for high-speed for next years? Or can we penetrate into the new applications? Can you give us that kind of colors or trend for next year? Thank you.
I think we are by far most excited for our USB4 retimer. And that will bring us more growth in the next year. And hopefully, associated with those, the AI related to the notebook. And we're also excited for our integrated touch panel solution. We do see the uptick of design win and design inquiry for those segments. And those solutions are together pretty expensive. So customer really like it. So I would think those are the two ones maybe create a surprise for us. And I think USB4 retimer probably is a very sure thing and will do pretty good as the design pipeline we knew that. Yeah. Among others, and our Thunderbolt customer may well do better. And as we can see, the recent they are selling and it looks good. And yeah.
Got it. So for USB4, can you give us the current penetration rate for USB4 in PC right now? Or how do you expect this number for next year? Thank you.
I think in general, USB 4 next year penetration will reach to the 30%-40%. I think more like 40%. And as we said clearly, we are in the customer platform, AMD, Qualcomm, and upcoming the NVIDIA AI notebook and so on and so forth. Those together very likely occupy 30 or 30 plus % of market share. Might be reach 35% of market share of total notebook. So that's how you make a calculation.
Got it. So how about the current penetration rate in Q3 or in Q4?
Current, what I would think probably 15%-20%. It will reach to the 40% on the unit of notebook. Okay? And some large notebook need two or four of such device. Depends on the number of ports on the notebook put together. Right? And the two is pretty common. Four is for the big notebook. And they will need two or four of those devices.
Got it. Got it. And my second question in terms of the competition in USB 4 markets. It seems like other competitors or players also want to enter into USB 4 retimer market. So do we see any market share risk or price pressure due to these competitions?
Intel is on their own, right? Intel is on their own. And among those, we see some in Taiwan. And however, it remains that, as we said, they are not able to pass all the CTS tests. Or if people don't put a logo there, they use their device. Previously, we have a startup called Kandou. And they're doing it, now the Kandou almost disappeared from market. And hopefully, next year it's not that big. But I don't know the long term.
And next year, the competition, most of the system already settled down. And they are already complete. And so that's what we view. But moving forward to the 2026, our solution will move to the highest speed, USB 4.2, 40 gigabit per second. So again, we will take a pretty unique position there. And we already start to do the testing with the newest CPU now. And that's the continuity of expand those market for us.
Okay. Understood. Thank you. I have no questions. Back to the queue. Thank you.
Thank you. And ladies and gentlemen, if there are no further English questions at the point, we will now begin our Chinese question and answer session.
[Foreign language] please go ahead. Okay.
[Foreign language]. Thank you, everybody. Thank you. You may disconnect now. Bye-bye.