Welcome to E Ink first quarter 2025 earnings call. All participants are currently in a listen-only mode. After the presentation, we will open the floor for a Q&A session. Today's conference is being recorded. The Webex replay will be available on E Ink's website after the conference. Joining us today are CFO Lloyd Chen and Finance Center Senior Director Patrick Chang. With that, I'll turn the call over to Lloyd.
Good day, everyone. This is Lloyd. Before we start, I mean, as you can see from the screen, you can see the cover page of this quarter's conference. This year basically marks the first year of large-format e-paper for E Ink. Last month, Touch Taiwan exhibition, we basically showcased the largest and most advanced color e-paper technologies and products. I think we're going to talk about the Touch Taiwan a bit later during my presentation. Okay. We also prepared a few video clips to give you what was happening during the Touch Taiwan thing. Okay. All right. Next page. Before we look at those financials and also some market information, let's spend a few seconds on the safe harbor statement. Next page. Okay. The first quarter key highlights. In first quarter, sales revenue reached TWD 8.06 billion, representing a 43% year-over-year growth. Operating profit was TWD 2.15 billion.
Non-operating income amounted to TWD 650 million. Net income came in at TWD 2.2 billion with EPS at TWD 1.91. Next page. Operating profit driven by sales growth in first quarter 2025. Operating profit increased to TWD 2.15 billion, with the operating margin rising to 26.6%. To expand more innovative e-paper applications, the company continues to invest in R&D and talent. We believe that research, development, and innovation are the key drivers of long-term growth and sustainable operations. Next page. Look at the balance sheet side. Total assets increased from TWD 80.9 billion to TWD 93.6 billion. Year-over-year increase of TWD 12.7 billion. Net asset value per share reached TWD 47.9. The increase in assets was primarily driven by sustained profitability and operating cash inflows.
We made appropriate allocation into financial instruments and expanded its operation capacity, leading to increases in cash, financial investments, and fixed tangible fixed assets and right-of-use assets. All right. Next page. In terms of the cash flow, first quarter, both cash and financial assets increased, totaling around TWD 61.6 billion, an increase of TWD 2.2 billion from the previous year. With continued profitability and strong cash flows, we maintain a solid financial position under this capital strength. We continue to allocate resources prudently in line with operational plans to support sustainable growth. We would like to briefly explain our e-paper color technologies, especially on signage. As you can see from the screen, the left-hand side, this is the full-color e-paper signage display featuring our latest E Ink Spectra 6 technology. That also represents the feature of vivid color.
The one in the middle, basically, it's our color technology called Marquee. That also provides a wider temperature range from minus 20 degrees Celsius to 65 degrees Celsius. The one on the right-hand side, it's our Kaleido 3. That basically provides video-capable features. We also prepared a video clip for you to understand more about these three color technologies.
In 2025, E Ink officially launched its 75-inch color e-paper displays, ushering in a new era of large-format e-paper technology. The 75-inch E Ink Spectra 6 features a high-color saturation full-color display, supporting integration with E Ink Ripple technology. With optimized animation rhythm and transition updates, it effectively captures attention and meets the demands of commercial applications. It offers ultra-low power consumption, delivering a new display experience for advertisers, brand owners, and retailers. Its applications include advertising billboards, information displays, wayfinding signage, as well as corporate and retail brand showcases. E Ink Marquee is an innovative full-color e-paper technology with a new four-particle system, delivering vivid colors optimized for outdoor and digital out-of-home signage across a wide temperature range. E Ink Marquee can operate in environments ranging from minus 20 degrees Celsius to 65 degrees Celsius without the need for cooling systems.
With exceptional energy efficiency and thermal performance, it offers a more cost-effective display solution for outdoor settings. Built on the E Ink Kaleido platform, the first dynamic color e-paper solution features improved refresh rates and advanced algorithms for smooth video playback. Delivering poster-like visuals, the 75-inch E Ink Kaleido display operates between minus 15 degrees Celsius and 65 degrees Celsius, making it suitable for outdoor environments. E Ink is collaborating with ecosystem partners to launch large-format e-paper signage, enhancing visual appeal and meeting demand for sustainable, energy-efficient digital displays. The future of color e-paper signage is now.
Okay. I believe through this video clip, you can get more sense of our three major color e-paper color technologies. Okay. All right. Let's move to the next page. We continue our innovations, so we get more and more recognitions externally. I think the first thing I would like to share is that we are planning to establish a joint venture with AUO, one of the leading TFT LCD makers in Taiwan. I mean, with their subsidiary display technology, AUO Display Technology, basically set up an e-paper module production line in Taiwan to begin with by combining our expertise in e-paper materials with AUO Group's strength in panel design, smart manufacturing, and also global market access. The partnership basically aims to accelerate the adoption of large-format e-paper in smart retail and digital signage applications.
I think from the screen right in the middle, during this year's Touch Taiwan exhibition, our ecosystem partner, Rimu, unveiled the world's first foldable color e-reader, mooInk V, featuring E Ink, our Gallery 3 color technology. This innovative product combines full-color display with a foldable form factor to offer a lightweight and paper-like digital reading experience. We also prepared a video clip for this, so we're going to show you a bit later. Last but not least, we continue to drive innovation through green technology and were honored with multiple prestigious awards at the 2025 Go Panel Awards and also Smart Display Application Awards, basically on our three color platforms. The first one is 75 Kaleido 3 color display, and also Spectra 6 billboard solution, and also Gallery 3 digital notepad. Okay. We prepared a video clip for mooInk V, the foldable readers.
Welcome to the E Ink booth at Touch Taiwan. Today, we are introducing the world's first foldable color e-reader, the mooInk V. The mooInk V was developed in collaboration with Rimu. Its 8-inch display uses E Ink Gallery 3 to bring stunning color and foldable design to a paper-like reading experience. Backed by almost a decade of R&D and over 200,000 fold tests, this is not your average e-reader. It folds like a book, fits in your pocket, and weighs just 255 grams. It is perfect for novels, manga, or even illustrated books. Here is the real benefit. It is blue light-free, meaning it is way easier on your eyes than traditional screens.
Okay. All right. Let's move to the next page. It is about Touch Taiwan, the exhibition we just held a few weeks ago. Basically, this year on Touch Taiwan exhibition, we have brought together 101 upstream and downstream ecosystem partners to create the largest ever e-paper industry. I mean, among those partners, the world's top six TFT backplane manufacturers: BOE, HKC, TCL, CSLT, Sharp, AUO, and Innolux all joined us, our key partners, underscoring the growing influence and scale of the e-paper ecosystem. As the market demand for automation, sustainability, and energy efficiency continues to rise, we remain committed to expanding e-paper applications and delivering greater value to the market through strategic collaboration and innovation. We also prepared a video clip for Touch Taiwan. All right. That is the video clip for the Touch Taiwan, the exhibition we just held a few weeks ago. Next page.
I'm going to talk about those environmental efforts we have done recently. In 2024, we received the leadership-level results, quite good results from CDP for both climate change and water security, basically with an A-list for climate change. This shows our strong efforts in climate action, carbon reduction, and water management. In waste reduction, both our Xinzhou and Ningkou sites in Taiwan earned UL 2799, Platinum Zero Waste to Landfill Certificate in the first quarter. This means the water from our operations is properly recycled and reused. We already reached 58% renewable energy use globally in 2024, far ahead of our original RE30 goal that we set up previously. We will continue working toward using more renewable energy. Okay. Next page. I believe we remain committed to sustainable development through strong governance and performance.
I think we were recognized in S&P 2025 Sustainability Yearbook as one of the top 1% of companies globally for sustainability performance. Basically, among 7,609 companies assessed, we also ranked among the top 10 highest-scoring companies worldwide, highlighting our strong commitment to sustainable development. Also, separately, in MSCI ESG rating, we improved to an AA leader rating. For Taiwan local governance evaluations, we continue to rank AAA and stay within the top 5% of the hardware industry for sustainability. Okay. Next page. I would like to talk a bit about the sustainability in action, especially internally at E Ink. We continue to contribute on the social front. In addition to encouraging employee-led volunteerism, our employee volunteer club actively supports and donates to disadvantaged and underserved groups.
We partner with MIT in soft programs to launch the E Ink Innovation Prize, which encourages innovative solutions using e-paper technology to tackle urgent global challenges. Locally, we also support the arts and cultural sectors in pursuing a sustainable vision. We collaborated with the Kaohsiung Museum of Fine Arts by donating our e-paper display to help create a low-carbon, smart, and sustainable exhibition space. Okay. That basically is our first quarter presentation. Let's move to the Q&A session.
We will now begin the Q&A session. To ask a question, please click the raise hand icon on the sidebar. When we take your question, please remember to unmute yourself. We will take the first question from Derek from Morgan Stanley.
Hi, Derek.
Hi.
Hi. Hi, Derek.
Hi. Thanks for taking my question. I think the first question is that in the previous earnings call, it seems that you mentioned that the consumer electronics segment should be growing by double-digit YOY in 2025. I am wondering if that is still your guidance at this stage.
I think in the previous earnings conference, we did not really mention that double-digit year-over-year growth on CE sectors. I think what we really mentioned is for the time being, we received lots of rush orders from the customers. Second quarter should be the historical high from the history. Third quarter, we basically still look quite positive. Fourth quarter remains to be seen because from our observation, some of our customers pull ahead their orders from the later quarter. That is why we receive a lot of rush orders. In general, for CE, we still stay positive. Whether it would be double-digit growth or slightly lower, I think it is hard to comment at this moment. For the time being, we still stay quite positive for CE.
Okay. Thank you. Just to clarify a little bit, when you were talking about 2Q, 3Q, and 4Q, you were referring to the overall revenue, not just CE, right?
Right. Right.
Okay. Okay. Thank you. During the mentoring session, the Chairman mentioned that, I'm not sure if I got it wrong, but it seems the Chairman mentioned that he thinks the color e-reader is going to be doing better this year, and it will be up by 40-50% year- over- year, and black and white will still be growing, but at a more moderate pace. Is that the right information that the Chairman is trying to deliver?
As I recall, I don't really remember those percentages. Once again, color technology, we believe, I mean, for CE, we believe it's going to be the mainstream going forward. Growth can be expected year over year. Whether it will grow up to 40-50%, like what you just mentioned, I think it still remains to be seen. We're definitely in the positive growing trend. For that part, it is 100% sure.
Okay. Okay. That is very clear. Also, during the mentoring call, the Chairman said that it seems that there is no or limited impact to the e-reader order as of now despite the tariff. He said that there is some impact on e-note. I was wondering what is the breakdown between e-reader and e-note within your consumer electronics segment?
I think it still varies from quarter to quarter. I believe e-reader is still relatively bigger, but e-note is catching right up after the e-reader. One thing I would like to mention, I think going forward, there would be a very, very thin line between e-reader and e-note because we believe in the future for the CE devices, as long as he can read and also can write, as long as he can write, also can read. I think it's kind of hard to say going forward. I mean, reader and e-note will be very, very well defined. I think there's going to be a very thin line for these two devices. Once again, we group these two products into one, which means we believe they're going to be very, very similar and compatible.
I think not to worry too much which one will be higher than the other. I think the combined e-reader and e-note basically is in a positive growing trend.
Okay. Okay. Thank you. I can understand that the line is getting finer between e-readers and e-note. Is it fair to say that at the current stage, maybe the breakdown is somewhere around 60/40 between e-reader and e-note with e-reader being bigger?
Yeah. Derek, I don't comment on the percentage then. I'll leave you to figure it out. Yeah. Yeah. I think I mentioned reader basically relatively higher, but e-note is catching right up.
Okay. Got it. Got it. My last question is regarding this final assembly capacity because also during the mentoring call, I think Johnson mentioned that your partners are moving their capacity outside of China into either Southeast Asia or Mexico. My question is that by the end of 2Q or maybe by the end of 3Q, do we have a sense about the breakdown between the final assembly capacity in China versus non-China? A rough idea would be good.
You mean, for example?
The final assembly.
Final assembly, you mean for device or module?
Correct. Device.
Device.
Because yeah, it is the device that is shipping into the end market, right? I was referring to device.
I really don't have the breakdown in %, but we do see a growing trend that they are adjusting the allocation between China and non-China. When I mention non-China, that means the region in Southeast Asia and Mexico. I don't have the breakdown, or I can't really break it out at this moment, but I do see a trend. They allocate more than before in terms of the allocation to Southeast Asia and Mexico. Once again, it depends on where their end customer is. If their end customer is American customers, I think they would utilize the resources in Mexico. Maybe Europe, non-American customers, basically, they're going to utilize their capacity in Southeast Asia. Derek, I would like to give you more color.
I think during the Trump's first administration, I think a lot of country manufacturers, I mean, device makers, they already smell the supply chain risks. They already started the different capacity allocation, as I mentioned previously. They just get it ready. Before, they still concentrate on China. Since they've already done those adjustments properly, they just start shifting the capacity from China to non-China areas. What I'm trying to say is it does not just happen overnight. They have been preparing for that. They just get it ready. Believe it, I mean, use it when the time is right.
Okay. Thank you. Very clear. Thank you. Thank you, Lloyd.
Thank you. Thank you.
Next, we will have Kenny from Nomura.
Hi, Kenny.
Hi, Lloyd.
Yes.
Yeah. Thanks for letting me squeeze in one or two questions. I just want to follow up on Derek's question earlier that I think, yeah, maybe Johnson, he made a very clear point that in terms of revenue, second quarter might be the peak. I just thought about if you are going to expand your edge file capacity in June, that means in second half, you would have more capacity to meet customers' demand. I mean, do you have, even if you are in tight capacity, let's say, and then you still have some backlog going into Q3, so is it certain that Q3 will be only flat or slightly down versus Q2, or you still see some opportunity to witness "improvement" if the demand is okay entering the second half of this year? Thanks.
Okay. So Kenny, basically, we receive the roading forecast from our customers regularly, I think, monthly basis, even some of them on biweekly basis. It has been changing. Of course, one of the scenarios could be we believe second quarter could be the peak, but later on, third quarter surpasses. Hard to say. Based on the situation we can foresee at this moment, we believe second quarter would be the peak. Yeah.
I see. Is this applied to both IoT and CE?
I would say yes for the time being. Yeah. It is dynamic, so hard to say at this moment. Yeah.
Got it. Great. Thanks. Just a final follow-up on the so-called cost sharing. I'm wondering if you are going to procure in a bigger volume or bunch from your supplier, trying to get a more favorable pricing to mitigate if any kind of a cost down throughout the whole supply chain. Yeah.
Kenny, come again, your question. Yeah. Sorry, I did not really follow at the beginning of your question. Your voice is a bit breaking up.
Sure. To make it simply put, are you going to procure more in the short term and trying to get better pricing from your upstream suppliers so that you can lower your perhaps material costs?
We have our own strategy and policy for the procurement of the material. There are basically a lot of moving parts at this moment. I understand where your question is coming from. In order to get the short-term maybe volume discount associated with the cost reduction, I do not think that that would be a very good idea to have a volume buy for the time being. Because there are a lot of moving parts at this moment, we basically follow our policy in terms of the procurement. Yeah.
Okay. Understood. Very helpful. Thank you, Lloyd.
All right. Thank you. Yeah. We noticed a question online. Basically, the question is, what are U.S. import tariffs for ESL and e-reader now? Let me start with the e-reader. Basically, we call it CE business because that includes e-reader and e-note. I think, as you can tell from the abbreviation of CE, e-reader, e-note is quite relevant to the consumer electronics. I believe the tariff basically creates the impact that affects consumers' purchase. We believe that that would affect the CE business a bit. However, we received the rush order from second quarter. From third quarter, basically, we see those customers try to pull ahead the order from fourth quarter. Even fourth quarter remained to be seen. We kind of believe that the whole year is still quite positive.
Of course, compared with the forecast that we made by the end of last year, it would not have been that great. In terms of the year-over-year growth, we still believe there is still a possibility to expect year-over-year growth. To what extent, I think, given the uncertainty on fourth quarter, it remains to be seen. For ESL, I think for those tariff impacts, a certain level of the inflation can be expected. From a retailer perspective, automation and even digitalization seems to be a trend for them. We believe the installation of the ESL could be accelerated associated with the tariff impact. For ESL, we stay very, very positive about the ESL business. The net-net, we still believe that the whole year, 2025, we still can expect a certain level of the growth.
Once again, to what extent remains to be seen. Okay.
Next, we will have Shuyu from CLSA.
Hi, Shu-Yu.
Hi, Lloyd. Thank you for having me. I have a few follow-ups. Thank you. One of the follow-ups is about ESL. The other system integrators and also our partners have hosted their earnings call earlier. I believe that most of them still see quite a positive trend in the U.S. They also see some hesitation recently from their European clients. That is not the first time, of course. In the past few quarters, some European clients have already postponed their orders. First of all, I am wondering how is our communication and our conversation with the clients, especially retailers in Europe for the past few months or few weeks? Are we also expecting, in terms of volume of ESL volume, more than 300 million units this year? This is a number mentioned by the management team earlier this year.
you. This is the first question.
I don't recall the number of 300 million units. Shu-Yu, once again, we supply the big sheet, mother sheet to our customers. Whether they cut it into 2-inch, 1-inch, or they cut it for retail signage up to 10-inch, it's very hard for us to know. Talking about those units, it's a bit beyond our, we don't really know how to calculate it, basically. I think for both American retailers and European retailers, we still stay quite positive in terms of the ESL, regardless of where the customers are geographically.
Thank you. Another follow-up is also for e-reader and e-note. I think we have already got many discussions earlier from other investors. I'm wondering, for Amazon Kindle, we've already heard some quality issues reported by the news a few months ago. Across brands, first of all, is that solved for now? My understanding is that this is not an issue, but we have to solve some problems within the supply chain for the manufacturing process. I think we are still staying quite positive during our earlier discussion on all the e-reader and e-note sector in the medium to long term. Are we expecting a huge replacement demand for black and white colored solution? That's my second question.
Right. Right.
I will get back to you.
Thank you. For the quality issue, we believe we are not in a position to comment on that. What I can tell you is if there is still a quality issue, we can tell from the forecast we receive. It seems that the forecast we have been collecting quite well. I assume that the quality issue should be gone. Yeah. That is my quick comment. For black and white and color, as I mentioned earlier, we believe color is going to be the mainstream. During the transition, I do not think most of the branders will just set a very clear cutoff point, just do a blunt shift from black and white to color. I believe there should be a transition from black and white to color.
In other words, I believe black and white devices still will be there and still will be some new devices. I believe the more and more color reader and notes will be out there going forward.
Understood. Very clear. Thank you very much, Lloyd.
All right. Thank you.
Due to the time constraint, we will take the final questions from Ellen Wang. Please go ahead.
Hi, Ellen.
Hi, Lloyd. I have two questions. One is about the guidance we have been talking about. The second one is about the product application. As you mentioned, the Q2 could be a peak, and the Q3 remains strong, and then Q4 remains to be seen, right? Is it based on the US dollar or based on the NTD? That is the first question. Also, are you talking about H5 is going to operate, like Johnson said, in June, hopefully? Theoretically, with more production, we expect more revenue, more income. Could you explain it a little bit? Thank you.
All right. For those quarterly sales revenue, the level of the quarterly sales revenue, I believe from both USD and TWD perspective, the statement basically remains the same. Okay? For your second question, I understand what you are trying to ask. I think your question is, presumably, if second quarter H5, we are facing a bit of hiccup, assuming third quarter, it can be ready. Does it mean that we will be expecting the higher sales revenue? I mean, theoretically, yes, because H5 is ready. We can manufacture more, and it generates more sales revenue. I think H5, basically, is aiming for the big-size products and applications. Of course, we can use it for the smaller size. I think since signage, we believe it is going to be our third growth engine.
We will focus on the signage product first. Once we focus on those products, which means it is going to be occupied, we cannot really use it for the small-size products and applications. It is kind of the trade-off between the product mix then. I mean, theoretically, yes, more capacity would generate more sales revenue. It all depends on how we are going to allocate the resources in H5.
Got it. Got it. Thank you, Lloyd. My second question, also the last question, is about application because we have been talking about education and the medical sector in many webinars many times. We want to know the updates. If any, foreseeable future, is there more adoption from some countries or some companies as a reference? Thank you.
Right. I think for medical, we have a lot of inquiries. For commitment and even the volume commercialization, I do believe we still need some time since for medical, it tends to be the tender business. It's not like once we get it, it's going to last for quite a long while. It's a tender business, and it's kind of a bit fragmented. We still need more time to have it recognized in this industry. For education, I think last year, we do notice growing momentum in China. We thought that the growing momentum will be carried on this year. I mean, before the tariff, it was there. After tariff, it sort of got affected a bit since it's also relevant to the consumer electronics. We still believe the business layer.
It's just due to the tariff, we are facing a bit of hiccup at this moment. We're still quite confident, and we still believe the potential from the education market.
No problem. Thank you.
All right. Thank you. Thank you, Ellen.
Okay. That concludes our Q&A session. I would like to turn the meeting over to Lloyd for closing remarks.
All right. So thank you for your participation. I believe we talked quite a lot about the tariff impact and also the capacity allocation, even for the H5. And we'll work very hard. Okay? See you next quarter. Thank you.
Thank you for your time, and see you next quarter.